10-Q 1 june01-10q081401.txt SECOND QUARTER 2001 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549-1004 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF -- 1934 For the quarterly period ended June 30, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF --- 1934 For the transition period from to --------------- ------------- Commission file number 1-143 GENERAL MOTORS CORPORATION (Exact name of registrant as specified in its charter) STATE OF DELAWARE 38-0572515 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 300 Renaissance Center, Detroit, Michigan 48265-3000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (313) 556-5000 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- As of July 31, 2001, there were outstanding 550,027,429 shares of the issuer's $1-2/3 par value common stock and 876,564,617 shares of GM Class H $0.10 par value common stock. - 1 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES INDEX Page No. ------- Part I - Financial Information (Unaudited) Item 1. Financial Statements Consolidated Statements of Income for the Three and Six Months Ended June 30, 2001 and 2000 3 Consolidated Balance Sheets as of June 30, 2001, December 31, 2000, and June 30, 2000 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2001 and 2000 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Part II - Other Information (Unaudited) Item 1. Legal Proceedings 18 Item 4. Submission of Matters to a Vote of Security Holders 20 Item 6. Exhibits and Reports on Form 8-K 22 Signatures 22 Exhibit 99 Hughes Electronics Corporation Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) 23 - 2 - PART I GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2001 2000 2001 2000 ---- ---- ---- ---- (dollars in millions except per share amounts) GENERAL MOTORS CORPORATION AND SUBSIDIARIES Total net sales and revenues $46,220 $48,743 $88,835 $95,601 ------ ------ ------ ------ Cost of sales and other expenses (Note 9) 37,181 38,069 71,691 75,210 Selling, general, and administrative expenses 5,855 5,481 11,245 10,338 Interest expense 2,259 2,358 4,470 4,586 ------ ------ ------ ------ Total costs and expenses 45,295 45,908 87,406 90,134 ------ ------ ------ ------ Income before income taxes and minority interests 925 2,835 1,429 5,467 Income tax expense 304 929 512 1,712 Equity income/(loss) and minority interests (144) (155) (203) (221) --- ----- --- ------ Net income 477 1,751 714 3,534 Dividends on preference stocks (23) (27) (51) (56) ---- ------- ---- ------- Earnings attributable to common stocks $454 $1,724 $663 $3,478 === ===== === ===== Basic earnings (losses) per share attributable to common stocks (Note 8) Earnings per share attributable to $1-2/3 par value $1.05 $2.99 $1.59 $5.87 ==== ==== ==== ==== Earnings per share attributable to Class H $(0.14) $(0.07) $(0.24) $(0.15) ==== ==== ==== ==== Earnings (losses) per share attributable to common stocks assuming dilution (Note 8) Earnings per share attributable to $1-2/3 par value $1.03 $2.93 $1.56 $5.74 ==== ==== ==== ==== Earnings per share attributable to Class H $(0.14) $(0.07) $(0.24) $(0.15) ==== ==== ==== ==== Reference should be made to the notes to consolidated financial statements. - 3 - CONSOLIDATED STATEMENTS OF INCOME - concluded (Unaudited) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2001 2000 2001 2000 ---- ---- ---- ---- (dollars in millions) AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS Total net sales and revenues $39,731 $42,870 $75,895 $84,065 ------ ------ ------ ------ Cost of sales and other expenses (Note 9) 35,182 36,260 67,676 71,581 Selling, general, and administrative expenses 4,091 4,032 7,730 7,539 ------ ------ ------ ------ Total costs and expenses 39,273 40,292 75,406 79,120 ------ ------ ------ ------ Interest expense 151 222 313 438 Net expense from transactions with Financing and Insurance Operations 87 172 218 311 ---- ------ --- ------ Income (loss) before income taxes and minority interests 220 2,184 (42) 4,196 Income tax expense (benefit) 68 698 (13) 1,240 Equity income/(loss) and minority interests (113) (155) (149) (220) --- ----- --- ------ Net income (loss) - Automotive, Communications Services, and Other Operations $39 $1,331 $(178) $2,736 == ===== === ===== FINANCING AND INSURANCE OPERATIONS Total revenues $6,489 $5,873 $12,940 $11,536 ----- ----- ------ ------ Interest expense 2,108 2,136 4,157 4,148 Depreciation and amortization expense 1,443 1,483 2,952 3,006 Operating and other expenses 1,729 1,391 3,446 2,697 Provision for financing and insurance losses 591 384 1,132 725 ----- ----- ------ ------ Total costs and expenses 5,871 5,394 11,687 10,576 ----- ----- ------ ------ Net income from transactions with Automotive, Communications Services, and Other Operations (87) (172) (218) (311) --- --- --- ----- Income before income taxes and minority interests 705 651 1,471 1,271 Income tax expense 236 231 525 472 Equity income/(loss) and minority interests (31) - (54) (1) --- --- --- --- Net income - Financing and Insurance Operations $438 $420 $892 $798 === === === === The above supplemental consolidating information is explained in Note 1, "Financial Statement Presentation." Reference should be made to the notes to consolidated financial statements. - 4 - CONSOLIDATED BALANCE SHEETS June 30, June 30, 2001 Dec. 31, 2000 (Unaudited) 2000 (Unaudited) ----------- ---- ----------- GENERAL MOTORS CORPORATION AND SUBSIDIARIES (dollars in millions) ASSETS Automotive, Communications Services, and Other Operations Cash and cash equivalents $8,370 $9,119 $9,441 Marketable securities 795 1,161 893 ------ ------- -------- Total cash and marketable securities 9,165 10,280 10,334 Accounts and notes receivable (less allowances) 6,533 5,835 5,968 Inventories (less allowances) (Note 2) 11,072 10,945 11,680 Equipment on operating leases (less accumulated depreciation) 5,084 5,699 5,973 Deferred income taxes and other current assets 8,499 8,388 9,678 ------ ------ ------ Total current assets 40,353 41,147 43,633 Equity in net assets of nonconsolidated associates 4,934 3,497 3,377 Property - net 33,922 33,977 33,436 Intangible assets - net 7,743 7,622 8,726 Deferred income taxes 15,560 14,870 13,456 Other assets 31,226 32,243 30,207 ------- ------- ------- Total Automotive, Communications Services, and Other Operations assets 133,738 133,356 132,835 Financing and Insurance Operations Cash and cash equivalents 1,139 1,165 692 Investments in securities 10,614 9,595 9,447 Finance receivables - net 89,608 92,415 85,782 Investment in leases and other receivables 35,701 36,752 37,883 Other assets 31,281 27,846 23,528 Net receivable from Automotive, Communications Services, and Other Operations 1,582 1,971 1,182 ------- ------- ------- Total Financing and Insurance Operations assets 169,925 169,744 158,514 ------- ------- ------- Total assets $303,663 $303,100 $291,349 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Automotive, Communications Services, and Other Operations Accounts payable (principally trade) $19,177 $18,309 $17,329 Loans payable 2,430 2,208 2,554 Accrued expenses 34,512 33,252 32,527 Net payable to Financing and Insurance Operations 1,582 1,971 1,182 ------ ------ ------ Total current liabilities 57,701 55,740 53,592 Long-term debt 8,662 7,410 8,518 Postretirement benefits other than pensions 34,109 34,306 33,931 Pensions 3,111 3,480 3,338 Other liabilities and deferred income taxes 14,791 15,768 17,279 ------- ------- ------- Total Automotive, Communications Services, and Other Operations liabilities 118,374 116,704 116,658 Financing and Insurance Operations Accounts payable 6,348 7,416 4,611 Debt 133,088 135,037 128,164 Other liabilities and deferred income taxes 15,494 12,922 12,161 ------- ------- ------- Total Financing and Insurance Operations liabilities 154,930 155,375 144,936 Minority interests 699 707 647 General Motors - obligated mandatorily redeemable preferred securities of subsidiary trusts holding solely junior subordinated debentures of General Motors (Note 4) Series G - 139 139 Stockholders' equity $1-2/3 par value common stock (issued, 549,606,968; 548,181,757; and 536,912,451 shares) (Note 8) 916 914 895 Class H common stock (issued, 876,465,865; 875,286,559 and 873,646,596 shares) (Notes 5 and 8) 88 88 87 Capital surplus (principally additional paid-in capital) 21,114 21,020 19,668 Retained earnings 10,233 10,119 9,816 ------ ------ ------- Subtotal 32,351 32,141 30,466 Accumulated foreign currency translation adjustments (2,814) (2,502) (2,252) Net unrealized loss on derivatives (Note 7) (187) - - Net unrealized gains on securities 355 581 876 Minimum pension liability adjustment (45) (45) (121) ------- ------- ------ Accumulated other comprehensive loss (2,691) (1,966) (1,497) ------- ------- ------- Total stockholders' equity 29,660 30,175 28,969 ------- ------- ------- Total liabilities and stockholders' equity $303,663 $303,100 $291,349 ======= ======= ======= Reference should be made to the notes to consolidated financial statements - 5 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, ------------------------- 2001 2000 ---- ---- Automotive, Financing Automotive, Financing Comm.Serv. and Comm.Serv. and and Other Insurance and Other Insurance --------- --------- --------- --------- (dollars in millions) Net cash provided by operating activities $3,455 $1,278 $6,235 $3,283 Cash flows from investing activities Expenditures for property (4,220) (42) (3,791) (213) Investments in marketable securities - acquisitions (773) (15,691) (1,399) (11,823) Investments in marketable securities - liquidations 1,139 14,734 2,204 11,836 Mortgage servicing rights - acquisitions - (813) - (398) Mortgage servicing rights - liquidations - 18 - - Finance receivables - acquisitions - (107,883) - (108,780) Finance receivables - liquidations - 68,560 - 73,835 Proceeds from sales of finance receivables - 41,156 - 28,906 Operating leases - acquisitions (3,182) (6,448) (3,967) (8,883) Operating leases - liquidations 3,576 5,138 3,507 4,602 Investments in companies, net of cash acquired (612) (119) (1,554) - Net investing activity with Financing and Insurance Operations - - (998) - Other (351) 129 (371) 151 ----- ----- ----- ------ Net cash used in investing activities (4,423) (1,261) (6,369) (10,767) ----- ----- ----- ------ Cash flows from financing activities Net increase (decrease) in loans payable 222 (21,634) 488 2,127 Long-term debt - borrowings 3,451 28,904 3,417 12,619 Long-term debt - repayments (2,225) (7,703) (3,337) (8,098) Net financing activity with Automotive, Communications Services, and Other Operations - - - 998 Repurchases of common and preference stocks (264) - (417) - Proceeds from issuing common stocks 71 - 356 - Cash dividends paid to stockholders (600) - (679) - --- --- --- ----- Net cash provided by (used in) financing activities 655 (433) (172) 7,646 --- --- --- ----- Effect of exchange rate changes on cash and cash equivalents (47) 1 (164) (1) Net transactions with Automotive/ Financing Operations (389) 389 181 (181) --- --- --- --- Net decrease in cash and cash equivalents (749) (26) (289) (20) Cash and cash equivalents at beginning of the period 9,119 1,165 9,730 712 ----- ----- ----- --- Cash and cash equivalents at end of the period $8,370 $1,139 $9,441 $692 ===== ===== ===== === Reference should be made to the notes to consolidated financial statements.
- 6 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Financial Statement Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. for interim financial information. In the opinion of management, all adjustments (consisting of only normal recurring items), which are necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results which may be expected for any other interim period or for the full year. For further information, refer to the December 31, 2000 consolidated financial statements and notes thereto included in General Motors Corporation's (the "Corporation" or "GM") 2000 Annual Report on Form 10-K, and all other GM, Hughes Electronics Corporation (Hughes), and General Motors Acceptance Corporation (GMAC) filings with the Securities and Exchange Commission. GM presents separate supplemental consolidating statements of income and other financial information for the following businesses: (1) Automotive, Communications Services, and Other Operations which consists of the design, manufacturing, and marketing of cars, trucks, locomotives, and heavy-duty transmissions and related parts and accessories, as well as the operations of Hughes; and (2) Financing and Insurance Operations which consists primarily of GMAC, which provides a broad range of financial services, including consumer vehicle financing, full-service leasing and fleet leasing, dealer financing, car and truck extended service contracts, residential and commercial mortgage services, vehicle and homeowners' insurance, and asset-based lending. Transactions between businesses have been eliminated in the Corporation's consolidated statements of income. Certain amounts for 2000 were reclassified to conform with the 2001 classifications. New Accounting Standards On July 20, 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations". SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Goodwill and certain intangible assets will remain on the balance sheet and not be amortized. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs may be necessary. The Company has not determined the impact, if any, that this statement will have on its consolidated financial position or results of operations. Also on July 20, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was issued by the FASB. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this statement. The Company is required to implement SFAS No. 142 on January 1, 2002 and it has not determined the impact, if any, that this statement will have on its consolidated financial position or results of operations. Note 2. Inventories Inventories included the following for Automotive, Communications Services, and Other Operations (dollars in millions): June 30, Dec. 31, June 30, 2001 2000 2000 -------- --------- -------- Productive material, work in process, and supplies $5,542 $5,555 $5,954 Finished product, service parts, etc. 7,377 7,319 7,609 ------- ------- ------- Total inventories at FIFO 12,919 12,874 13,563 Less LIFO allowance 1,847 1,929 1,883 ------- ------- ------- Total inventories (less allowances) $11,072 $10,945 $11,680 ====== ====== ====== Note 3. Contingent Matters Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, governmental investigations, claims, and proceedings are pending against the Corporation, including those arising out of alleged product defects; employment-related matters; governmental regulations relating to safety, emissions, and fuel economy; product warranties; financial services; dealer, supplier, and other contractual relationships; and environmental matters. In connection with the disposition by Hughes of its defense electronics business to Raytheon Company in 1997 and its satellite systems manufacturing businesses to The Boeing Company in 2000, there are disputes regarding the purchase price and other matters that may result in payments by Hughes to the acquiring companies that could be material to Hughes. GM has established reserves for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or other treble damage claims, or demands for recall campaigns, environmental remediation programs, or sanctions, that if granted, could require the Corporation to pay damages or make other expenditures in amounts that could not be estimated at June 30, 2001. After discussion with counsel, it is the opinion of management that such liability is not expected to have a material adverse effect on the Corporation's consolidated financial condition or results of operations. - 7 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 4. Preferred Securities of Subsidiary Trusts On April 2, 2001, GM redeemed the Series G Trust's sole assets causing the Series G Trust to redeem the approximately 5 million outstanding Series G 9.87% Trust Originated Preferred Securitiessm (TOPrSsm). The Series G TOPrS were redeemed at a price of $25 per share plus accrued and unpaid dividends of $0.42 per share. Also on April 2, 2001, GM redeemed the approximately 5 million outstanding Series G depositary shares, each of which represents a one-fourth interest in a GM Series G 9.12% Preference Share, at a price of $25 per share plus accrued and unpaid dividends of $0.59 per share. The securities together had a total face value of approximately $252 million. ------------------ sm "Trust Originated Preferred Securities" and "TOPrS" are service trademarks of Merrill Lynch & Co. Note 5. Capital Stock Transactions During the second quarter of 2000, GM completed an exchange offer in which GM repurchased 86 million shares of GM $1-2/3 par value common stock and issued 92 million shares of GM Class H common stock. In addition, on June 12, 2000, GM contributed approximately 54 million shares and approximately 7 million shares of GM Class H common stock to the U.S. Hourly-Rate Employees Pension Plan and Voluntary Employees' Beneficiary Association (VEBA) trust, respectively. The total value of the contributions was approximately $5.6 billion. As a result of the exchange offer and employee benefit plan contributions, the economic interest in Hughes attributable to GM $1-2/3 par value common stock decreased from approximately 62% to approximately 30% and the economic interest in Hughes attributable to GM Class H common stock increased from approximately 38% to 70% on a fully diluted basis. On June 6, 2000, the GM Board of Directors declared a three-for-one stock split of the GM Class H common stock. The stock split was in the form of a 200% stock dividend, paid on June 30, 2000 to GM Class H common stockholders of record on June 13, 2000. All GM Class H common stock per share amounts and numbers of shares for all periods presented have been adjusted to reflect the stock split. Furthermore, as a result of this stock split, the voting and liquidation rights of the GM Class H common stock were reduced from 0.6 votes per share and 0.6 liquidation units per share, to 0.2 votes per share and 0.2 liquidation units per share in order to avoid dilution in the aggregate voting or liquidation rights of any class. The voting and liquidation rights of the GM $1-2/3 par value common stock were not changed. The voting and liquidation rights of GM $1-2/3 par value common stock are one vote per share and one liquidation unit per share. Note 6. Comprehensive Income GM's total comprehensive income (loss) was as follows (dollars in millions): Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2001 2000 2001 2000 ---- ---- ---- ---- Net income $477 $1,751 $714 $3,534 Other comprehensive income (loss) 167 (425) (725) (339) --- ------ --- ------ Total $644 $1,326 $(11) $3,195 === ===== == ===== Note 7. Derivative Financial Instruments Effective January 1, 2001, GM adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which requires that all derivatives be recorded at fair value on the balance sheet and establishes criteria for designation and effectiveness of derivative transactions for which hedge accounting is applied. GM assesses the initial and ongoing effectiveness of its hedging relationships in accordance with its documented policies. As a result of the adoption of this standard as of January 1, 2001, GM recorded a transition adjustment representing a one-time after-tax charge to income totaling $23 million, as well as an after-tax unrealized gain of $4 million to other comprehensive income. GM is exposed to market risk from changes in foreign currency exchange rates, interest rates, and certain commodity and equity security prices. In the normal course of business, GM enters into a variety of foreign exchange, interest rate, and commodity forward contracts, swaps, and options, with the objective of minimizing exposure arising from these risks. A risk management control system is utilized to monitor foreign exchange, interest rate, commodity and equity price risks, and related hedge positions. - 8 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 8. Earnings Per Share Attributable to Common Stocks Earnings per share (EPS) attributable to each class of GM common stock was determined based on the attribution of earnings to each such class of common stock for the period divided by the weighted-average number of common shares for each such class outstanding during the period. Diluted EPS attributable to each class of GM common stock considers the impact of potential common shares, unless the inclusion of the potential common shares would have an antidilutive effect. The attribution of earnings to each class of GM common stock was as follows (dollars in millions): Three Months Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 ---- ---- ---- ---- Earnings (losses) attributable to common stocks Earnings attributable to $1-2/3 par value $574 $1,762 $870 $3,549 (Losses) attributable to Class H $(120) $(38) $(207) $(71) Earnings attributable to GM $1-2/3 par value common stock for the period represent the earnings attributable to all GM common stocks for the period, reduced by the Available Separate Consolidated Net Income (ASCNI) of Hughes for the respective period. Losses attributable to GM Class H common stock represent the ASCNI of Hughes, excluding the effects of GM purchase accounting adjustments arising from GM's acquisition of Hughes Aircraft Company (HAC), reduced by the amount of dividends accrued on the Series A Preferred Stock of Hughes (as an equivalent measure of the effect that GM's payment of dividends on the GM Series H 6.25% Automatically Convertible Preference Stock would have if paid by Hughes). The calculated losses used for computation of the ASCNI of Hughes are then multiplied by a fraction, the numerator of which is equal to the weighted-average number of shares of GM Class H common stock outstanding (876 million and 563 million during the three months ended June 30, 2001 and 2000, respectively, and 876 million and 488 million during the six months ended June 30, 2001 and 2000, respectively), and the denominator of which is a number equal to the weighted-average number of shares of GM Class H common stock which if issued and outstanding would represent a 100% interest in the earnings of Hughes (the "Average Class H dividend base"). The Average Class H dividend base was 1.3 billion for the second quarters of 2001 and 2000, and for the six month periods ended June 30, 2001 and 2000. The reconciliation of the amounts used in the basic and diluted earnings per share computations was as follows (dollars in millions except per share amounts): - 9 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 8. Earnings Per Share Attributable to Common Stocks (concluded) $1-2/3 Par Value Common Stock Class H Common Stock ----------------------------- -------------------- Per Share Per Share Income Shares Amount ASCNI Shares Amount ------ ------ ------ ----- ------ ------ Three Months Ended June 30, 2001 Net income (loss) $582 $(105) Less:Dividends on preference stocks 8 15 --- --- Basic EPS Income (loss) attributable to common stocks 574 549 $1.05 (120) 876 $(0.14) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 10 - - --- --- --- --- Diluted EPS Adjusted income (loss) attributable to common stocks $574 559 $1.03 $(120) 876 $(0.14) === === ==== === === ==== Three Months Ended June 30, 2000 Net income (loss) $1,779 $(28) Less:Dividends on preference stocks 17 10 ----- -- Basic EPS Income (loss) attributable to common stocks 1,762 590 $2.99 (38) 563 $(0.07) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 12 - - ----- --- -- --- Diluted EPS Adjusted income (loss) attributable to common stocks $1,762 602 $2.93 $(38) 563 $(0.07) ===== === ==== == === ==== Six Months Ended June 30, 2001 Net income (loss) $889 $(175) Less:Dividends on preference stocks 19 32 --- --- Basic EPS Income (loss) attributable to common stocks 870 549 $1.59 (207) 876 $(0.24) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 10 - - --- --- --- --- Diluted EPS Adjusted income (loss) attributable to common stocks $870 559 $1.56 $(207) 876 $(0.24) === === ==== === === ==== Six Months Ended June 30, 2000 Net income (loss) $3,587 $(53) Less:Dividends on preference stocks 38 18 ----- -- Basic EPS Income (loss) attributable to common stocks 3,549 605 $5.87 (71) 488 $(0.15) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 13 - - ----- --- -- --- Diluted EPS Adjusted income (loss) attributable to common stocks $3,549 618 $5.74 $(71) 488 $(0.15) ===== === ==== == === ====
Note 9. Depreciation and Amortization Depreciation and amortization included in cost of sales and other expenses for Automotive, Communications Services, and Other Operations was as follows (dollars in millions): Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2001 2000 2001 2000 ---- ---- ---- ---- Depreciation $1,137 $972 $2,168 $1,962 Amortization of special tools 573 661 1,138 1,315 Amortization of intangible assets 85 81 158 152 ----- ----- ----- ----- Total $1,795 $1,714 $3,464 $3,429 ===== ===== ===== ===== - 10 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 10. Segment Reporting GM's reportable operating segments within its Automotive, Communications Services, and Other Operations (ACO) business consist of General Motors Automotive (GMA) (which is comprised of four regions: GM North America (GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM Asia Pacific (GMAP)), Hughes, and Other. GM's reportable operating segments within its Financing and Insurance Operations (FIO) business consist of GMAC and Other. Selected information regarding GM's reportable operating segments were as follows (dollars in millions):
Total Other Total GMNA GME GMLAAM GMAP GMA Hughes Other ACO GMAC Financing FIO ---- --- ------ ---- --- ------ ----- --- ---- --------- --- For the Three Months Ended June 30, 2001 Net sales and revenues: External customers $28,609 $5,987 $1,692 $927 $37,215 $1,997 $519 $39,731 $6,422 $67 $6,489 Intersegment (492) 244 47 201 - 6 (6) - - - - ------ ----- ----- ----- ------ ----- --- ------ ----- -- ----- Total net sales and revenues $28,117 $6,231 $1,739 $1,128 $37,215 $2,003 $513 $39,731 $6,422 $67 $6,489 ====== ===== ===== ===== ====== ===== === ====== ===== == ===== Interest income (a) $293 $101 $(1) $4 $397 $19 $(250) $166 $666 $(113) $553 Interest expense $350 $79 $15 $2 $446 $42 $(337) $151 $2,050 $58 $2,108 Net income (loss) $521 $(154) $31 $(121) $277 $(156)(b) $(82) $39 $449 $(11) $438 Segment assets $90,185 $19,186 $4,472 $903 $114,746 $19,081 (c) $(89) $133,738 $168,850 $1,075 $169,925 For the Three Months Ended June 30, 2000 Net sales and revenues: External customers $30,799 $6,908 $1,422 $740 $39,869 $2,251 $750 $42,870 $5,755 $118 $5,873 Intersegment (230) 234 (54) 50 - 9 (9) - - - - ------ ----- ----- ---- ------ ----- --- ------ ----- --- ----- Total net sales and revenues $30,569 $7,142 $1,368 $790 $39,869 $2,260 $741 $42,870 $5,755 $118 $5,873 ====== ===== ===== === ====== ===== === ====== ===== === ===== Interest income (a) $139 $114 $8 $3 $264 $19 $(126) $157 $539 $(126) $413 Interest expense $290 $107 $41 $1 $439 $58 $(275) $222 $2,027 $109 $2,136 Net income (loss) $1,411 $166 $10 $(123) $1,464 $(64)(b) $(69) $1,331 $395 $25 $420 Segment assets $87,397 $22,387 $4,463 $1,084 $115,331 $19,940 (c) $(2,436) $132,835 $157,482 $1,032 $158,514 (a) Interest income is included in net sales and revenues from external customers. (b) The amount reported for Hughes excludes amortization of GM purchase accounting adjustments related to GM's acquisition of HAC of $1 million and $5 million for 2001 and 2000, respectively. (c) The amount reported for Hughes excludes the unamortized GM purchase accounting adjustments of approximately $387 million and $395 million, at June 30, 2001 and 2000, respectively, related to GM's acquisition of HAC.
- 11- GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded (Unaudited) Note 10. Segment Reporting (concluded)
Total Other Total GMNA GME GMLAAM GMAP GMA Hughes Other ACO GMAC Financing FIO ---- --- ------ ---- --- ------ ----- --- ---- --------- --- For the Six Months Ended June 30, 2001 Net sales and revenues: External customers $54,189 $11,987 $3,053 $1,765 $70,994 $3,908 $993 $75,895 $12,791 $149 $12,940 Intersegment (966) 512 81 373 - 12 (12) - - - - ------ ------ ----- ----- ------ ----- --- ------ ------ --- ------ Total net sales and revenues $53,223 $12,499 $3,134 $2,138 $70,994 $3,920 $981 $75,895 $12,791 $149 $12,940 ====== ====== ===== ===== ====== ===== === ====== ====== === ====== Interest income (a) $562 $184 $- $8 $754 $43 $(475) $322 $1,304 $(231) $1,073 Interest expense $705 $139 $39 $3 $886 $93 $(666) $313 $4,039 $118 $4,157 Net income (loss) $627 $(238) $36 $(142) $283 $(260)(b) $(201) $(178) $914 $(22) $892 For the Six Months Ended June 30, 2000 Net sales and revenues: External customers $60,528 $13,478 $2,671 $1,523 $78,200 $4,358 $1,507 $84,065 $11,376 $160 $11,536 Intersegment (715) 498 87 130 - 20 (20) - - - - ------ ------ ----- ----- ------ ----- ----- ------ ------ --- ------ Total net sales and revenues $59,813 $13,976 $2,758 $1,653 $78,200 $4,378 $1,487 $84,065 $11,376 $160 $11,536 ====== ====== ===== ===== ====== ===== ===== ====== ====== === ====== Interest income (a) $262 $214 $14 $5 $495 $37 $(214) $318 $1,022 $(236) $786 Interest expense $556 $193 $62 $1 $812 $103 $(477) $438 $3,937 $211 $4,148 Net income (loss) $2,700 $387 $11 $(116) $2,982 $(141)(b) $(105) $2,736 $792 $6 $798 (a) Interest income is included in net sales and revenues from external customers. (b) The amount reported for Hughes excludes amortization of GM purchase accounting adjustments related to GM's acquisition of HAC of $2 million and $11 million for 2001 and 2000, respectively.
* * * * * * - 12- GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the December 31, 2000 consolidated financial statements and notes thereto along with the MD&A included in General Motors Corporation's (the "Corporation" or "GM") 2000 Annual Report on Form 10-K, and all other GM, Hughes Electronics Corporation (Hughes), and General Motors Acceptance Corporation (GMAC) filings with the Securities and Exchange Commission. All earnings per share amounts included in the MD&A are reported as diluted. GM presents separate financial information for the following businesses: Automotive, Communications Services, and Other Operations and Financing and Insurance Operations. GM's reportable operating segments within its Automotive, Communications Services, and Other Operations business consist of: . GM Automotive (GMA), which is comprised of four regions: GM North America (GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM Asia Pacific (GMAP); . Hughes, which includes activities relating to digital entertainment, information and communications services, and satellite-based private business networks; and . Other, which includes the design, manufacturing, and marketing of locomotives and heavy-duty transmissions, the elimination of intersegment transactions, certain non-segment specific revenues and expenditures, and certain corporate activities. GM's reportable operating segments within its Financing and Insurance Operations business consist of GMAC and Other Financing, which includes financing entities operating in the U.S., Canada, Brazil, Germany, Sweden, and Mexico that are not associated with GMAC. The disaggregated financial results for GMA have been prepared using a management approach, which is consistent with the basis and manner in which GM management internally disaggregates financial information for the purpose of assisting in making internal operating decisions. In this regard, certain common expenses were allocated among regions less precisely than would be required for stand-alone financial information prepared in accordance with accounting principles generally accepted in the U.S. (GAAP) and certain expenses (primarily certain U.S. taxes related to non-U.S. operations) were included in the Automotive, Communications Services, and Other Operations' Other segment. The financial results represent the historical information used by management for internal decision making purposes; therefore, other data prepared to represent the way in which the business will operate in the future, or data prepared on a GAAP basis, may be materially different. RESULTS OF OPERATIONS For the second quarter of 2001, consolidated net income for the Corporation was $477 million, or $1.03 per share of GM $1-2/3 par value common stock, compared with $1.8 billion, or $2.93 per share of GM $1-2/3 par value common stock for the second quarter of 2000. GM's consolidated net income for the six months ended June 30, 2001 was $714 million, or $1.56 per share of GM $1-2/3 par value common stock, compared with $3.5 billion, or $5.74 per share of GM $1-2/3 par value common stock for the six months ended June 30, 2000. Effective January 1, 2001, GM adopted Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which requires that all derivatives be recorded at fair value on the balance sheet and establishes criteria for designation and effectiveness of derivative transactions for which hedge accounting is applied. As a result of the adoption of this standard as of January 1, 2001, GM recorded a transition adjustment representing a one-time after-tax charge to income totaling $23 million, as well as an after-tax unrealized gain of $4 million to other comprehensive income. For the first quarter of 2001, the net effect of the initial adoption of SFAS No. 133 resulted in an increase to income for the Corporation of $12 million after-tax (GMNA $(14) million, GME $2 million, GMLAAM $(1) million, GMAP $(1) million, Hughes $(8) million, and GMAC $34 million). This amount represents the initial transition adjustment recorded as a charge to income of $23 million and the amount of the initial transition adjustment originally recorded in other comprehensive income which was reclassified into earnings during the first quarter. These amounts were primarily recorded in cost of sales for Automotive, Communications Services, and Other Operations and in operating and other expenses and interest expense for Financing and Insurance Operations. - 13 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Vehicle Unit Deliveries of Cars and Trucks Three Months Ended June 30, ------------------------------------------------------ 2001 2000 GM as GM as a % of a % of Industry GM Industry Industry GM Industry -------- --- -------- -------- --- -------- (units in thousands) GMNA United States Cars 2,324 609 26.2% 2,450 695 28.4% Trucks 2,343 666 28.4% 2,417 660 27.3% ----- ----- ----- ----- Total United States 4,667 1,275 27.3% 4,867 1,355 27.8% Canada, Mexico, and Other 742 186 25.0% 741 196 26.5% ----- ----- ----- ----- Total GMNA 5,409 1,461 27.0% 5,608 1,551 27.7% GME 5,275 502 9.5% 5,386 516 9.6% GMLAAM 980 174 17.8% 901 143 15.9% GMAP 3,143 116 3.7% 3,063 118 3.8% ------ ----- ------ ----- Total Worldwide 14,807 2,253 15.2% 14,958 2,328 15.6% ====== ===== ====== ===== Six Months Ended June 30, ------------------------------------------------------ 2001 2000 GM as GM as a % of a % of Industry GM Industry Industry GM Industry -------- --- -------- -------- --- -------- (units in thousands) GMNA United States Cars 4,413 1,213 27.5% 4,677 1,339 28.6% Trucks 4,460 1,258 28.2% 4,682 1,299 27.7% ----- ----- ----- ----- Total United States 8,873 2,471 27.8% 9,359 2,638 28.2% Canada, Mexico, and Other 1,373 348 25.3% 1,360 355 26.1% ----- ------ ----- ------ Total GMNA 10,246 2,819 27.5% 10,719 2,993 27.9% GME 10,521 999 9.5% 10,962 1,038 9.5% GMLAAM 1,960 338 17.3% 1,783 282 15.8% GMAP 6,565 245 3.7% 6,518 233 3.6% ------ ----- ------ ----- Total Worldwide 29,292 4,401 15.0% 29,982 4,546 15.2% ====== ===== ====== ===== Wholesale Sales Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2001 2000 2001 2000 -------- -------- -------- -------- (units in thousands) GMNA Cars 646 806 1,239 1,537 Trucks 716 770 1,348 1,528 ----- ----- ----- ----- Total GMNA 1,362 1,576 2,587 3,065 ----- ----- ----- ----- GME Cars 473 505 914 965 Trucks 22 34 49 73 --- --- --- ----- Total GME 495 539 963 1,038 --- --- --- ----- GMLAAM Cars 127 105 238 197 Trucks 60 49 108 92 --- --- --- --- Total GMLAAM 187 154 346 289 --- --- --- --- GMAP Cars 57 42 104 81 Trucks 43 53 135 130 --- -- --- --- Total GMAP 100 95 239 211 --- -- --- --- Total Worldwide 2,144 2,364 4,135 4,603 ===== ===== ===== ===== - 14 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMA Financial Review GMA's income and net margin, adjusted to exclude a net charge of $133 million which represents General Motors' share of severance payments and asset impairments that were part of the previously announced restructuring of its affiliate Isuzu Motors Ltd. (the Isuzu restructuring charges), was $410 million and 1.1% on net sales and revenues of $37.2 billion for the second quarter of 2001. This compares with income of $1.5 billion and a net margin of 3.7% on net sales and revenues of $39.9 billion for the prior year quarter. For the six months ended June 30, 2001 income and net margin, adjusted to exclude the Isuzu restructuring charges and the net effect of the initial adoption of SFAS No. 133 during the first quarter of 2001, decreased to $430 million and 0.6% on net sales and revenues of $71.0 billion compared with income of $3.0 billion and a net margin of 3.8% on net sales and revenues of $78.2 billion for the prior year six-month period. The decrease in adjusted second quarter and year-to-date 2001 income and net sales and revenues was primarily due to a decrease in wholesale sales volumes and pricing pressures in North America and Europe. These unfavorable conditions were partially offset by cost structure improvements, also primarily in North America and Europe. GMNA's income was $521 million for the second quarter of 2001, compared with $1.4 billion for the prior year quarter. Income for the six months ended June 30, 2001, adjusted to exclude the net effect of the initial adoption of SFAS No. 133 during the first quarter of 2001, totaled $641 million compared with $2.7 billion for the prior year six-month period. The decrease in GMNA's second quarter and year-to-date 2001 income was primarily the result of lower wholesale sales volumes and unfavorable net price, partially offset by improvements in manufacturing costs due to performance efficiencies and material cost savings. Net price, which comprehends the percent increase/(decrease) a customer pays in the current period for the same comparably equipped vehicle produced in the previous year's period, was unfavorable for the quarter at (0.8)% year-over-year. GME's loss was $154 million for the second quarter of 2001, compared with income of $166 million for the prior year quarter. Losses for the six months ended June 30, 2001, adjusted to exclude the net effect of the initial adoption of SFAS No. 133 during the first quarter of 2001, totaled $240 million compared with income of $387 million for the prior year six-month period. The decrease in second quarter and year-to-date 2001 earnings was partially due to a continued shift in sales mix from larger, more profitable vehicles to the smaller, less profitable entries, as well as a decrease in wholesale sales volume from the continued weakening of the European industry and a continued increase in competitive pricing pressure. GMLAAM's income was $31 million for the second quarter of 2001, compared with income of $10 million for the prior year quarter. Income for the six months ended June 30, 2001, adjusted to exclude the net effect of the initial adoption of SFAS No. 133 during the first quarter of 2001, totaled $37 million compared with $11 million for the prior year six-month period. The increase in second quarter and year-to-date 2001 earnings was primarily due to an increase in wholesale sales volumes and nominal price increases, partially offset by increases in material and manufacturing costs. GMAP's income for the second quarter of 2001, adjusted to exclude the Isuzu restructuring charges, was $12 million compared with a loss of $123 million for the prior year quarter. Losses for the six months ended June 30, 2001, adjusted to exclude the Isuzu restructuring charges and the net effect of the initial adoption of SFAS No. 133 during the first quarter of 2001, totaled $8 million compared with a loss of $116 million for the prior year six-month period. The increase in second quarter and year-to-date 2001 earnings was primarily due to equity income improvements from several joint ventures in the region as well as an increase in wholesale volumes and prices, partially offset by increases in material costs. Hughes Financial Review Hughes' net sales and revenues decreased to $2.0 billion and $3.9 billion in the second quarter and first six months of 2001, respectively, compared with $2.3 billion and $4.4 billion in the comparable periods in 2000. The decrease in second quarter and year-to-date 2001 net sales and revenues resulted from decreased revenues at Hughes Network Systems (HNS) and PanAmSat Corporation (PanAmSat), as well as the sale of the satellite systems manufacturing businesses (Satellite Businesses) to The Boeing Company on October 6, 2000. The decrease in net sales and revenues at HNS was primarily due to decreased shipments of DIRECTV receiving equipment due primarily to DIRECTV completing the conversion of PRIMESTAR By DIRECTV customers to the high-power DIRECTV service in 2000 and a decrease in manufacturing subsidiaries. The decrease in net sales and revenues at PanAmSat was primarily due to new outright sales and sales-type lease transactions executed during the second quarter and first six months of 2000 for which there were no comparable transactions in the second quarter and first six months of 2001. These decreases were partially offset by an increase in net sales and revenues at the Direct-To-Home businesses that resulted from the addition of approximately 1.7 million net new subscribers in the United States and Latin America since June 30, 2000. - 15 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Hughes Financial Review (concluded) Hughes' loss was $156 million for the second quarter of 2001, compared with a loss of $64 million for the prior year quarter. Losses for the six months ended June 30, 2001, adjusted to exclude the net effect of the initial adoption of SFAS No. 133 during the first quarter of 2001, totaled $252 million compared with a loss of $141 million for the prior year six-month period. The increase in the second quarter and year-to-date 2001 losses was primarily due to higher marketing costs at the Direct-To-Home businesses, increased depreciation and amortization expense due to capital expenditures for property and satellites since the second quarter of 2000 and a change in the useful life of the Galaxy VIII-i satellite that resulted from the failure of its primary propulsion system during the third quarter of 2000, and the sale of the Satellite Businesses in October 2000. These increases were partially offset by the write-off of the discontinued DIRECTV Japan business in 2000. The increase in adjusted loss for the first six months of 2001 was also impacted by a decrease in income tax benefit of $152 million due to lower pre-tax losses in 2001 as well as the additional tax benefit in 2000 associated with the write-off of Hughes' investment in DIRECTV Japan. Due to rapid consolidation in the media and telecommunications industries, GM is now considering alternative strategic transactions involving Hughes and other participants in those industries. Any such transaction might involve the separation of Hughes from GM. GM's objective in this effort is to maximize the enterprise value of Hughes for the long-term benefit of the holders of GM's Class H common stock and GM $1-2/3 par value common stock through a structure that maintains the financial strength of GM. No assurance can be given that any transaction will be agreed upon with any party or that other conditions, including any stockholder or regulatory approvals will be satisfied. GMAC Financial Review GMAC's income was $449 million on net sales and revenues of $6.4 billion for the second quarter of 2001, compared with $395 million on net sales and revenues of $5.8 billion for the prior year quarter. Income for the first six months of 2001, adjusted to exclude the net effect of the initial adoption of SFAS No. 133 during the first quarter of 2001, was $880 million on net sales and revenues of $12.8 billion, compared with $792 million on net sales and revenues of $11.4 billion for the prior year period. Income from automotive and other financing operations totaled $360 million for the second quarter of 2001, compared with $278 million for the prior year quarter. The strong results can be attributed to higher asset levels, increased securitization activity, and the positive impact of lower short term interest rates, partially offset by higher credit losses and lower off-lease residual values. Income from insurance operations totaled $41 million for the second quarter of 2001, compared with $57 million for the prior year quarter. The decrease was primarily due to lower capital gains. Income from mortgage operations totaled $48 million for the second quarter of 2001, compared with $60 million for the prior year quarter. The decrease in earnings from mortgage operations was primarily due to the lower interest rate environment, which led to an acceleration of loan prepayments as more customers refinanced their mortgages requiring a write-down of mortgage servicing rights, partially offset by the effect of a significant increase in mortgage originations. LIQUIDITY AND CAPITAL RESOURCES Automotive, Communications Services, and Other Operations --------------------------------------------------------- At June 30, 2001, cash, marketable securities, and $3.0 billion of assets of the Voluntary Employees' Beneficiary Association (VEBA) trust invested in fixed-income securities totaled $12.2 billion, compared with $13.3 billion at December 31, 2000 and June 30, 2000, respectively. The decrease from December 31, 2000 was primarily due to an increase in accounts receivable and inventory levels, partially offset by an increase in accounts payable. In addition, GM's purchase of an additional 10% equity stake in Suzuki, an increase in net capital expenditures, and the redemption of preferred securities contributed to the decrease in cash. Total assets in the VEBA trust used to pre-fund part of GM's other postretirement benefits liability approximated $5.2 billion at June 30, 2001, compared with $6.7 billion at December 31, 2000 and $6.9 billion at June 30, 2000. GM previously indicated that it had a goal of maintaining $13.0 billion of cash and marketable securities in order to continue funding product development programs throughout the next downturn in the business cycle. This $13.0 billion target includes cash to pay certain costs that were pre-funded in part by VEBA contributions. Long-term debt was $8.7 billion at June 30, 2001, compared with $7.4 billion at December 31, 2000 and $8.5 billion at June 30, 2000. The ratio of long-term debt to long-term debt and GM's net assets of Automotive, Communications Services, and Other Operations was 36.1% at June 30, 2001, compared with 30.8% at December 31, 2000 and 34.5% at June 30, 2000. The ratio of long-term debt and short-term loans payable to the total of this debt and GM's net assets of Automotive, Communications Services, and Other Operations was 41.9% at June 30, 2001, compared with 36.6% at December 31, 2000 and 40.6% at June 30, 2000. - 16 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Automotive, Communications Services, and Other Operations (concluded) --------------------------------------------------------- Net liquidity, calculated as cash and marketable securities less the total of loans payable and long-term debt, was $(1.9) billion at June 30, 2001, compared with $662 million at December 31, 2000 and $(738) million at June 30, 2000. Financing and Insurance Operations ---------------------------------- At June 30, 2001, GMAC owned assets and serviced automotive receivables totaling $193.0 billion, compared with $185.6 billion at December 31, 2000 and $173.3 billion at June 30, 2000. The increase from December 31, 2000 was primarily the result of increases in serviced retail receivables, other assets, real-estate mortgages held for sale, commercial and other loan receivables, investments in securities, due and deferred from receivable sales, mortgage servicing rights, and mortgage lending receivables. These increases were partially offset by a decline in net operating lease assets, serviced wholesale receivables, mortgage loans held for investment, and factored receivables. Consolidated automotive and commercial finance receivables serviced by GMAC, including sold receivables, totaled $116.8 billion at June 30, 2001, compared with $112.5 billion at December 31, 2000 and $104.5 billion at June 30, 2000. The increase from December 31, 2000 was primarily the result of a $4.8 billion increase in serviced retail receivables, a $1.3 billion increase in commercial and other loan receivables, partially offset by a $2.0 billion decrease in serviced wholesale receivables. Continued GM-sponsored retail financing incentives contributed to the rise in serviced retail receivables. The increase in commercial and other loan receivables was primarily attributable to increases in secured notes as well as continued growth at Commercial Credit LLC and GMAC Business Credit LLC. The decrease in serviced wholesale receivables was due to reduced dealer inventory levels at June 30, 2001 compared with December 31, 2000. At June 30, 2001, GMAC's total borrowings were $131.4 billion, compared with $133.4 billion at December 31, 2000 and $126.7 billion at June 30, 2000. GMAC's ratio of total debt to total stockholder's equity at June 30, 2001 was 8.9:1, compared with 9.5:1 at December 31, 2000 and 9.6:1 at June 30, 2000. Book Value Per Share Book value per share is determined based on the liquidation rights of the various classes of common stock. Book value per share of GM $1-2/3 par value common stock was $38.85 at June 30, 2001, compared with $39.36 at December 31, 2000 and $38.44 at June 30, 2000. Book value per share of GM Class H common stock, adjusted to reflect the GM Class H common stock split, was $7.77 at June 30, 2001, compared with $7.87 at December 31, 2000 and $7.69 at June 30, 2000. Dividends Dividends may be paid on common stocks only when, as, and if declared by the GM Board in its sole discretion. The amount available for the payment of dividends on each class of common stock will be reduced on occasion by dividends paid on that class and will be adjusted on occasion for changes to the amount of surplus attributed to the class resulting from the repurchase or issuance of shares of that class. GM's policy is to distribute dividends on its $1-2/3 par value common stock based on the outlook and indicated capital needs of the business. On May 1, 2001, the GM Board declared a quarterly cash dividend of $0.50 per share on GM $1-2/3 par value common stock, paid June 9, 2001, to holders of record on May 11, 2001. With respect to GM Class H common stock, the GM Board determined that it will not pay any cash dividends at this time in order to allow the earnings of Hughes to be retained for investment in its business. A quarterly dividend of $8.7793 per share for the GM Series H 6.25% Automatically Convertible Preference Stock was paid on August 1, 2001, to the sole holder of record on July 2, 2001. - 17 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Employment and Payrolls Worldwide employment at June 30, (in thousands) 2001 2000 ---- ---- GMNA 207 218 GME 76 90 GMLAAM 25 24 GMAP 11 11 GMAC 29 27 Hughes 11 18 Other 13 13 ---- ---- Total employees 372 401 === === Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2001 2000 2001 2000 ---- ---- ---- ---- Worldwide payrolls - (in billions) $5.2 $5.8 $10.2 $11.4 === === ==== ==== New Accounting Standards On July 20, 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations". SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Goodwill and certain intangible assets will remain on the balance sheet and not be amortized. On an annual basis, and when there is reason to suspect that their values have been diminished or impaired, these assets must be tested for impairment, and write-downs may be necessary. The Company has not determined the impact, if any, that this statement will have on its consolidated financial position or results of operations. Also on July 20, 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was issued by the FASB. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of this statement. The Company is required to implement SFAS No. 142 on January 1, 2002 and it has not determined the impact, if any, that this statement will have on its consolidated financial position or results of operations. * * * * * * * PART II ITEM 1. LEGAL PROCEEDINGS (a) Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Corporation became, or was, a party during the quarter ended June 30, 2001, or subsequent thereto, but before the filing of this report are summarized below: With respect to the previously reported putative class actions alleging defects in vehicle paint, the Corporation was served with another putative class action on May 24, 2001, filed in the Circuit Court, Third Judicial Circuit, Madison County, Illinois (Rose Ann Hayes v General Motors Corporation and Albrecht-Hamlin Chevrolet, Inc). The named plaintiff purports to represent a class of "all person in the United states who (a) are the original and current owner or lessee of a 1989-1997 model year GM vehicle that currently exhibits topcoat delamination; or (b) are the original and current owner or lessee of a 1989-1997 model year GM vehicle, and paid to repair topcoat delamination on that vehicle; or (c) were the original owner or lessee of a 1989-1997 model year GM vehicle, and paid to repair topcoat delamination on that vehicle." The Complaint alleges that GM failed to disclose the possibility that vehicles would experience "topcoat delamination" and asserts claims for common law and statutory "fraud by omission" based on that factual predicate The case is in its most preliminary stage and no determination has been made as to whether the case may proceed as a class action. - 18- GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS (concluded) On May 18, 2001, in Oklahoma State Court, plaintiffs Cable Connection, Inc., TV Options, Inc., Swartzel Electronics, Inc. and Orbital Satellite, Inc. filed a class action complaint against DIRECTV and Hughes. All four plaintiffs are DIRECTV dealers (three residential and one commercial), who allege claims ranging from breach of contract to fraud, promissory estoppel, antitrust and unfair competition claims. The plaintiffs seek unspecified damages and unjunctive relief. They claim to be bringing the complaint on behalf of all DIRECTV dealers, including former PRIMESTAR and USSB dealers. DIRECTV and Hughes have filed a motion to stay and compel arbitration with each of the individual plaintiffs pursuant to the arbitration clause in each of the dealer's contracts with DIRECTV, and will vigorously defend against these allegations. From August 6 through 9, 2001, five purported class actions (Wurzel v. Cornelius, et al.; Selden Realty Association, Inc.v. Hughes Electronics Corporation, et al.; Weilheimer v. Cornelius, et al, Kopelman v. Cornelius, et al, and Lerner v. Cornelius, et al.) were filed on behalf of owners of GM Class H shares against Hughes Electronics Corporation, General Motors Corporation and the Hughes directors in Delaware Chancery Court. A sixth purported class action was filed against Hughes and the Hughes directors only in Superior Court in Los Angeles, California (Salamone v. Hughes Electronics Corporation, et al.). The lawsuits allege that News Corp has been favored as a bidder to purchase Hughes over EchoStar to benefit GM in violation of alleged fiduciary duties. GM, Hughes and the director defendants believe these actions are without merit and intend to vigorously defend the lawsuits. As previously reported, General Electric Capital Corporation ("GECC") and DIRECTV entered into a contract on July 31, 1995, in which GECC agreed to establish and manage a private label consumer credit program for consumer purchases of hardware and related DIRECTV(R) programming. Under the contract, GECC also agreed to provide certain related services to DIRECTV, including credit risk scoring, billing and collections services. DIRECTV agreed to act as a surety for loans complying with the terms of the contract. Hughes guaranteed DIRECTV's performance under the contract. A complaint and counterclaim were filed by the parties in the U.S. District Court for the District of Connecticut concerning GECC's performance and DIRECTV's obligation to act as a surety. A trial commenced on June 12, 2000 with GECC presenting evidence to the jury for damages of $157 million. DIRECTV sought damages from GECC of $45 million. On July 21, 2000, the jury returned a verdict in favor of GECC and awarded contract damages in the amount of $133.0 million. The trial judge issued an order granting GECC $48.5 million in interest under Connecticut's offer-of-judgment statute. With this order, the total judgment entered in GECC's favor was $181.5 million. Hughes and DIRECTV filed a notice of appeal on December 29, 2000. The appeal briefs have been submitted and oral argument is expected in mid-September 2001. Hughes and DIRECTV believe that it is reasonably possible that the jury verdict will be overturned and a new trial granted. However, if Hughes were not to prevail in this matter, Hughes could be required to make a cash payment to GECC that would be material to Hughes' consolidated financial statements. (b) Previously reported legal proceedings which have been terminated, either during the quarter ended June 30, 2001, or subsequent thereto, but before the filing of this report are summarized below: On June 16, 2000 the Michigan Department of Environmental Quality ("MDEQ") proposed a settlement payment in excess of $100,000 for alleged violations of Federal and State air regulations at the Powertrain Saginaw Metal Casting Operations plant in Saginaw, Michigan. The alleged violations involved the lack of proper approvals and are not related to any degradation of the environment. GM has entered into a Consent Order with MDEQ providing for a settlement payment of $113,551 and GM's agreement to retire certain emission credits. * * * * * * * - 19 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a) The annual meeting of stockholders of the Registrant was held on June 5, 2001. At that meeting, the following matters were submitted to a vote of the stockholders of General Motors Corporation: 2001 General Motors Annual Meeting Final Voting Results (All classes of common stock) Proposal Voting Results -------- -------------- Votes* Percent** ------- --------- Item No. 1 Nomination and Election of Directors The Judges subscribed and delivered a certificate reporting that the following nominees for directors had received the number of votes* set opposite their respective names. Percy N. Barnevik For 573,168,914 97.9% Withheld 12,401,942 2.1 John H. Bryan For 572,996,632 97.9 Withheld 12,574,224 2.1 Thomas E. Everhart For 572,850,898 97.8 Withheld 12,719,958 2.2 George M. C. Fisher For 573,075,562 97.9 Withheld 12,495,294 2.1 Nobuyuki Idei For 573,157,584 97.9 Withheld 12,413,272 2.1 Karen Katen For 573,177,514 97.9 Withheld 12,393,342 2.1 J. Willard Marriott, Jr. For 567,606,022 96.9 Withheld 17,964,834 3.1 Eckhard Pfeiffer For 573,023,176 97.9 Withheld 12,547,680 2.1 John F. Smith, Jr. For 572,937,961 97.9 Withheld 12,632,895 2.1 G. Richard Wagoner, Jr. For 573,081,090 97.8 Withheld 12,489,766 2.2 Lloyd D. Ward For 572,947,661 97.8 Withheld 12,623,195 2.2 Item No. 2 A proposal of the Board of For 568,018,041 97.0% Directors that the stockholders Against 13,318,842 2.3 ratify the selection of Abstain 4,233,973 0.7 Deloitte & Touche LLP as independent public accountants for the year 2001. Item No. 3 A stockholder proposal that For 25,578,653 5.3% GM provide each year a detailed Against 401,971,911 82.5 report of accidents caused by Abstain 59,527,914 12.2 driver distraction due to driver use of the internet or cell phones in General Motors cars. Item No. 4 A stockholder proposal that For 24,688,891 5.1% the Board of Directors take Against 453,473,021 93.1 necessary steps to nominate Abstain 8,916,568 1.8 at least two candidates for each open board position. Item No. 5 A stockholder proposal to For 31,809,541 6.5% establish policies on slave or Against 428,942,430 88.1 forced labor in China. Abstain 26,326,507 5.4 - 20 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - continued Proposal Voting Results -------- -------------- Votes* Percent** ------- --------- Item No. 6 A stockholder proposal that For 25,943,416 5.3% stockholders have the Against 452,051,417 92.8 opportunity for an advisory Abstain 9,083,646 1.9 vote on the members of the board audit committee. Item No. 7 A stockholder proposal that For 56,150,087 11.5% GM's spin-off companies retain Against 420,258,198 86.3 GM's good corporate governance Abstain 10,670,193 2.2 standards. Item No. 8 A stockholder proposal to For 198,659,893 40.8% request stockholder vote to Against 280,523,112 57.6 be required to adopt or Abstain 7,895,473 1.6 maintain a poison pill. Item No. 9 A stockholder proposal to For 26,960,559 5.5% double director compensation Against 450,673,710 92.5 in years when market share Abstain 9,444,211 2.0 increases. Item No. 10 A stockholder proposal For 63,533,448 13.0% requesting a transition to Against 408,266,011 83.8 independent directors Abstain 15,279,019 3.2 for each key board committee seat as openings occur. Item No. 11 A stockholder proposal For 92,301,920 19.0% requesting opportunity to Against 379,684,312 78.0 vote on Golden Parachutes. Abstain 15,092,248 3.0 Item No. 12 A stockholder proposal that GM For 19,844,604 4.1% engage the services of a Against 459,623,016 94.4 nationally recognized Abstain 7,610,859 1.5 investment banker. * Numbers represent the aggregate voting power of all votes cast as of June 5, 2001 with holders of GM $1-2/3 par value common stock casting one vote per share and holders of GM Class H common stock casting 0.2 vote per share, which represents the applicable voting power after the three-for-one stock split of the GM Class H common stock in the form of a 200% stock dividend, paid on June 30, 2000 to GM Class H common stockholders of record on June 13, 2000. ** Percentages represent the aggregate voting power of both classes of GM common stock cast for each item. * * * * * * - 21- GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit Number Exhibit Name Page No. ------ ----------------------------------------------- -------- 99 Hughes Electronics Corporation Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations 23 (b) REPORTS ON FORM 8-K. Ten reports on Form 8-K, dated April 3, 2001 (2), April 6, 2001, April 18, 2001 (2), April 20, 2001, May 1, 2001, May 25, 2001 (2), and June 1, 2001 were filed during the quarter ended June 30, 2001 reporting matters under Item 5, Other Events. Two reports on Form 8-K dated April 17, 2001 and June 11, 2001 were submitted to the Securities and Exchange Commission under Item 9, Regulation FD Disclosure. Pursuant to General Instruction B of Form 8-K the report submitted under Item 9 on June 11, 2001 is not deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 and we are not subject to the liabilities of that section. We are not incorporating, and will not incorporate by reference that report into a filing under the Securities Act or the Exchange Act. * * * * * * SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GENERAL MOTORS CORPORATION -------------------------- (Registrant) Date: August 14, 2001 /s/Peter R. Bible --------------------- ------------------------------------------ (Peter R. Bible, Chief Accounting Officer) - 22-