10-Q 1 september01-10q111301.txt GMC 3RD QUARTER 10-Q 2001 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 September 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 October 31, 2001, there were outstanding 555,504,137 shares of the issuer's $1-2/3 par value common stock and 877,316,752 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 Nine Months Ended September 30, 2001 and 2000 3 Consolidated Balance Sheets as of September 30, 2001, December 31, 2000, and September 30, 2000 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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 14 Part II - Other Information (Unaudited) Item 1. Legal Proceedings 21 Item 6. Exhibits and Reports on Form 8-K 23 Signatures 23 Exhibit 99 Hughes Electronics Corporation Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) 24 - 2 - PART I GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2001 2000 2001 2000 ---- ---- ---- ---- (dollars in millions except per share amounts) GENERAL MOTORS CORPORATION AND SUBSIDIARIES Total net sales and revenues $42,475 $42,690 $131,310 $138,291 ------ ------ ------- ------- Cost of sales and other expenses (Note 7) 34,866 33,678 106,557 108,888 Selling, general, and administrative expenses 5,926 5,266 17,171 15,604 Interest expense 1,968 2,480 6,438 7,066 ------ ------ ------- ------- Total costs and expenses 42,760 41,424 130,166 131,558 ------ ------ ------- ------- Income (loss) before income taxes and minority interests (285) 1,266 1,144 6,733 Income tax expense 76 436 588 2,148 Equity income/(loss) and minority interests (7) (1) (210) (222) ---- ---- ---- ----- Net income (loss) (368) 829 346 4,363 Dividends on preference stocks (25) (27) (76) (83) ---- ---- ---- ----- Earnings attributable to common stocks $(393) $802 $270 $4,280 === === === ===== Basic earnings (losses) per share attributable to common stocks (Note 6) Earnings per share attributable to $1-2/3 par value $(0.41) $1.57 $1.18 $7.51 ==== ==== ==== ==== Earnings per share attributable to Class H $(0.19) $(0.09) $(0.43) $(0.23) ==== ==== ==== ==== Earnings (losses) per share attributable to common stocks assuming dilution (Note 6) Earnings per share attributable to $1-2/3 par value $(0.41) $1.55 $1.16 $7.37 ==== ==== ==== ==== Earnings per share attributable to Class H $(0.19) $(0.09) $(0.43) $(0.23) ==== ==== ==== ==== Reference should be made to the notes to consolidated financial statements. - 3 - CONSOLIDATED STATEMENTS OF INCOME - concluded (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2001 2000 2001 2000 ---- ---- ---- ---- (dollars in millions) AUTOMOTIVE, COMMUNICATIONS SERVICES, AND OTHER OPERATIONS Total net sales and revenues $36,297 $36,602 $112,192 $120,667 ------ ------ ------- ------- Cost of sales and other expenses (Note 7) 32,861 31,827 100,537 103,408 Selling, general, and administrative expenses 4,107 3,765 11,837 11,304 ------ ------ ------- ------- Total costs and expenses 36,968 35,592 112,374 114,712 ------ ------ ------- ------- Interest expense 216 210 529 648 Net expense from transactions with Financing and Insurance Operations 97 197 315 508 --- --- ----- ----- Income (loss) before income taxes and minority interests (984) 603 (1,026) 4,799 Income tax (benefit) expense (181) 193 (194) 1,433 Equity income/(loss) and minority interests (1) 13 (150) (207) --- --- --- ----- Net income (loss) - Automotive, Communications Services, and Other Operations $(804) $423 $(982) $3,159 === === === ===== FINANCING AND INSURANCE OPERATIONS Total revenues $6,178 $6,088 $19,118 $17,624 ----- ----- ------ ------ Interest expense 1,752 2,270 5,909 6,418 Depreciation and amortization expense 1,477 1,474 4,429 4,480 Operating and other expenses 1,774 1,450 5,220 4,147 Provision for financing and insurance losses 573 428 1,705 1,153 ----- ----- ------ ------ Total costs and expenses 5,576 5,622 17,263 16,198 ----- ----- ------ ------ Net income from transactions with Automotive, Communications Services, and Other Operations 97 197 315 508 --- --- --- ----- Income before income taxes and minority interests 699 663 2,170 1,934 Income tax expense 257 243 782 715 Equity income/(loss) and minority interests (6) (14) (60) (15) --- --- ----- ----- Net income - Financing and Insurance Operations $436 $406 $1,328 $1,204 === === ===== ===== 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 Sept.30, Sept.30, 2001 Dec. 31, 2000 GENERAL MOTORS CORPORATION AND SUBSIDIARIES (Unaudited) 2000 (Unaudited) --------- ----- --------- ASSETS (dollars in millions) Automotive, Communications Services, and Other Operations Cash and cash equivalents $7,899 $9,119 $9,351 Marketable securities 829 1,161 1,176 ----- ------ ------ Total cash and marketable securities 8,728 10,280 10,527 Accounts and notes receivable (less allowances) 6,200 5,835 5,975 Inventories (less allowances) (Note 2) 10,508 10,945 11,300 Equipment on operating leases (less accumulated depreciation) 4,974 5,699 5,980 Deferred income taxes and other current assets 8,751 8,388 9,489 ------ ------ ------ Total current assets 39,161 41,147 43,271 Equity in net assets of nonconsolidated associates 4,913 3,497 3,301 Property - net 34,555 33,977 34,036 Intangible assets - net 7,675 7,622 8,651 Deferred income taxes 15,930 14,870 13,202 Other assets 30,984 32,243 33,015 ------- ------- ------- Total Automotive, Communications Services, and Other Operations assets 133,218 133,356 135,476 Financing and Insurance Operations Cash and cash equivalents 10,530 1,165 912 Investments in securities 9,598 9,595 9,309 Finance receivables - net 90,190 92,415 87,534 Investment in leases and other receivables 36,441 36,752 37,551 Other assets 33,624 27,846 24,864 Net receivable from Automotive, Communications Services, and Other Operations 1,243 1,971 1,599 ------- ------- ------- Total Financing and Insurance Operations assets 181,626 169,744 161,769 ------- ------- ------- Total assets $314,844 $303,100 $297,245 ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Automotive, Communications Services, and Other Operations Accounts payable (principally trade) $19,335 $18,309 $18,190 Loans payable 1,744 2,208 3,321 Accrued expenses 35,417 33,252 31,997 Net payable to Financing and Insurance Operations 1,243 1,971 1,599 ------ ------ ------ Total current liabilities 57,739 55,740 55,107 Long-term debt 9,320 7,410 8,245 Postretirement benefits other than pensions 34,276 34,306 34,376 Pensions 3,443 3,480 3,226 Other liabilities and deferred income taxes 14,183 15,768 16,088 ------- ------- ------- Total Automotive, Communications Services, and Other Operations liabilities 118,961 116,704 117,042 Financing and Insurance Operations Accounts payable 6,936 7,416 5,316 Debt 144,846 135,037 129,325 Other liabilities and deferred income taxes 14,577 12,922 13,238 ------- ------- ------- Total Financing and Insurance Operations liabilities 166,359 155,375 147,879 Minority interests 700 707 670 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, 554,439,259; 548,181,757; and 565,371,465 shares) (Note 6) 924 914 943 Class H common stock (issued, 877,032,955; 875,286,559; and 874,807,080 shares) (Note 6) 88 88 87 Capital surplus (principally additional paid-in capital) 21,330 21,020 21,818 Retained earnings 9,565 10,119 10,335 ------ ------ ------ Subtotal 31,907 32,141 33,183 Accumulated foreign currency translation adjustments (2,825) (2,502) (2,480) Net unrealized loss on derivatives (392) - - Net unrealized gains on securities 179 581 933 Minimum pension liability adjustment (45) (45) (121) ----- ----- ----- Accumulated other comprehensive loss (3,083) (1,966) (1,668) ----- ----- ----- Total stockholders' equity 28,824 30,175 31,515 ------- ------- ------- Total liabilities and stockholders' equity $314,844 $303,100 $297,245 ======= ======= ======= Reference should be made to the notes to consolidated financial statements. - 5 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 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 (used in) operating activities $5,509 $(651) $9,066 $4,746 Cash flows from investing activities Expenditures for property (6,287) (53) (6,314) (335) Investments in marketable securities - acquisitions (840) (25,071) (2,425) (18,198) Investments in marketable securities - liquidations 1,172 25,205 2,947 17,998 Mortgage servicing rights - acquisitions - (884) - (698) Mortgage servicing rights - liquidations - 17 - - Finance receivables - acquisitions - (166,597) - (140,295) Finance receivables - liquidations - 103,919 - 88,560 Proceeds from sales of finance receivables - 63,798 - 43,407 Operating leases - acquisitions (4,480) (10,586) (5,342) (12,147) Operating leases - liquidations 4,783 9,239 4,615 7,313 Investments in companies, net of cash acquired (679) (446) (3,911) - Net investing activity with Financing and Insurance Operations - - (998) - Other (146) 110 (558) 356 ----- ----- ------ ------ Net cash used in investing activities (6,477) (1,349) (11,986) (14,039) ----- ----- ------ ------ Cash flows from financing activities Net (decrease) increase in loans payable (464) (18,332) 1,255 1,121 Long-term debt - borrowings 4,533 42,791 4,130 19,450 Long-term debt - repayments (2,673) (13,817) (4,213) (11,482) Net financing activity with Automotive, Communications Services, and Other Operations - - - 998 Repurchases of common and preference stocks (264) - (652) - Proceeds from issuing common stocks 91 - 2,778 - Proceeds from sales of treasury stocks 222 - - - Cash dividends paid to stockholders (900) - (989) - --- ------ ----- ------ Net cash provided by financing activities 545 10,642 2,309 10,087 --- ------ ----- ------ Effect of exchange rate changes on cash and cash equivalents (69) (5) (365) 3 Net transactions with Automotive/ Financing Operations (728) 728 597 (597) ----- ----- --- --- Net (decrease) increase in cash and cash equivalents (1,220) 9,365 (379) 200 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 $7,899 $10,530 $9,351 $912 ===== ====== ===== ===
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 In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (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. This statement specifies that certain acquired intangible assets in a business combination be recognized as assets separately from goodwill and existing intangible assets and goodwill be evaluated for these new separation requirements. Goodwill and intangible assets determined to have indefinite useful lives will not be amortized. The Corporation is evaluating but has not yet determined the impact that this statement will have on its consolidated financial position or results of operations. In June 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 Corporation is required to implement SFAS No. 142 on January 1, 2002. The Corporation is evaluating but has not yet determined the impact that this statement will have on its consolidated financial position or results of operations. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Corporation is required to implement SFAS No. 143 on January 1, 2002. Management does not expect this statement to have a material impact on GM's consolidated financial position or results of operations. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This statement supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement retains the previously existing accounting requirements related to the recognition and measurement of the impairment of long-lived assets to be held and used while expanding the measurement requirements of long-lived assets to be disposed of by sale to include discontinued operations. It also expands the previously existing reporting requirements for discontinued operations to include a component of an entity that either has been disposed of or is classified as held for sale. The Corporation is required to implement SFAS No. 144 on January 1, 2002. Management does not expect this statement to have a material impact on GM's consolidated financial position or results of operations. Note 2. Inventories Inventories included the following for Automotive, Communications Services, and Other Operations (dollars in millions): Sept. 30, Dec. 31, Sept. 30, 2001 2000 2000 -------- -------- -------- Productive material, work in process, and supplies $5,457 $5,555 $6,121 Finished product, service parts, etc. 6,898 7,319 7,062 ------ ------ ------ Total inventories at FIFO 12,355 12,874 13,183 Less LIFO allowance 1,847 1,929 1,883 ------ ------ ------ Total inventories (less allowances) $10,508 $10,945 $11,300 ====== ====== ====== - 7 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) 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 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 Boeing Company 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 September 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. 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. Comprehensive Income GM's total comprehensive income (loss) was as follows (dollars in millions): Three Months Ended Nine Months Ended September 30, September 30, --------------------- ------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Net income (loss) $(368) $829 $346 $4,363 Other comprehensive (loss) (392) (171) (1,117) (510) --- --- ----- ----- Total $(760) $658 $(771) $3,853 === === === ===== Note 6. 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 Nine Months Ended September 30, September 30, --------------------- ------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Earnings (losses) attributable to common stocks (Losses) earnings attributable to $1-2/3 par value $(223) $878 $647 $4,424 (Losses) attributable to Class H $(170) $(76) $(377) $(144) (Losses) 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. - 8 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 6. Earnings Per Share Attributable to Common Stocks (continued) (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 (877 million and 874 million during the three months ended September 30, 2001 and 2000, respectively, and 876 million and 618 million during the nine months ended September 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 third quarters of 2001 and 2000, and for the nine month periods ended September 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 6. 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 September 30, 2001 Net (loss) $(215) $(153) Less:Dividends on preference stocks 8 17 --- --- Basic EPS (Loss) attributable to common stocks (223) 551 $(0.41) (170) 877 $(0.19) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - - - - --- --- --- --- Diluted EPS Adjusted (loss) attributable to common stocks $(223) 551 $(0.41) $(170) 877 $(0.19) === === ==== === === ==== Three Months Ended September 30, 2000 Net income (loss) $889 $(60) Less:Dividends on preference stocks 11 16 --- -- Basic EPS Income (loss) attributable to common stocks 878 559 $1.57 (76) 874 $(0.09) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 8 - - --- --- -- --- Diluted EPS Adjusted income (loss) attributable to common stocks $878 567 $1.55 $(76) 874 $(0.09) === === ==== == === ==== Nine Months Ended September 30, 2001 Net income (loss) $674 $(328) Less:Dividends on preference stocks 27 49 --- --- Basic EPS Income (loss) attributable to common stocks 647 549 $1.18 (377) 876 $(0.43) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 7 - - --- --- --- --- Diluted EPS Adjusted income (loss) attributable to common stocks $647 556 $1.16 $(377) 876 $(0.43) === === ==== === === ==== Nine Months Ended September 30, 2000 Net income (loss) $4,472 $(109) Less:Dividends on preference stocks 48 35 ----- --- Basic EPS Income (loss) attributable to common stocks 4,424 589 $7.51 (144) 618 $(0.23) ==== ==== Effect of Dilutive Securities Assumed exercise of dilutive stock options - 11 - - ----- --- --- --- Diluted EPS Adjusted income (loss) attributable to common stocks $4,424 600 $7.37 $(144) 618 $(0.23) ===== === ==== === === ====
Note 7. 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 Nine Months Ended September 30, September 30, -------------------- ------------------- 2001 2000 2001 2000 ---- ---- ---- ---- Depreciation $1,123 $1,002 $3,291 $2,964 Amortization of special tools 609 537 1,747 1,852 Amortization of intangible assets 80 57 238 209 ----- ----- ----- ----- Total $1,812 $1,596 $5,276 $5,025 ===== ===== ===== ===== - 10 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 8. 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): Other GMNA GME GMLAAM GMAP GMA Hughes Other Total ACO GMAC Financing Total FIO ---- --- ------ ---- --- ------ ----- --------- ---- --------- --------- For the Three Months Ended September 30, 2001 Net sales and revenues: External customers $26,635 $4,987 $1,258 $818 $33,698 $2,108 $491 $36,297 $6,116 $62 $6,178 Intersegment (366) 130 54 182 - 5 (5) - - - - ------ ----- ----- ----- ------ ----- --- ------ ----- -- ----- Total net sales and revenues $26,269 $5,117 $1,312 $1,000 $33,698 $2,113 $486 $36,297 $6,116 $62 $6,178 ====== ===== ===== ===== ====== ===== === ====== ===== == ===== Interest income (a) $303 $95 $(4) $4 $398 $9 $(261) $146 $602 $(89) $513 Interest expense $311 $104 $27 $2 $444 $41 $(269) $216 $1,686 $66 $1,752 Net income (loss) $251 $(287) $(6) $60 $18 $(227)(b) $(595) $(804) $437 $(1) $436 Segment assets $91,767 $18,316 $4,139 $870 $115,092 $19,068 (c) $(942) $133,218 $180,384 $1,242 $181,626 For the Three Months Ended September 30, 2000 Net sales and revenues: External customers $26,566 $5,115 $1,471 $834 $33,986 $2,082 $534 $36,602 $6,067 $21 $6,088 Intersegment (395) 224 53 118 - 6 (6) - - - - ------ ----- ----- --- ------ ----- --- ------ ----- -- ----- Total net sales and revenues $26,171 $5,339 $1,524 $952 $33,986 $2,088 $528 $36,602 $6,067 $21 $6,088 ====== ===== ===== === ====== ===== === ====== ===== == ===== Interest income (a) $157 $105 $5 $3 $270 $21 $(153) $138 $587 $(87) $500 Interest expense $323 $100 $15 $1 $439 $66 $(295) $210 $2,158 $112 $2,270 Net income (loss) $728 $(181) $31 $(10) $568 $(88)(b) $(57) $423 $401 $5 $406 Segment assets $91,585 $18,596 $4,580 $1,060 $115,821 $20,248 (c) $(593) $135,476 $160,254 $1,515 $161,769
(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 $57 million and $390 million, at September 30, 2001 and 2000, respectively, related to GM's acquisition of HAC. - 11- GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (Unaudited) Note 8. Segment Reporting (concluded)
Other GMNA GME GMLAAM GMAP GMA Hughes Other Total ACO GMAC Financing Total FIO ---- --- ------ ---- --- ------ ----- --------- ---- --------- --------- For the Nine Months Ended September 30, 2001 Net sales and revenues: External customers $80,824 $16,974 $4,311 $2,583 $104,692 $6,016 $1,484 $112,192 $18,907 $211 $19,118 Intersegment (1,332) 642 135 555 - 17 (17) - - - - ------ ------ ----- ----- ------- ----- ----- ------- ------ --- ------ Total net sales and revenues $79,492 $17,616 $4,446 $3,138 $104,692 $6,033 $1,467 $112,192 $18,907 $211 $19,118 ====== ====== ===== ===== ======= ===== ===== ======= ====== === ====== Interest income (a) $865 $279 $(4) $12 $1,152 $52 $(736) $468 $1,905 $(319) $1,586 Interest expense $1,016 $243 $66 $5 $1,330 $134 $(935) $529 $5,725 $184 $5,909 Net income (loss) $878 $(525) $30 $(82) $301 $(487)(b) $(796) $(982) $1,351 $(23) $1,328 For the Nine Months Ended September 30, 2000 Net sales and revenues: External customers $87,094 $18,593 $4,142 $2,357 $112,186 $6,440 $2,041 $120,667 $17,443 $181 $17,624 Intersegment (1,110) 722 140 248 - 26 (26) - - - - ------ ------ ----- ----- ------- ----- ----- ------- ------ --- ------ Total net sales and revenues $85,984 $19,315 $4,282 $2,605 $112,186 $6,466 $2,015 $120,667 $17,443 $181 $17,624 ====== ====== ===== ===== ======= ===== ===== ======= ====== === ====== Interest income (a) $418 $319 $19 $9 $765 $58 $(367) $456 $1,609 $(322) $1,287 Interest expense $879 $293 $77 $2 $1,251 $169 $(772) $648 $6,095 $323 $6,418 Net income (loss) $3,428 $206 $42 $(126) $3,550 $(229)(b) $(162) $3,159 $1,193 $11 $1,204
(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 $3 million and $16 million for 2001 and 2000, respectively. * * * * * * - 12- GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - concluded (Unaudited) Note 9. Subsequent Events On October 28, 2001, GM and its subsidiary Hughes together with EchoStar Communications Corporation (EchoStar) announced the signing of definitive agreements that provide for the spin-off of Hughes from GM and the merger of Hughes with EchoStar. The spin-off of Hughes from GM would result in current holders of GM Class H common stock receiving one share of new Hughes Class C common stock in exchange for each share of GM Class H common stock held prior to the spin-off. The merger of Hughes and EchoStar would result in Hughes being the surviving entity and taking the name EchoStar Communications Corp. Holders of Class A EchoStar common stock prior to the merger would receive about 1.3699 shares of stock of the merged entity in exchange for each share of Class A EchoStar common stock held prior to the merger. As part of the transaction, GM would receive up to $4.2 billion in cash for the reduction of its approximate 30% retained economic interest in Hughes to about 11% immediately preceding the merger. In addition GM plans to seek to exchange up to 100 million shares of GM Class H common stock (or after the transaction 100 million shares of new EchoStar common stock) for GM outstanding debt, which would further improve GM's net liquidity position. Following these transactions, GM expects to retain an approximate 3 to 5% interest in the merged entity. The transaction is subject to a number of conditions, including approval by a majority of each class of GM shareholders - GM $1-2/3 and GM Class H - voting both separately as distinct classes and also together as a single class. The proposed transaction also is subject to anti-trust clearance and approval by the Federal Communications Commission. The transaction is also contingent upon the receipt of a favorable ruling from the Internal Revenue Service that the separation of Hughes from GM will qualify as tax-free to GM and its stockholders for U.S. Federal Income Tax purposes. The transaction is currently expected to close in the second half of 2002. In connection with the disposition by Hughes of its defense electronics business to Raytheon Company in 1997, there were disputes regarding the purchase price adjustments. On October 16, 2001, Hughes reached a settlement of the dispute with Raytheon. GM's consolidated financial statements include a charge of $474 million for the quarter ended September 30, 2001 related to this settlement. -13- 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 (ACO) 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 third quarter of 2001, the Corporation's consolidated net loss was $368 million, or $(0.41) per share of GM $1-2/3 par value common stock, compared with consolidated net income of $829 million, or $1.55 per share of GM $1-2/3 par value common stock for the third quarter of 2000. GM's consolidated net income for the nine months ended September 30, 2001 was $346 million, or $1.16 per share of GM $1-2/3 par value common stock, compared with $4.4 billion, or $7.37 per share of GM $1-2/3 par value common stock for the nine months ended September 30, 2000. The consolidated net loss for the third quarter 2001 included special items on an after-tax basis. These items are detailed in the schedule on page 15 and represent the following: (1) The Ste. Therese charge at GMNA relates to the previously announced closing of the Ste. Therese, Quebec assembly plant. (2) The Raytheon settlement included in Other ACO relates to Hughes' settlement with the Raytheon Company on a purchase price adjustment related to Raytheon's 1997 merger with Hughes Defense. (3) The gain on sale of Thomson relates to Hughes' sale of 4.1 million shares of Thomson Multimedia common stock. (4) The SkyPerfecTV! writedown relates to Hughes' non-cash charge from the revaluation of its investment. (5) The severance charge relates to Hughes' 10% company-wide workforce reduction in the U.S. (6) The DIRECTV Japan adjustment relates to a favorable adjustment to the expected costs associated with the shutdown of Hughes' DIRECTV Japan business. GM's consolidated net income for the nine months ended September 30, 2001 also included special items related to GM's share of severance payments and asset impairments that were part of the restructuring of its affiliate Isuzu Motors Ltd. in the second quarter and the net impact of initially adopting SFAS No. 133, "Accounting for Derivatives and Hedging Activities" in the first quarter. There were no special items for the third quarter or first nine months of 2000. - 14 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES List of Special Items - After Tax (dollars in millions)
Total Other GMNA GME GMLAAM GMAP GMA Hughes Other Total ACO GMAC Financing Total GM ---- --- ------ ---- --- ------ ----- --------- ---- --------- -------- For the Three Months Ended September 30, 2001 Reported Net Income (Loss) $251 $(287) $(6) $60 $18 $(227) $(595) $(804) $437 $(1) $(368) Ste. Therese Charge 194 - - - 194 - - 194 - - 194 Raytheon Settlement - - - - - - 474 474 - - 474 Gain on Sale of Thomson - - - - - (67) - (67) - - (67) SkyPerfecTV! Writedown - - - - - 133 - 133 - - 133 Severance Charge - - - - - 40 - 40 - - 40 DIRECTV Japan Adjustment - - - - - (21) - (21) - - (21) --- --- --- --- --- ---- --- -- --- -- --- Adjusted Net Income (Loss) $445 $(287) $(6) $60 $212 $(142) $(121) $(51) $437 $(1) $385 === === = == === === === == === = === For the Nine Months Ended September 30, 2001 Reported Net Income (Loss) $878 $(525) $30 $(82) $301 $(487) $(796) $(982) $1,351 $(23) $346 Ste. Therese Charge 194 - - - 194 - - 194 - - 194 Raytheon Settlement - - - - - - 474 474 - - 474 Gain on Sale of Thomson - - - - - (67) - (67) - - (67) SkyPerfecTV! Writedown - - - - - 133 - 133 - - 133 Severance Charge - - - - - 40 - 40 - - 40 DIRECTV Japan Adjustment - - - - - (21) - (21) - - (21) Isuzu Restructuring - - - 133 133 - - 133 - - 133 SFAS No. 133 14 (2) 1 1 14 8 - 22 (34) - (12) ----- --- --- --- --- --- --- -- ----- --- ----- Adjusted Net Income(Loss) $1,086 $(527) $31 $52 $642 $(394) $(322) $(74) $1,317 $(23) $1,220 ===== === == == === === === == ===== == =====
See Results of Operations section on page 14 for further discussion of these items. - 15 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Vehicle Unit Deliveries of Cars and Trucks Three Months Ended September 30, ----------------------------------------------------- 2001 2000 ------------------------ ----------------------- GM as GM as a % of a % of Industry GM Industry Industry GM Industry -------- --- -------- -------- --- -------- (units in thousands) GMNA United States Cars 2,042 544 26.6% 2,297 670 29.2% Trucks 2,126 608 28.6% 2,257 579 25.7% ----- ----- ----- ----- Total United States 4,168 1,152 27.7% 4,554 1,249 27.4% Canada, Mexico, and Other 687 167 24.2% 695 186 26.8% ----- ----- ----- ----- Total GMNA 4,855 1,319 27.2% 5,249 1,435 27.3% GME 4,570 414 9.1% 4,697 413 8.8% GMLAAM 920 159 17.3% 950 159 16.8% GMAP 3,147 136 4.3% 3,260 125 3.8% ------ ----- ------ ----- Total Worldwide 13,492 2,028 15.0% 14,156 2,132 15.1% ====== ===== ====== ===== Nine Months Ended September 30, ----------------------------------------------------- 2001 2000 ------------------------ ----------------------- GM as GM as a % of a % of Industry GM Industry Industry GM Industry -------- --- -------- -------- --- -------- (units in thousands) GMNA United States Cars 6,455 1,757 27.2% 6,974 2,009 28.8% Trucks 6,584 1,866 28.3% 6,940 1,878 27.1% ------ ----- ------ ----- Total United States 13,039 3,623 27.8% 13,914 3,887 27.9% Canada, Mexico, and Other 2,060 515 25.0% 2,054 541 26.3% ------ ----- ------ ------ Total GMNA 15,099 4,138 27.4% 15,968 4,428 27.7% GME 15,150 1,415 9.3% 15,710 1,460 9.3% GMLAAM 2,878 497 17.3% 2,661 441 16.6% GMAP 9,748 381 3.9% 9,781 348 3.6% ------ ----- ------ ------ Total Worldwide 42,875 6,431 15.0% 44,120 6,677 15.1% ====== ===== ====== ===== Wholesale Sales Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2001 2000 2001 2000 -------- -------- -------- ------- (units in thousands) GMNA Cars 586 703 1,825 2,240 Trucks 651 625 1,999 2,153 ----- ----- ----- ----- Total GMNA 1,237 1,328 3,824 4,393 ----- ----- ----- ----- GME Cars 375 367 1,289 1,332 Trucks 21 29 70 102 --- --- ----- ----- Total GME 396 396 1,359 1,434 --- --- ----- ----- GMLAAM Cars 106 131 344 328 Trucks 48 50 156 142 --- --- --- --- Total GMLAAM 154 181 500 470 --- --- --- --- GMAP Cars 50 49 154 130 Trucks 71 85 206 215 --- --- --- --- Total GMAP 121 134 360 345 --- --- --- --- Total Worldwide 1,908 2,039 6,043 6,642 ===== ===== ===== ===== - 16 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMA Financial Review GMA's income and margin, adjusted to exclude special items (adjusted income and margin), was $212 million and 0.6% on net sales and revenues of $33.7 billion for the third quarter of 2001. This compares with income of $568 million and a net margin of 1.7% on net sales and revenues of $34.0 billion for the prior year quarter. The decrease in adjusted income from the prior year quarter was primarily due to a decrease in wholesale sales volume in North America and pricing pressures in both North America and Europe. These unfavorable conditions were partially offset by favorable mix and cost structure improvements. These factors, in addition to overall unfavorable mix for the nine months ended September 30, 2001, contributed to a decrease in adjusted income and margin to $642 million and 0.6% on net sales and revenues of $104.7 billion compared with income of $3.6 billion and a net margin of 3.2% on net sales and revenues of $112.2 billion for the prior year nine-month period. GMNA's adjusted income was $445 million for the third quarter of 2001, compared with $728 million for the prior year quarter. Adjusted income for the nine months ended September 30, 2001 totaled $1.1 billion compared with $3.4 billion for the prior year nine-month period. The decrease in GMNA's third quarter and year-to-date 2001 adjusted income was primarily the result of lower wholesale sales volumes and unfavorable net price, partially offset by favorable mix and aggressive cost containment due to manufacturing performance efficiencies, material cost savings, and engineering productivity. 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 (2.1)% year-over-year. This decrease includes a dealer stock adjustment of (0.6)% on units in dealer inventory on September 30, 2001 related to the Keep America Rolling sales incentive which offers interest-free automotive financing on U.S. models for retail vehicle customers. GME's loss was $287 million for the third quarter of 2001, compared with a loss of $181 million for the prior year quarter. This increase in the loss from the prior year quarter was primarily due to a continued unfavorable shift in sales mix from larger, more profitable vehicles to the smaller, less profitable entries and a continued increase in competitive pricing pressure. These factors, in addition to an overall decrease in wholesale sales volumes for the nine months ended September 30, 2001, contributed to an adjusted loss of $527 million compared with income of $206 million for the prior year nine-month period. GMLAAM's loss was $6 million for the third quarter of 2001, compared with income of $31 million for the prior year quarter. Adjusted income for the nine months ended September 30, 2001 totaled $31 million compared with $42 million for the prior year nine-month period. The decrease in third quarter and year-to-date 2001 adjusted earnings was primarily due to increases in material and manufacturing costs coupled with mix deterioration. These unfavorable items were partially offset by nominal price increases, as well as increases in wholesale sales volumes in the nine months ended September 30, 2001. GMAP's income for the third quarter of 2001 was $60 million compared with a loss of $10 million for the prior year quarter. The increase in third quarter earnings was primarily due to equity income improvements from several joint ventures in the region, as well as slightly favorable pricing and decreases in overall costs. These favorable conditions also contributed to adjusted income for the nine months ended September 30, 2001 totaling $52 million compared with a loss of $126 million for the prior year nine-month period. Hughes Financial Review Total net sales and revenues were $2.1 billion and $6.0 billion in the third quarter and first nine months of 2001, respectively, compared with $2.1 billion and $6.5 billion in the comparable periods in 2000. The decrease in year-to-date 2001 net sales and revenues resulted from decreased revenues at PanAmSat Corporation (PanAmSat) and Hughes Network Systems (HNS), 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 PanAmSat was primarily due to a decline of new outright sales and sales-type lease transactions executed during the first nine months of 2001 as compared to the first nine months of 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. 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 September 30, 2000. - 17 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Hughes Financial Review (concluded) Hughes' adjusted loss was $142 million for the third quarter of 2001, compared with a loss of $88 million for the prior year quarter. The adjusted loss for the nine months ended September 30, 2001 totaled $394 million compared with a loss of $229 million for the prior year nine-month period. The increase in the third quarter and year-to-date 2001 adjusted losses was primarily due increased costs associated with the rollout of new DIRECTWAY services at HNS, increased depreciation and amortization expense due to capital expenditures for property and satellites since the third 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, the sale of the Satellite Businesses in October 2000, and the consolidation of Telocity Delaware, Inc. since its acquisition in April 2001. These increases in expenses were partially offset by a decrease in interest expense due to a net decrease in outstanding borrowings of $1.3 billion since September 30, 2000 and the write-off of the discontinued DIRECTV Japan business in 2000. The increase in adjusted loss for the first nine months of 2001 was also impacted by a decrease in income tax benefit of $137 million due to additional tax settlements and foreign tax credits received in 2000, as well as the additional tax benefit in 2000 associated with the write-off of Hughes' investment in DIRECTV Japan. On October 28, 2001, GM and its subsidiary Hughes together with EchoStar Communications Corporation (EchoStar) announced the signing of definitive agreements that, subject to stockholder approval and regulatory clearance, provide for the spin-off of Hughes from GM and the merger of Hughes with EchoStar. See Note 9 - Subsequent Events in the Notes of Consolidated Financial Statements for further details of this transaction. GMAC Financial Review GMAC's income was $437 million for the third quarter of 2001, compared with $401 million for the prior year quarter. Adjusted income for the nine months ended September 30, 2001 was $1.3 billion compared with $1.2 billion for the prior year nine-month period. Income from automotive and other financing operations totaled $310 million for the third quarter of 2001, compared with $273 million for the prior year quarter. The strong results can be attributed to higher asset levels 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 $49 million for the third quarter of 2001, compared with $50 million for the prior year quarter. The decrease was primarily due to lower investment income and capital gains reflecting general weakness in the equity markets partially offset by improved underwriting results. Income from mortgage operations totaled $78 million for the third quarter of 2001, virtually unchanged from the same quarter in 2000. This was primarily due to a significant increase in mortgage originations largely offset by intangibles impairment from higher levels of mortgage prepayments and the revaluation of retained interest securities from securitizations. LIQUIDITY AND CAPITAL RESOURCES Automotive, Communications Services, and Other Operations --------------------------------------------------------- At September 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 $11.7 billion, compared with $13.3 billion at December 31, 2000 and $13.5 billion at September 30, 2000. The decrease from December 31, 2000 was primarily due to GM's purchase of an additional 10% equity stake in Suzuki, an increase in net capital expenditures, and the redemption of preferred securities. These items were partially offset by working capital improvements. Total assets in the VEBA trust used to pre-fund part of GM's other postretirement benefits liability approximated $4.9 billion at September 30, 2001, compared with $6.7 billion at December 31, 2000 and September 30, 2000, respectively. 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 $9.3 billion at September 30, 2001, compared with $7.4 billion at December 31, 2000 and $8.2 billion at September 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 39.5% at September 30, 2001, compared with 30.8% at December 31, 2000 and 30.9% at September 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 43.7% at September 30, 2001, compared with 36.6% at December 31, 2000 and 38.6% at September 30, 2000. Net liquidity, calculated as cash and marketable securities less the total of loans payable and long-term debt, was $(2.3) billion at September 30, 2001, compared with $662 million at December 31, 2000 and $(1.0) million at September 30, 2000. - 18 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Automotive, Communications Services, and Other Operations (concluded) --------------------------------------------------------------------- In October 2001, GM's credit rating was downgraded by Standard & Poor's, Fitch, Inc., and Moody's Investors Service. Although the downgrades diminish GM's access to the commercial paper market, the Corporation's overall financial flexibility continues to be strong as a result of the Corporation's cash position, ample contractually committed credit facilities and exceptional capital markets access. Financing and Insurance Operations ---------------------------------- At September 30, 2001, GMAC owned assets and serviced automotive receivables totaling $205.5 billion, compared with $185.6 billion at December 31, 2000 and $174.9 billion at September 30, 2000. The increase from December 31, 2000 was primarily the result of increases in cash and cash equivalents, serviced retail receivables, real-estate mortgages held for sale, other assets, commercial and other loan receivables, mortgage lending receivables, and due and deferred from receivable sales. These increases were partially offset by a decline in serviced wholesale receivables, operating lease assets, receivables due from GM, mortgage loans held for investment, and factored receivables. Consolidated automotive and commercial finance receivables serviced by GMAC, including sold receivables, totaled $117.7 billion at September 30, 2001, compared with $112.5 billion at December 31, 2000 and $104.9 billion at September 30, 2000. The increase from December 31, 2000 was primarily the result of a $7.5 billion increase in serviced retail receivables, a $1.3 billion increase in commercial and other loan receivables, partially offset by a $3.4 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 September 30, 2001 compared with December 31, 2000. The on-balance sheet finance receivables decreased from $93.0 billion at December 30, 2000 to $90.6 billion at September 30, 2001 primarily due to an increase in securitization activity. At September 30, 2001, GMAC's total borrowings were $143.2 billion, compared with $133.4 billion at December 31, 2000 and $127.7 billion at September 30, 2000. GMAC's ratio of total debt to total stockholder's equity at both September 30, 2001 and December 31, 2000 was 9.5:1 compared with 9.4:1 at September 30, 2000. In October 2001, GMAC's credit rating was downgraded by Standard & Poor's and Fitch, Inc while Moody's Investors Service affirmed the company's rating. GMAC has proven its sound operating and financial position, the high quality and liquidity of its assets, the importance of its auto finance operations to GM, and the relatively strong position of the finance company's creditors. GMAC has operated with sound levels of alternative liquidity to support both its debt-paying ability and its ongoing business operations through market stresses. The company expects to remain positioned to operate as a prudent finance company, with more stable business metrics through economic cycles. 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 $37.44 at September 30, 2001, compared with $39.36 at December 31, 2000 and $40.39 at September 30, 2000. Book value per share of GM Class H common stock, was $7.49 at September 30, 2001, compared with $7.87 at December 31, 2000 and $8.08 at September 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 GM $1-2/3 par value common stock based on the outlook and indicated capital needs of the business. On August 7, 2001, the GM Board declared a quarterly cash dividend of $0.50 per share on GM $1-2/3 par value common stock, paid September 10, 2001, to holders of record on August 17, 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 November 1, 2001, to the sole holder of record on October 1, 2001. - 19 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES Employment and Payrolls Worldwide employment at September 30, (in thousands) 2001 2000 ---- ---- GMNA 201 212 GME 74 90 GMLAAM 24 24 GMAP 11 11 GMAC 29 27 Hughes 11 18 Other 13 13 --- --- Total employees 363 395 === === Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2001 2000 2001 2000 ---- ---- ---- ---- Worldwide payrolls - (in billions) $4.9 $5.2 $15.0 $16.6 === === ==== ==== New Accounting Standards In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (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. This statement specifies that certain acquired intangible assets in a business combination be recognized as assets separately from goodwill and existing intangible assets and goodwill be evaluated for these new separation requirements. Goodwill and intangible assets determined to have indefinite useful lives will not be amortized. The Corporation is evaluating but has not yet determined the impact that this statement will have on its consolidated financial position or results of operations. In June 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 Corporation is required to implement SFAS No. 142 on January 1, 2002. The Corporation is evaluating but has not yet determined the impact that this statement will have on its consolidated financial position or results of operations. In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Corporation is required to implement SFAS No. 143 on January 1, 2002. Management does not expect this statement to have a material impact on GM's consolidated financial position or results of operations. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This statement supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The statement retains the previously existing accounting requirements related to the recognition and measurement of the impairment of long-lived assets to be held and used while expanding the measurement requirements of long-lived assets to be disposed of by sale to include discontinued operations. It also expands on the previously existing reporting requirements for discontinued operations to include a component of an entity that either has been disposed of or is classified as held for sale. The Corporation is required to implement SFAS No. 144 on January 1, 2002. Management does not expect this statement to have a material impact on GM's consolidated financial position or results of operations. * * * * * * * - 20 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES 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 September 30, 2001, or subsequent thereto, but before the filing of this report are summarized below: Environmental Matters By letter dated August 16, 2001, U.S. EPA has alleged that General Motors Corporation violated the Resource Conservation and Recovery Act (RCRA) by failing to seek the reissuance of a permit within the time specified in the permit. The permit covers RCRA corrective action activities in the site of a former General Motors plant in Anderson, Indiana. U.S. EPA is seeking penalties in excess of $100,000. * * * Other Matters As previously reported six class actions were filed on behalf of owners of GM Class H shares alleging that in order to benefit GM in violation of alleged fiduciary duties, GM and Hughes have favored News Corp. over EchoStar as a bidder to merge with Hughes. Three additional class actions making essentially the same allegation having been filed in state courts in California (Brody v. Hughes Electronics Corp., et al, Lieberman v. Hughes Electronics Corp., et al) and New York (Krim v. General Motors Corporation, et. al). As indicated under Management's Discussion and Analysis in this report, GM, Hughes and EchoStar have entered into definitive agreements relating to a spin-off of Hughes from GM and the subsequent merger of Hughes and EchoStar. Management of News Corp. has notified GM that it has withdrawn its offer relating to a possible transaction involving Hughes. GM, Hughes and the Hughes directors intend to vigorously defend these actions. * * * With respect to the previously reported Oklahoma State Court action filed on May 18, 2001 by Cable Connections, Inc., TV Options, Inc., Swartzel Electronics, Inc. and Orbital Satellite, Inc., the Court granted DIRECTV's motion to stay and compel arbitration. * * * In April 2001, Robert Garcia doing business as Direct Satellite TV, a DIRECTV dealer, instituted arbitration proceedings with DIRECTV with the American Arbitration Association in Los Angeles, California regarding his commissions and certain chargeback disputes. The parties have been proceeding with the arbitration, though no hearing date has been set. On October 4, 2001, Mr. Garcia filed a class action complaint against DIRECTV and Hughes in Los Angeles Superior Court asserting the same chargeback/commissions claims and a Consumer Legal Remedies Act claim. Mr. Garcia alleges $300 million in class-wide damages and seeks certification of a class of plaintiffs to proceed in arbitration with court oversight. DIRECTV and Hughes do not believe that the court has jurisdiction to order or oversee the class-wide arbitration. DIRECTV and Hughes will vigorously defend against these allegations and seek to enforce the arbitration agreement. * * * On September 19, 2001, the National Rural Telecommunications Cooperation ("NRTC") filed a lawsuit against DIRECTV in the U.S. District Court of the Central District of California seeking a declaration from the Court that the NRTC is not required to defend and indemnify DIRECTV for the Pegasus Development Corporation and Personalized Media Communications v. DIRECTV, et al, lawsuit pending in the U.S. District Court for the District of Delaware. The NRTC has been paying and continues to pay DIRECTV's legal fees in that matter under protest. * * * - 21 - GENERAL MOTORS CORPORATION AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS (concluded) (b) Previously reported legal proceedings which have been terminated, either during the quarter ended September 30, 2001, or subsequent thereto, but before the filing of this report are summarized below: Environmental Matters As previously reported, on December 7, 2000, Federal and State (Indiana) environmental authorities made a settlement demand in excess of $100,000 against Guide Corporation (not affiliated with GM), Guide's parent corporation, a subcontractor of Guide and GM, relating to an alleged chemical release from the Guide operation which occurred more than a year after the Guide Corporation had acquired a vehicle lighting products operation from GM located in Anderson, Indiana. This matter has been resolved by a settlement in which GM was not required to make any contribution. * * * As previously reported, General Motors received two Notices of Violation dated May 25, 2000 and August 23, 2000 from the MDEQ alleging non-compliance at the Lansing Craft Centre with certain clean air regulations. General Motors received two additional Notices of Violation; one dated November 17, 2000 from the MDEQ and another dated October 27, 2000 from the U.S. Environmental Protection Agency. The facility has modified its air permit. GM has agreed to pay a penalty of $107,900 to MDEQ, and implemented three supplemental environmental projects, in settlement of these allegations. * * * Other Matters With regard to the previously reported EchoStar action filed on February 1, 2000 against DIRECTV, Hughes Network Systems and Thompson Consumer Electronics, Inc. and amended on April 5, 2001 to add Circuit City Stores, Inc., Best Buy Co., Inc. and Radio Shack Corporation as defendants, the matter was dismissed with prejudice against all DIRECTV companies and Hughes Network Systems on November 1, 2001. All the DIRECTV and Hughes' counterclaims against Echostar were dismissed with prejudice. * * * * * * * - 22 - 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 24 ------------------ (b) REPORTS ON FORM 8-K. Eleven reports on Form 8-K, were filed on July 3, 2001, July 17, 2001, August 1, 2001, August 7, 2001, August 21, 2001, August 27, 2001, September 4, 2001, September 18, 2001, September 21, 2001, September 25, 2001 and September 26, 2001 during the quarter ended September 30, 2001 reporting matters under Item 5, Other Events. * * * * * * 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: November 13, 2001 /s/Peter R. Bible ----------------------- ------------------------------------------ (Peter R. Bible, Chief Accounting Officer) - 23 -