10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549-1004

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2006
OR
o	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 Incorporation or Organization)	(I.R.S. Employer 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

      Large accelerated filer     þ          Accelerated filer     o          Non-accelerated filer     o

      Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes o          No þ

      As of April 30, 2006, there were outstanding 565,561,036 shares of the issuer’s $1²/3 par value common stock.

Website Access to Company’s Reports

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

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

INDEX

		Page No.
Part I — Financial Information
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2006 and 2005		I-1
	Supplemental Information to the Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2006 and 2005		I-2
	Condensed Consolidated Balance Sheets as of March 31, 2006, December 31, 2005, and March 31, 2005		I-3
	Supplemental Information to the Condensed Consolidated Balance Sheets as of March 31, 2006, December 31, 2005, and March 31, 2005		I-4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005		I-5
	Supplemental Information to the Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005		I-6
	Notes to Condensed Consolidated Financial Statements		I-7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		I-28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		I-57
Item 4.	Controls and Procedures		I-57
Part II — Other Information
Item 1.	Legal Proceedings		II-1
Item 1A	Risk Factors		II-2
Item 2(c)	Purchases of Equity Securities		II-8
Item 6.	Exhibits		II-8
Signatures			II-9
Memorandum of Understanding
UAW-GM-Delphi Special Attrition Program
Quarterly Report on Form 10-Q
302 Certification of Chief Executive Officer
302 Certification of Chief Financial Officer
906 Certification of Chief Executive Officer
906 Certification of Chief Financial Officer

PART I

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

		Three Months Ended
		March 31,
		2006		2005
		(Dollars in millions
		except per share
		amounts)
Total net sales and revenues		$	52,245	$	45,773
Cost of sales and other expenses			41,912		39,499
Selling, general, and administrative expenses			5,532		4,889
Interest expense			4,229		3,679
	Total costs and expenses		51,673		48,067
Income (loss) before income taxes, equity income and minority interests			572		(2,294	)
Income tax expense (benefit)			194		(972	)
Equity income (loss) and minority interests			67		69
	Net income (loss)	$	445	$	(1,253	)
Basic earnings (loss) per share attributable to common stock (Note 9)		$	0.79	$	(2.22	)
Earnings (loss) per share attributable to common stock assuming dilution (Note 9)		$	0.78	$	(2.22	)

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

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION TO THE

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

		Three Months Ended
		March 31,
		2006			2005
		(Dollars in millions)
AUTOMOTIVE AND OTHER OPERATIONS
Total net sales and revenues		$	43,390		$	37,303
Cost of sales and other expenses			39,514			37,146
Selling, general, and administrative expenses			3,400			2,837
	Total costs and expenses		42,914			39,983
Interest expense			684			685
Net expense from transactions with Financing and Insurance Operations			146			87
Income (loss) before income taxes, equity income, and minority interests			(354	)		(3,452	)
Income tax (benefit)			(105	)		(1,398	)
Equity income (loss) and minority interests			56			72
	Net income (loss) — Automotive and Other Operations	$	(193	)	$	(1,982	)
FINANCING AND INSURANCE OPERATIONS
Total revenues		$	8,855		$	8,470
Interest expense			3,545			2,994
Depreciation and amortization expense			1,511			1,398
Operating and other expenses			2,287			2,089
Provisions for financing and insurance losses			732			918
	Total costs and expenses		8,075			7,399
Net income from transactions with Automotive and Other Operations			(146	)		(87	)
Income before income taxes, equity income, and minority interests			926			1,158
Income tax expense			299			426
Equity income (loss) and minority interests			11			(3	)
	Net income — Financing and Insurance Operations	$	638		$	729

The above Supplemental Information is intended to facilitate analysis of General Motors Corporation’s businesses: (1) Automotive and Other Operations; and (2) Financing and Insurance Operations.

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

I-2

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

					March 31,			December 31,			March 31,
					2006			2005			2005
					(Dollars in millions)
ASSETS
Cash and cash equivalents					$	34,868		$	30,726		$	26,389
Marketable securities						19,839			19,726			26,256
	Total cash and marketable securities					54,707			50,452			52,645
Finance receivables — net						180,161			180,793			190,646
Loans held for sale						18,171			21,865			22,569
Accounts and notes receivable (less allowances)						16,801			15,578			18,001
Inventories (less allowances) (Note 2)						15,519			14,354			13,189
Assets held for sale						—			19,030			—
Deferred income taxes						29,160			29,889			26,967
Net equipment on operating leases — (less accumulated depreciation)						39,787			38,187			34,371
Equity in net assets of nonconsolidated affiliates						1,830			3,291			6,500
Property — net						40,235			40,214			38,106
Intangible assets — net (Note 3)						4,458			4,339			4,864
Other assets						62,835			58,086			60,239
	Total assets				$	463,664		$	476,078		$	468,097
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable (principally trade)					$	30,210		$	29,913		$	28,519
Notes and loans payable						277,007			285,750			291,831
Liabilities related to assets held for sale						—			10,941			—
Postretirement benefits other than pensions						36,445			33,997			28,462
Pensions						11,731			11,304			9,295
Deferred income taxes						5,275			4,477			6,709
Accrued expenses and other liabilities						86,496			84,060			77,774
	Total liabilities					447,164			460,442			442,590
Minority interests						1,075			1,039			416
Stockholders’ equity
$12/3 par value common stock (outstanding, 565,559,329;
565,518,106; and 565,470,511 shares)						943			943			942
Capital surplus (principally additional paid-in capital)						15,296			15,285			15,234
Retained earnings						2,652			2,361			12,526
			Subtotal			18,891			18,589			28,702
Accumulated foreign currency translation adjustments						(1,694	)		(1,722	)		(1,784	)
Net unrealized gains on derivatives						1,109			733			612
Net unrealized gains on securities						956			786			535
Minimum pension liability adjustment						(3,837	)		(3,789	)		(2,974	)
		Accumulated other comprehensive loss				(3,466	)		(3,992	)		(3,611	)
				Total stockholders’ equity		15,425			14,597			25,091
Total liabilities and stockholders’ equity					$	463,664		$	476,078		$	468,097

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

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION TO THE

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

			March 31,		December 31,		March 31,
			2006		2005		2005
			(Dollars in millions)
ASSETS
Automotive and Other Operations
Cash and cash equivalents			$	17,427	$	15,187	$	10,205
Marketable securities				1,396		1,416		5,447
	Total cash and marketable securities			18,823		16,603		15,652
Accounts and notes receivable (less allowances)				9,440		7,758		6,493
Inventories (less allowances) (Note 2)				14,862		13,851		12,736
Net equipment on operating leases — (less accumulated depreciation)				7,217		6,993		6,329
Deferred income taxes and other current assets				10,032		8,877		10,975
	Total current assets			60,374		54,082		52,185
Equity in net assets of nonconsolidated affiliates				1,830		3,291		6,500
Property — net				38,457		38,466		36,265
Intangible assets — net (Note 3)				1,851		1,862		1,550
Deferred income taxes				21,034		22,849		18,093
Other assets				41,724		41,103		40,405
	Total Automotive and Other Operations assets			165,270		161,653		154,998
Financing and Insurance Operations
Cash and cash equivalents				17,441		15,539		16,184
Investments in securities				18,443		18,310		20,809
Finance receivables — net				180,161		180,793		190,646
Loans held for sale				18,171		21,865		22,569
Assets held for sale				—		19,030		—
Net equipment on operating leases (less accumulated depreciation)				32,570		31,194		28,042
Other assets				31,608		27,694		34,849
Net receivable from Automotive and Other Operations				4,609		4,452		2,300
	Total Financing and Insurance Operations assets			303,003		318,877		315,399
Total assets			$	468,273	$	480,530	$	470,397
LIABILITIES AND STOCKHOLDERS’ EQUITY
Automotive and Other Operations
Accounts payable (principally trade)			$	26,614	$	26,182	$	24,168
Loans payable				1,207		1,519		2,446
Accrued expenses				43,317		42,665		44,544
Net payable to Financing and Insurance Operations				4,609		4,452		2,300
	Total current liabilities			75,747		74,818		73,458
Long-term debt				31,021		31,014		29,879
Postretirement benefits other than pensions				31,431		28,990		23,754
Pensions				11,576		11,214		9,204
Other liabilities and deferred income taxes				21,699		22,023		15,924
	Total Automotive and Other Operations liabilities			171,474		168,059		152,219
Financing and Insurance Operations
Accounts payable				3,596		3,731		4,351
Liabilities related to assets held for sale				—		10,941		—
Debt				244,779		253,217		259,506
Other liabilities and deferred income taxes				31,924		28,946		28,814
	Total Financing and Insurance Operations liabilities			280,299		296,835		292,671
		Total liabilities		451,773		464,894		444,890
Minority interests				1,075		1,039		416
		Total stockholders’ equity		15,425		14,597		25,091
Total liabilities and stockholders’ equity			$	468,273	$	480,530	$	470,397

The above Supplemental Information is intended to facilitate analysis of General Motors Corporation’s businesses: (1) Automotive and Other Operations; and (2) Financing and Insurance Operations.

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

I-4

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31,
	2006			2005
	(Dollars in millions)
Net cash provided by (used in) operating activities	$	790		$	(6,148	)
Cash flows from investing activities
Expenditures for property		(1,376	)		(1,288	)
Investments in marketable securities — acquisitions		(5,443	)		(6,178	)
Investments in marketable securities — liquidations		4,969			4,567
Net change in mortgage servicing rights		(56	)		(104	)
Increase (decrease) in finance receivables		(7,589	)		1,282
Proceeds from sales of finance receivables		16,220			6,475
Proceeds from sale of business units/equity investments		9,911			—
Operating leases — acquisitions		(4,524	)		(3,672	)
Operating leases — liquidations		1,625			1,439
Investments in companies, net of cash acquired		(5	)		(75	)
Other		(2,402	)		(2,451	)
Net cash provided by (used in) investing activities		11,330			(5	)
Cash flows from financing activities
Net increase (decrease) in loans payable		(5,900	)		1,292
Long-term debt — borrowings		23,824			10,545
Long-term debt — repayments		(26,895	)		(16,127	)
Cash dividends paid to stockholders		(141	)		(283	)
Other		1,081			1,566
Net cash provided by (used in) financing activities		(8,031	)		(3,007	)
Effect of exchange rate changes on cash and cash equivalents		53			(444	)
Net increase (decrease) in cash and cash equivalents		4,142			(9,604	)
Cash and cash equivalents at beginning of the period		30,726			35,993
Cash and cash equivalents at end of the period	$	34,868		$	26,389

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

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION TO THE

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Automotive and Other						Financing and Insurance
	Three Months Ended March 31,
	2006			2005			2006			2005
				(Dollars in millions)
Net cash provided by (used in) operating activities	$	2,962		$	(2,555	)	$	(2,172	)	$	(3,593	)
Cash flows from investing activities
Expenditures for property		(1,272	)		(1,233	)		(104	)		(55	)
Investments in marketable securities — acquisitions		(44	)		(93	)		(5,399	)		(6,085	)
Investments in marketable securities — liquidations		61			1,429			4,908			3,138
Net change in mortgage servicing rights		—			—			(56	)		(104	)
Increase (decrease) in finance receivables		—			—			(7,589	)		1,282
Proceeds from sales of finance receivables		—			—			16,220			6,475
Proceeds from the sale of business units/equity investments		1,968			—			7,943			—
Operating leases — acquisitions		—			—			(4,524	)		(3,672	)
Operating leases — liquidations		—			—			1,625			1,439
Net investing activity with Financing and Insurance Operations		—			500			—			—
Investments in companies, net of cash acquired		(5	)		(75	)		—			—
Other		(1,053	)		(374	)		(1,349	)		(2,077	)
Net cash provided by (used in) investing activities		(345	)		154			11,675			341
Cash flows from financing activities
Net increase (decrease) in loans payable		(361	)		223			(5,539	)		1,069
Long-term debt — borrowings		58			13			23,766			10,532
Long-term debt — repayments		(146	)		—			(26,749	)		(16,127	)
Net financing activity with Automotive & Other		—			—			—			(500	)
Cash dividends paid to stockholders		(141	)		(283	)		—			—
Other		—			—			1,081			1,566
Net cash provided by (used in) financing activities		(590	)		(47	)		(7,441	)		(3,460	)
Effect of exchange rate changes on cash and cash equivalents		56			(369	)		(3	)		(75	)
Net transactions with Automotive/ Financing Operations		157			(126	)		(157	)		126
Net increase (decrease) in cash and cash equivalents		2,240			(2,943	)		1,902			(6,661	)
Cash and cash equivalents at beginning of the period		15,187			13,148			15,539			22,845
Cash and cash equivalents at end of the period	$	17,427		$	10,205		$	17,441		$	16,184

The above Supplemental Information is intended to facilitate analysis of General Motors Corporation’s businesses: (1) Automotive and Other Operations; and (2) Financing and Insurance Operations. Classification of cash flows for Financing and Insurance Operations is consistent with presentation in GM’s Consolidated Statement of Cash Flows.

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

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Financial Statement Presentation

      The accompanying unaudited condensed 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. The condensed consolidated financial statements include the accounts of General Motors Corporation and domestic and foreign subsidiaries that are more than 50% owned, principally General Motors Acceptance Corporation and Subsidiaries (GMAC), (collectively referred to as the Corporation, General Motors , GM, we, or us). In addition, GM consolidates variable interest entities (VIEs) for which it is deemed to be the primary beneficiary. General Motors’ share of earnings or losses of affiliates is included in the consolidated operating results using the equity method of accounting when GM is able to exercise significant influence over the operating and financial decisions of the investee. GM encourages reference to the GM Annual Report on Form 10-K for the period ended December 31, 2005, filed separately with the U.S. Securities and Exchange Commission (SEC).

      GM presents its primary financial statements on a fully consolidated basis. Transactions between businesses have been eliminated in the Corporation’s condensed consolidated financial statements. These transactions consist principally of borrowings and other financial services provided by Financing and Insurance Operations (FIO) to Automotive and Other Operations (Auto & Other).

      To facilitate analysis, GM presents separate supplemental financial information for its reportable operating segments.

GM’s Auto & Other reportable operating segment consists of:

•  GM’s four automotive regions: GM North America (GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM Asia Pacific (GMAP), which constitute GM Automotive (GMA); and

•  Other, which includes the elimination of intersegment transactions, certain non-segment specific revenues and expenditures, including legacy costs related to postretirement benefits for certain Delphi and other retirees, and certain corporate activities.

      GM’s FIO reportable operating segment consists of GMAC and Other Financing, which includes financing entities that are not consolidated by GMAC.

     Consolidation of GM Daewoo

      On February 3, 2005, GM completed the purchase of 16.6 million newly issued shares of common stock in GM Daewoo Auto & Technology Company (GM Daewoo) for approximately $49 million, which increased GM’s ownership in GM Daewoo to 48.2% from 44.6%. No other shareholders in GM Daewoo participated in the issue. On June 28, 2005, GM purchased from Suzuki Motor Corporation (Suzuki) 6.9 million shares of outstanding common stock in GM Daewoo for approximately $21 million. This increased GM’s ownership in GM Daewoo to 50.9%. Accordingly, as of June 30, 2005, GM began consolidating GM Daewoo.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 1.  Financial Statement Presentation — (continued)

      The following unaudited financial information for the three months ended March 31, 2006 and 2005 represents amounts attributable to GM Daewoo on a basis consistent with giving effect to the increased ownership and consolidation as of January 1, 2005. The pro forma effect on net income (loss) is not significant compared to equity income recognized.

	Three Months Ended
	March 31,
	2006	2005
	Actual	Pro Forma
	(Dollars in millions)
Total net sales and revenues	$1,618	$	1,171

     Change in Accounting Principle

      On January 1, 2006, GM adopted Statement of Financial Accounting Standards No. 156, “Accounting for Servicing of Financial Assets” (SFAS No. 156), which provides the following: (1) revised guidance on when a servicing asset and servicing liability should be recognized, (2) requires all separately recognized servicing assets and liabilities to be initially measured at fair value, if practicable, (3) permits an entity to elect to measure servicing assets and liabilities at fair value each reporting date and report changes in fair value in earnings in the period in which the changes occur, (4) upon initial adoption, a one time reclassification of available-for-sale securities to trading securities for securities which are identified as offsetting an entity’s exposure to changes in the fair value of servicing assets or liabilities that a servicer elects to subsequently measure at fair value, and (5) requires separate presentation of servicing assets and liabilities subsequently measured at fair value in the balance sheet and additional disclosures. GM recorded a reduction to retained earnings as of January 1, 2006 of $13 million, net of tax, as a cumulative effect of a change in accounting principle for the adoption of SFAS No. 156.

     New Accounting Standards

      Beginning January 1, 2006, the Corporation adopted SFAS No. 123(R), “Share-Based Payment” (SFAS 123(R)), requiring companies to record share-based payment transactions as compensation expense at fair market value. The Corporation elected the modified prospective method in adopting SFAS 123(R). This method requires compensation cost to be recognized (a) based on the requirements of SFAS 123(R) for all share-based payments granted or modified after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123(R) that remain unvested on the effective date. The Corporation began expensing the fair market value of newly granted stock options and other stock based compensation awards to employees pursuant to SFAS 123 in 2003; therefore this statement did not have a significant effect on GM’s consolidated financial position or results of operations.

      Prior to the adoption of SFAS No. 123(R), the Corporation used the Black-Scholes model to calculate the grant-date fair value of awards granted under the GMLTIP plan. The GMLTIP plan consists of award opportunities granted to participants that are based on the achievement of specific corporate business criteria. The condition is a minimum percentile ranking of GM’s Total Shareholder Return (TSR) among the companies in the S&P 500. The achievement of a certain TSR ranking relative to other stocks in the S&P 500 is considered a market condition under SFAS No. 123(R) and should be reflected in the calculation of the grant-date fair value of the award. For awards granted under the GMLTIP plan subsequent to the adoption of SFAS No. 123(R), the Corporation uses a lattice model to calculate the grant-date fair value of awards which incorporates the market condition.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 1.  Financial Statement Presentation — (concluded)

      In December 2005, the FASB released FASB Staff Position (FSP) SFAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards,” which provides a practical transition election related to accounting for the tax effects of share-based payment awards to employees. The Corporation is currently reviewing the transition alternatives and will elect the appropriate alternative within one year of the adoption of SFAS 123(R).

      In February 2006, the FASB released FSP SFAS 123(R)-4, “Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event,” which clarifies the classification of options and similar instruments issued as employee compensation that allow for cash settlement upon the occurrence of a contingent event. The FSP did not have a significant effect on GM’s consolidated financial position or results of operations.

      In April 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” requiring retrospective application as the required method for reporting a change in accounting principle, unless impracticable or a pronouncement includes specific transition provisions. This statement also requires that a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. This statement carries forward the guidance in APB Opinion No. 20, “Accounting Changes,” for the reporting of the correction of an error and a change in accounting estimate. This statement is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005.

      In November 2005, the FASB released FSP FIN 45-3, “Application of FASB Interpretation No. 45 to Minimum Revenue Guarantees Granted to a Business or Its Owners,” requiring companies to disclose minimum revenue guarantees in accordance with the guidelines provided in FIN 45 for interim and annual financial statements. GM adopted FIN 45-3 upon issuance. The Interpretation did not have a significant effect on GM’s consolidated financial position or results of operations.

      In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments” which amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” This statement amends SFAS No. 133 to permit fair value remeasurement for any hybrid instrument that contains an embedded derivative that otherwise would require bifurcation. This statement also eliminates the interim guidance in SFAS No. 133 Implementation Issue D-1 which provides that beneficial interests in securitized financial assets are not subject to the provisions of SFAS No. 133. Finally, this statement amends SFAS No. 140 to eliminate the restriction on the passive derivative instruments that a qualifying special-purpose entity (SPE) may hold. This statement is effective for all financial instruments acquired or issued in first fiscal years beginning after September 15, 2006. Management is assessing the potential impact on GM’s financial condition or results of operations.

      In April 2006, the FASB issued FSP FIN 46(R)-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R)” which requires the variability of an entity to be analyzed based on the design of the entity. The nature and risks in the entity, as well as the purpose for the entity’s creation are examined to determine the variability in applying FIN 46(R). The variability is used in applying FIN 46(R) to determine whether an entity is a variable interest entity, which interests are variable interests in the entity, and who is the primary beneficiary of the variable interest entity. This statement is effective for all reporting periods after June 15, 2006. Management is assessing the potential impact on GM’s financial condition or results of operations.

I-9

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 2. Inventories

      Inventories included the following (dollars in millions):

				March 31,			Dec. 31,			March 31,
				2006			2005			2005
Automotive and Other Operations
Productive material, work in process, and supplies				$	5,888		$	5,471		$	5,179
Finished product, service parts, etc.					10,465			9,871			8,999
	Total inventories at FIFO				16,353			15,342			14,178
		Less LIFO allowance			(1,491	)		(1,491	)		(1,442	)
			Total inventories (less allowances)	$	14,862		$	13,851		$	12,736
Financing and Insurance Operations
Off-lease vehicles					657			503			453
Total consolidated inventories (less allowances)				$	15,519		$	14,354		$	13,189

Note 3. Goodwill and Acquired Intangible Assets

      The components of the Corporation’s acquired intangible assets as of March 31, 2006, and 2005 were as follows (dollars in millions):

			Gross Carrying		Accumulated		Net Carrying
			Amount		Amortization		Amount
March 31, 2006
Automotive and Other Operations
Amortizing intangible assets:
	Patents and intellectual property rights		$	510	$	159	$	351
Non-amortizing intangible assets:
	Goodwill							753
	Pension intangible asset							747
		Total goodwill and intangible assets					$	1,851
Financing and Insurance Operations
Amortizing intangible assets:
	Customer lists and contracts		$	117	$	45		72
	Trademarks and other			35		21		14
		Total	$	152	$	66	$	86
Non-amortizing intangible assets:
	Goodwill							2,521
		Total goodwill and intangible assets						2,607
Total consolidated goodwill and intangible assets							$	4,458

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 3.  Goodwill and Acquired Intangible Assets — (concluded)

			Gross Carrying		Accumulated		Net Carrying
			Amount		Amortization		Amount
March 31, 2005
Automotive and Other Operations
Amortizing intangible assets:
	Patents and intellectual property rights		$	303	$	71	$	232
Non-amortizing intangible assets:
	Goodwill							571
	Pension intangible asset							747
		Total goodwill and intangible assets					$	1,550
Financing and Insurance Operations
Amortizing intangible assets:
	Customer lists and contracts		$	74	$	43		31
	Trademarks and other			40		21		19
		Total	$	114	$	64	$	50
Non-amortizing intangible assets:
	Goodwill							3,264
		Total goodwill and intangible assets						3,314
Total consolidated goodwill and intangible assets							$	4,864

      Aggregate amortization expense on existing acquired intangible assets was $14 million for the quarter ended March 31, 2006. Estimated amortization expense in each of the next five years is as follows: 2007 — $71 million; 2008 — $68 million; 2009 — $60 million; 2010 — $35 million; and 2011 — $17 million.

      The changes in the carrying amounts of goodwill for the quarters ended March 31, 2006, and 2005, were as follows (dollars in millions):

							Total
	GMNA			GME			Auto & Other			GMAC			Total GM
Balance as of December 31, 2005	$	383		$	374		$	757		$	2,446		$	3,203
Goodwill acquired during the period		—			—			—			71			71
Other		(16	)		—			(16	)		(2	)		(18	)
Transfer of business unit		(61	)		61			—			—			—
Effect of foreign currency translation and other		2			10			12			6			18
Balance as of March 31, 2006	$	308		$	445		$	753		$	2,521		$	3,274
Balance as of December 31, 2004	$	154		$	446		$	600		$	3,274		$	3,874
Goodwill acquired during the period		—			—			—			3			3
Effect of foreign currency translation		(3	)		(26	)		(29	)		(13	)		(42	)
Balance as of March 31, 2005	$	151		$	420		$	571		$	3,264		$	3,835

I-11

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 4. Investment in Nonconsolidated Affiliates

      Nonconsolidated affiliates of GM identified herein are those entities in which GM owns an equity interest and for which GM uses the equity method of accounting, because GM has the ability to exert significant influence over decisions relating to their operating and financial affairs. GM’s significant affiliates, and the percent of GM’s current equity ownership, or voting interest, in them include the following: Japan — Fuji Heavy Industries Ltd. (sold at March 31, 2006, 20.1% at March 31, 2005), Suzuki Motor Corporation (Suzuki) (3.7% at March 31, 2006, now accounted for as an equity security rather than as an equity method investment, and 20.4% at March 31, 2005); China — Shanghai General Motors Co., Ltd (50% at March 31, 2006 and 2005), SAIC GM Wuling Automobile Co., Ltd (34% at March 31, 2006 and 2005); Korea — GM Daewoo (fully consolidated — 50.9% at March 31, 2006 and 48.2% at March 31, 2005); Italy — GM-Fiat Powertrain (FGP) (dissolved at March 31, 2006 and 50% at March 31, 2005). Information regarding GM’s share of income (loss) for all nonconsolidated affiliates (as described above) in the following countries is included in the table below (in millions):

	Three Months
	Ended March 31,
GM’s Share Of Nonconsolidated Affiliates’ Net Income (Loss)	2006		2005
Italy		NA	$	21
Japan	$	21	$	50
China	$	70	$	33
Korea		NA	$	(8	)

      In the first quarter of 2006 GM sold 92.36 million shares of its investment in Suzuki, reducing GM’s equity stake in Suzuki from 20.4% to approximately 3.7% (16.3 million shares).

Note 5. Product Warranty Liability

      Policy, product warranty and recall campaigns liability included the following (dollars in millions):

	Three Months			Twelve Months			Three Months
	Ended			Ended			Ended
	March 31, 2006			Dec. 31, 2005			March 31, 2005
Beginning balance	$	9,128		$	9,315		$	9,133
Payments		(1,119	)		(4,696	)		(1,209	)
Increase in liability (warranties issued during period)		1,090			5,159			1,221
Adjustments to liability (pre-existing warranties)		(11	)		(381	)		5
Effect of foreign currency translation		46			(269	)		(110	)
Ending balance	$	9,134		$	9,128		$	9,040

      Beginning in the second quarter of 2005, product warranty liability includes certified-used vehicles.

Note 6. Postemployment Benefit Costs (Plant Idling Reserve)

      Costs to idle, consolidate or close facilities and provide postemployment benefits to employees idled on an other than temporary basis are accrued based on management’s best estimate of the wage and benefits costs that will be incurred for qualified employees under the JOBS bank provisions of the current labor agreement through the date of its expiration in September 2007, plus estimated costs expected to be paid thereafter taking into account policy changes that GM intends to negotiate into the JOBS program after the expiration of the current collective bargaining agreement. Costs related to the idling of employees that are expected to be temporary are expensed as incurred. GM reviews the adequacy and continuing need for these liabilities on an

I-12

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 6.  Postemployment Benefit Costs (Plant Idling Reserve) — (concluded)

annual basis in conjunction with its year-end production and labor forecasts. Furthermore, GM reviews the reasonableness of the liabilities on a quarterly basis.

      GM together with Delphi and the UAW announced on March 22, 2006 that they had entered into the UAW-GM-Delphi Special Attrition Program Agreement (Attrition Agreement), which is intended to reduce the number of U.S. hourly employees at GM and Delphi through an accelerated attrition program. When originally executed, Delphi’s participation in the Attrition Agreement was subject to approval by the U.S. Bankruptcy Court for the Southern District of New York, which has jurisdiction over Delphi’s Chapter 11 proceedings. On April 7, 2006, the Bankruptcy Court declared in a hearing that Delphi’s participation in the Attrition Agreement was approved. The Attrition Agreement provides for a combination of early retirement programs and other incentives designed to help reduce employment levels at both GM and Delphi, and by which the Corporation will be able to reduce the number of employees that are and will be in the JOBS bank in a cost effective manner.

      In the first quarter of 2006, GM recorded a favorable pre-tax adjustment of $136 million to the reserve for postemployment benefits, primarily due to higher than anticipated headcount reductions associated with previously announced GMNA plant idling activities.

      In 2005, GM recognized a pre-tax charge of $1.9 billion, or $1.2 billion after tax, for postemployment benefit and other liabilities related to the restructuring of North American operations announced in November 2005. Approximately 17,500 employees were included in the charge for locations included in this action, some leaving the company through attrition and some transferring to other sites.

      The liability for postemployment benefits (primarily wage and benefit continuation) as of March 31, 2006 totals approximately $1.8 billion relating to multiple plants and approximately 17,600 employees. The liability for postemployment benefits as of December 31, 2005 was approximately $2.0 billion relating to multiple plants and approximately 18,400 employees. The liability for postemployment benefits was $210 million relating to numerous plants and approximately 2,100 employees as of March 31, 2005. The following table summarizes the activity for this liability (dollars in millions):

		Three Months			Twelve Months			Three Months
		Ended			Ended			Ended
		March 31, 2006			Dec. 31, 2005			March 31, 2005
Beginning balance		$	2,012		$	237		$	237
	Spending		(109	)		(91	)		(30	)
	Interest accretion		8			12			3
	Additions		—			1,891			—
	Adjustments		(136	)		(37	)		—
Ending balance		$	1,775		$	2,012		$	210

Note 7. Commitments and Contingent Matters

     Commitments

      GM has guarantees related to its performance under operating lease arrangements and the residual value of lease assets totaling $639 million. Expiration dates vary, and certain leases contain renewal options. The fair value of the underlying assets is expected to fully mitigate GM’s obligations under these guarantees. Accordingly, no liabilities were recorded with respect to such guarantees.

I-13

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 7.  Commitments and Contingent Matters — (continued)

      Also, GM has entered into agreements with certain suppliers and service providers that guarantee the value of the suppliers’ assets and agreements with third parties that guarantee fulfillment of certain suppliers’ commitments. The maximum exposure under these commitments amounts to $114 million.

      GMAC has guaranteed certain amounts related to the securitization of mortgage loans, agency loan programs loans sold with recourse, and the repayment of third-party debt. In addition, GMAC issues financial standby letters of credit as part of their financing and mortgage operations. At March 31, 2006 approximately $8 million was recorded with respect to these guarantees, the maximum exposure under which is approximately $7.5 billion.

      In addition to guarantees, GM has entered into agreements indemnifying certain parties with respect to environmental conditions pertaining to ongoing or sold GM properties. Due to the nature of the indemnifications, GM’s maximum exposure under these agreements cannot be estimated. No amounts have been recorded for such indemnities.

      In connection with certain divestitures prior to January 1, 2003, GM has provided guarantees with respect to benefits for former GM employees relating to pensions, postretirement health care, and life insurance. Other than items pertaining to the fourth quarter 2005 charge with respect to the contingent exposures relating to the Delphi Chapter 11 filing, including under the benefit guarantees, the maximum exposure under these agreements cannot be estimated due to the nature of these indemnities. No amounts have been recorded for such indemnities as the Corporation’s obligations under them are not probable and estimable.

      In addition to the above, in the normal course of business GM periodically enters into agreements that incorporate indemnification provisions. While the maximum amount to which GM may be exposed under such agreements cannot be estimated, it is the opinion of management that these guarantees and indemnifications are not expected to have a material adverse effect on the Corporation’s consolidated financial position or results of operations.

     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 a number of shareholder class actions, bondholder class actions, shareholder derivative suits and ERISA class action and other matters arising out of alleged product defects including asbestos-related claims; 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.

      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, incurred but not reported asbestos-related claims, 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 March 31, 2006. 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.

     Delphi Bankruptcy

      On October 8, 2005, Delphi filed a petition for Chapter 11 proceedings under the United States Bankruptcy Code for itself and many of its U.S. subsidiaries. GM expects no immediate effect on its global

I-14

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 7.  Commitments and Contingent Matters — (continued)

automotive operations as a result of Delphi’s action. Delphi is GM’s largest supplier of automotive systems, components and parts, and GM is Delphi’s largest customer.

      GM will continue to work constructively in the court proceedings with Delphi, Delphi’s unions, and other participants in Delphi’s restructuring process. GM’s goal is to pursue outcomes that are in the best interests of GM and its stockholders, and that enable Delphi to continue as an important supplier to GM.

      Delphi has indicated to GM that it expects no disruption in its ability to supply GM with the systems, components and parts it needs as Delphi pursues a restructuring plan under the Chapter 11 process. Although the challenges faced by Delphi during its restructuring process could create operating and financial risks for GM, that process is also expected to present opportunities for GM. These opportunities include reducing, over the long term, the significant cost penalty GM incurs in obtaining parts from Delphi, as well as improving the quality of systems, components and parts GM procures from Delphi as a result of the restructuring of Delphi through the Chapter 11 process. However, there can be no assurance that GM will be able to realize any benefits.

      On March 31, 2006, Delphi filed a motion under the U.S. Bankruptcy Code seeking authority to reject certain supply contracts with GM. A hearing on this motion is scheduled for June 2 and 5, 2006. Although Delphi has not rejected any GM contracts as of this time and has assured GM that it does not intend to disrupt production at GM assembly facilities, there is a risk that Delphi or one or more of its affiliates may reject or threaten to reject individual contracts with GM, either for the purpose of exiting specific lines of business or in an attempt to increase the price GM pays for certain parts and components. As a result, GM might be materially adversely affected by disruption in the supply of automotive systems, components and parts that could force the suspension of production at GM assembly facilities.

      Delphi also filed, on March 31, 2006, motions under the U.S. Bankruptcy Code seeking authority to reject its U.S. labor agreements and modify retiree welfare benefits. The unions and certain other parties have filed objections to these motions. Hearings on these motions are scheduled for May 9, 10 and 12, 2006. While Delphi has indicated to us that it expects no disruptions in its ability to continue supplying us with the systems, components, and parts we need as Delphi pursues its bankruptcy restructuring plan, labor disruptions at Delphi resulting from Delphi’s pursuit of a restructuring plan could seriously disrupt our North American operations, prevent us from executing our GMNA turnaround initiatives, and materially adversely impact our business. Accordingly, resolution of the Delphi related issues remains a critical near term priority.

      Various financial obligations Delphi has to GM as of the date of Delphi’s Chapter 11 filing, including the $927 million payable for amounts that Delphi owed to GM relating to Delphi employees who were formerly GM employees and subsequently transferred back to GM as job openings became available to them under certain employee “flowback” arrangements, may be subject to compromise in the bankruptcy proceedings, which may result in GM receiving payment of only a portion of the face amount owed by Delphi.

      GM is seeking to minimize this risk by protecting our right of setoff against the $1.15 billion we owed to Delphi as of the date of its Chapter 11 filing. A procedure for determining setoff claims has been put in place by the bankruptcy court. However, the extent to which these obligations are covered by our right to setoff may be subject to dispute by Delphi, the creditors committee, or Delphi’s other creditors, and limitation by the court. GM cannot provide any assurance that it will be able to fully or partially setoff such amounts. However, to date setoffs of approximately $52.5 million have been agreed to by Delphi and taken by GM. Although GM believes that it is probable that it will be able to collect all of the amounts due from Delphi, the financial impact of a substantial compromise of our right of setoff could have a material adverse impact on our financial position.

I-15

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 7.  Commitments and Contingent Matters — (continued)

      In connection with GM’s spin-off of Delphi in 1999, GM entered into separate agreements with the UAW, the International Union of Electrical Workers and the United Steel Workers. In each of these three agreements (Benefit Guarantee Agreement(s)), GM provided contingent benefit guarantees to make payments for limited pension and OPEB expenses to certain former GM U.S. hourly employees who transferred to Delphi as part of the spin-off and meet the eligibility requirements for such payments (Covered Employees).

      Each Benefit Guarantee Agreement contains separate benefit guarantees relating to pension, post-retirement health care and life insurance benefits. These limited benefit guarantees each have separate triggering events that initiate potential GM liability if Delphi fails to provide the corresponding benefit at the required level. Therefore, it is possible that GM could incur liability under one of the guarantees (e.g., pension) without triggering the other guarantees (e.g., post-retirement health care or life insurance). In addition, with respect to pension benefits, GM’s obligation under the pension benefit guarantees only arises to the extent that the combination of pension benefits provided by Delphi and the Pension Benefit Guaranty Corporation (PBGC) falls short of the amounts GM has guaranteed.

      The Chapter 11 filing by Delphi does not by itself trigger any of the benefit guarantees. Moreover, Delphi’s filing of motions under the U.S. Bankruptcy Code to reject its U.S. labor agreements and modify retiree welfare benefits does not by itself trigger any of the benefit guarantees. In addition, the benefit guarantees expire on October 18, 2007 if not previously triggered by Delphi’s failure to pay the specified benefits. If a benefit guarantee is triggered before its expiration date, GM’s obligation could extend for the lives of affected Covered Employees, subject to the applicable terms of the pertinent benefit plans or other relevant agreements.

      The benefit guarantees do not obligate GM to guarantee any benefits for Delphi retirees in excess of the levels of corresponding benefits GM provides at any given time to GM’s own hourly retirees. Accordingly, if any of the benefits GM provides to its hourly retirees are reduced, there would be a similar reduction in GM’s obligations under the corresponding benefit guarantee.

      A separate agreement between GM and Delphi requires Delphi to indemnify GM if and to the extent GM makes payments under the benefit guarantees to the UAW employees or retirees. GM received a notice from Delphi, dated October 8, 2005, that it was more likely than not that GM would become obligated to provide benefits pursuant to the benefit guarantees to the UAW employees or retirees. The notice stated that Delphi was unable at that time to estimate the timing and scope of any benefits GM might be required to provide under those benefit guarantees. Any recovery by GM under indemnity claims against Delphi might be subject to partial or complete discharge in the Delphi reorganization proceeding. As a result, GM’s claims for indemnity may not be paid partially or in full.

      As part of the discussion to attain GM’s health-care agreement with the UAW, GM provided former GM employees who became Delphi employees the potential to earn up to seven years of credited service for purposes of eligibility for certain health-care benefits under the GM/UAW benefit guarantee agreement.

      As discussed above, GM together with Delphi and the UAW announced on March 22, 2006 that they had entered into the UAW-GM-Delphi Special Attrition Program Agreement (the Attrition Agreement) which is intended to reduce the number of U.S. hourly employees at GM and Delphi through an accelerated attrition program. When originally executed, Delphi’s participation in the Attrition Agreement was subject to approval by the U.S. Bankruptcy Court for the Southern District of New York, which has jurisdiction over Delphi’s Chapter 11 proceedings. On April 7, 2006, the Bankruptcy Court declared in a hearing that Delphi’s participation in the Attrition Agreement was approved. The Attrition Agreement provides for a combination of

I-16

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 7.  Commitments and Contingent Matters — (concluded)

early retirement programs and other incentives designed to help reduce employment levels at both GM and Delphi.

      In the Attrition Agreement, GM has agreed to assume certain costs regarding UAW-represented Delphi employees. Specifically, GM agreed to (1) pay lump sums of $35,000 to certain employees who participate in the Attrition Program; (2) allow Delphi employees who agree to retire under the Attrition Program to flowback to GM for purposes of retirement whereby GM will assume all post-retirement health care and life insurance (OPEB) obligations to such retiree; (3) subsidize, for an interim period of time, health care and life insurance coverage for Delphi employees participating in a special voluntary pre-retirement program if Delphi reduces or eliminates its health care and/or life insurance coverage provided to active UAW employees; and (4) accept 5,000 active flowback employees, and as a result after they flow back, pay such employee’s wages and benefits and incur pension and OPEB obligations for such employees. The Attrition Agreement provides that for such costs, other than the $35,000 lump sum payment, GM will have a prepetition, general unsecured claim assertable against the estate of Delphi under certain existing agreements. This claim is subject to the rights of parties in interest to object to allowance on any grounds other than the claim did not arise under the terms of the pre-existing contractual agreements between GM and Delphi. GM believes that the Attrition Agreement will enhance the prospects for GM, the UAW and Delphi to reach a broad-based consensual resolution of issues relating to the Delphi restructuring.

      GM believes that it is probable that it has incurred a contingent liability due to Delphi’s Chapter 11 filing. GM believes that the range of the contingent exposures is between $5.5 billion and $12 billion, with amounts near the low end of the range considered more possible than amounts near the high end of the range. GM established a reserve of $5.5 billion ($3.6 billion after tax) for this contingent liability in the fourth quarter of 2005, and has made no adjustments to that reserve balance as of March 31, 2006. These views reflect GM’s current assessment that it is unlikely that a Chapter 11 process will result in both a termination of Delphi’s pension plan and complete elimination of its OPEB plans. The amount of this charge may change, depending on the result of discussions among GM, Delphi, and Delphi’s unions, and other factors. GM is currently unable to estimate the amount of additional charges, if any, which may arise from Delphi’s Chapter 11 filing. A consensual agreement to resolve the Delphi matter may cause GM to incur additional costs in exchange for benefits that would accrue to GM over time.

      With respect to the possible cash flow effect on GM related to its ability to make either pension or OPEB payments, if any are required under the benefit guarantees, GM would expect to make such payments from ongoing operating cash flow and financings. Such payments, if any, are not expected to have a material effect on GM’s cash flows in the short-term. However, if payable, these payments would be likely to increase over time, and could have a material effect on GM’s liquidity in coming years. (For reference, Delphi’s 2004 Form 10-K reported that its total cash outlay for OPEB for 2004 was $226 million, which included $154 million for both hourly and salaried retirees, the latter of whom are not covered under the benefit guarantees, plus $72 million in payments to GM for certain former Delphi hourly employees that flowed back to retire from GM). If benefits to Delphi’s U.S. hourly employees under Delphi’s pension plan are reduced or terminated, the resulting effect on GM cash flows in future years due to the Benefit Guarantee Agreements is currently not reasonably estimable.

I-17

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 8. Comprehensive Income (Loss)

      GM’s total comprehensive income (loss), net of tax, was as follows (in millions):

		Three Months
		Ended March 31,
		2006		2005
Net income (loss)		$	445	$	(1,253	)
Other comprehensive income (loss)			526		(726	)
	Total	$	971	$	(1,979	)

Note 9. Earnings (Loss) Per Share Attributable to Common Stock

      The reconciliation of the amounts used in the basic and diluted earnings (loss) per share computations for income (loss) from continuing operations was as follows (in millions except per share amounts):

		$12/3 Par Value Common Stock
		Income					Per Share
		(Loss)			Shares		Amount
Three Months Ended March 31, 2006
Basic EPS
	Income (loss) attributable to common stock	$	445			566	$	0.79
Effect of Dilutive Securities
	Assumed exercise of dilutive stock options		—			3		—
Diluted EPS
	Adjusted income (loss) attributable to common stock	$	445			569	$	0.78
Three Months Ended March 31, 2005
Basic EPS
	Income (loss) attributable to common stock	$	(1,253	)		565	$	(2.22	)
Effect of Dilutive Securities
	Assumed exercise of dilutive stock options		—			—		—
Diluted EPS
	Adjusted income (loss) attributable to common stock	$	(1,253	)		565	$	(2.22	)

      Certain stock options and convertible securities were not included in the computation of diluted earnings per share for the periods presented since the instruments’ underlying exercise prices were greater than the average market prices of GM $1²/3 par value common stock and inclusion would be antidilutive. Such shares not included in the computation of diluted earnings per share were 108 million as of March 31, 2006 and 114 million as of March 31, 2005.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 10. Depreciation and Amortization

      Depreciation and amortization included in cost of sales and other expenses and selling, general and administrative expenses for Automotive and Other Operations was as follows (in millions):

		Three Months
		Ended March 31,
		2006		2005
Depreciation		$	1,114	$	1,270
Amortization of special tools			733		816
Amortization of intangible assets			14		10
	Total	$	1,861	$	2,096

Note 11. Pensions and Other Postretirement Benefits

	U.S. Plans						Non-U.S. Plans						U.S. Other						Non-U.S.
	Pension Benefits						Pension Benefits						Benefits						Other Benefits
	Three Months						Three Months						Three Months						Three Months
	Ended March 31,						Ended March 31,						Ended March 31,						Ended March 31,
	2006			2005			2006			2005			2006			2005			2006			2005
	(Dollars in millions)
Components of expense
Service cost	$	253		$	279		$	113		$	72		$	176		$	176		$	13		$	12
Interest cost		1,219			1,221			211			241			1,077			1,027			47			54
Expected return on plan assets		(2,014	)		(1,974	)		(174	)		(185	)		(375	)		(421	)		—			—
Amortization of prior service cost		273			291			25			27			(28	)		(18	)		(20	)		2
Recognized net actuarial loss		406			517			94			69			619			562			32			22
Curtailments, settlements, and other		23			91			13			59			—			—			—			—
Net expense	$	160		$	425		$	282		$	283		$	1,469		$	1,326		$	72		$	90

      Effective February 7, 2006, GM announced and communicated it would increase the U.S. salaried workforce’s participation in the cost of health care, capping GM’s contributions to salaried retiree health care at the level of 2006 expenditures. Effective March 31, 2006, the U.S. District Court for the Eastern District of Michigan approved the tentative settlement agreement with the UAW related to reductions in hourly retiree health care; this approval is now under appeal. Given the significance of these events, the plans will be remeasured as of their respective effective dates because the plans’ year end was September 30, 2005. GM will not commence recognition of the Net Periodic Benefit Cost associated with the remeasurements until three months subsequent to the remeasurement date(s). As a result, the first quarter 2006 values for Post Retirement Benefits Liabilities and Net Periodic Benefit Cost do not reflect any amount associated with these salaried or hourly plan remeasurements.

      During the first quarter of 2006, GM withdrew $2 billion from the VEBA trust. GM is considering additional VEBA withdrawals in the future.

Note 12. Restructuring and Other Initiatives

      GMNA results in the first quarter of 2006 include a charge of $65 million, after tax, related to costs expected to be incurred in 2006 under a new salaried severance program, which allows involuntarily terminated employees to receive continued salary and benefits for a period of time after termination. In addition, results in the first quarter of 2006 include a favorable adjustment of $88 million after-tax, related to the reserve for postemployment benefits, primarily due to higher than anticipated headcount reductions associated with previously announced GMNA plant idling activities, and an after-tax charge of $52 million for certain components of the U.S. hourly attrition program related to lump sum benefit payments.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 12. Restructuring and Other Initiatives — (concluded)

      Results in the first quarter of 2006 include other after-tax restructuring charges recognized at GME and GMLAAM of $40 million and $27 million, respectively. Additionally, first quarter 2006 results included after-tax curtailment charges of $12 million at GMNA and $3 million in Other Operations related to modifications in GM’s pension plans for current U.S. salaried employees.

      Results in the first quarter of 2005 include after-tax charges of $140 million recorded in GMNA and $8 million recorded in Other Operations related to voluntary early retirement and other separation programs with respect to certain salaried employees in the U.S.

      GMNA results in the first quarter of 2005 include a charge of $84 million, after tax, for the write-down to fair market value of various plant assets in connection with the first quarter announcement to discontinue production at the Lansing assembly plant during the second quarter of 2005.

      GME results in the first quarter of 2005 include an after-tax separation charge of $422 million related to the restructuring plan announced in the fourth quarter of 2004. This plan targets a reduction in annual structural costs of an estimated $600 million by 2006. A total reduction of 12,000 employees, including 10,000 in Germany, over the period 2005 through 2007 through separation programs, early retirements, and selected outsourcing initiatives is expected. The charge incurred in the first quarter of 2005 covers approximately 5,650 people, of whom 4,900 are in Germany.

Note 13. Stock Incentive Plans

      GM’s stock incentive plans consist of the General Motors 2002 Stock Incentive Plan, formerly the 1997 General Motors Amended Stock Incentive Plan (GMSIP), the General Motors 1998 Salaried Stock Option Plan (GMSSOP), the General Motors 2002 Long Term Incentive Plan (GMLTIP) and the General Motors 2006 Cash-Based Restricted Stock Unit Plan (GMCRSU), collectively the Plans. The GMSIP, the GMLTIP and the GMCRSU are administered by the Executive Compensation Committee of the GM Board. The GMSSOP is administered by the Vice President of Global Human Resources.

      The compensation cost that has been charged against income for the above plans was approximately $32.4 million and $25.4 million for the three months ended March 31, 2006 and 2005, respectively. The total income tax benefit recognized in the income statement for share-based compensation arrangements was approximately $9.9 million and $9.7 million for the three months ended March 31, 2006 and 2005, respectively.

GMSIP and GMSSOP

      Under the GMSIP, 27.4 million shares of GM $1²/3 par value common stock may be granted from June 1, 2002, through May 31, 2007, of which approximately 3.1 million were available for grants at March 31, 2006. Any shares granted and undelivered under the GMSIP, due primarily to expiration or termination, become again available for grant. Options granted prior to 1997 under the GMSIP generally are exercisable one-half after one year and one-half after two years from the dates of grant. Stock option grants awarded since 1997 are generally exercisable one-third after one year, one-third after two years and fully after three years from the dates of grant. Option prices are 100% of fair market value on the dates of grant and the options generally expire 10 years from the dates of grant, subject to earlier termination under certain conditions.

      Under the GMSSOP, which commenced January 1, 1998 and ends December 31, 2007, the number of shares of GM $1²/3 par value common stock that may be granted each year is determined by management. Approximately 0.9 million shares of GM $1²/3 par value common stock were available for grants at March 31, 2006. Stock options vest one year following the date of grant and are exercisable two years from the date of

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 13. Stock Incentive Plans — (continued)

grant. Option prices are 100% of fair market value on the dates of grant and the options generally expire 10 years and two days from the dates of grant subject to earlier termination under certain conditions.

      The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the weighted-average assumptions noted in the following table. Expected volatilities are based on both the implied and historical volatility of the Corporation’s stock. The Corporation uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options represents the period of time that options granted are expected to be outstanding. The interest rate for periods during the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

	Three Months					Three Months
	Ended					Ended
	March 31,					March 31,
	2006					2005
	GM			GM		GM			GM
	SIP			SSOP		SIP			SSOP
Interest rate		4.63	%		—		3.74	%		—
Expected life (years)		6			—		6			—
Expected volatility		48	%		—		32	%		—
Dividend yield		4.78	%		—		5.5	%		—

      Changes in the status of outstanding options were as follows:

	GMSIP
	$12/3 Par Value Common
					Weighted
			Weighted-		Average
			Average		Remaining		Aggregate
	Shares under		Exercise		Contractual		Intrinsic
	Option		Price		Term		Value
Options outstanding at January 1, 2006		84,130,586	$	53.11
Granted		2,702,796	$	20.90
Exercised				—
Terminated		2,861,108	$	42.98
Options outstanding at March 31, 2006		83,972,274	$	52.39		5.3	$	1,007,661
Options exercisable at March 31, 2006		73,660,530	$	54.61		4.8		—

	GMSSOP
	$12/3 Par Value Common
					Weighted
			Weighted-		Average
			Average		Remaining		Aggregate
	Shares under		Exercise		Contractual		Intrinsic
	Option		Price		Term		Value
Options outstanding at January 1, 2006		27,213,635	$	55.19
Granted		—		—
Exercised		—		—
Terminated		97,651	$	53.65
Options outstanding at March 31, 2006		27,115,984	$	55.20		5.1		—
Options exercisable at March 31, 2006		27,115,984	$	55.20		5.1		—

I-21

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 13. Stock Incentive Plans — (continued)

      The weighted-average grant-date fair value was $7.06 and $7.21 for the GMSIP options granted during the three month periods ended March 31, 2006 and 2005, respectively. The total intrinsic value of GMSIP options exercised during the three month periods ended March 31, 2006 and 2005 was approximately $0 million and $2.1 million, respectively. There were no options granted under the GMSSOP during the three month periods ended March 31, 2006 and 2005.

GMLTIP

      The GMLTIP consists of award opportunities granted to participants that are based on the achievement of specific corporate business criteria. The target number of shares of GM $1²/3 par value common stock that may be granted each year is determined by management. These grants are subject to a three-year performance period and the final award payout may vary based on the achievement of those criteria. The condition for all three plans is a minimum percentile ranking of GM’s Total Shareholder Return among the companies in the S&P 500.

      At March 31, 2006, approximately 5.7 million target shares were outstanding under the GMLTIP. Of these outstanding shares, a total of 1.3 million were granted in 2004 at a grant-date fair value of $49.33. Management intends to settle these awards with GM $1²/3 par value common stock. Of the remaining outstanding shares, approximately 2.0 million were granted in 2005 at a fair value of $39.13 and 2.5 million were granted for the three month period ended March 31, 2006 at a fair value of $21.13. Management intends to settle these awards in cash. As a result, these cash-settled awards are recorded as a liability until the date of final award payout. In accordance with SFAS No. 123(R), the fair value of each cash-settled award is recalculated at the end of each reporting period and the liability and expense adjusted based on the new fair value. The preceding is the targeted number of shares that would be used in the final award calculation should the targeted performance condition be achieved. Final payout is subject to approval by the Executive Compensation Committee of the Board of Directors. The fair value at March 31, 2006 was $25.22 for the shares granted during the three month period ended March 31, 2006 and $12.78 for the shares granted in 2005.

      Prior to the adoption of SFAS No. 123(R), the fair value of each award under the GMLTIP was equal to the fair market value of the underlying shares on the date of grant. Beginning January 1, 2006 in accordance with the adoption of SFAS No. 123(R), the fair value of each award under the GMLTIP is estimated on the date of grant, and each subsequent reporting period, using a lattice-based option valuation model that uses the assumptions noted in the following table. Because lattice-based valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatilities are based on the implied volatility from GM’s tradeable options. The expected term of these target awards represent the remaining time in the performance period. The risk-free rate for periods during the contractual life of the performance shares is based on the U.S. Treasury yield curve in effect at the time of valuation. Because the payout depends on the Corporation’s performance ranked with the S&P 500, the valuation also depends on the performance of other stocks in the S&P 500 from the grant date to the exercise date as well as estimates of the correlations among their future performances.

	Three Months Ended
	March 31, 2006
Expected volatility		64	%
Expected dividends		N/A
Expected term (years)		2-3
Risk-free interest rate		5.26	%

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 13. Stock Incentive Plans — (concluded)

      The weighted average remaining contractual term was 2.75 years for target awards outstanding at March 31, 2006. There were no shares delivered or cash paid during the three month periods ended March 31, 2006 and 2005.

GMCRSU

      In 2006, the Corporation established a cash-based restricted stock unit plan which provides restricted share units to certain global executives excluding executive officers. Awards under the plan vest and are paid in one-third increments on each anniversary date of the award over a three year period. Compensation expense is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. Since the awards are settled in cash, these cash-settled awards are recorded as a liability until the date of exercise. In accordance with SFAS No. 123(R), the fair value of each cash-settled award is recalculated at the end of each reporting period and the liability and expense adjusted based on the new fair value.

      The fair value of each RSU is based on the Corporation’s stock price on date of grant and each subsequent reporting period until date of settlement. There were 4.2 million restricted units granted during the three month period ended March 31, 2006 with a fair value of $20.90 a share. The fair value at March 31, 2006 was $21.27 per share.

      The weighted average remaining contractual term was 2.75 years for the RSU’s outstanding March 31, 2006. There were no shares delivered during the three month period ended March 31, 2006.

Summary

      A summary of the status of the Corporation’s options as of March 31, 2006 and the changes during the three month period then ended, is presented below:

			Weighted-
			Average
			Grant-Date
	Shares		Fair Value
Nonvested at January 1, 2006		15,923,106	$	9.28
Granted		2,702,796		20.90
Vested		8,258,058		9.47
Forfeited		56,100		8.80
Nonvested at March 31, 2006		10,311,744	$	8.54

      As or March 31, 2006, there was $40.6 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted-average period of 0.9 years.

      Cash received from option exercise under all share-based payment arrangements for the three months ended March 31, 2006 and 2005 was $0 and $11.2 million, respectively. The tax benefit from the exercise of the share-based payment arrangements totaled $0 and $0.8 million, respectively, for the three months ended March 31, 2006 and 2005.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 14. Segment Reporting

											Total						Auto &					Other			Total
	GMNA			GME			GMLAAM		GMAP		GMA			Other			Other			GMAC		Financing			Financing
	(Dollars in millions)
For the Three Months Ended March 31, 2006
Manufactured products sales and revenues:
External customers and other income	$	29,870		$	7,601		$	2,962	$	3,262	$	43,695		$	(305	)	$	43,390		$	8,822	$	33		$	8,855
Intersegment		(1,339	)		490			178		671		—			—			—			—		—			—
Total manufactured products	$	28,531		$	8,091		$	3,140	$	3,933	$	43,695		$	(305	)	$	43,390		$	8,822	$	33		$	8,855
Interest income(a)	$	305		$	107		$	20	$	25	$	457		$	(265	)	$	192		$	605	$	(154	)	$	451
Interest expense		798			153			28		55		1,034			(350	)		684			3,562		(17	)		3,545
Net income (loss)		(503	)		48			29		453		27			(220	)		(193	)		637		1			638
Segment assets		125,737			25,942			4,740		10,944		167,363			(2,093	)		165,270			303,793		(790	)		303,003
For the Three Months Ended March 31, 2005(b)
Manufactured products sales and revenues:
External customers and other income	$	26,001		$	7,657		$	2,134	$	1,535	$	37,327		$	(24	)	$	37,303		$	8,221	$	249		$	8,470
Intersegment		(774	)		451			165		159		1			(1	)		—			—		—			—
Total manufactured products	$	25,227		$	8,108		$	2,299	$	1,694	$	37,328		$	(25	)	$	37,303		$	8,221	$	249		$	8,470
Interest income(a)	$	292		$	95		$	19	$	3	$	409		$	(200	)	$	209		$	477	$	(94	)	$	383
Interest expense		755			114			24		7		900			(215	)		685			3,001		(7	)		2,994
Net income (loss)		(1,737	)		(514	)		31		70		(2,150	)		168			(1,982	)		728		1			729
Segment assets		124,730			25,372			4,469		4,963		159,534			(4,536	)		154,998			315,252		147			315,399

(a)	Interest income is included in net sales and revenues from external customers.
(b)	Effective January 1, 2006, four powertrain entities were transferred from GMNA to GME for management reporting. Accordingly, first quarter 2005 amounts have been revised for comparability by reclassifying $151 million of revenue, $33 million of net income and $59 million of segment assets from GMNA to GME.

Note 15. Subsequent Events

Sale of Equity Stake in Isuzu Motors, Ltd.

      On April 11, 2006, GM announced it would sell its 7.9% equity stake in Isuzu Motors Ltd. GM realized proceeds of approximately $300 million and completed the sale in April 2006. GM recognized a pre-tax gain of approximately $300 million from this transaction, as GM’s book basis was written down to zero in 2002.

Sale of Regional Home Builder

      In April 2006 GMAC signed a definitive agreement to sell its equity interest in a regional home builder. The definitive agreement is subject to certain conditions prior to closing; however, GMAC expects to close this cash transaction during the second quarter of 2006. Upon closing, GMAC expects to record a gain that is estimated to be material to its results of operations. GMAC is selling its entire equity investment in this regional home builder. Under the equity method of accounting, GMAC’s share of pretax income recorded

I-24

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 15. Subsequent Events — (continued)

from this investment approximated $20.1 million and $13.4 million for the three months ended March 31, 2006 and 2005, respectively, and $95.8 million for the year ended December 31, 2005.

Sale of a Controlling Interest in GMAC

      On April 2, 2006, GM and its wholly owned subsidiaries, GMAC and GM Finance Co. Holdings Inc., entered into a definitive agreement pursuant to which GM will sell a 51% controlling interest in GMAC for a purchase price of $7.4 billion to FIM Holdings LLC, a consortium of investors led by Cerberus Capital Management, L.P., a private investment firm, which also includes Citigroup Inc. and Aozora Bank Ltd. as consortium members (FIM Holdings). GM will retain a 49% equity investment interest in GMAC. In addition, GM and the consortium will invest $1.9 billion of cash in new GMAC preferred equity, with $1.4 billion to be invested by GM and $500 million to be invested by FIM Holdings. The transaction is subject to a number of U.S. and international regulatory and other approvals. GM expects to close the transaction in the fourth quarter of 2006.

      Prior to consummation of the agreement, (i) certain assets with respect to automotive leases and retail installment sales contracts owned by GMAC and its affiliates having a net book value of approximately $4 billion will be dividended to GM, (ii) GM will assume certain of GMAC’s post-employment benefit obligations, (iii) GMAC will transfer to GM certain entities which hold a fee interest in certain real properties, (iv) GMAC will pay dividends to GM in an amount up to the amount of GMAC net income prior to the Acquisition, (v) GM will repay certain indebtedness owing to GMAC and specified intercompany unsecured obligations owing to GMAC shall be no greater than $1.5 billion and (vi) GMAC will make a one-time distribution to GM of approximately $2.7 billion of cash to reflect the increase in GMAC’s equity value resulting from the transfer of a portion of GMAC’s net deferred tax liabilities arising from the conversion of GMAC and certain of its subsidiaries to limited liability company form. The total value of the cash proceeds and distributions to GM before it purchases preferred limited liability company interests of GMAC will be approximately $14 billion over three years, comprised of the $7.4 billion purchase price, the $4 billion of retained assets and the $2.7 billion cash dividend.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 15. Subsequent Events — (continued)

      The following table presents the major classes of assets and liabilities that are expected to be included in the sale transaction. The amounts have been adjusted using certain reasonable estimates to reflect the transactions described above to the extent such transactions are expected to have an impact on the asset and liability balances as of March 31, 2006 as presented below:

		March 31, 2006
		(Dollars in millions)
ASSETS
Cash and cash equivalents		$	13,807
Marketable securities			18,269
	Total cash and marketable securities		32,076
Finance receivables — net			173,375
Loans held for sale			18,171
Accounts and notes receivable (less allowances)			10,261
Inventories (less allowances)			657
Net equipment on operating leases — (less accumulated depreciation)			17,541
Property — net			1,783
Intangible assets — net			2,607
Other assets			16,749
	Total assets	$	273,220
LIABILITIES
Accounts payable (principally trade)		$	2,513
Notes and loans payable			226,035
Deferred income taxes			1,904
Accrued expenses and other liabilities			26,089
Total liabilities			256,541
Minority interests			46
	Total liabilities and minority interests	$	256,587

      GM will take a non-cash pre-tax charge to earnings currently estimated at $1.1 billion to $1.3 billion ($750 million to $850 million after tax) in the second quarter of 2006 associated with the planned sale of 51% of GMAC.

      As part of the transaction, GM and GMAC will enter into a number of agreements that will require that GMAC continue to allocate capital to automotive financing consistent with historical practices, thereby continuing to provide critical financing support to a significant share of GM’s global sales. While GMAC will retain the right to make individual credit decisions, GMAC will commit to fund a broad spectrum of customers and dealers consistent with historical practice in the relevant jurisdiction. Subject to GMAC’s fulfillment of certain conditions, GM will grant GMAC exclusivity for 10 years for U.S., Canadian, and international GM-sponsored retail and wholesale marketing incentives around the world, with the exception of Saturn branded products.

      As part of the agreement, GM will retain an option, for 10 years after the closing of the transaction, to repurchase from GMAC certain assets related to the automotive finance business of the North American

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 15. Subsequent Events — (concluded)

Operations and International Operations of GMAC, subject to certain conditions, including that GM’s credit ratings are investment grade or are higher than GMAC’s credit ratings.

      There can be no assurance that the sale transaction will be completed or if it is completed, that the terms of the sale will not be different from those set forth in the definitive agreement. Furthermore, even if the sale transaction is completed on the agreed-upon terms, there is no assurance that it will delink GMAC’s credit rating from GM’s credit rating or maintain ResCap’s credit rating at investment grade.

      The agreement is subject to the satisfaction or waiver of customary and other closing conditions, including, among other things, (i) reasonable satisfaction by the members of FIM Holdings, pursuant to an agreement with or other writing from, the PBGC that, following the closing, GMAC and its subsidiaries will not have any liability with respect to the ERISA plans of GM, (ii) receipt of ratings for the senior unsecured long-term indebtedness of GMAC and Residential Capital Corporation, an indirect wholly owned subsidiary of GMAC, after giving effect to the transactions contemplated by the Agreement, of at least BB and BBB- (or their respective equivalents), respectively, and an A.M. Best rating for GMAC’s significant insurance subsidiaries of at least B++ (iii) that no material adverse effect will have occurred with respect to the business, financial condition or results of operations of GMAC, which includes any actual downgrading by any of the major rating agencies of GM’s unsecured long-term indebtedness rating below CCC or its equivalent, and (iv) the receipt of required regulatory approvals and licenses. The agreement may be terminated upon the occurrence of certain events, including the failure to complete the transaction by March 31, 2007.

* * * * * *

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Basis of presentation

      This management’s discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the December 31, 2005 consolidated financial statements and notes thereto (the 2005 Consolidated Financial Statements), along with the MD&A included in General Motors Corporation’s (the Corporation, General Motors, or GM) 2005 Annual Report on Form 10-K, filed separately with the U.S. Securities and Exchange Commission (SEC). All earnings per share amounts included in the MD&A are reported on a fully diluted basis. See related discussion in Item 2 of the General Motors Acceptance Corporation (GMAC) Form 10-Q for the quarterly period ended March 31, 2006, which is herein incorporated by reference.

      GM presents separate supplemental financial information for its reportable operating segments:

•  Automotive and Other Operations (Auto & Other); and

•  Financing and Insurance Operations (FIO).

      GM’s Auto & Other reportable operating segment consists of:

•  GM’s four automotive regions: GM North America (GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM Asia Pacific (GMAP), which constitute GM Automotive (GMA); and

•  Other, which includes the elimination of intersegment transactions, certain non-segment specific revenues and expenditures, including legacy costs related to postretirement benefits for certain Delphi Corporation (Delphi) and other retirees, and certain corporate activities.

      GM’s FIO reportable operating segment consists of GMAC and Other Financing, which includes financing entities that are not consolidated by 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). 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 in accordance with GAAP, may be materially different.

      Consistent with industry practice, market share information employs estimates of sales in certain countries where public reporting is not legally required or otherwise available on a consistent basis.

Overview

      GM is primarily engaged in automotive production and marketing and financing and insurance operations. GM designs, manufactures, and markets vehicles worldwide, having its largest operating presence in North America. GM’s finance and insurance operations primarily relate to GMAC, a wholly owned subsidiary of GM, which provides a broad range of financial services, including automotive finance and mortgage products and services.

Financial Results

      GM’s consolidated net sales and revenues increased to $52.2 billion in the first quarter of 2006 compared to $45.8 billion the first quarter of 2005. The first quarter 2006 revenue levels were a record quarterly high for GM, representing an approximate increase of 14% over the first quarter of 2005. GM earned consolidated net

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

      Financial Results — (continued)

income of $445 million in the first quarter of 2006, compared to a net loss of $1.25 billion in the first quarter of 2005. GMAC’s net income in the first quarter of 2006 declined to $637 million, compared to $728 million in the first quarter of 2005.

      GM’s results of operations in the first quarter of 2006 were most significantly affected by the following trends and significant events:

Automotive Operations — Improved Profitability

      Both GMNA and GME reported considerably improved performance in the first quarter of 2006 compared to the first quarter of 2005. GMNA results improved by $1.2 billion, benefiting from higher production volumes as well as improved vehicle pricing. GMNA production volumes increased by approximately 73,000 in the first quarter of 2006 compared to the first quarter of 2005. The favorable pricing is attributable to the value pricing initiatives announced in January, as well as improvements in pricing on recently launched vehicles such as the Chevrolet Tahoe, GMC Yukon, and Cadillac Escalade. In addition to the profitability improvements at GMNA, the remaining three automotive regions posted profitable results in the first quarter of 2006. GME’s improved first quarter 2006 results reflected continued progress in the restructuring efforts, largely in manufacturing. GMAP and GMLAAM were also profitable in the first quarter of 2006, with results comparable to the first quarter of 2005 after taking into consideration the favorable gain in GMAP associated with the sale of the Suzuki shares discussed below. Please refer to the Results of Operations section starting on page I-33 for further discussion on regional performance.

Sale of Suzuki Investment

      During the first quarter of 2006, GM reduced its equity stake in Suzuki Motor Corporation from 20.4% to 3.7%. The sale of the investment resulted in an after-tax gain of $372 million recognized by GMAP. In addition to the favorable net income impact, the transaction generated sales proceeds of approximately $2.0 billion which enhance GM’s liquidity position as well as the strength of its balance sheet. GM maintains a 3.7% equity ownership in Suzuki after the transaction, and the strategic alliance between GM and Suzuki continues.

UAW Health Care Settlement Agreement

      On October 29, 2005, GM and the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW) entered into a memorandum of understanding, which was ratified on November 11, 2005, to reduce GM’s health-care costs significantly while maintaining comprehensive health care coverage for its UAW hourly employees and retirees in the United States. In December 2005, GM, the UAW and a class of UAW hourly retirees finalized an agreement (“the Settlement Agreement”), subject to court approval. On March 31, 2006, the U.S. District Court for the Eastern District of Michigan entered an Order and Final Judgment (Judgment) approving the Settlement Agreement. This Judgment is now on appeal. The Settlement Agreement provides that either GM or the UAW can terminate the Settlement Agreement on 90 days notice beginning in September 2011.

      GM will account for the reduced health care coverage provisions of the Settlement Agreement as an amendment of GM’s Health Care Program for Hourly Employees (the Modified Plan). Currently, GM expects the impact of the reduced health care coverage provisions of the Settlement Agreement to result in a reduction of GM’s OPEB obligations under the Modified Plan of approximately $15 billion. The $15 billion reduction will be amortized on a straight-line basis over the remaining service lives of active UAW hourly employees (7.4 years) as a reduction of OPEB expense. The overall reduction of expense will also comprehend the amortization of $3 billion related to contributions to the Mitigation Plan as discussed below, and the expense related to previously negotiated wage increases for active employees now diverted to the

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

      Financial Results — (continued)

Mitigation Plan, currently estimated to be $2.5 billion on a net present value basis or approximately $350 million per year, as also discussed below.

      The Settlement Agreement also provides that GM will make contributions to a new independent Voluntary Employees’ Beneficiary Association (the Mitigation Plan). The assets of the Mitigation Plan will be used to mitigate the effect of reduced GM health care coverage on individual UAW retirees and, depending on the level of mitigation, are expected to be available for a number of years. The new independent Mitigation Plan will be partially funded by GM contributions of $1 billion in each of 2006, 2007, and 2011. The 2011 contribution may be accelerated under specified circumstances. GM will also make future contributions subject to provisions of the Settlement Agreement that relate to profit sharing payments, increases in the value of a notional number of shares of GM’s $1²/3 par value common stock (collectively, the Supplemental Contributions), as well as wage deferral payments, and dividend payments.

      GM’s obligation to make contributions to the Mitigation Plan are fixed or determined by formula as defined in the Settlement Agreement and Judgment. GM’s obligations are limited to these contributions. GM is not obligated to provide incremental funding in the event of an asset shortfall in the Mitigation Plan, and the Settlement Agreement specifically provides that the ability of the assets in the Mitigation Plan to mitigate retiree health care costs is not guaranteed by GM. Furthermore, the Mitigation Plan is completely independent of GM and is administered by an independent trust committee which shall not include any GM representatives.

      As disclosed on GM’s Forms 8-K dated April 13 and April 20, 2006, because the Settlement Agreement became effective upon Judgment, GM planned to begin accounting for its contributions to the Mitigation Plan under the Settlement Agreement in its financial statements for the first quarter of 2006. Under the accounting treatment consistent with this approach, the Mitigation Plan would have been treated as a defined contribution plan (given the limits on GM’s responsibility to make further contributions) and the obligation to make the first $1 billion contribution was to be recognized in the first quarter of 2006 when it became due and payable. As also disclosed in the aforementioned Form 8-K filings, GM has been in discussions with the Staff of the U.S. Securities and Exchange Commission regarding the accounting treatment for the Mitigation Plan.

      Based on those discussions, GM has now determined that it will account for the Mitigation Plan as a defined benefit plan, with a cap on GM’s OPEB obligation under that plan limited to the present value of the three $1 billion cash payments and minimum Supplemental Contributions required by the Settlement Agreement, rather than a defined contribution plan. Under a capped defined benefit model, the three $1 billion payments and minimum Supplemental Contributions (considered funding of the Mitigation Plan) represent the present value of GM’s obligation to the new Mitigation Plan of approximately $3 billion. This amount will be amortized on a straight-line basis over the remaining service lives of active UAW hourly employees (7.4 years) as OPEB expense. Payments from GM to the Mitigation Plan related to wage deferrals, dividends or changes in the estimate of Supplemental Contributions will be recorded as an expense in the quarter that the hours are worked, the dividend is declared, or the change in estimate occurs, respectively. GM will recognize the expense for the wage deferrals as the future services are rendered, since the active-UAW represented-hourly-employees elected to forgo contractual wage increases and have those amounts contributed to the Mitigation Plan.

      Therefore, these changes are expected to reduce GM’s OPEB obligations by $12 billion, which will be amortized over the 7.4 year period. GM will commence recognition of this amortization and lower interest and service cost from the Settlement Agreement in the third quarter of 2006. Because the annual plan measurement date for the Modified Plan is September 30 rather than December 31, and because the Settlement Agreement became effective on March 31, 2006, amortization of the $12 billion benefit related to the Modified Plan will be recognized on a one quarter lag basis, beginning on July 1, 2006. Accordingly, the $1 billion contribution called for on March 31, 2006 is no longer considered a cost for the first quarter of 2006, but rather will be recognized through the amortization of the aforementioned net $12 billion negative plan

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

      Financial Results — (continued)

amendment in the Modified Plan. For 2006, the reduction in health care expense will be allocated approximately 80% to GMNA and 20% to the Corporate sector.

      The Settlement Agreement will also result in cash flow savings estimated to be about $1 billion per year once the Settlement Agreement is fully implemented and will remain in effect until at least September 2011, after which either GM or the UAW may cancel the agreement upon 90 days written notice. Similarly, GM’s contractual obligations to provide health care benefits to UAW hourly retirees extends to at least September 2011, and will continue thereafter until terminated by either GM or the UAW. As a result, the provisions of the Settlement Agreement will continue in effect for UAW retirees beyond the expiration in September 2007 of the current collective bargaining agreement between GM and the UAW.

      Similar to the Settlement Agreement, on April 10, 2006 GM and the Industrial Division of the Communication Workers of America, AFL-CIO (IUE-CWA) also reached a tentative agreement to reduce health-care costs. The agreement was ratified by the IUE-CWA membership on April 21, 2006. The agreement is subject to court approval. The remaining 2% of hourly employees and retirees are represented by a group of other unions with which we are planning health care discussions. The savings achieved under the IUE-CWA agreement, while not significant, are fully incorporated in the reduction of OPEB liabilities and annual employee health-care expenses described above. Court approval is expected during calendar year 2006 and recognition of this benefit will commence 90 days following court approval.

Strategy

      GM’s primary focus continues to be the return of its North American operations to profitability and positive cash flow. The 2006 first quarter results indicate progress towards this goal, and GM remains committed to the turnaround efforts to not only return GM to profitability, but to position GM to be competitive for years to come through management of the cost, revenue, and liquidity aspects of our business.

      On the cost side of the business, our primary goals were to address our legacy cost burden and reduce our structural costs in line with falling revenue. Legacy costs are primarily related to the cost of benefits provided to retired employees and their dependents, and costs associated with employees and their dependents of businesses divested by GM. Structural costs, such as the cost of unionized employees, are those costs that do not vary with production and include all costs other than material, freight, and policy and warranty costs. To date we have made real progress in these areas, evidenced by the UAW Health Care Settlement Agreement described above. On February 7, 2006, GM announced it would cap its contributions to salaried retiree health care at the level of 2006 expenditures, and, on March 7, 2006, GM announced it would freeze accrued pension benefits for U.S. salaried employees and implement a new benefit structure for future accruals. Regarding structural costs, in November 2005 GM announced plans to idle 12 facilities and reduce manufacturing employment levels by approximately 30,000 employees over the 2005 to 2008 period. During the first quarter of 2006, two assembly plants within the original announcement stopped production. To further support the structural cost initiatives, on March 22, 2006 GM, the UAW, and Delphi Corporation announced they had entered into the UAW-GM-Delphi Special Attrition Program Agreement designed to reduce the number of hourly employees of GM and of Delphi through an accelerated attrition program. In addition, on April 10, 2006 GM and the IUE-CWA announced a tentative agreement to reduce GM’s health care costs for IUE-CWA retirees in a manner similar to the UAW health care Settlement Agreement.

      In terms of revenue, GMNA sales of recently launched vehicles, such as the Chevrolet Tahoe, GMC Yukon, and Cadillac Escalade full size utility trucks, are performing well and gaining momentum, with sales in January and February 23% higher than the same period a year earlier, and up 30% in March when compared to February 2006. GM plans on capitalizing on this momentum with the introduction of new products such as the Saturn Sky and Saturn Aura, which will be available for sale in spring and later this year, respectively. Furthermore, GM is seeing benefits associated with the “Total Value Promise” initiative

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Financial Results — (concluded)

Strategy — (concluded)

announced in January 2006, as GMNA incentive levels have been reduced while vehicle transaction prices have increased.

      Similar progress has been achieved regarding liquidity items. In February  2006 GM’s Board of Directors elected to reduce the quarterly dividend by 50% which will improve liquidity by over $500 million. In March 2006 GM reduced its equity interest in Suzuki generating approximately $2.0 billion, and on April 11, 2006 GM announced it would sell its 7.9% equity stake in Isuzu Motors Ltd, by which GM expects to realize cash proceeds of approximately $300 million. On April 2, 2006 GM entered into a definitive agreement to sell 51% of a controlling interest in GMAC. The total value of the cash proceeds and distributions to GM before it purchases preferred limited liability company interests of GMAC will be approximately $14 billion over three years, comprised of the $7.4 billion purchase price, the $4 billion of retained assets and the $2.7 billion cash dividend. Collectively, these liquidity actions will serve to fund our GMNA turnaround plan and to enhance the strength of our balance sheet. In addition, the GMAC transaction will provide GMAC with a solid foundation for improving its current credit rating, position GMAC for long term growth, and provide a stronger foundation to support GM sales and dealers.

      In addition to the focus on restoring GMNA operations to profitability, GM needs to address near term issues associated with its largest supplier, Delphi Corporation. On March 31, 2006 Delphi filed a motion under the U.S. Bankruptcy Code seeking authority to reject certain supply contracts with GM. A hearing on this motion is scheduled for June 2 and 5, 2006. Although Delphi has not rejected any GM contracts as of this time and has assured GM that it does not intend to disrupt production at GM assembly facilities, there is a risk that Delphi or one or more of its affiliates may reject or threaten to reject individual contracts with GM, either for the purpose of exiting specific lines of business or in an attempt to increase the price GM pays for certain parts and components. As a result, GM might be materially adversely affected by disruption in the supply of automotive systems, components and parts that could force the suspension of production at GM assembly facilities.

      Delphi also filed on March 31, 2006 motions under the U.S. Bankruptcy Code seeking authority to reject its U.S. labor agreements and modify retiree welfare benefits. The unions and certain other parties have filed objections to these motions. Hearings on these motions are scheduled for May 9, 10 and 12, 2006. While Delphi has indicated to us that it expects no disruptions in its ability to continue supplying us with the systems, components, and parts we need as Delphi pursues its bankruptcy restructuring plan, labor disruptions at Delphi resulting from Delphi’s pursuit of a restructuring plan could seriously disrupt our North American operations, prevent us from executing our GMNA turnaround initiatives, and materially adversely impact our business. Accordingly, resolution of the Delphi related issues remains a critical near term priority.

      Please refer to the Key Factors Affecting Future Results section starting on page I-40 for further discussion on the above topics.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Results of Operations

		Three Months Ended
		March 31,
Consolidated Results		2006			2005
		(Dollars in millions)
Consolidated:
	Total net sales and revenues	$	52,245		$	45,773
	Net income (loss)	$	445		$	(1,253	)
	Net margin		0.9	%		(2.7	)%
Automotive and Other Operations:
	Total net sales and revenues	$	43,390		$	37,303
	Net income (loss)	$	(193	)	$	(1,982	)
Financing and Insurance Operations:
	Total revenues	$	8,855		$	8,470
	Net income	$	638		$	729

      The increase in first quarter 2006 total net sales and revenues, compared with first quarter 2005, was due to higher GMA revenue of $6.4 billion, primarily driven by an increase in global production volume of nearly 10%, with all regions except GME showing increases, as well as a favorable pricing at GMNA.

      Consolidated results improved by about $1.7 billion to net income of $445 million in the first quarter of 2006, compared to a net loss of $1.3 billion in the first quarter of 2005. The net loss of $193 million at Auto & Other is primarily attributable to GMNA, which had a net loss of $503 million, and Other Operations, which incurred a net loss of $220 million. These losses more than offset net income earned at all other automotive regions. GMAC earned $637 million in the first quarter of 2006, down $91 million from the 2005 level, reflecting lower income from mortgage operations partially offset by improved earnings from financing and insurance operations.

      First quarter 2006 results included:

•  Consolidated net income of $445 million;

•  Improved results at GMNA;

•  Profitability at all other automotive regions;

•  Continued profitability at GMAC; and

•  Strengthened liquidity position at Auto & Other.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Results of Operations (concluded)

      More detailed discussions on the results of operations for the automotive regions, other operations, and GMAC can be found in the following sections.

GM Automotive and Other Operations Financial Review

			Three Months Ended
			March 31,
			2006			2005
			(Dollars in millions)
Auto & Other:
	Total net sales and revenues		$	43,390		$	37,303
	Net income (loss)		$	(193	)	$	(1,982	)
GMA net income (loss) by region:
	GMNA		$	(503	)	$	(1,737	)
	GME			48			(514	)
	GMLAAM			29			31
	GMAP			453			70
		Net income (loss)	$	27		$	(2,150	)
	Net margin			0.1	%		(5.8	)%
	GM global automotive market share			13.2	%		13.3	%
Other Operations:
	Net income (loss)		$	(220	)	$	168

      GM Auto & Other’s net sales and revenues increased $6.1 billion, or 16%, in the first quarter of 2006, compared to the year-earlier quarter. The increase was driven by a 13% increase, or $3.3 billion, at GMNA, primarily from higher production volume and favorable pricing. GMAP’s revenue more than doubled over 2005, largely due to the consolidation of GM Daewoo, which was reported under the equity method of accounting in the first quarter of 2005. GMLAAM’s revenue increased nearly 37%, while GME’s revenue was essentially flat. GM’s global market share was 13.2% and 13.3% for the first quarters of 2006 and 2005, respectively. GMNA’s market share decreased 1.5 percentage points, to 23.7% for the quarter, compared to 2005. Market share gains were achieved in GMLAAM and GMAP, while GME’s share decreased slightly.

      GMA earned net income of $27 million in the first quarter 2006, an improvement of $2.2 billion compared to a net loss of $2.2 billion in 2005, with all regions showing improved results.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review (continued)

GM Automotive Regional Results

GM North America

			Three Months Ended
			March 31,
			2006			2005
			(Dollars in millions)
GMNA:
	Total net sales and revenues		$	28,531		$	25,227
	Net income (loss)		$	(503	)	$	(1,737	)
	Net margin			(1.8	)%		(6.9	)%
			(Volume in thousands)
Production volume
	Cars			496			470
	Trucks			759			712
		Total GMNA		1,255			1,182
Vehicle unit sales
	Industry — North America			4,758			4,688
	GM as a percentage of industry			23.7	%		25.2	%
	Industry — U.S.			4,050			4,001
	GM as a percentage of industry			23.8	%		25.4	%
	GM cars			20.7	%		23.3	%
	GM trucks			26.4	%		27.1	%

      North American industry vehicle unit sales increased 1.5% to 4.8 million in the first quarter of 2006 compared to 2005, whereas, U.S. industry vehicle unit sales increased slightly to 4.05 million units compared to 4.00 million units in the first quarter of 2005.

      U.S. industry volume in the first quarter of 2006 represents a seasonally adjusted annual rate of 17.4 million, compared to 17.1 million in the first quarter of 2005. GM’s U.S. market share decreased by 1.6 percentage points, to 23.8%, compared to the first quarter of 2005 reflecting a decline in vehicle unit deliveries of approximately 52 thousand units, or 5.1%. GM’s U.S. car market share declined by 2.6 percentage points to 20.7%, while GM’s U.S. truck market share declined to 26.4%, down 0.7 percentage point.

      GMNA production volumes were higher in 2006 by approximately 73 thousand units, at 1.255 million units for the quarter, compared to 1.182 million units in the first quarter of 2005. Dealer inventories in the U.S. declined year over year by approximately 74 thousand units, to 1.169 million units at March 31, 2006 from 1.243 million units at March 31, 2005.

      In the first quarter of 2006, GMNA recorded a net loss of $503 million, a reduction of $1.2 billion from the first quarter 2005 net loss of $1.7 billion. The improvement in results was due in part to the following factors:

•  Increased production volumes, which contributed approximately $460 million to quarterly results; and

•  Favorable pricing, the result of GM’s pricing initiatives with less reliance on incentives, as well as higher demand for recently launched vehicles such as the Chevrolet Tahoe, GMC Yukon, and Cadillac Escalade, contributed approximately $450 million to the improvement. These improvements were the primary drivers of the increased GMNA net margins in the first quarter of 2006 compared to the first quarter of 2005, as expenses were relatively flat other than those items mentioned below.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review (continued)

     GM North America (concluded)

      In addition to the factors above, results in the first quarter of 2006 included the following items related to GMNA’s restructuring initiatives:

•  After-tax charges of $41 million, compared to $140 million for the first quarter 2005. The first quarter 2006 charges include costs related to separations of salaried employees, components of an hourly attrition program related to retroactive lump sum payments, partially offset by favorable adjustments for higher than anticipated headcount reductions associated with previously announced GMNA plant closing activities.

      Also contributing to the improvement in 2006 compared to 2005 were first quarter 2005 after-tax charges of $84 million for the write-down to fair market value of various plant assets in connection with the cessation of production at the Lansing assembly plant.

GM Europe

		Three Months Ended
		March 31,
		2006			2005
		(Dollars in millions)
GME:
	Total net sales and revenues	$	8,091		$	8,108
	Net income (loss)	$	48		$	(514	)
	Net margin		0.6	%		(6.3	)%
		(Volume in thousands)
Production volume			494			502
Vehicle unit sales
	Industry		5,522			5,283
	GM as a percentage of industry		9.5	%		9.7	%
GM market share — Germany			10.0	%		10.9	%
GM market share — United Kingdom			14.5	%		14.9	%

      Industry vehicle unit sales increased in Europe during the first quarter of 2006 by approximately 4.5% compared to the first quarter of 2005, with year-over-year growth in most countries. GME vehicle unit deliveries increased by approximately 8 thousand units in the first quarter of 2006 versus the same period in 2005. Although GME unit deliveries increased in the first quarter 2006, given the strong increases in the industry volumes, GME’s market share declined to 9.5%, representing a 0.2 percentage point reduction versus the same period in 2005. GME experienced market share losses for the two largest markets in Europe, Germany and the United Kingdom, in the first quarter of 2006 as compared to the first quarter of 2005.

      GME earned net income of $48 million in the first quarter 2006, compared to a net loss of $514 million in the first quarter of 2005, reflecting the turnaround efforts in the region. The increase in income was due in part to the following factors:

•  Pricing improvements of approximately $50 million, primarily driven by the successful launch of the new Zafira; and

•  Material cost reductions and favorable structural cost savings attributable to continued progress in restructuring efforts largely in manufacturing, resulting in approximately $100 million improvement.

      In addition, GME’s 2006 results include an after-tax restructuring charge of $40 million, primarily at Adam Opel, compared to restructuring charges of $422 million, after tax, in the first quarter of 2005.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review (continued)

GM Latin America/Africa/Mid-East

		Three Months Ended
		March 31,
		2006			2005
		(Dollars in millions)
GMLAAM:
	Total net sales and revenues	$	3,140		$	2,299
	Net income (loss)	$	29		$	31
	Net margin		0.9	%		1.3	%
		(Volume in thousands)
Production volume			194			185
Vehicle unit sales
	Industry		1,361			1,189
	GM as a percentage of industry		16.9	%		15.4	%
GM market share — Brazil			21.4	%		19.0	%

      Industry vehicle unit sales in the GMLAAM region increased over 14% in the first quarter of 2006, to 1.361 million units, compared to the first quarter of 2005. Overall, GMLAAM’s vehicle unit sales outpaced the strong industry growth resulting in a 1.5 percentage point increase in market share to 16.9% in the first quarter of 2006. The market share gain was primarily the result of a 2.4 percentage points increase in Brazil as well as gains from GM’s Middle East operations. The first quarter 2006 market share gains were partially offset by decreases in Argentina and South Africa market share, both of which had increases in sales but were subject to strong local industry growth. GMLAAM achieved an all-time record first quarter sales volume of 230 thousand units in 2006.

      GMLAAM earned net income of $29 million in the first quarter of 2006, compared to a net income of $31 million in the first quarter of 2005. Favorable pricing, production volumes, and product mix were offset by unfavorable currency impacts, especially movements in the Brazilian real. First quarter results for 2006 also included a $27 million charge for restructuring primarily related to the costs of voluntary employee separations at GM do Brasil.

GM Asia Pacific

		Three Months Ended
		March 31,
		2006			2005
		(Dollars in millions)
GMAP:
	Total net sales and revenues	$	3,933		$	1,694
	Net income (loss)	$	453		$	70
	Net margin		11.5	%		4.1	%
		(Volume in thousands)
Production volume			468			335
Vehicle unit sales
	Industry		5,076			4,659
	GM as a percentage of industry		6.4	%		5.0	%
GM market share — Australia			16.5	%		18.4	%
GM market share — China			13.5	%		10.2	%

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review (concluded)

     GM Asia Pacific (concluded)

      Industry vehicle unit sales in the Asia Pacific region increased by approximately 9% in the first quarter of 2006 compared to the first quarter of 2005, at 5.1 million units, with significant gains in China, India, and South Korea. GMAP increased its vehicle unit sales in the region by approximately 92 thousand units, or 40%, in the first quarter of 2006, primarily due to increased sales in China. GMAP sales volume includes Wuling sales in China due to the combination of the market environment and GM’s significant equity ownership position in Wuling. GMAP’s first quarter 2006 market share increased to 6.4%, from 5.0% in the first quarter of 2005. In China, GMAP increased its sales volume 76% compared to the first quarter of 2005, and increased its market share to 13.5%, up from 10.2% in the first quarter of 2005.

      Net income from GMAP was $453 million and $70 million in the first quarters of 2006 and 2005, respectively. The increase in GMAP’s net income, compared with the first quarter of 2005, was primarily due to the following factors:

•  A gain of $372 million, after tax, from the sale of approximately 85% of GM’s investment in Suzuki, discussed above; and

•  Improved results at GM Daewoo and GM’s joint ventures in China, partially offset by unfavorable results at Holden and Thailand.

      GMAP results reflect the consolidation of GM Daewoo as of June 30, 2006.

Other Operations

		Three Months Ended
		March 31,
		2006			2005
		(Dollars in millions)
Other Operations:
	Total net sales, revenues, and eliminations	$	(305	)	$	(25	)
	Net income (loss)	$	(220	)	$	168

      Other Operations recorded a net loss of $220 million in the first quarter of 2006, compared to net income of $168 million in 2005. The deterioration in results is primarily attributable to tax benefits included only in 2005, which contributed $389 million to the prior year results.

      Other Operations’ results also include after-tax legacy costs of $149 million and $112 million for the first quarters of 2006 and 2005, respectively, related to employee benefit costs of divested businesses, primarily Delphi, for which GM has retained responsibility. In addition, 2006 results include an after-tax charge of $3 million related to curtailment charges with respect to U.S. salaried pension changes, and 2005 results include an $8 million after-tax charge related to early retirement and other separation programs for certain U.S. salaried employees.

GMAC Financial Review

      GMAC’s net income was $637 million and $728 million in the first quarters of 2006 and 2005, respectively. The decrease in net income in the first quarter of 2006, compared with 2005, was primarily the

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GMAC Financial Review (concluded)

result of a decline in mortgage income, partially offset by improved earnings from financing and insurance operations.

		Three Months Ended
		March 31,
		2006		2005
		(In millions)
Financing operations		$	270	$	216
Mortgage operations			238		418
Insurance operations			129		94
	Net income	$	637	$	728

      Net income from financing operations totaled $270 million and $216 million in the first quarters of 2006 and 2005, respectively. The increase in earnings is primarily due to favorable consumer credit provisions, primarily as a result of automotive whole loan activity, and favorable international credit experience. Earnings also benefited from lower compensation expense primarily as a result of decreased OPEB expense in the U.S.

      Net income from mortgage operations totaled $238 million in the first quarter of 2006, a 43% decrease from the $418 million earned in the first quarter of 2005. Earnings at ResCap were negatively affected by lower net margins resulting from both pricing pressures and higher funding costs, despite increased revenues from higher asset levels. In addition, gains on sales of loans were down due to a significant gain in the first quarter of 2005 realized from the sale of a portfolio of distressed mortgage loans. Apart from this, mortgage loan gains were relatively flat as the favorable effect from higher sales volume was offset by lower margins. ResCap’s credit provision was lower compared to the first quarter of 2005, as a result of favorable credit trends. Mortgage originations were $41.6 billion for the latest quarter, representing an increase from $34.6 billion in the year-ago period. GMAC income related to commercial mortgage operations was $41 million, representing operating earnings of $50 million and a $9 million loss on the sale of 78% of the commercial mortgage business. Cash proceeds from the sale were approximately $1.5 billion. At the closing, GMAC Commercial Mortgage also repaid to GMAC approximately $7.3 billion in intercompany loans, bringing the total cash from the sale to $8.8 billion.

      Net income from insurance operations totaled $129 million and $94 million in the first quarters of 2006 and 2005, respectively. The increase in net income in the first quarter of 2006, compared with 2005, was primarily due to the impact of strong underwriting results. First quarter results also benefited from the acquisition of MEEMIC Insurance Co., a personal lines business that offers automobile and homeowners insurance in the Midwest. Along with increased earnings, GMAC insurance maintained a strong investment portfolio, with a market value of $7.9 billion at March 31, 2006, including net unrealized gains of $622 million.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results

      The following discussion identifies the key factors, known events, and trends that could affect our future results.

GM North America Restructuring Plan — Update

      GM has been systematically and aggressively implementing its four-point turnaround plan for GMNA’s business to return the operations to profitability and positive cash flow as soon as possible. The four elements of this plan include:

•  Product Excellence

•  Revitalize Sales and Marketing Strategy

•  Accelerate Cost Reductions and Quality Improvements

•  Address Health Care Burden

      To date GM has already taken a number of previously disclosed steps resulting in progress towards the execution of the turnaround plan. The following is an update regarding further initiatives associated with certain elements of the GMNA turnaround plan:

Accelerate Cost Reductions and Quality Improvements: UAW-GM-Delphi Special Attrition Program Agreement

      As part of the initiatives to accelerate cost reductions and bring our structural cost and employment levels in line with revenues and demand for our vehicles, GM together with Delphi and the UAW announced on March 22, 2006 that they had entered into the UAW-GM-Delphi Special Attrition Program Agreement (the Attrition Agreement) which is intended to reduce the number of U.S. hourly employees at GM and Delphi through an accelerated attrition program. When originally executed, Delphi’s participation in the Attrition Agreement was subject to approval by the U.S. Bankruptcy Court for the Southern District of New York, which has jurisdiction over Delphi’s Chapter 11 proceedings. On April 7, 2006, the Bankruptcy Court declared in a hearing that Delphi’s participation in the Attrition Agreement was approved. The agreement will provide for a combination of early retirement programs and other incentives designed to help reduce employment levels at both GM and Delphi, and by which GM will be able to reduce the number of employees who are and will be in the JOBS bank in a cost effective manner.

      In the Attrition Agreement, GM has agreed to assume certain costs regarding UAW-represented Delphi employees. Specifically, GM agreed to (1) pay lump sums of $35,000 to certain employees who participate in the Attrition Program; (2) allow Delphi employees who agree to retire under the Attrition Program to flowback to GM for purposes of retirement whereby GM will assume all post-retirement health care and life insurance (OPEB) obligations to such retiree; (3) subsidize, for an interim period of time, health care and life insurance coverage for Delphi employees participating in a special voluntary pre-retirement program if Delphi reduces or eliminates its health care and/or life insurance coverage provided to active UAW employees; and (4) accept 5,000 active flowback employees, and as a result after they flow back, pay such employee’s wages and benefits and incur pension and OPEB obligations for such employees. The Attrition Agreement provides that for such costs, other than the $35,000 lump sum payment, GM will have a prepetition, general unsecured claim assertable against the estate of Delphi under certain existing agreements. This claim is subject to the rights of parties in interest to object to allowance on any grounds other than the claim did not arise under the terms of the pre-existing contractual agreements between GM and Delphi. GM believes that the Attrition Agreement will enhance the prospects for GM, the UAW and Delphi to reach a broad-based consensual resolution of issues relating to the Delphi restructuring.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)

GM North America Restructuring Plan — Update — (concluded)

      Also under the Attrition Agreement, GM will provide certain UAW-represented employees at GM with (i) a lump sum payment of $35,000 for normal or early voluntary retirements retroactive to October 1, 2005; (ii) a mutually satisfactory retirement for employees with at least 10 years of credited service and 50 years of age or older; (iii) payment of gross monthly wages ranging from $2,750 to $2,900 to those employees who participate in a special voluntary pre-retirement program depending on years of credited service and plant work location; and (iv) a buyout of $140,000 for employees with ten or more years of seniority, or of $70,000 for employees with less than 10 years seniority, provided such employees sever all ties with GM and Delphi except for any vested pension benefits.

      GMNA recorded an after tax charge of $52 million in the first quarter of 2006 associated with the $35,000 lump sum payments for normal or early voluntary retirements between March 31, 2006 and the October 1, 2005 retroactive agreement date described above. GM expects all other significant charges for this program to be incurred in the second and third quarters of 2006 in conjunction with execution of the remaining attrition program elements.

Expected Cost Reduction in North America

      As has been previously disclosed, GMNA continues to target a reduction of structural costs in North America by $7 billion on a running rate basis by the end of 2006. Running rate basis refers to the average annualized cost savings into the foreseeable future anticipated to result from cost savings actions when fully implemented. GM expects $4.5 billion of the structural cost reduction to be realized during calendar year 2006, which is greater than the $4 billion of structural cost reductions previously estimated for calendar year 2006 in GM’s 2005 annual report on Form 10-K. This improvement is due to a reduction by $1 billion in previously-expected charges associated with the UAW healthcare settlement agreement in the first quarter of 2006, partially offset by an increase in amortization expense related to the $1 billion and future contributions associated with the Mitigation Plan.

      Attainment of the structural cost reductions will be, based in part on the following restructuring initiatives which have been announced and/ or executed:

•  October 2005 — UAW Health Care Settlement Agreement

•  November 2005 — GMNA Capacity Reductions

•  February 2006 — Salaried Retiree Health Care Revisions

•  March 2006 — Salaried Retiree Pension Plan Revisions

•  March 2006 — GM-UAW-Delphi Special Attrition Program Agreement

      In addition to the structural cost reductions, GMNA was also targeting a net reduction in material costs in 2006 of $1 billion, prior to factoring in the cost of government mandated product improvements. Reducing material costs remains a critical part of GMNA’s overall long-term cost reduction plans. Attainment of this target, however, has been challenged by higher commodity prices and troubled supplier situations. GMNA will continue its aggressive pursuit of material cost reduction via improvements in its global processes for product development which will enable further part commonization and reuse among architectures, as well as through the continued use of the most competitive supply sources globally.

Delphi Bankruptcy

      On October 8, 2005, Delphi filed a petition for Chapter 11 proceedings under the United States Bankruptcy Code for itself and many of its U.S. subsidiaries. GM expects no immediate effect on its global

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)

Delphi Bankruptcy — (continued)

automotive operations as a result of Delphi’s action. Delphi is GM’s largest supplier of automotive systems, components and parts, and GM is Delphi’s largest customer.

      GM will continue to work constructively in the court proceedings with Delphi, Delphi’s unions, and other participants in Delphi’s restructuring process. GM’s goal is to pursue outcomes that are in the best interests of GM and its stockholders, and that enable Delphi to continue as an important supplier to GM.

      Delphi has indicated to GM that it expects no disruption in its ability to supply GM with the systems, components and parts it needs as Delphi pursues a restructuring plan under the Chapter 11 process. Although the challenges faced by Delphi during its restructuring process could create operating and financial risks for GM, that process is also expected to present opportunities for GM. These opportunities include reducing, over the long term, the significant cost penalty GM incurs in obtaining parts from Delphi, as well as improving the quality of systems, components and parts GM procures from Delphi as a result of the restructuring of Delphi through the Chapter 11 process. However, there can be no assurance that GM will be able to realize any benefits.

      On March 31, 2006, Delphi filed a motion under the U.S. Bankruptcy Code seeking authority to reject certain supply contracts with GM. A hearing on this motion is scheduled for June 2 and 5, 2006. Although Delphi has not rejected any GM contracts as of this time and has assured GM that it does not intend to disrupt production at GM assembly facilities, there is a risk that Delphi or one or more of its affiliates may reject or threaten to reject individual contracts with GM, either for the purpose of exiting specific lines of business or in an attempt to increase the price GM pays for certain parts and components. As a result, GM might be materially adversely affected by disruption in the supply of automotive systems, components and parts that could force the suspension of production at GM assembly facilities.

      Delphi also filed on March 31, 2006 motions under the U.S. Bankruptcy Code seeking authority to reject its U.S. labor agreements and modify retiree welfare benefits. The unions and certain other parties have filed objections to these motions. Hearings on these motions are scheduled for May 9, 10 and 12, 2006. While Delphi has indicated to us that it expects no disruptions in its ability to continue supplying us with the systems, components, and parts we need as Delphi pursues its bankruptcy restructuring plan, labor disruptions at Delphi resulting from Delphi’s pursuit of a restructuring plan could seriously disrupt our North American operations, prevent us from executing our GMNA turnaround initiatives, and materially adversely impact our business. Accordingly, resolution of the Delphi related issues remains a critical near term priority.

      Various financial obligations Delphi has to GM as of the date of Delphi’s Chapter 11 filing, including the $927 million payable for amounts that Delphi owed to GM relating to Delphi employees who were formerly GM employees and subsequently transferred back to GM as job openings became available to them under certain employee “flowback” arrangements, may be subject to compromise in the bankruptcy proceedings, which may result in GM receiving payment of only a portion of the face amount owed by Delphi.

      GM is seeking to minimize this risk by protecting our right of setoff against the $1.15 billion we owed to Delphi as of the date of its Chapter 11 filing. A procedure for determining setoff claims has been put in place by the bankruptcy court. However, the extent to which these obligations are covered by our right to setoff may be subject to dispute by Delphi, the creditors committee, or Delphi’s other creditors, and limitation by the court. GM cannot provide any assurance that it will be able to fully or partially setoff such amounts. However, to date setoffs of approximately $52.5 million have been agreed to by Delphi and taken by GM. Although GM believes that it is probable that it will be able to collect all of the amounts due from Delphi, the financial impact of a substantial compromise of our right of setoff could have a material adverse impact on our financial position.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)

Delphi Bankruptcy — (continued)

      In connection with GM’s spin-off of Delphi in 1999, GM entered into separate agreements with the UAW, the International Union of Electrical Workers and the United Steel Workers. In each of these three agreements (Benefit Guarantee Agreement(s)), GM provided contingent benefit guarantees to make payments for limited pension and OPEB expenses to certain former GM U.S. hourly employees who transferred to Delphi as part of the spin-off and meet the eligibility requirements for such payments (Covered Employees).

      Each Benefit Guarantee Agreement contains separate benefit guarantees relating to pension, post-retirement health care and life insurance benefits. These limited benefit guarantees each have separate triggering events that initiate potential GM liability if Delphi fails to provide the corresponding benefit at the required level. Therefore, it is possible that GM could incur liability under one of the guarantees (e.g., pension) without triggering the other guarantees (e.g., post-retirement health care or life insurance). In addition, with respect to pension benefits, GM’s obligation under the pension benefit guarantees only arises to the extent that the combination of pension benefits provided by Delphi and the Pension Benefit Guaranty Corporation (PBGC) falls short of the amounts GM has guaranteed.

      The Chapter 11 filing by Delphi does not by itself trigger any of the benefit guarantees. Moreover, Delphi’s filing of motions under the U.S. Bankruptcy Code to reject its U.S. labor agreements and modify retiree welfare benefits does not by itself trigger any of the benefit guarantees. In addition, the benefit guarantees expire on October 18, 2007 if not previously triggered by Delphi’s failure to pay the specified benefits. If a benefit guarantee is triggered before its expiration date, GM’s obligation could extend for the lives of affected Covered Employees, subject to the applicable terms of the pertinent benefit plans or other relevant agreements.

      The benefit guarantees do not obligate GM to guarantee any benefits for Delphi retirees in excess of the levels of corresponding benefits GM provides at any given time to GM’s own hourly retirees. Accordingly, if any of the benefits GM provides to its hourly retirees are reduced, there would be a similar reduction in GM’s obligations under the corresponding benefit guarantee.

      A separate agreement between GM and Delphi requires Delphi to indemnify GM if and to the extent GM makes payments under the benefit guarantees to the UAW employees or retirees. GM received a notice from Delphi, dated October 8, 2005, that it was more likely than not that GM would become obligated to provide benefits pursuant to the benefit guarantees to the UAW employees or retirees. The notice stated that Delphi was unable at that time to estimate the timing and scope of any benefits GM might be required to provide under those benefit guarantees. Any recovery by GM under indemnity claims against Delphi might be subject to partial or complete discharge in the Delphi reorganization proceeding. As a result, GM’s claims for indemnity may not be paid partially or in full.

      As part of the discussion to attain GM’s health-care agreement with the UAW, GM provided former GM employees who became Delphi employees the potential to earn up to seven years of credited service for purposes of eligibility for certain health-care benefits under the GM/ UAW benefit guarantee agreement.

      As discussed above, GM together with Delphi and the UAW announced on March 22, 2006 that they had entered into the UAW-GM-Delphi Special Attrition Program Agreement (the Attrition Agreement) which is intended to reduce the number of U.S. hourly employees at GM and Delphi through an accelerated attrition program. When originally executed, Delphi’s participation in the Attrition Agreement was subject to approval by the U.S. Bankruptcy Court for the Southern District of New York, which has jurisdiction over Delphi’s Chapter 11 proceedings. On April 7, 2006, the Bankruptcy Court declared in a hearing that Delphi’s participation in the Attrition Agreement was approved. The Attrition Agreement provides for a combination of early retirement programs and other incentives designed to help reduce employment levels at both GM and

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)

Delphi Bankruptcy — (concluded)

Delphi, and by which GM will be able to reduce the number of employees who are and will be in the JOBS bank in a cost effective manner.

      In the Attrition Agreement, GM has agreed to assume certain costs regarding UAW-represented Delphi employees. Specifically, GM agreed to (1) pay lump sums of $35,000 to certain employees who participate in the Attrition Program; (2) allow Delphi employees who agree to retire under the Attrition Program to flowback to GM for purposes of retirement whereby GM will assume all post-retirement health care and life insurance (OPEB) obligations to such retiree; (3) subsidize, for an interim period of time, health care and life insurance coverage for Delphi employees participating in a special voluntary pre-retirement program if Delphi reduces or eliminates its health care and/or life insurance coverage provided to active UAW employees; and (4) accept 5,000 active flowback employees, and as a result after they flow back, pay such employee’s wages and benefits and incur pension and OPEB obligations for such employees. The Attrition Agreement provides that for such costs, other than the $35,000 lump sum payment, GM will have a prepetition, general unsecured claim assertable against the estate of Delphi under certain existing agreements. This claim is subject to the rights of parties in interest to object to allowance on any grounds other than the claim did not arise under the terms of the pre-existing contractual agreements between GM and Delphi. GM believes that the Attrition Agreement will enhance the prospects for GM, the UAW and Delphi to reach a broad-based consensual resolution of issues relating to the Delphi restructuring.

      GM believes that it is probable that it has incurred a contingent liability due to Delphi’s Chapter 11 filing. GM believes that the range of the contingent exposures is between $5.5 billion and $12 billion, with amounts near the low end of the range considered more possible than amounts near the high end of the range. GM established a reserve of $5.5 billion ($3.6 billion after tax) for this contingent liability in the fourth quarter of 2005, and has made no adjustments to that reserve balance as of March 31, 2006. These views reflect GM’s current assessment that it is unlikely that a Chapter 11 process will result in both a termination of Delphi’s pension plan and complete elimination of its OPEB plans. The amount of this charge may change, depending on the result of discussions among GM, Delphi, and Delphi’s unions, and other factors. GM is currently unable to estimate the amount of additional charges, if any, which may arise from Delphi’s Chapter 11 filing. A consensual agreement to resolve the Delphi matter may cause GM to incur additional costs in exchange for benefits that would accrue to GM over time.

      With respect to the possible cash flow effect on GM related to its ability to make either pension or OPEB payments, if any are required under the benefit guarantees, GM would expect to make such payments from ongoing operating cash flow and financings. Such payments, if any, are not expected to have a material effect on GM’s cash flows in the short-term. However, if payable, these payments would be likely to increase over time, and could have a material effect on GM’s liquidity in coming years. (For reference, Delphi’s 2004 Form 10-K reported that its total cash outlay for OPEB for 2004 was $226 million, which included $154 million for both hourly and salaried retirees, the latter of whom are not covered under the benefit guarantees, plus $72 million in payments to GM for certain former Delphi hourly employees that flowed back to retire from GM). If benefits to Delphi’s U.S. hourly employees under Delphi’s pension plan are reduced or terminated, the resulting effect on GM cash flows in future years due to the Benefit Guarantee Agreements is currently not reasonably estimable.

GMAC — Sale of 51% Controlling Interest

      On April 2, 2006, GM and its wholly owned subsidiaries, GMAC and GM Finance Co. Holdings Inc., entered into a definitive agreement pursuant to which GM will sell a 51% controlling interest in GMAC for a purchase price of $7.4 billion to FIM Holdings LLC, a consortium of investors led by Cerberus Capital Management, L.P., a private investment firm, which also includes Citigroup Inc. and Aozora Bank Ltd. as consortium members (FIM Holdings). GM will retain a 49% equity investment interest in GMAC. In

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)

GMAC — Sale of 51% Controlling Interest — (continued)

addition, GM and the consortium will invest $1.9 billion of cash in new GMAC preferred equity, with $1.4 billion to be invested by GM and $500 million to be invested by FIM Holdings. The transaction is subject to a number of U.S. and international regulatory and other approvals. GM expects to close the transaction in the fourth quarter of 2006.

      GM believes this agreement represents another critical event in the current turnaround efforts, and will provide a number of benefits such as:

•  Strong long term Services Agreement between GM and GMAC — As part of the transaction, GM and GMAC will enter into a number of agreements that will require that GMAC continue to allocate capital to automotive financing consistent with historical practices, thereby continuing to provide critical financing support to a significant share of GM’s global sales. While GMAC will retain the right to make individual credit decisions, GMAC will commit to fund a broad spectrum of customers and dealers consistent with historical practice in the relevant jurisdiction. Subject to GMAC’s fulfillment of certain conditions, GM will grant GMAC exclusivity for 10 years for U.S., Canadian and international GM-sponsored consumer and wholesale marketing incentives, with the exception of Saturn branded products.

•  Improved Liquidity — Significant upfront sales proceeds to bolster GM liquidity, strengthening GM’s balance sheet and funding the turnaround plan.

•  Enhanced shareholder value through a stronger GMAC — GM will retain an 49% equity investment interest in GMAC, and will be able to continue to participate in GMAC’s strong profitability levels.

•  Expected de-linkage of GMAC’s credit rating from GM — GM expects the introduction of a new controlling investor for GMAC, new capital at GMAC, and significantly reduced intercompany exposures to GM will provide GMAC with a solid foundation to improve its current credit rating, and de-link the GMAC credit ratings from GM.

      As part of the agreement, GM will retain an option, for 10 years after the closing of the transaction, to repurchase from GMAC certain assets related to the automotive finance business of the North American Operations and International Operations of GMAC, subject to certain conditions, including that GM’s credit ratings are investment grade or are higher than GMAC’s credit ratings.

      Citigroup plans to arrange two asset-backed funding facilities that total $25 billion which will support GMAC’s ongoing business and enhance GMAC’s liquidity position. A $10 billion facility is expected to be available before closing and the other facility is expected to be available on or after closing. Citigroup has committed $12.5 billion in the aggregate to those two facilities. The funding facilities are in addition to Citigroup’s initial equity investment in GMAC.

      Prior to consummation of the agreement, (i) certain assets with respect to automotive leases and retail installment sales contracts owned by GMAC and its affiliates having a net book value of approximately $4 billion, will be dividended to GM, (ii) GM will assume certain of GMAC’s post-employment benefit obligations, (iii) GMAC will transfer to GM certain entities which hold a fee interest in certain real properties, (iv) GMAC will pay dividends to GM in an amount up to the amount of GMAC net income prior to the Acquisition, (v) GM will repay certain indebtedness owing to GMAC and specified intercompany unsecured obligations owing to GMAC shall be no greater than $1.5 billion and (vi) GMAC will make a one-time distribution to GM of approximately $2.7 billion of cash to reflect the increase in GMAC’s equity value resulting from the transfer of a portion of GMAC’s net deferred tax liabilities arising from the conversion of GMAC and certain of its subsidiaries to limited liability company form. The total value of the cash proceeds and distributions to GM before it purchases preferred limited liability company interests of GMAC will be approximately $14 billion over three years, comprised of the $7.4 billion purchase price, the $4 billion of

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (concluded)

GMAC — Sale of 51% Controlling Interest — (concluded)

retained assets and the $2.7 billion cash dividend. GM will take a non-cash pre-tax charge to earnings currently estimated at $1.1 billion to $1.3 billion ($750 million to $850 million after tax) in the second quarter of 2006 associated with the planned sale of 51% of GMAC.

      The agreement is subject to the satisfaction or waiver of customary and other closing conditions, including, among other things, (i) reasonable satisfaction by the members of FIM Holdings, pursuant to an agreement with or other writing from, the PBGC that, following the closing, GMAC and its subsidiaries will not have any liability with respect to the ERISA plans of GM, (ii) receipt of ratings for the senior unsecured long-term indebtedness of GMAC and Residential Capital Corporation, an indirect wholly owned subsidiary of GMAC, after giving effect to the transactions contemplated by the Agreement, of at least BB and BBB- (or their respective equivalents), respectively, and an A.M. Best rating for GMAC’s significant insurance subsidiaries of at least B++ and (iii) that no material adverse effect will have occurred with respect to the business, financial condition or results of operations of GMAC, which includes any actual downgrading by any of the major rating agencies of GM’s unsecured long-term indebtedness rating below CCC or its equivalent, and (iv) the receipt of required regulatory approvals and licenses. The agreement may be terminated upon the occurrence of certain events, including the failure to complete the transaction by March 31, 2007. There can be no assurance that the sale transaction will be completed or if it is completed, that the terms of the sale will not be different from those set forth in the definitive agreement. Furthermore, even if the sale transaction is completed on the agreed-upon terms, there is no assurance that it will delink GMAC’s credit rating from GM’s credit rating or maintain ResCap’s credit rating at investment grade.

      The sale of a controlling interest in GMAC will have the effect of reducing a significant portion of the GMAC U.S. pre-tax income available to GM. Given this anticipated decline in U.S. pre-tax income as a result of the transaction, we have reassessed the need for a valuation allowance against our U.S. net deferred tax assets balance of $21.8 billion as of March 31, 2006. At this time, we consider it more likely than not that we will have U.S. taxable income in the future that will allow us to realize these deferred tax assets. However, it is possible that some or all of these deferred tax assets could ultimately expire unused, especially if our GMNA restructuring activities are not successful or if GMAC’s income declines.

Investigations

      GM has been cooperating with the government in connection with a number of investigations, including investigations concerning pension and OPEB and certain transactions between GM and Delphi.

      The Securities and Exchange Commission (SEC) has issued subpoenas to GM in connection with various matters involving GM that it has under investigation. These matters include GM’s financial reporting concerning pension and OPEB, certain transactions between GM and Delphi, supplier price reductions or credits, and any obligation GM may have to fund pension and OPEB costs in connection with Delphi’s proceedings under Chapter 11 of the U.S. Bankruptcy Code. In addition, the SEC has issued a subpoena in connection with an investigation of our transactions in precious metal raw materials used in our automotive manufacturing operations, and a federal grand jury recently issued a subpoena in connection with supplier credits.

      Separately, SEC and federal grand jury subpoenas have been served on GMAC entities in connection with industry wide investigations into practices in the insurance industry relating to loss mitigation insurance products such as finite risk insurance.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Liquidity and Capital Resources

Automotive and Other Operations

Available Liquidity

      GM believes it has sufficient liquidity, balance sheet strength and financial flexibility to meet its capital requirements over the short and medium-term under reasonably foreseeable circumstances. Over the long term, we believe that GM’s ability to meet its capital requirements will primarily depend on the execution of its turnaround plan and the return of its North American operations to profitability and positive cash flow. GM Auto & Other’s available liquidity includes its cash balances, marketable securities and readily-available assets of its VEBA trusts. At March 31, 2006, GM Auto & Other’s available liquidity was $21.6 billion compared with $20.4 billion at December 31, 2005 and $19.8 billion at March 31, 2005. The amount of GM’s consolidated cash and marketable securities is subject to intra-month and seasonal fluctuations and includes balances held by various GM business units and subsidiaries worldwide that are needed to fund their operations.

		Mar. 31, 2006		Dec. 31, 2005		Mar 31, 2005
		(Dollars in billions)
Cash and cash equivalents		$	17.4	$	15.2	$	10.2
Other marketable securities			1.4		1.4		5.4
Readily-available assets of VEBA trusts			2.8		3.8		4.2
	Available Liquidity	$	21.6	$	20.4	$	19.8

      In addition to the readily-available portion of GM’s VEBA trusts included in available liquidity, GM expects to have access to significant additional assets in its VEBA trusts over time to fund its future OPEB plan costs. Total assets in the VEBA trusts and related 401(h) accounts approximated $18.6 billion at March 31, 2006 versus $19.1 billion at December 31, 2005. The decline in these balances was primarily driven by $2 billion of withdrawals during the first quarter of 2006, partially offset by asset returns during the quarter.

      GM also has a $5.6 billion unsecured line of credit under a standby facility with a syndicate of banks that terminates in June 2008. GM has not previously drawn on this credit facility or its predecessor facilities and believes that it has sufficient liquidity over the short and medium term without drawing on this facility. GM believes that it has a good faith basis on which to make a borrowing request under this credit facility. However, in view of GM’s recent restatement of its prior financial statements, there is substantial uncertainty as to whether the bank syndicate would be required to honor such a request, and therefore there is a high risk that GM would not be able to borrow under this facility. GM believes that this matter is unlikely to be tested because GM has no current need or intention to draw on the existing facility.

      Moreover, GM is currently exploring the possibility of amending or replacing the existing facility (the “New Facility”) by the end of the second quarter or early in the third quarter. Changes to the existing line of credit could include, among other terms, a security interest in certain GM assets, a reduction in the size of the facility, and an extension of the term beyond 2008. GM anticipates that it could periodically use the New Facility to fund such needs as seasonal working capital demands, which is a typical use for a secured line of credit. There can be no assurance that GM will be successful in negotiating an amendment or replacement of the existing credit line or, if so, as to the amount, terms or conditions of any New Facility.

      GM believes that issues also may arise from its recent restatement of its prior financial statements under various financing agreements, which consist principally of obligations in connection with sale/leaseback transactions and other lease obligations and do not include GM’s public debt indentures, as to which GM is a party. GM has evaluated the effect of its restatement under these agreements, including its legal rights (such as its ability to cure) with respect to any claims that could be asserted. While the amounts that might be subject to possible claims of acceleration, termination or other remedies under some or all of these agreements are uncertain, GM currently believes such amounts would likely not exceed approximately $2 billion,

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Automotive and Other Operations — (continued)

     Available Liquidity — (continued)

compared with an initial estimate of $3 billion as discussed in GM’s 2005 Form 10-K. The reduction of this estimate is the result of further analysis of the underlying portfolio. In addition, there may be economic disincentives for third parties to raise such claims to the extent they have them. GM believes that it has sufficient liquidity over the short and medium term, regardless of the resolution of these matters.

      GM also has an additional $0.4 billion in undrawn committed facilities with various maturities and undrawn uncommitted lines of credit of $0.5 billion. In addition, GM’s consolidated affiliates with non-GM minority shareholders, primarily GM Daewoo, have a combined $1.5 billion in undrawn committed facilities.

      On April 3, 2006, GM announced that it had entered into a definitive agreement to sell a 51% controlling interest in GMAC to a consortium of investors led by Cerberus Capital Management, L.P. The transaction is subject to a number of U.S., international and other approvals and is expected to close in the fourth quarter of 2006. The closing of the transaction would have a material effect on GM’s liquidity position. The total value of the cash proceeds and distributions to GM before it purchases preferred limited liability company interests of GMAC will be approximately $14 billion in cash from this transaction over three years, comprised of the $7.4 billion purchase price, $4 billion of retained assets and a $2.7 billion cash dividend.

Cash Flow

      The $1.2 billion increase in available liquidity to $21.6 billion at March 31, 2006 from $20.4 billion at December 31, 2005 was primarily the result of GM Auto & Other’s positive operating cash flow, and cash proceeds from asset sales, partially offset by the significant capital expenditures required to support the business.

      For the quarter ended March 31, 2006, Auto & Other’s operating cash flow was $3.0 billion compared with a negative $2.6 billion in the first quarter of 2005. GM’s operating cash flow was principally driven by Auto & Other’s improved first quarter performance, a net loss of $0.2 billion compared with a $2.0 billion net loss in the first quarter of 2005. The 2006 first quarter loss was offset by GM’s withdrawal of $2.0 billion from its VEBA trusts for its OPEB plans for reimbursement of retiree healthcare and life insurance benefits provided to eligible plan participants, improving operating cash flow by $2.0 billion.

      Auto & Other’s first quarter 2006 investing cash flows consisted primarily of capital expenditures (a use of investing cash flow) of $1.3 billion, compared with $1.2 billion in the first quarter 2005. In March, 2006 GM sold its interest in Suzuki common stock for approximately $2.0 billion in cash, positively impacting investing cash flow by the same amount.

Debt

      GM Auto & Other’s total debt at March 31, 2006 was $32.2 billion, of which $1.2 billion was classified as short-term and $31.0 billion was classified as long-term. At March 31, 2005, total debt was $32.3 billion, of which $2.4 billion was short-term and $29.9 billion was long-term.

      Separate from the $1.2 billion of short-term debt, near-term North American term debt maturities include up to approximately $1.2 billion in 2007, primarily related to approximately $1.2 billion of convertible debentures that may be put to GM for cash settlement in March 2007, and approximately $1.3 billion of various maturities in 2008.

      In order to provide financial flexibility to GM and its suppliers, GM maintains a trade payables program through GMACCF. Under the terms of the transaction to sell 51% of GMAC to Cerberus, GM will be permitted to continue administering the program through GMACCF so long as GM provides the funding of advance payments to suppliers under the program. At March 31, 2006, GM owed approximately $0.4 billion to GMACCF under the program, which amount is included in the balances of net payable to FIO and net

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Automotive and Other Operations — (concluded)

     Available Liquidity — (concluded)

receivable from Auto & Other in GM’s Supplemental Information to the Consolidated Balance Sheets, and is eliminated in GM’s Consolidated Balance Sheets.

Net Liquidity

      Net liquidity, calculated as cash, marketable securities, and $2.8 billion ($3.8 billion at December 31, 2005) of readily-available assets of the VEBA trust less the total of loans payable and long-term debt, was a negative $10.6 billion at March 31, 2006, compared with a negative $12.1 billion at December 31, 2005.

Financing and Insurance Operations

      At March 31, 2006, GMAC’s consolidated assets totaled $303.8 billion, compared with $320.5 billion at December 31, 2005 and $315.2 billion at March 31, 2005. The decrease from December 31, 2005 was primarily attributable to the sale of approximately 78% of GMAC’s equity in GMAC Commercial Mortgage in the first quarter of 2006. The decrease from March 31, 2005 was primarily attributable to a decrease of $9.5 billion in net finance receivables and loans, driven by decreases in retail automotive receivables partially offset by an increase in residential mortgage receivables.

      GMAC’s total debt decreased to $244.8 billion at March 31, 2006, compared with $253.2 billion at December 31, 2005 and $259.4 billion at March 31, 2005. GMAC’s ratio of total debt to total stockholder’s equity at March 31, 2006 was 10.9:1, compared with 11.9:1 at December 31, 2005, and 11.5:1 at March 31, 2005. GMAC’s liquidity, as well as its ability to profit from ongoing activity, is in large part dependent upon its timely access to capital and the costs associated with raising funds in different segments of the capital markets. Part of GMAC’s strategy in managing liquidity risk has been to develop diversified funding sources across a global investor base. As an important part of its overall funding and liquidity strategy, GMAC maintains substantial bank lines of credit. These bank lines of credit, which totaled $44.3 billion at March 31, 2006, provide “back-up” liquidity and represent additional funding sources, if required.

      GMAC currently has a $3.0 billion syndicated line of credit committed through June 2006, $4.4 billion committed through June 2008, and committed and uncommitted lines of credit of $3.3 billion and $8.6 billion, respectively. In addition, at March 31, 2006, New Center Asset Trust (NCAT) and Mortgage Interest Networking Trust (MINT) had $18.5 billion and $3.0 billion in committed liquidity facilities, respectively. NCAT is a special purpose entity administered by GMAC for the purpose of funding assets as part of GMAC’s securitization funding programs. This entity funds the purchase of assets through the issuance of asset-backed commercial paper and represents an important source of liquidity to GMAC. At March 31, 2006, NCAT had commercial paper outstanding of $12.0 billion, which is not consolidated in the Corporation’s Consolidated Balance Sheet. In addition, GMAC has been able to diversify its unsecured funding through the formation of ResCap. ResCap, which was formed as the holding company of GMAC’s residential mortgage businesses, has a $3.5 billion syndicated line of credit consisting of a $1.75 billion syndicated term loan, a $0.9 billion syndicated line of credit committed through July 2008, and a $0.9 billion syndicated line of credit committed through July 2006. Finally, GMAC has $108.0 billion in committed secured funding facilities with third-parties, including commitments with third-party asset-backed commercial paper conduits, as well as forward flow sale agreements with third-parties and repurchase facilities. This includes five year commitments that GMAC entered into in 2005 with remaining capacity to sell up to $59 billion of retail automotive receivables to third party purchasers through 2010. The unused portion of these committed and uncommitted facilities totaled $72.7 billion at March 31, 2006.

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Status of Debt Ratings

      Standard & Poor’s, Moody’s, and Fitch currently rate GM’s and GMAC’s credit at non-investment grade. Dominion Bond Rating Services (DBRS) rates GM’s credit at non-investment grade and maintains an investment grade rating for GMAC. All major rating agencies rate ResCap at investment grade. The following table summarizes GM’s, GMAC’s and ResCap’s credit ratings as of April 21, 2006:

	Senior Debt			Commercial Paper
Rating Agency	GM	GMAC	ResCap	GM	GMAC	ResCap
DBRS	B(High)	BBB(Low)	BBB	R-3(Mid)	R-2(Low)	R-2(Mid)
Fitch	B	BB	BBB-	Withdrawn	B	F3
Moody’s	B3	Ba1	Baa3	Not Prime	Not Prime	P3
S&P	B	BB	BBB-	B-3	B-1	A-3

	Outlook
Rating Agency	GM	GMAC	ResCap
DBRS	Negative	Developing	Developing
Fitch	Rating Watch Negative	Positive	Positive
Moody’s	Negative	Review for Possible Downgrade	Review for Possible Downgrade
S&P	Rating Watch Negative	Developing	Developing

      While GM experienced limited access to the capital markets in the first quarter of 2006 as a result of deterioration in its credit ratings, we were able to utilize available liquidity to meet our capital requirements. Similarly, due to the downgrade of GMAC’s unsecured debt to non-investment grade, GMAC’s access to the unsecured capital markets was limited. GMAC was able to meet its capital requirements by accessing alternative funding sources, with a focus on secured funding and automotive whole loan sales.

      Each of Standard and Poor’s, Moody’s, Fitch, and DBRS has recently downgraded GM’s senior debt ratings.

      On February 21, 2006, Moody’s downgraded GM’s senior unsecured debt to B2 with a negative outlook from B1 under review for a possible downgrade. On March 16, 2006, Moody’s placed the senior unsecured ratings of GM, GMAC and ResCap under review for a possible downgrade. At the same time, Moody’s changed the review status of ResCap’s short-term P-3 ratings to review for possible downgrade from direction uncertain. On March 29, 2006 Moody’s downgraded GM’s senior unsecured debt to B3 with a negative outlook leaving the ratings of GMAC and ResCap on review for possible downgrade. On May 5, 2006, Moody’s placed GM’s senior unsecured debt rating under review for a possible downgrade. GM’s corporate rating and the ratings of GMAC and ResCap were unaffected.

      On March 1, 2006, Fitch downgraded GM’s senior unsecured rating from B+ to B. Following GM’s April 2, 2006 entry into a definitive agreement to sell 51% of its stake in GMAC, Fitch changed GMAC’s and ResCap’s rating-watch outlook to positive from evolving.

      On March 29, 2006, Standard and Poor’s placed both GM’s long term B and short term B-3 corporate credit ratings on CreditWatch with negative implications. The ratings for GMAC and ResCap were affirmed as BB and BBB minus, respectively. Both GMAC and ResCap’s ratings were left on CreditWatch with developing implications.

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Status of Debt Ratings — (concluded)

      While the aforementioned ratings actions have increased borrowing costs and limited access to unsecured debt markets, these outcomes have been mitigated by actions taken by GM and GMAC over the past few years to focus on an increased use of liquidity sources other than institutional unsecured markets that are not directly affected by ratings on unsecured debt, including secured funding sources beyond traditional asset classes and geographical markets, automotive whole loan sales, and use of bank and conduit facilities. Further reductions of GM’s and/or GMAC’s credit ratings could increase the possibility of additional terms and conditions contained in any new or replacement financing arrangements. As a result of specific funding actions taken over the past few years, management believes that GM and GMAC will continue to have access to sufficient capital to meet the Corporation’s ongoing funding needs over the short and medium-term. Notwithstanding the foregoing, management believes that the current ratings situation and outlook increase the level of risk for achieving the Corporation’s funding strategy and GMAC’s ability to sustain current level of asset originations over the long-term. In addition, the ratings situation and outlook increase the importance of successfully executing the Corporation’s plans for improvement of operating results. On April 2, 2006, GM entered into a definitive agreement to sell 51% of its stake in GMAC. One of the goals of this transaction is to delink GMAC’s credit rating from GM’s credit rating and renew its access to low-cost financing.

Line of Credit Between GM and GMAC

      GM has a $4 billion revolving line of credit from GMAC that expires in September 2006. This credit line is used for general operating and seasonal working capital purposes and to reduce external liquidity requirements, given the differences in the timing of GM’s and GMAC’s peak funding requirements. The line was not utilized in the first quarter of 2006. In the first quarter of 2005, the maximum amount outstanding on this line was $3.3 billion. Interest is payable on amounts advanced under the arrangements based on market interest rates, adjusted to reflect the credit rating of GM or GMAC in its capacity as borrower.

Off-Balance Sheet Arrangements

      GM and GMAC use off-balance sheet arrangements where economics and sound business principles warrant their use. GM’s principal use of off-balance sheet arrangements occurs in connection with the securitization and sale of financial assets generated or acquired in the ordinary course of business by GMAC and its subsidiaries and, to a lesser extent, by GM. The assets securitized and sold by GMAC and its subsidiaries consist principally of mortgages, and wholesale and retail loans secured by vehicles sold through GM’s dealer network. The assets sold by GM consist principally of trade receivables.

      In addition, GM leases real estate and equipment from various off-balance sheet entities that have been established to facilitate the financing of those assets for GM by nationally prominent lessors that GM believes are creditworthy. These assets consist principally of office buildings, warehouses, and machinery and equipment. The use of such entities allows the parties providing the financing to isolate particular assets in a single entity and thereby syndicate the financing to multiple third parties. This is a conventional financing technique used to lower the cost of borrowing and, thus, the lease cost to a lessee such as GM.

      There is a well-established market in which institutions participate in the financing of such property through their purchase of ownership interests in these entities and each is owned by institutions that are independent of, and not affiliated with, GM. GM believes that no officers, directors or employees of GM, GMAC, or their affiliates hold any direct or indirect equity interests in such entities.

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Off-Balance Sheet Arrangements — (concluded)

      Assets in off-balance sheet entities were as follows (dollars in millions):

		March 31,		Dec. 31,		March 31,
		2006		2005		2005
Automotive and Other Operations Assets leased under operating leases		$	2,288	$	2,430	$	2,469
Trade receivables sold(1)			737		708		1,153
	Total	$	3,025	$	3,138	$	3,622
Financing and Insurance Operations Receivables sold or securitized:
	— Mortgage loans	$	90,207	$	99,084	$	81,496
	— Retail finance receivables		8,212		6,014		4,777
	— Wholesale finance receivables		21,326		21,421		24,507
	Total	$	119,745	$	126,519	$	110,780

(1)  In addition, trade receivables sold to GMAC were $595 million, $525 million and $558 million for the periods ended March 31, 2006, December 31, 2005, and March 31, 2005, respectively.

Book Value Per Share

      Book value per share was determined based on the liquidation rights of the common stockholders. Book value per share of GM $1²/3 par value common stock was $27.27 at March 31, 2006, $25.81 at December 31, 2005, and $44.37 at March 31, 2005.

      Book value per share is a meaningful financial measure for GM, as it provides investors an objective metric based on GAAP that can be compared to similar metrics for competitors and other industry participants. The book value per share can vary significantly from the trading price of common stock since the latter is driven by investor expectations about a variety of factors, including the present value of future cash flows, which may or may not warrant financial statement recognition under GAAP.

      As of March 31, 2006, GM’s book value per share was significantly higher than the trading price of its $1²/3 par value common stock. GM believes that this difference is driven mainly by marketplace uncertainty surrounding future events at GM.

Dividends

      Dividends may be paid on our $1²/3 par value common stock only when, as, and if declared by GM’s Board of Directors in its sole discretion out of amounts available for dividends under applicable law. At March 31, 2006, the amount of our capital surplus plus retained earnings on a GAAP basis was about $17.9 billion. Under Delaware law, our board may declare dividends only to the extent of our statutory “surplus” (which is defined as total assets minus total liabilities, in each case at fair market value, minus statutory capital), or if there is no such surplus, out of our net profits for the then current and/or immediately preceding fiscal year.

      GM’s policy is to distribute dividends on its $1²/3 par value common stock based on the outlook and indicated capital needs of the business. Cash dividends per share of GM $1²/3 par value common stock were $2.00 in 2005, 2004, and 2003. At the February 6, 2006 meeting of the GM Board of Directors, the board approved the reduction of the quarterly dividend on GM $1²/3 par value common stock from $0.50 per share to $0.25 per share, effective for the first quarter of 2006, which was paid on March 10, 2006 to holders of record as of February 16, 2006.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Employment And Payrolls

Worldwide employment for GM and its wholly-owned subsidiaries at March 31, (in thousands)		2006		2005
GMNA			169		179
GME(1)			64		58
GMLAAM			31		30
GMAP(2)			32		15
GMAC			31		34
Other			2		5
	Total employees		329		321

	Three Months
	Ended
	March 31,
	2006	2005
Worldwide payrolls — (in billions)	$5.3	$5.3

(1)	Approximately 7,000 employees were added in the fourth quarter of 2005 from a former powertrain joint venture with Fiat.
(2)	Approximately 13,000 employees were added as a result of the GM Daewoo consolidation in the third quarter of 2005.

Critical Accounting Estimates

      The condensed consolidated financial statements of GM are prepared in conformity with GAAP, which requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. GM’s accounting policies and critical accounting estimates are consistent with those described in Note 1 to the 2005 Consolidated Financial Statements and the MD&A section in our 2005 Annual Report on Form 10-K. Management believes that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. The Corporation has discussed the development, selection and disclosures of its critical accounting estimates with the Audit Committee of GM’s Board of Directors, and the Audit Committee has reviewed the Corporation’s disclosures relating to these estimates.

      GM will be remeasuring its U.S. Salaried Pension Plans as a result of previously announced benefit modifications. The primary impacts of this remeasurement will be reflected in the second quarter of 2006 and subsequent periods.

      Other than the above item, there have been no significant changes in the methodologies and processes used in developing these estimates from what is described in GM’s 2005 Annual Report on Form 10-K.

New Accounting Standards

      Beginning January 1, 2006, the Corporation adopted SFAS No. 123R, “Share-Based Payment” (SFAS 123R), requiring companies to record share-based payment transactions as compensation expense at fair market value. The Corporation elected the modified prospective method in adopting SFAS 123R. This method requires compensation cost to be recognized (a) based on the requirements of SFAS 123R for all share-based payments granted or modified after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date. The Corporation began expensing the fair market value of newly granted stock options

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

New Accounting Standards — (continued)

and other stock based compensation awards to employees pursuant to SFAS 123 in 2003; therefore this statement did not have a significant effect on GM’s consolidated financial position or results of operations.

      Prior to the adoption of SFAS No. 123(R), the Corporation used the Black-Scholes model to calculate the grant-date fair value of awards granted under the GMLTIP plan. The GMLTIP plan consists of award opportunities granted to participants that are based on the achievement of specific corporate business criteria. The condition is a minimum percentile ranking of GM’s Total Shareholder Return (TSR) among the companies in the S&P 500. The achievement of a certain TSR ranking relative to other stocks in the S&P 500 is considered a market condition under SFAS No. 123(R) and should be reflected in the calculation of the grant-date fair value of the award. For awards granted under the GMLTIP plan subsequent to the adoption of SFAS No. 123(R), the Corporation uses a lattice model to calculate the grant-date fair value of awards which incorporates the market condition.

      In December 2005, the FASB released FASB Staff Position (FSP) SFAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards,” which provides a practical transition election related to accounting for the tax effects of share-based payment awards to employees. The Corporation is currently reviewing the transition alternatives and will elect the appropriate alternative within one year of the adoption of SFAS 123(R).

      In February 2006, the FASB released FSP SFAS 123(R)-4, “Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event,” which clarifies the classification of options and similar instruments issued as employee compensation that allow for cash settlement upon the occurrence of a contingent event. The FSP did not have a significant effect on GM’s consolidated financial position or results of operations.

      In April 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” requiring retrospective application as the required method for reporting a change in accounting principle, unless impracticable or a pronouncement includes specific transition provisions. This statement also requires that a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. This statement carries forward the guidance in APB Opinion No. 20, “Accounting Changes,” for the reporting of the correction of an error and a change in accounting estimate. This statement is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005.

      In November 2005, the FASB released FSP FIN 45-3, “Application of FASB Interpretation No. 45 to Minimum Revenue Guarantees Granted to a Business or Its Owners,” requiring companies to disclose minimum revenue guarantees in accordance with the guidelines provided in FIN 45 for interim and annual financial statements. GM adopted FIN 45-3 upon issuance. The Interpretation did not have a significant effect on GM’s consolidated financial position or results of operations.

      In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments” which amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” This statement amends SFAS No. 133 to permit fair value remeasurement for any hybrid instrument that contains an embedded derivative that otherwise would require bifurcation. This statement also eliminates the interim guidance in SFAS No. 133 Implementation Issue D-1 which provides that beneficial interests in securitized financial assets are not subject to the provisions of SFAS No. 133. Finally, this statement amends SFAS No. 140 to eliminate the restriction on the passive derivative instruments that a qualifying special-purpose entity (SPE) may hold. This statement is effective for all financial instruments acquired or issued in first fiscal years beginning after September 15, 2006.

      In April 2006, the FASB issued FSP FIN 46(R)-6, “Determining the Variability to Be Considered in Applying FASB Interpretation No. 46(R)” which requires the variability of an entity to be analyzed based on

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New Accounting Standards — (concluded)

the design of the entity. The nature and risks in the entity, as well as the purpose for the entity’s creation are examined to determine the variability in applying FIN 46(R). The variability is used in applying FIN 46(R) to determine whether an entity is a variable interest entity, which interests are variable interests in the entity, and who is the primary beneficiary of the variable interest entity. This statement is effective for all reporting periods after June 15, 2006.

Forward-Looking Statements

      In this report, in reports subsequently filed by GM with the SEC on Form 10-K and Form 10-Q and filed or furnished on Form 8-K, and in related comments by management of GM, our use of the words “expect,” “anticipate,” “estimate,” “forecast,” “initiative,” “objective,” “plan,” “goal,” “project,” “outlook,” “priorities,” “target,” “intend,” “evaluate,” “pursue,” “seek,” “may,” “would,” “could,” “should,” “believe,” “potential,” “continue,” “designed,” “impact,” or the negative of any of those words or similar expressions is intended to identify forward-looking statements. All statements in subsequent reports which GM may file with the SEC on Form 10-Q and filed or furnished on Form 8-K, other than statements of historical fact, including without limitation, statements about future events and financial performance, are forward-looking statements that involve certain risks and uncertainties. While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable when made, these statements are not guarantees of any events or financial results, and GM’s actual results may differ materially due to numerous important factors that may be revised or supplemented in subsequent reports on SEC Forms 10-K, 10-Q and 8-K. Such factors include, among others, the following:

•  The ability of GM to realize production efficiencies, to achieve reductions in costs as a result of the turnaround restructuring and health care cost reductions and to implement capital expenditures at levels and times planned by management;

•  The resolution of the appeal of the court approval of the health care settlement agreement;

•  The pace of product introductions;

•  Market acceptance of the Corporation’s new products;

•  Significant changes in the competitive environment and the effect of competition in the Corporation’s markets, including on the Corporation’s pricing policies;

•  Our ability to maintain adequate liquidity and financing sources and an appropriate level of debt;

•  Restrictions on GMAC’s and ResCap’s ability to pay dividends and prepay subordinated debt obligations to us;

•  Changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates;

•  Costs and risks associated with litigation;

•  The final results of investigations and inquiries by the SEC;

•  Changes in our accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, including the range of estimates for the Delphi benefit guarantees, which could result in an impact on earnings;

•  Changes in relations with unions and employees/retirees and the legal interpretations of the agreements with those unions with regard to employees/retirees;

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Forward-Looking Statements — (continued)

•  Negotiations and bankruptcy court actions with respect to Delphi’s obligations to GM, negotiations with respect to GM’s obligations under the benefit guarantees to Delphi employees, and GM’s ability to recover any indemnity claims against Delphi;

•  Labor strikes or work stoppages at GM or at key suppliers such as Delphi;

•  Additional credit rating downgrades and the effects thereof;

•  The effect of a potential sale or other extraordinary transaction involving GMAC on the results of GM’s and GMAC’s operations and liquidity;

•  Other factors affecting financing and insurance operating segments’ results of operations and financial condition such as credit ratings, adequate access to the market, changes in the residual value of off-lease vehicles, changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate, and changes in our contractual servicing rights;

•  Shortages of and price increases for fuel; and

•  Changes in economic conditions, commodity prices, currency exchange rates or political stability in the markets in which we operate.

      In addition, GMAC’s actual results may differ materially due to numerous important factors that are described in GMAC’s most recent report on SEC Form 10-K, which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following:

•  The ability of GM to complete a transaction regarding a controlling interest in GMAC while maintaining a significant stake in GMAC, securing separate credit ratings and low cost funding to sustain growth for GMAC and ResCap, and maintaining the mutually beneficial relationship between GMAC and GM;

•  Significant changes in the competitive environment and the effect of competition in the Corporation’s markets, including on the Corporation’s pricing policies;

•  Our ability to maintain adequate financing sources;

•  Our ability to maintain an appropriate level of debt;

•  The profitability and financial condition of GM, including changes in production or sales of GM vehicles, risks based on GM’s contingent benefit guarantees and the possibility of labor strikes or work stoppages at GM or at key suppliers such as Delphi;

•  Funding obligations under GM and its subsidiaries’ qualified U.S. defined benefits pension plans;

•  Restrictions on ResCap’s ability to pay dividends and prepay subordinated debt obligations to us;

•  Changes in the residual value of off-lease vehicles;

•  Changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate;

•  Changes in our contractual servicing rights;

•  Costs and risks associated with litigation;

•  Changes in our accounting assumptions that may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings;

•  Changes in the credit ratings of GMAC or GM;

•  The threat of natural calamities;

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Forward-Looking Statements — (concluded)

•  Changes in economic conditions, currency exchange rates or political stability in the markets in which we operate; and

•  Changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations.

      Investors are cautioned not to place undue reliance on forward-looking statements. GM undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other such factors that affect the subject of these statements, except where expressly required by law.

* * * * * * *

Item 3. Quantitative And Qualitative Disclosures About Market Risk

      There have been no significant changes in the Corporation’s exposure to market risk since December 31, 2005. See Item 7A in GM’s Annual Report on Form 10-K for the year ended December 31, 2005.

* * * * * * *

Item 4. Controls and Procedures

      The Corporation maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the specified time periods.

      GM’s management, with the participation of its chief executive officer and its chief financial officer, evaluated the effectiveness of GM’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as of March 31, 2006. Based on that evaluation, GM’s chief executive officer and chief financial officer concluded that, as of that date, GM’s disclosure controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, were not effective at the reasonable assurance level.

      Management’s assessment identified the following material weaknesses and significant deficiency:

(A)  A material weakness was identified related to our design and maintenance of adequate controls over the preparation, review, presentation and disclosure of amounts included in our previously-reported condensed consolidated statements of cash flows for certain prior periods, which resulted in misstatements therein and our previous restatements thereof. Cash outflows related to certain mortgage loan originations and purchases were not appropriately classified as either operating cash flows or investing cash flows consistent with our original description as loans held for sale or loans held for investment. In addition, proceeds from sales and repayments related to certain mortgage loans, which initially were classified as mortgage loans held for investment and subsequently transferred to mortgage loans held for sale, were reported as operating cash flows instead of investing cash flows in our condensed consolidated statements of cash flows, as required by Statement of Financial Accounting Standards No. 102 Statement of Cash Flows — Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale. Finally, certain non-cash proceeds and transfers were not appropriately presented in the condensed consolidated statements of cash flows.

      GM management is in the process of remediating this material weakness through the design and implementation of enhanced controls to aid in the correct preparation, review, presentation and disclosures of our condensed consolidated statements of cash flows. Management will monitor, evaluate and test the operating effectiveness of these controls.

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Controls and Procedures — (concluded)

(B)

As discussed in GM’s Annual Report on Form 10-K for the year ended December 31, 2005, GM management remediated a material weakness in control procedures used to account for GM’s portfolio of vehicles on operating lease with daily rental car entities.

(C)

GM management also identified a significant deficiency in internal controls related to accounting for complex contracts. This deficiency was identified as a result of certain contracts being accounted for incorrectly and without appropriate consideration of the economic substance of the contracts. GM management is in the process of remediating this significant deficiency by implementing a delegation of authority for approval of the accounting for complex contracts that requires formal review and approval by experienced accounting personnel.

      Other than indicated above, there were no changes in the Corporation’s internal control over financial reporting that occurred during the quarter ended March 31, 2006, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

Limitations on the Effectiveness of Controls

      Our management, including our CEO and CFO, does not expect that our disclosure controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within General Motors have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II

Item 1. Legal Proceedings

Stockholder and Bondholder Class Actions

      In the previously reported ERISA Class Action In re General Motors ERISA Litigation, on April 6, 2006, the United States District Court for the Eastern District of Michigan denied the motion of the GM defendants to dismiss. The ruling is not a decision on the merits of the claims. No determination has been that the case may be maintained as a class action. The GM defendants intend to vigorously defend this action.

      In the previously reported stockholder class action In re General Motors Securities Litigation (previously Folksam Asset Management v. General Motors, et al. and Galliani v. General Motors, et. al.) on April 17, 2006, the Judicial Panel on Multidistrict Litigation entered an order transferring In re General Motors Securities Litigation to the United States District Court for the Eastern District of Michigan for coordinated or consolidated pretrial proceedings with Stein v. Bowles, et al.; Rosen, et al. v. General Motors Corp., et al; Gluckstern v. Wagoner, et al.; and Orr v. Wagoner, et al., all of which have been previously reported.

      In the previously reported bondholder class action Zielezienski, et al. v. General Motors, et al. on April 3, 2006, the court entered an order transferring the case to the United States District Court for the Eastern District of Michigan from the United States District Court for the Southern District of Florida.

Canadian Export Antitrust Class Actions

      In the previously reported antitrust class actions In re New Market Vehicle Canadian Export Antitrust Litigation Cases, General Motors and Nissan Motor Co. Ltd. have filed a petition for leave to appeal the decision of the United States District Court for the District of Maine certifying a class action for injuctive relief only under federal rule 23(b)(2) and deferring a decision on plaintiffs’ motion to certify statewide damages classes. On April 18, 2006, the United States Court of Appeals for the First Circuit ordered that it will hold in abeyance the petition for leave to appeal pending the district court’s ruling on the motion to certify statewide damages classes.

Health Care Litigation

      In the previously reported putative class action UAW, et al. v. General Motors Corporation, which challenged GM’s ability to modify the health care plan for certain hourly retirees and surviving spouses, the decision of the U.S. District Court for the Eastern District of Michigan on March 31, 2006 approving a settlement agreement has been appealed by the putative plaintiff class to the U.S. Court of Appeals for the Sixth Circuit.

Coolant System Product Litigation

      Kenneth Stewart v. General Motors of Canada Limited and General Motors Corporation, a complaint filed in the Superior Court of Ontario dated April 24, 2006, alleges a class action covering Canadian residents, except residents of British Columbia and Quebec, who purchased 1995 to 2003 GM vehicles with 3.1, 3.4, 3.8 and 4.3 liter engines. Plaintiff alleges that defects in the engine cooling systems allow coolant to leak into the engine and cause engine damage. The complaint alleges violation of the Business Practices and Competition Acts and seeks alleged benefits received as a result of failure to warn and negligence, compensatory damages, punitive damages, fees and costs.. Similar complaints were filed in the Supreme Court of British Columbia on behalf of purchasers resident in British Columbia (Donald Goodridge v. General Motors of Canada Limited and General Motors Corporation, dated May 2, 2006) and in the Superior Court of Quebec on behalf of purchasers resident in Quebec and Canada. (Dominique Gauthier v. General Motors of Canada Limited, dated April 18, 2006).

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Legal Proceedings — (concluded)

      In Gutzler v. General Motors Corporation, initially filed on April 11, 2003, the Circuit Court of Jackson County, Missouri certified a class on January 9, 2006, comprised of “all consumers who purchased or leased a GM vehicle in Missouri that was factory-equipped with Dex-Cool,” coolant, included as original equipment in GM vehicles manufactured since 1995. The Court also certified two sub-classes comprised of (i) class members who purchased or leased a vehicle with a 4.3-liter engine, and (ii) class members who purchased or leased a vehicle with a 3.1, 3.4 or 3.8-liter engine. On March 6, 2006, the Missouri Court of Appeals for the Western District declined to hear GM’s appeal of the class certifications, and GM’s petition to transfer the matter to the Missouri Supreme Court for further review is pending. GM has been named as the defendant in 20 similar putative class actions in various different federal and state courts in the U.S. alleging defects in the engine cooling systems in GM vehicles; 14 cases are still pending in U.S. courts including six cases that have been consolidated, either finally or conditionally, for pre-trial proceedings in a federal multi-district proceeding in the District Court for the Southern District of Illinois.

Environmental Matters

      With respect to the previously reported matter in which the EPA had issued an Administrative complaint on October 17, 2003 against General Motors in connection with the Corporation’s assembly facilities in Moraine, Ohio, Pontiac, Michigan, and Orion, Michigan, the EPA Administrative Law Judge has issued a preliminary determination that GM is liable for multiple violations of the hazardous waste rules as applied to GM’s painting and purge operations. The Judge has ordered GM to pay $568,116 in penalties. GM believes that the case was wrongly decided because the purge material in question is not a “waste”, but instead is being used as intended in enclosed systems to clean, suspend paint solids, and transport fluids. The purge material is thereafter captured, reclaimed, and reused by GM in its processes. GM intends to appeal to the Environmental Appeals Board on the grounds that the purge material in question is not a “waste.”

* * * * * * *

Item 1A. Risk Factors

      The risk factors immediately following, which were disclosed in our 2005 Form 10-K, have been modified to provide additional disclosure related to changes since we filed our 2005 Form 10-K. See our 2005 Form 10-K for an expanded description of other risks facing the Corporation listed below under “Other Risk Factors.”

Financial difficulties, labor stoppages or work slowdowns at key suppliers, including Delphi, could result in a disruption in our operations and have a material adverse effect on our business.

      We rely on many suppliers to provide us with the systems, components and parts that we need to manufacture our automotive products and operate our business. In recent years, some of these suppliers have experienced severe financial difficulties and solvency problems. Financial difficulties or solvency problems at those suppliers could materially adversely affect their ability to supply us with the systems, components and parts that we need to operate our business, resulting in a disruption in our operations. Similarly, many of these suppliers utilize workforces with substantial union representation. Workforce disputes resulting in work stoppages or slowdowns at these suppliers could also have a material adverse effect on their ability to continue supplying us.

      In particular, our largest supplier, Delphi, filed a Chapter 11 bankruptcy petition in October 2005. On March 31, 2006 Delphi filed motions under the U.S. Bankruptcy Code seeking authority to reject its U.S. labor agreements and modify retiree welfare benefits. The unions and certain other parties have filed objections to these motions. Hearings on these motions are scheduled for May 9, 10 and 12, 2006. While Delphi has indicated to us that it expects no disruptions in its ability to continue supplying us with the systems, components, and parts we need as Delphi pursues its bankruptcy restructuring plan, labor disruptions at

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Risk Factors — (continued)

Delphi resulting from Delphi’s pursuit of a restructuring plan could seriously disrupt our North American operations, prevent us from executing our GMNA turnaround initiatives, and materially adversely impact our business. We believe that the UAW has recently asked the UAW-represented Delphi employees to authorize a strike if Delphi voids its labor contracts and that the UAW has asked these employees to complete the vote by May 14, 2006.

Delphi may seek to reject or compromise its obligations to us through its Chapter 11 bankruptcy proceedings.

      In connection with its Chapter 11 bankruptcy restructuring, Delphi filed a motion under the U.S. Bankruptcy Code on March 31, 2006 seeking authority to reject certain supply contracts with GM. A hearing on this motion is scheduled for June 2 and 5, 2006. Although Delphi has not rejected any GM contracts as of this time and has assured GM that it does not intend to disrupt production at GM assembly facilities, there is a risk that Delphi or one more of its affiliates may reject or threaten to reject individual contracts with GM, either for the purpose of exiting specific lines of business or in an attempt to increase the price GM pays for various systems, components and parts we purchase from Delphi. As a result, we could experience a material disruption in our supply of automotive systems, components and parts that could force the suspension of production at GM assembly facilities, which could materially adversely affect our business, including implementation of our GMNA turnaround initiatives. It is also difficult for us to quickly switch to a different supplier for some of the systems, components and parts we purchase from Delphi as a result of the extended validation and production lead times for these items.

      Various financial obligations Delphi has to GM as of the date of Delphi’s Chapter 11 filing, including the $927 million payable for amounts that Delphi owed to GM relating to Delphi employees who were formerly GM employees and subsequently transferred back to GM as job openings became available to them under certain employee “flowback” arrangements, may be subject to compromise in the bankruptcy proceedings, which may result in GM receiving payment of only a portion of the face amount owed by Delphi. GM will seek to minimize this risk by protecting our right of setoff against the $1.15 billion we owed to Delphi as of the date of its Chapter 11 filing. A procedure for determining setoff claims has been put in place by the bankruptcy court. However, the extent to which these obligations are covered by our right to setoff may be subject to dispute by Delphi, the creditors committee, or Delphi’s other creditors, and limitation by the court. GM cannot provide any assurance that it will be able to fully or partially setoff such amounts. However, to date setoffs of approximately $52.5 million have been agreed to by Delphi and taken by GM. The financial impact of substantial compromise or our right of setoff could have a material adverse impact on our financial position.

Continued failure to achieve profitability may cause some or all of our deferred tax assets to expire.

      As of March 31, 2006, we had approximately $21.8 billion in U.S. net deferred tax assets. These deferred tax assets include net operating loss carryovers that can be used to offset taxable income in future periods and reduce our income taxes payable in those future periods. However, many of these deferred tax assets will expire if they are not utilized within certain time periods. At this time, we consider it more likely than not that we will have U.S. taxable income in the future that will allow us to realize these deferred tax assets. However, it is possible that some or all of these deferred tax assets could ultimately expire unused, especially if our GMNA restructuring initiatives are not successful or if GM’s share of GMAC’s income declines. On April 2, 2006, GM entered into a definitive agreement to sell a 51% controlling interest in GMAC to a consortium of investors. While this will not directly affect GM’s ability to realize our deferred tax assets, it will result in a significant portion of GMAC’s U.S. pre-tax income to no longer be available to GM. Therefore, unless we are able to generate sufficient U.S. taxable income from our automotive operations, a substantial valuation allowance may be required, which would materially increase our expenses in the period taken and adversely

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Risk Factors — (continued)

affect our business. If we were required to record a valuation allowance against all of our U.S. deferred tax assets as of March 31, 2006, our resulting total stockholders’ equity would have been negative.

Restrictions in our labor agreements, including the JOBS bank provisions in the UAW agreement, could limit our ability to pursue or achieve cost savings through restructuring initiatives, and labor strikes, work stoppages or similar difficulties could significantly disrupt our operations.

      Substantially all of the hourly employees in our U.S., Canadian and European automotive operations are represented by labor unions and are covered by collective bargaining agreements, which usually have a multi-year duration. Many of these agreements include provisions that limit our ability to realize cost savings from restructuring initiatives such as plant closings and reductions in work force. In particular, our collective bargaining agreement with the UAW, which covers the majority of our U.S. hourly employees, includes a JOBS bank provision that requires us to continue paying full wages and benefits, generally after 48 weeks of layoff, during the term of the agreement to qualified employees who would have otherwise been laid off due to plant idlings or other restructuring initiatives. We have been discussing these provisions with the UAW in an effort to develop an agreed upon accelerated attrition program by which we can reduce the number of employees that are and will be in the JOBS bank in a cost effective manner.

      However, currently this provision significantly limits our ability in the United States to achieve cost savings through plant idlings, workforce reductions, or similar initiatives and, in particular, our ability to execute our GMNA turnaround initiatives.

      As part of our discussions with the UAW, on March 22, 2006, GM, Delphi and the UAW reached a tentative agreement intended to reduce the number of U.S. hourly employees through an accelerated attrition program. On April 7, 2006, the bankruptcy court declared in a hearing that Delphi’s participation in the agreement was approved. We cannot provide any assurance that enough employees will agree to participate in the attrition program to reduce employment levels at GM sufficient to provide the benefits we anticipate.

      Our current collective bargaining agreement with the UAW will expire in September 2007. Any UAW strikes, threats of strikes, or other resistance in connection with the negotiation of a new agreement could impair our ability to implement further measures to reduce structural costs and improve production efficiencies in furtherance of our GMNA initiatives.

We have reached an agreement to sell a controlling interest in GMAC . There is a risk that this transaction may not be completed, or if it is completed, that it may not delink GMAC’s credit rating from GM’s credit rating or maintain ResCap’s investment grade credit rating. In addition, this transaction, if completed, would reduce our interest in GMAC’s earnings going forward.

      On April 2, 2006, GM entered into a definitive agreement to sell a 51% controlling interest in GMAC to a consortium of investors. There can be no assurance that the sale transaction will be completed or if it is completed, that the terms of the sale will not be different from those set forth in the definitive agreement. Furthermore, even if the sale transaction is completed on the agreed-upon terms, there is no assurance that it will not delink GMAC’s credit rating from GM’s credit rating or maintain ResCap’s credit rating at investment grade.

      Failure to complete the sale transaction will place further pressure on both GM’s and GMAC’s credit profiles, potentially resulting in further downgrades with GMAC’s credit ratings explicitly re-linked to those of GM. Moreover, any reduction in the automotive finance capacity of GMAC could materially adversely affect GM’s business to the extent that third party financing is not available to fund GM’s automotive sales. In the absence of a transaction:

•  GMAC’s access to capital may be seriously constrained, as most unsecured funding sources may decline, including bank funding;

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Risk Factors — (concluded)

•  The cost of funds related to borrowings that are secured by assets may increase, leading to a reduction in liquidity for certain asset classes;

•  It may be increasingly difficult to securitize assets, resulting in reduced capacity to support overall automotive originations;

•  Uncompetitive funding costs may result in a lower return on capital and significantly lower earnings and dividends; and

•  GMAC may need to consider divesting certain businesses in order to maintain adequate liquidity to fund new originations or otherwise preserve the value of its businesses.

      In addition, the sale transaction, if completed, would reduce our interest in the earnings of GMAC and ResCap, although the financial effects of that reduction would be offset by the value of the consideration we would receive from the purchasers.

Our pension and OPEB expenses are affected by factors outside our control, including the performance of plan assets, interest rates, actuarial data and experience, and changes in laws and regulations.

      Our future funding obligations for our IRS-qualified U.S. defined benefit pension plans and OPEB plans depend upon changes in the level of benefits provided for by the plans, the future performance of assets set aside in trusts for these plans, the level of interest rates used to determine minimum ERISA funding levels, actuarial data and experience, and any changes in government laws and regulations. In addition, our employee benefit plans hold a significant amount of equity securities. If the market values of these securities decline to a point where our pension obligations are not fully funded, our pension and OPEB expenses would increase and, as a result, could materially adversely affect our business. Any decreases in interest rates, if and to the extent not offset by contributions and asset returns, could also increase our obligations under such plans. We may be legally required to make contributions to the pension plans in the future, and those contributions could be material.

      In addition, on March 31, 2006, the Financial Accounting Standards Board (FASB) issued an exposure draft detailing proposed changes in the accounting rules for pensions and other postretirement benefits, which would require a company to include on its balance sheet an additional net asset or net liability to reflect the funded or unfunded status, as the case may be, of its retirement plans. In light of the unrecognized losses associated with our pension and OPEB liabilities under existing accounting rules, if these expected proposed rules had been in effect as of December 31, 2005, the substantial additional liability that we would have had to include on our balance sheet would have caused our total stockholders’ equity to be negative.

      Further, the U.S. Congress is currently considering legislation that, if adopted, would affect the manner in which GM administers its pensions. This proposed legislation is designed, among other things, to increase the amount by which companies fund their pension plans and to require companies that sponsor defined benefit plans to pay higher premiums to the PBGC. If this proposed legislation becomes law, GM, under certain future circumstances, could become subject to additional material funding requirements.

Other Risk Factors

      The following risk factors, which were disclosed in our 2005 Form 10-K, have not materially changed since we filed our 2005 Form 10-K. See our 2005 Form 10-K for a complete discussion of these risk factors.

Risks related to GM and its automotive business

•  Our ability to achieve structural and material cost reductions and to realize production efficiencies for our automotive operations is critical to our ability to achieve our turnaround plan and return to profitability.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Risks related to GM and its automotive business — (concluded)

•  We have guaranteed a significant amount of Delphi’s financial obligations to its unionized workers. If Delphi fails to satisfy these obligations, we would be obligated to pay some of these obligations.

•  Our health-care cost burden is one of our biggest competitive challenges, and if we do not make progress on structurally fixing this issue, it will continue to be a long-term threat to GM.

•  Our extensive pension and OPEB obligations to retirees are a competitive disadvantage for us.

•  We have recently experienced a series of credit rating actions that have downgraded our credit ratings to historically low levels. Further reduction of our credit ratings, or failure to restore our credit ratings to higher levels, could have a material adverse effect on our business.

•  Our liquidity position could be negatively affected by a variety of factors, which in turn could have a material adverse effect on our business.

•  GM’s recent restatement of its prior financial statements could negatively impact its rights and obligations under certain contracts to which it is a party, including its $5.6 billion standby credit facility, which could under certain circumstances materially adversely affect GM’s future liquidity.

•  The government is currently investigating certain of our accounting practices. The final outcome of these investigations could require us to restate prior financial results.

•  We operate in a highly competitive industry that has excess manufacturing capacity.

•  The bankruptcy or insolvency of a major competitor could result in further competitive disadvantages for us in relation to that competitor.

•  Shortages and increases in the price of fuel can result in diminished profitability due to shifts in consumer vehicle demand.

•  A decline in consumer demand for our higher margin vehicles could result in diminished profitability.

•  Our indebtedness and other obligations of our automotive operations are significant and could materially adversely affect our business.

•  Our pension and OPEB expenses are affected by factors outside our control, including the performance of plan assets, interest rates, actuarial data and experience, and changes in laws and regulations.

•  The pace of introduction and market acceptance of new vehicles is important to our success.

•  Economic and industry conditions constantly change and could have a material adverse effect on our business and results of operations.

•  Changes in existing, or the adoption of new, laws, regulations or policies of governmental organizations may have a significant negative impact on how we do business.

•  Our businesses outside the United States expose us to additional risks that may cause our revenues and profitability to decline.

•  A failure of or interruption in the communications and information systems on which we rely to conduct our operations could adversely affect our business.

•  We could be materially adversely affected by changes in currency exchange rates, commodity prices, equity prices and interest rates.

•  We are subject to significant risks of litigation.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Risks related to GM’s finance, mortgage and insurance businesses

•  Our finance, mortgage and insurance businesses require substantial capital, and if we are unable to maintain adequate financing sources, our business, results of operations and financial condition will suffer and jeopardize our ability to continue operations.

•  We are exposed to credit risk which could affect the business, results of operations and financial condition of our finance, mortgage and insurance operations.

•  Our earnings may decrease because of increases or decreases in interest rates.

•  Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates.

•  ResCap’s ability to pay dividends and to prepay subordinated debt obligations to GMAC is restricted by contractual arrangements.

•  We use estimates and assumptions in determining the fair value of certain of our assets, in determining our allowance for credit losses, in determining lease residual values and in determining our reserves for insurance losses and loss adjustment expenses. If our estimates or assumptions prove to be incorrect, the business, results of operations and financial condition of our finance, mortgage and insurance operations could be materially adversely affected.

•  General business and economic conditions of the industries and geographic areas in which we operate affect the business, results of operations and financial condition of our finance, mortgage and insurance operations.

•  Our business, results of operations and financial condition may be materially adversely affected by decreases in the residual value of off-lease vehicles.

•  Fluctuations in valuation of investment securities or significant fluctuations in investment market prices could negatively affect revenues.

•  Changes in existing U.S. government-sponsored mortgage programs, or disruptions in the secondary markets in the United States or in other countries in which our mortgage subsidiaries operate, could materially adversely affect the business, results of operations and financial condition of our mortgage business.

•  GMAC may be required to repurchase contracts and provide indemnification if GMAC breaches representations and warranties from its securitization and whole loan transactions, which could harm our business, results of operations and financial condition.

•  Significant indemnification payments or contract, lease or loan repurchase activity of retail contracts or leases or mortgage loans could harm our business, results of operations and financial condition.

•  A loss of contractual servicing rights could have a material adverse effect on our operations.

•  The regulatory environment in which GMAC operates could have a material adverse effect on its business.

      The worldwide financial services industry is highly competitive. If we are unable to compete successfully or if there is increased competition in the automotive financing, mortgage and/or insurance markets or generally in the markets for securitizations or asset sales, our margins could be materially adversely affected.

* * * * * * * *

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Item 2(c). Purchases of Equity Securities

      GM made no purchases of GM $1²/3 par value common stock during the three months ended March 31, 2006.

* * * * * * * *

Item 6. Exhibits

Exhibit
Number			Exhibit Name
	10	.1	Memorandum of Understanding dated October 29, 2005 between the International Union, UAW and General Motors Corporation
	10	.2	UAW-GM-Delphi Special Attrition Program dated March 22, 2006 among the International Union, UAW, General Motors Corporation and Delphi Corporation
	13		General Motors Acceptance Corporation Quarterly Report on Form 10-Q, File No. 000-03754, for the quarterly period ended March 31, 2006
	31	.1	Section 302 Certification of the Chief Executive Officer
	31	.2	Section 302 Certification of the Chief Financial Officer
	32	.1	Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* * * * * * * *

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

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: May 10, 2006

By:  /s/ PETER R. BIBLE

(Peter R. Bible, Chief Accounting Officer)

II-9 EX-10.1 2 k05088exv10w1.htm MEMORANDUM OF UNDERSTANDING

Exhibit 10.1

MEMORANDUM OF UNDERSTANDING

October 29, 2005

      During the course of the past several months, General Motors and the UAW have discussed at length GM’s deteriorating financial situation, including its spiraling health care costs and competitive challenges. In conjunction with these discussions, GM has provided the UAW with extensive access to GM’s financial records and the UAW has conducted a thorough review of GM’s financial position. As a result of the discussions the parties agree to the following, subject to ratification:

Affordability

      Retirees and surviving spouses who meet the following two-part test will continue to be covered by the current Health Care Program for Hourly Employees (“the Plan”), except the responsibility for the dental plan will be moved to the Defined Contribution VEBA (DC VEBA), and those changes referred to in Attachment C will apply:

      (a) Annual GM pension benefit income of $8,000 or less (excluding the lump-sum payment), and

      (b) Monthly benefit rate of $33.33 or less.

Amended Plan

Eligibility and Coverage

      Coverage for active employees, current and future retired employees, surviving spouses and dependents will be provided in accordance with existing eligibility rules. References in this Memorandum of Understanding (MOU) to retirees, Retired Participants, or similar wording is intended to include current and future retirees, surviving spouses, and their eligible dependents unless the context indicates otherwise.

Opting In and/or Out

      Retired participants who decline coverage under the Plan as amended herein (“Amended Plan”), will be automatically covered by a catastrophic plan as set forth in Attachment A. Retired participants will be allowed to elect between the Amended Plan and the catastrophic plan only during an annual enrollment period.

      Retired participants who fail to initially enroll in the Amended Plan will be allowed to enroll in the Amended Plan at any time during the first six months following the effective date.

Amended Plan Structure

      The Amended Plan will be the 2003-2007 defined benefit plan (i.e., the current Plan), with only the following modifications:

      Monthly Contributions (Current and Future Retired Participants and Surviving Spouses only)

      $50 (single); $105 (multiple party)

      Initially reduced to $10 (single); $21 (multiple party) by DC VEBA.

      Traditional Care Network (TCN) and Preferred Provider Organization (PPO) Deductibles (Current and Future Retired Participants and Surviving Spouses only)

      $300/$600

      Initially reduced to $150 (single); $300 (multiple party) by DC VEBA.

      TCN and PPO Co-insurance (Current and Future Retired Participants and Surviving Spouses only)

      10% In Network

      30% Out of Network

      TCN and PPO Out of Pocket Maximum (Current and Future Retired Participants and Surviving Spouses only)

      $500/$1000 In Network (including deductibles, excluding monthly contributions, prescription co-payments, Durable Medical Equipment (DME)/ Prosthetics & Orthotics (P&O), Mental Health/ Substance Abuse (MHSA), dental and vision cost sharing and other Amended Plan sanctions or exclusions, such as MHSA care beyond limits or outside of network)

      Initially reduced to $250 (single); $500 (multiple party) by DC VEBA.

      $1000/$2000 Out of Network (including deductibles, excluding monthly contributions, prescription co-payments, DME/ P&O, MHSA, dental and vision cost sharing and other Amended Plan sanctions or exclusions, such as MHSA care beyond limits or outside of network)

      Initially reduced to $500 (single); $1000 (multiple party) by DC VEBA.

      Emergency Room (Current and Future Retired Participants and Surviving Spouses only)

      $50 co-payment per visit unless admitted. The co-payments do not apply to meeting Amended Plan deductible amounts and do not apply to meeting Amended Plan out-of-pocket maximum amounts. The co-payments apply regardless of whether the Amended Plan out of pocket maximum has been met.

      Prescription Drugs (Active, Current and Future Retired Participants and Surviving Spouses)

      The co-payments do not apply to meeting Amended Plan deductible amounts and do not apply to meeting Amended Plan out-of-pocket maximum amounts. The co-payments apply regardless of whether the Amended Plan out of pocket maximum has been met.

      $5 generic/$10 brand retail co-payment

      $10 generic/$15 brand mail order co-payment per 90 day supply

      $15 retail co-payment for ED Drugs

      $18 mail order co-payment for ED Drugs

      Plan Design Escalation

      All dollar-denominated plan design items such as drug co-payments, TCN and PPO deductibles, out-of-pocket maximums, and contributions will increase annually at a rate not to exceed 3% as specified in Attachment B.

      Dental Plan (Current and Future Retired Participants and Surviving Spouses only including those covered by Affordability provision)

      Coverage will be provided for retirees, surviving spouses and dependents from the DC VEBA. The assets of the DC VEBA will be used to provide the benefit and will initially pay 100% of claims and administrative costs that would have been paid by the dental plan.

      Health Care Program Modifications (Active, Current and Future Retired Participants, Surviving Spouses, and Dependents, unless otherwise specified in Attachment C)

      See Attachment C.

      Mitigation

      The reductions for monthly contributions, deductibles, and out-of-pocket maximums, as well as the percentage of retiree dental to be provided by the assets of the DC VEBA are initially planned to be as set forth above. Any subsequent change will be determined by the Committee as limited by the trust agreement.

      Administration

      The administration of the Amended Plan shall be as defined in the Plan as well as the supplements, letters and memoranda attached thereto. This includes the joint committee identified in Exhibit C. Section 4. (d) and the miscellaneous letter for the Corporation-Union Committee on Health Care Benefits.

Defined Contribution VEBA Administration

      A new VEBA trust (the “Defined Contribution VEBA” or “DC VEBA”) will be established. It will be administered by an independent trust committee (the “Committee”) which shall not include any GM representatives. GM will fully cooperate with the DC VEBA by, for example, either accepting direct monthly payments from the DC VEBA or directing monthly payments to carriers for mitigation amounts and by providing sufficient information regarding the contribution obligations to allow the DC VEBA to faithfully evaluate and enforce the contribution obligations.

Purpose

      The purpose of the DC VEBA will be to reduce or reimburse monthly contributions, deductibles, out-of-pocket maximums, and/or co-insurance payable by retired participants, and/or to pay or reimburse costs related to dental coverage for retired participants.

DC VEBA Funding

      Contributions and/or asset transfers to the DC VEBA will be made as follows upon the entry of Judgment approving this agreement:

      (a) GM will cause the transfer of $1.0 billion of assets from a trust or otherwise to the DC VEBA (the “First Contribution”). Such transfer will be made as soon as practicable after the entry of Judgment approving this agreement and in no event later than the date on which retirees are required to make a monthly contribution under this agreement. One year following the First Contribution GM will cause the transfer of $1.0 billion of assets from a trust or otherwise to the DC VEBA (the “Second Contribution”). In 2011, on the anniversary date of the First Contribution GM will cause the transfer of $1.0 billion of assets from a trust or otherwise to the DC VEBA (the “Third Contribution”). If after the Second Contribution and prior to 2011 the value of the assets in the DC VEBA drops below $600 million as of the last day of any month, the Third Contribution will be pulled forward and paid within 15 days thereafter. In the event the Judgment approving this agreement is reversed or materially altered in whole or in part, there will be no obligation to make any transfer under this paragraph.

      (b) Profit Sharing Payments as defined below.

      (c) Wage Deferral Payments as defined below.

      (d) Stock Appreciation Rights as defined below.

      (e) Stock Dividend Payments as defined below.

DC VEBA Profit Sharing Payments

      For the Plan Years 2006 through 2012 (which is a time period equivalent in length to the seven year period of prior service cost amortization associated with the Amended Plan changes set forth in this agreement), in determining the “Profit Sharing Amount” as defined in Article II, Section 2.13 of the Profit Sharing Plan, the impact on profits associated with the changes (as described in Attachment D) to the Plan

that are implemented pursuant to this agreement will be excluded from the calculation of “Profits.” An amount equal to the resulting reduction in the Profit Sharing Amounts otherwise payable, will be contributed by GM to the DC VEBA. If the amount payable to the DC VEBA under this paragraph is less than thirty million dollars ($30,000,000), an incremental amount totaling the difference between thirty million dollars ($30,000,000) and the amount payable to the DC VEBA under this paragraph will be calculated. The cumulative (if multiple years) incremental amount plus interest will be contributed to the DC VEBA in the earlier of (a) the next plan year in which profit sharing is contributed to the DC VEBA, or (b) the 2013 Plan Year. The interest will be calculated at the OPEB discount rate in effect for the year (or years, if the incremental amount were not paid for multiple years) immediately prior to the incremental contribution.

DC VEBA Wage Deferral Payments

      Contributions equivalent to one dollar ($1.00) per hour in wage deferrals and COLA diversions will be made to the DC VEBA which will consist of the following:

      Effective with the first quarterly COLA adjustment following entry of Judgment approving this agreement, a cumulative total of seventeen cents ($0.17) will be diverted from future quarterly COLA increases, in additional increments of no more than six cents ($.06) in any quarter. Effective with the COLA adjustment immediately following the three month period in which the full seventeen cent ($0.17 cent) diversion has been reached, that amount shall be subtracted from the Cost of Living Allowance table, and the table shall be adjusted so that the actual three-month Average Consumer Price Index equates to the allowance then payable.

      In addition, the September 18, 2006 three percent (3%) general increase to the hourly wage rate will not be payable. Instead an equivalent amount, equating to an average of $0.83 (eighty-three cents) per hour, will be contributed to the DC VEBA.

      Finally, the current COLA diversion will be increased by an additional two cents ($0.02) beginning with the quarterly COLA adjustment following the quarter in which the above referenced cumulative total of seventeen cents ($0.17) has been diverted, and for each subsequent quarter.

      Contributions based on these wage deferrals, additional COLA diversions and COLA-equivalent deferrals will be calculated on the basis of the then current total amount of the deferrals multiplied by every hour worked times a factor of 1.5 in order to reflect the value of wage-related costs including pay for time not worked, overtime premiums, shift premiums, etc., that would otherwise have been incurred by GM had such amounts not been deferred. Such contributions will be made on a quarterly basis, in arrears.

      In the event that the court does not enter the Judgment approving the agreement, or such judgment is overturned in whole or in part on appeal, GM will cease any additional contributions provided for under the preceding paragraphs and prospectively reinstate the base hourly wage rates and COLA deferrals.

DC VEBA Stock Appreciation Rights (SAR)

      Following entry of Judgment approving this agreement, GM will make three cash contributions to the DC VEBA based on the increase in the notional value of eight (8) million shares of GM Common Stock, with one third of the number of shares applied to each contribution. GM will contribute to the DC VEBA the value of any appreciation in the share price over the average share price for the week ending October 14, 2005 (“Base Value”). One-third of the shares become available for generating the contribution amount on the Judgment date, one third on the first anniversary date of the Judgment, and the final third on the second anniversary of the Judgment. All three grants expire three years from the Judgment; the grants, or any portion thereof, may be exercised by the Committee at any time following the date they become available and prior to expiration. The exercise price will be based on the average share price one week prior to the exercise date. Once exercised by the Committee, the shares have no additional future value. The contribution will be based on the difference between the exercise price and the Base Value times the number of shares per issue. No contribution will be made if the exercise price on the exercise date is lower than the Base Value on the effective date of the agreement. Final documentation will include a provision for adjustment of the Base Value and/or notional shares (i.e., the eight [8] million notional shares, or to the extent notional shares have been exercised, the balance of non-exercised notional shares outstanding), as appropriate, in the event of stock

splits, reverse splits, exchange offers, stock buybacks, asset spinoffs, or other transactions on the same basis as that provided to those covered under the then current GM Stock Incentive Program. In no event shall a single transaction result in both a SAR’s related cash distribution under the DC VEBA Stock Dividend Payment paragraph below and an adjustment of the Base Value and/or notional shares as described above. In the event the Judgment approving this agreement is reversed or materially altered in whole or in part, there will be no obligation to make a SAR contribution under this paragraph.

DC VEBA Stock Dividend Payments

      Following entry of the Judgment approving this agreement, as GM implements its turnaround plan and performance improves, if through September 14, 2011, GM raises its regular quarterly cash dividend above $.50 per share, GM will place on a one time basis, an amount equivalent to four quarters of such dividend increase in the DC VEBA. In the event that GM declares any distribution, other than a regular quarterly cash dividend, to be paid to all shareholders of record, at any time after October 17, 2005, but prior to the expiration of the Stock Appreciation Rights as defined above, an equivalent per share cash contribution to the DC VEBA will be made at that time based upon the number of non-exercised SAR shares as identified above, i.e., eight (8) million shares less any exercised SAR shares. If the obligation in the preceding sentence arises prior to the establishment of the DC VEBA, GM shall make the contribution (with interest) as soon as practicable after the DC VEBA is established. In the event the Judgment approving this agreement is reversed or materially altered in whole or in part, there will be no obligation to make a stock dividend contribution under this paragraph.

Terms of DC VEBA

      The Trust Agreement governing the DC VEBA will contain provisions which direct that if there is a termination of this agreement, the assets of the DC VEBA will be utilized as soon as reasonably practicable to reimburse GM for the cost of providing health care for hourly retirees and beneficiaries in an amount equal to a pro rata share of the DC VEBA assets plus any earnings on the pro rata share. For purposes of this paragraph, the pro rata share will be determined by dividing the GM Amounts contributed/transferred to the DC VEBA by all amounts contributed/transferred to the DC VEBA. The GM Amounts are equal to the sum of the amounts GM has caused to be transferred or contributed to the DC VEBA under a) above, d) above — Stock Appreciation Rights, e) above — Stock Dividend Payments, and the payment of the incremental amount resulting from the $30 million guarantee under the Profit Sharing provisions described under b) above.

Plan Administration Costs

      GM and the UAW will continue to work with third party benefit administrators and other parties responsible for benefit plan administration to reduce administrative costs.

Effect of Legislative Changes

      The impact of legislation on the Health Care Program cannot be predicted with any certainty. Because these matters are unsettled, in the event any legislation has the effect of reducing retiree health care costs, GM and the UAW agree to discuss the impact of such legislation on this agreement at that time in order to equitably address any resulting financial benefit.

Fees

      The UAW will apply to the court for reimbursement of reasonable attorney and professional fees (not to include any success fee, completion bonus or rate premiums) payable by the UAW in connection with the court proceedings to obtain the Judgment approving this agreement and approval for the payment of certain professional fees associated with the settlement process.

Indemnification

      The parties will seek court approval of a mutually agreeable indemnity provision whereby GM agrees to indemnify the UAW from liability incurred as a result of the UAW’s entering into, or participation in the discussions regarding this agreement.

Effective Date

      Implementation of the matters set forth in Attachment C (the “Administrative Changes”) will take place in accordance with the provisions of Attachment C. Other than those changes described in Attachment C which will occur following ratification, adoption of the Amended Plan will take place as soon as practicable after entry of Judgment approving the agreement by the United States District Court in Detroit. The parties will jointly work diligently to have this agreement approved by the Federal District Court in Detroit by April 1, 2006. Except for the Administrative Changes, the Plan will continue to operate without modification until entry of Judgment approving this agreement or termination of this agreement.

Legal Judgment

      There is currently a dispute between GM and the UAW regarding whether GM can unilaterally modify benefits provided by the Plan or whether such benefits are vested with respect to retired participants. A declaratory judgment action has been filed by the UAW and retirees in the federal District Court in Detroit regarding this dispute. GM and the UAW in such proceeding will seek a judgment from the Federal District Court approving a class-wide settlement which (a) incorporates this agreement, and (b) is applicable to all retired participants, GM and the UAW (the “Judgment”).

Duration and Termination

      This agreement will remain in effect unless and until terminated in accordance with this section.

      Termination of the agreement may occur as a result of litigation-related events as follows:

      1. If the declaratory judgment action is enjoined or stayed, or withdrawn, dismissed, or otherwise terminated prior to judgment, or if the Judgment is denied in whole or in material part, either GM or the UAW may terminate this agreement by 30 days written notice to the other party.

      2. If the Judgment is granted by the District Court, but overturned in whole or in part on appeal or otherwise, either GM or the UAW may terminate this agreement by 30 days written notice to the other party.

      If the agreement does not terminate in accordance with 1 or 2 above, the agreement and the Amended Plan will remain in effect until at least September 14, 2011. The agreement and the Amended Plan will continue in effect indefinitely after September 14, 2011, including but not limited to the inflation protection provided by the ongoing annual increase not to exceed 3% in enrollee cost share, provided that GM or the UAW may declare a termination, by providing 90 days written notice to the other party. In the event that either party declares a termination, both parties will remain protected by the “no prejudice” provision described below.

      Termination of the agreement and/or the Amended Plan under any of the methods described above shall not modify or terminate the “No Prejudice” agreement.

No Prejudice

      This agreement, and anything occurring in connection with reaching this agreement, are without prejudice to GM, the UAW and the retirees. The parties may use this agreement to assist in securing the Judgment approving the settlement and to implement the Administrative Changes in accordance with Attachment C. It is intended that neither party nor the retirees may use this agreement, or anything occurring in connection with reaching this agreement, as evidence against GM, the UAW or the retirees in any circumstance except where the parties are operating under or enforcing the settlement incorporating this agreement or the Judgment approving the settlement. The settlement agreement, and the Judgment approving the settlement, will include a clear and unequivocal “no prejudice” provision making clear that, except where

the parties are operating under or enforcing the settlement incorporating this agreement or the Judgment approving the settlement, neither this agreement nor anything occurring in connection with reaching this agreement will prejudice any right of the UAW, the retirees, or GM on any issue, including but not limited to the issue described under the Legal Judgment paragraph above, except that in the event the Amended Plan becomes effective following court approval and the Amended Plan is later terminated in accordance with termination provisions of this agreement, neither the retirees nor the UAW would retain the right to seek reimbursement or recovery in connection with the health care changes incorporated in this agreement and Amended Plan for the period prior to termination.

      The “no prejudice” provision will include the understanding that in the event the court enters the Judgment, but this agreement is thereafter terminated by GM, the case law as it exists on the date of Judgment will be treated as the applicable body of case law for determining the legal issue described in the Legal Judgment paragraph above in litigation between GM, the UAW and current retirees, subject to any and all changes in the applicable law from subsequent legislative, regulatory or administrative developments, and provided further that GM may make any and all arguments in such litigation as are available to it regarding such case law as of the date of Judgment.

Final Documents

      All matters set forth in this agreement are subject to full legal documentation satisfactory to the parties consistent with the provisions set forth in this agreement.

Health Care Reform

      GM will publicly support federal policies to improve the quality and affordability of health care, and work cooperatively with the UAW towards that goal. See Attachment E.

Capital Spending

      During these discussions, the Corporation affirmed its intent to reinvest in its core automobile business through capital spending programs. In that regard, General Motors, on average, has spent $3.9 billion per year for Portfolio Initiatives over the most recent 6 year period of time and $1.2 Billion for Non-Portfolio Initiatives during that same time period. Future capital spending is forecasted to include, on average, $4.6 Billion for Portfolio Initiatives over the next 6 year period of time and $1.0 Billion for Non-Portfolio Initiatives during that same time period. This results in a projected annual capital spending of $5.6 Billion for GMNA. The parties’ efforts during these recent health care discussions enhance the ability of GMNA to attain these projected capital spending levels. As business conditions change and modifications are made to the capital spending programs, advanced dialogue with the UAW will occur. The General Motors capital spending programs will be reviewed at least annually, or upon request, with the UAW.

Agreement dated                                              , 2005

International Union, UAW General Motors Corporation

Attachment A

Group Catastrophic Plan

      This option will be a single catastrophic TCN plan offering which will consist, in general, of the following:

      Eligibility: All Hourly retirees are eligible to enroll in this catastrophic plan, except for active employees and retired and surviving spouse enrollees with annual GM pension benefit income of $8,000 or less and a monthly benefit rate of $33.33 or less.

      Initial and Ongoing Enrollment: Eligible Participants electing not to make monthly contributions for program coverage or who fail to authorize monthly contributions from their pension payments will be defaulted into this “catastrophic plan” option. As well, eligible Participants may voluntarily elect to enroll in this plan. Eligible Participants who are enrolled in this catastrophic TCN Plan will be subject to Rolling Enrollment rules.

      Plan Design:

      Monthly Contribution: $0

      Deductible: $1,250 (single) and $2,500 (family)

      Co-insurance: after deductible is met, 10% in-network and 30% out of network

Out-of-Pocket Maximums: $2,500 (single) and $5,000 (family) in-network;
$5,000 (single) and $10,000 (family) out-of-network

      ER Co-Payment: $100 per visit, waived if admitted

      Rx Co-payment Retail: $15 Generic, $35 Brand; $50 (Erectile Dysfunction medications)

      Rx Co-Payment Mail Order: $30 Generic, $70 Brand; $100 (Erectile Dysfunction medications)

      Deductibles, co-insurance, and out-of-pocket maximums noted above are not subject to mitigation. All dollar-denominated plan design items such as drug co-payments, deductibles and out-of-pocket maximums will increase annually at a rate not to exceed 3% as specified in Attachment B.

Attachment B

Plan Design Escalation

Escalation 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 %

$ (Where Applicable)	2006			2007			2008			2009			2010			2011
Monthly Contributions
Single		50			52			53			55			56			58
Family		105			108			111			115			118			122
Medical Plan A
Deductible — Single		300			309			318			328			338			348
Deductible — Family		600			618			637			656			675			696
Co-insurance In Network		10.0	%		10.0	%		10.0	%		10.0	%		10.0	%		10.0	%
Co-insurance Out Network		30.0	%		30.0	%		30.0	%		30.0	%		30.0	%		30.0	%
MOOP Single (In Network)		500			515			530			546			563			580
MOOP Family (In Network)		1,000			1,030			1,061			1,093			1,126			1,159
MOOP Single (Out Network)		1,000			1,030			1,061			1,093			1,126			1,159
MOOP Family (Out Network)		2,000			2,060			2,122			2,185			2,251			2,319
E/ R Co-payment**		50			52			53			55			56			58
Rx Plan
Generic — Retail		5			5			5			5			6			6
Brand — Retail		10			10			11			11			11			12
Select Drugs — Retail*		15			15			16			16			17			17
Generic — Mail		10			10			11			11			11			12
Brand — Mail		15			15			16			16			17			17
Select Drugs — Mail*		18			19			19			20			20			21

*  ED Drugs

**  Not subject to deductible or out-of-pocket maximum

Note: All dollar-denominated plan design items affecting enrollee cost share, i.e., drug co-payments, TCN and PPO deductibles, out-of-pocket maximums, emergency room co-payments, and contributions will increase annually as measured against the total annual aggregate medical trend in the overall plan for each respective year at a rate not to exceed 3% and rounded to the nearest whole dollar.

Attachment C

Health Care Program Modifications

(Effective As Noted in Each Item Listed Below)

(Applicable to All Active Employees, Current and Future Retirees,

Surviving Spouses, and Dependents, Unless Otherwise Specified)

Coordination With Medicare

•  Coverage to Medicare B Benefit (regardless of Med B enrollment) and Medicare Part B Maximum Payment Provisions:

•  For Medicare eligible enrollees (regardless of whether or not they are enrolled in Medicare Part B), Program benefits will be limited to an amount equal to the secondary balance payment that would have been made on the basis that, on the date of services, the enrollee was enrolled in Medicare Part B and received services from a provider that participates in Medicare. In the event an enrollee receives services from a provider that does not accept assignment, the enrollee will be responsible for all fees charged above the Medicare allowed amount, unless the enrollee is in a situation in which the enrollee does not have the ability or control to select a provider that accepts Medicare assignment to perform the service. No enrollee payment over the Medicare allowed amount will count towards enrollee cost sharing maximums.

•  It is recognized that the above provisions will indirectly require Medicare eligible enrollees who delayed enrollment in Medicare B, to enroll upon the implementation date of this agreement. The parties agree to send educational pieces 90-120 days prior to implementation, to those enrollees identified as eligible for Medicare, but not yet enrolled. Such delayed enrollment into Medicare Part B will result in penalties being applied by Medicare to the Part B monthly premiums. GM has agreed to work with Medicare to identify a way to eliminate penalties incurred. This may involve GM making a lump sum payment to Medicare; however, these discussions are not complete at this time. In the event GM and Medicare cannot reach agreement on eliminating the penalty, GM will establish a single nationwide Traditional Care Network (TCN) plan in which Medicare eligible enrollees who have elected to delay enrollment in Medicare Part B will be enrolled and this plan will not be subject to the provisions outlined in the first bullet above. Any enrollee in this group who later decides to enroll in Medicare Part B will be placed in a regular TCN plan and will be fully responsible for any and all penalties incurred at that time.

•  Coordination of Benefits for Medications covered under Medicare Part B:

•  The parties agree to encourage Medicare Part B enrollees to assign Medicare benefits to those pharmacies from which the enrollee receives medications that are covered under Medicare Part B. A program will be developed and implemented to educate enrollees about Medicare paying for certain medications and to encourage enrollees to use those pharmacies that have the capabilities to electronically bill Medicare and to assign Medicare benefits to such pharmacies in order for the Program to take advantage of Medicare paying primary on the claim. Further, the parties agree to monitor the improvement of electronic Medicare billing capabilities across the pharmacy network. Upon mutual agreement, the parties may at a later date implement a mandatory program. At that point, enrollees who utilize pharmacies which do not have electronic claim submission capabilities with Medicare will be required to pay for the secondary balance of the claim at the point of sale and seek reimbursement via submission of a paper claim from the prescription drug carrier.

•  The provisions outlined above will not apply to Active enrollees eligible for Medicare as their primary coverage.

•  This entire Program Coordination related to Medicare Eligible Enrollees will be implemented as soon as practicable after approval of the agreement by the Federal District Court.

Hospital/Surgical/Medical Modifications — TCN and PPO, Unless Otherwise Specified

      1. “Cosmetic” Provisions — Eliminate coverage for inpatient and outpatient hospital services (e.g., room & board, lab, x-rays, etc.) provided in conjunction with non-covered “plastic, cosmetic and reconstructive” surgeries.

•  This entire Program Modification related to Modifying “Cosmetic” Provisions will be implemented as soon as practicable after approval of the agreement by the Federal District Court.

      2. Referral Process for the “Preferred Provider Organization” Option

•  Require prospective authorization of out-of-network referrals.

•  In the event a referral is not approved prior to a service being provided, the enrollee is responsible for the out-of-network co-insurance. Any amount charged over R&C does not count toward enrollee cost sharing maximums.

•  The parties agree not to promote further reductions in PPO networks as outlined in the Miscellaneous Letter (Preferred Provider Organization), but to support ongoing network improvements by the carriers as quality and performance evaluation tools continue to develop and are utilized to drive members to high performing providers, as mutually agreed upon.

•  This entire Program Modification related to Improving the Referral Process for the “Preferred Provider Organization” Option will be implemented as soon as practicable after approval of the agreement by the Federal District Court.

      3. Integrated Care Management Program: — The parties agreed, during 2003 bargaining, to conduct a study of integrated care management. The Request For Proposal (RFP) will be released during the fourth quarter of 2005. The assessment of the RFP responses will be completed during the first quarter of 2006. The new Integrated Care Management Program will be implemented as soon as practicable upon completion of the study. The program will include, at a minimum, the following: Inpatient & Outpatient “Prospective” Pre-certification, as appropriate; Disease Management Programs, Centers of Excellence Programs and a LifeSteps Health Risk Assessment tool. Further, the parties agree to include a limited office visit benefit, similar to that currently included in the Coordinated Care Management (CCM) program. The parties agree to restrict the availability of the office visit benefits and will mutually define criteria to determine who is eligible to receive such benefits. However, the parties further agree that the value of this office visit benefit will not deteriorate from what is currently available under CCM.

•  The current Health Care Program language allows the parties to initiate and implement these Program Modifications related to the Integrated Care Management Program. These modifications will be implemented as soon as practicable following the ratification of this agreement.

      4. Hold Harmless — Except as otherwise provided in Section 4 of the Miscellaneous Letter entitled Understandings With Respect To Health Care-General, when an enrollee receives services from a physician who is not participating in Blue Cross Blue Shield (BCBS) or United Health Care (UHC) networks or from a facility not participating in a UHC network, the Program will be responsible to pay only up to the reasonable and customary (R&C) level as determined by the carrier. The enrollee will be responsible for all fees charged above R&C, unless the enrollee is in a situation in which the enrollee does not have the ability or control to select a par provider to perform the service. Such amounts over R&C are considered “Other Amounts Not Covered” by the Health Care Program and therefore will be the responsibility of the enrollee and will not be applied towards enrollee cost-sharing.

•  This entire Program Modification Related to Modifying Hold Harmless will be implemented as soon as practicable after approval of the agreement by the Federal District Court.

Prescription Drug Tools and Other Modifications

      In mid-year 2005, the parties jointly hired an independent consultant with the goal of reviewing various Rx Tools and with the intent the parties implement, as soon as practicable, such Rx Tools following review and recommendation by the consultant and as has been mutually agreed by the parties. These Rx Tools will be implemented in TCN, PPO and the parties will recommend that HMO plans implement the recommended Rx Tools as agreed upon.

      1. Those tools specifically reviewed by the consultant and agreed upon by the parties include:

•  Select Drugs/Drug Classes

•  Proton Pump Inhibitors (PPIs): Restrict coverage to generic omeprazole only. Brand dispensing will be permitted only for the following:

•  Barrett’s esophagitis and Zoellinger-Ellison syndrome patients (prior authorization required).

•  Patients demonstrating intolerance to omeprazole or who have failed prior prescription drug omeprazole therapy.

•  Selective Serotonin Reuptake Inhibitors (SSRIs): Restrict coverage to generic citalopram for patients who have not previously used either citalopram or escitalopram (Lexapro). For patients who have previously used citalopram prescriptions and then present a prescription for escitalopram, prior authorization is appropriate.

•  Statins: Preferred coverage review for Pravachol and Crestor.

•  Specific Rx Tools Edits:

•  Dose Duration for PPIs

•  Dose Optimization for Statins

•  Step Therapy for Enbrel

•  Step Therapy for Rheumatoid Arthritis medications

•  Prior Authorization for Erythroid Stimulants

•  Prior Authorization for Alzheimer’s disease medications

•  Prior Authorization for Anti-Emetics

      2. The Rx Tools Consultant will continue to evaluate specific medications, tools and other opportunities to improve the performance of the National Managed Pharmacy Program, as directed by the parties. Implementation will only be by mutual agreement. Such tools will include, but not be limited to, the following:

•  Step Therapy Edits — These edits ensure treatment is closer to evidence-based or commonly accepted guidelines by having patients use acceptable first line therapies initially for treatment. For example, use of first line treatments could be required prior to dispensing COX II Inhibitors used to manage pain.

•  Prior Authorization Edits — These edits are designed to confirm diagnosis and other clinical information before medications are dispensed. They also act as a safeguard to ensure FDA-approved uses (or common medically acceptable uses) of certain medications. For example, injectable drugs used to treat hepatitis and growth hormones, are examples of medications covered by these edits.

•  Dose and Quantity Edits — These edits promote medication dosing or length of therapy consistent with FDA recommended or commonly acceptable medical practice. These edits also could limit quantity per prescription fill to FDA recommended or common dosing guidelines. Examples of dose and quantity edits include:

•  Length of Therapy: limiting treatment of finger/toe nail fungus to 3 months as approved in FDA labeling

•  Dose Duration: limiting availability of high dose medication to the period medical guidelines recommend

•  Appropriate Quantity: allowing 8 estrogen patches per retail script and 24 per mail order script (dosing is twice a week)

•  Dose Optimization Edits — These edits promote once a day dosing versus multiple dosing per day for drugs where no clinical reason exists to divide dosing.

•  “34 day” and “90 day” Provisions — These edits are designed to identify quantities that appear to be in excess of the amount considered usual for a 34 or 90 day supply which then requires a conversation between the dispensing pharmacy and physician prior to the quantity being dispensed.

      3. RationalMed on a Nationwide Basis — Implement this program which identifies patients at risk for possible adverse Rx treatment outcomes and communicates the potential risks to treating physicians and provides information to support therapy decisions.

      4. Maintenance Drug List (MDL) — Add all maintenance drugs, as proposed, in Exhibit 1 to Attachment C.

      5. Quarterly Mailing of Prescription Drug Explanation of Benefits (EOBs) — Eliminate mailing of EOBs. EOBs will be available upon request to the carrier, via the carrier website or when an adverse determination is made.

      6. Edits for Select Drugs in TCN, PPO and HMOs — Implement Prior Authorization for Revatio to provide approval only for treatment of Pulmonary Arterial Hypertension (PAH) and exclude Dapoxetine from Program coverage.

      7. Pharmacy Benefit Manager — Complete an evaluation of the current (and potential) pharmacy benefit manager in line with the CUCHCB letter. As well, the parties agree to evaluate, as part of this process, Specialty Pharmacies.

•  The current Health Care Program language allows the parties to initiate and implement these Program Modifications, items 1-7. These modifications will be implemented as soon as practicable following the ratification of this agreement.

Health Maintenance Organization (HMO) Benefit Design and Administration — Effective as soon as practicable after approval by the Federal District Court, the HMO plan design will be as follows:

•  Monthly Contributions: $50 single; $105 multiple party (Current and Future Retired Participants and Surviving Spouses only, excludes those covered by the Affordability provision).

Initially reduced to $10 (single); $21 (multiple party) by DC VEBA.

•  Office Visit co-payments: $10

•  ER co-payments: $50 (Current and Future Retired Participants and Surviving Spouses only, excludes those covered by the Affordability provision)

•  Prescription Drug co-payments: (Current and Future Retired Participants and Surviving Spouses only, excluding those covered by the Affordability provision)

•  Retail: $5 generic/$10 brand; $15 Erectile Dysfunction medications

•  Mail Order (if offered): $10 generic/$15 brand; $18 Erectile Dysfunction medications

•  It is recognized that some HMOs may not be able to or may be unwilling to administer the Rx design outlined above. In the event this should occur, the parties will jointly agree upon an Rx design that achieves comparable savings. Additionally, it is agreed that if an HMO has implemented a mandatory mail order feature, the mail order co-payments will not exceed those outlined above.

•  HMOs may implement all pharmacy management tools currently available within their books of business.

•  Each HMO will make available to the membership a listing of pharmacy management tools employed by the plan.

•  If an enrollee, as a result of dissatisfaction with the pharmacy tools used by the HMO, wants to enroll in a different plan offering, the enrollee will be permitted to do so at any time.

•  This entire Program Modification related to Modifying HMO Benefit Design and Administration will be implemented as soon as practicable after approval of the agreement by the Federal District Court.

      During these negotiations, the parties discussed a number of approaches that might possibly be followed in applying the agreed-to health care savings associated with the Traditional Care Network (TCN) to the HMO environment, where the opportunity to implement parallel changes in plan design is not always possible. The parties agree that the goal of achieving an equivalent amount of health care savings from HMO plans would likely require some combination of the following: an increase in the existing office visit co-payment; additional monthly contributions; and other potential changes. The parties further agree that determining the appropriate mix and structure of such changes requires further analysis and study. As a result, the equivalent value of the TCN-related changes (i.e., those related to deductibles and out of pocket maximums) will not be applied to the existing HMO structure prior to January 1, 2007.

Exhibit 1 to Attachment C

Additions to MDL

Drug Brand Name	Drug Generic Name	Therapeutic Class
ACCURETIC	quinapril/hydrochlorothiazide	Hypertension
ACEON	perindopril	Hypertension
ACTIVELLA	estradiol/norethindrone	Estrogen Replacement
ACTONEL	risedronate	Osteoporosis
ACTOS	pioglitazone	Diabetes
ADVICOR	lovastatin/niacin	High Cholesterol
AGGRENOX	dipyridamole/aspirin	Antiplatelet Agent — Stroke prevention
ALTOPREV	lovastatin xl	High Cholesterol
ATACAND	candesartan	Hypertension
ATACAND HCT	candesartan/hydrochlorothiazide	Hypertension
AVALIDE	irbesartan/hydrochlorothiazide	Hypertension
AVANDAMET	rosiglitazone/metformin	Diabetes
AVANDIA	rosiglitazone	Diabetes
AVAPRO	irbesartan	Hypertension
BENICAR	olmesartan	Hypertension
BENICAR HCT	olmesartan/hydrochlorothiazide	Hypertension
CADUET	amlodipine/atorvastatin	Hypertension — Cholesterol
CLIMARA PRO	estradiol/levonorgestrel	Estrogen Replacement
COMBIPATCH	estradiol/norethindrone	Estrogen Replacement
COMTAN	entacopone	Parkinson’s Disease
COREG	carvedilol	Hypertension — CHF
DIOVAN HCT	valsartan/hydrochlorothiazide	Hypertension
EVISTA	raloxifene	Osteoporosis
FEMHRT	ethinyl estradiol/norethindrone	Estrogen Replacement
FOSAMAX	alendronate	Osteoporosis
GLUCOVANCE	glyburide/metformin	Diabetes
GLYSET	miglitol	Diabetes
HYZAAR	losartan/hydrochlorothiazide	Hypertension
LEXXEL	enalapril/felodipine	Hypertension
LOTREL	amlodipine/benazepril	Hypertension
MIACALCIN	calcitonin	Osteoporosis
MICARDIS	telmisartan	Hypertension
MICARDIS HCT	telmisartan/hydrochlorothiazide	Hypertension
MIRAPEX	pramipexole	Parkinson’s Disease
MOBIC	meloxicam	Pain Management — NSAID
ORTHO-PREFEST	estradiol/norgestimate	Estrogen Replacement
PLAVIX	clopidogrel	Antiplatelet Agent — Stroke prevention
PLETAL	cilostazol	Platelet Aggregation Inhibitor
PRANDIN	repaglinide	Diabetes
PRAVIGARD PAC	pravastatin/aspirin	Cholesterol — Stroke Prevention
PRECOSE	acarbose	Diabetes
REQUIP	ropinarole	Parkinson’s Disease
STARLIX	nateglinide	Diabetes
TARKA	trandolapril/verapamil	Hypertension
TEVETEN	eprosartan	Hypertension
TEVETEN HCT	eprosartan/hydrochlorothiazide	Hypertension
TRICOR	fenofibrate	Cholesterol — Triglycerides
ZETIA	ezetimibe	High Cholesterol
ZIAC	bisoprolol/hydrochlorothiazide	Hypertension
ZYFLO	zileuton	Asthma

Attachment D

10-14-05 Framework Plan Change Effect on Hourly Expense

Projected at Valuation Trend Basis 2006-2011

Discount Rate = 5.75%

(Assumes Plan Change as of 10/1/2005; i.e., no impact on 2005 Expense;

100% savings in 2006 expense; Excludes Impact of VEBA Contributions)

		’06-’11 Avg.
		Annual Net Sav.
($B)
Hourly Expense(1)
	Service Cost		0.1
	Interest		0.8
	Amortization of Loss(3)		(0.2	)
	Prior Service Cost Amortization(2)		2.2
	Total Gross Expense		2.9
	Expected Return On Assets		—
	Net Expense		2.9
Cash			1.0

Note — Values Estimated using Plan Change Model & Trued up to 2006 Wyatt Expense Savings Total for Scenario

Do not consider “Final”/will Require updating following Legal Judgement

(1)	Value to be used for “setting” projected GM before tax profit impact
(2)	Prior Service Cost Amortization Period = Average Remaining Service Life 7.1 Years
(3)	Loss Amortization Period = Average Remaining Working Life 8.62 Years

Attachment E

Health Care Reform Letter

      A prominent theme throughout the parties’ current discussions has been the unsustainable trend of rising health care costs. The resulting economic burden has not only impaired the Corporation’s competitiveness and employees’ job security but also has imperiled workers, families and communities throughout the country.

      Over the years, the parties have worked together to improve various aspects of the health care system, including accreditation standards for Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), clinical quality standards, Certificate of Need policies and Electronic Health Records. Cost trends however continue to rise.

      Given the fragmented and wasteful nature of the U.S. health care system, the parties recognize an issue-by-issue approach to reform — while necessary — is no longer sufficient in meeting the needs of purchasers, payers, consumers, and patients. The parties agree that a lasting solution to our health care cost crisis cannot be forged at the bargaining table.

      Many developed countries have addressed the health care problem by requiring broad-based financing, cost-effective delivery and simple, universal administration. In Canada, many companies have gained a substantial competitive advantage relative to U.S. labor costs because of such a national health care system. Here at home government must be more aggressive in leveling the playing field so American businesses and workers can be as competitive as possible.

      To this end, the parties will engage in an unprecedented effort to enact policies to improve the quality of health care and to make it more affordable, accessible and accountable on a comprehensive, national basis. As examples of such an approach, the parties agree to pursue the following efforts:

      National Health Care Reform: The parties will develop and/or support national proposals that, in whole or part, reinforce risk-pooling, streamline administration, assure access and foster cost-effective, quality health care.

      Reinsurance or Stop Loss Coverage: Catastrophic costs pose a special burden on all payers. The financial risks underlying such cases are best shared across the population at large. Therefore, the parties will support federal efforts to address these high-cost cases and thereby level the competitive playing field.

      Prescription Drug Initiatives: Given the growing importance of prescription drugs in medical treatments, it’s imperative to ensure safety and cost effectiveness in the purchase and utilization of prescription drugs. To this end, the parties will aggressively advocate for and promote pharmaceutical safety and cost containment policies that include the following:

      a. A standardized reporting system for adverse drug reactions;

      b. Independent comparative evaluation of new drugs against existing drugs and broad-based distribution of the findings;

      c. An end to the manipulation of patent expirations and extensions;

      d. FDA approval for generic biopharmaceuticals.

      Technology Evaluation: While policy analysts debate the details, almost all agree that technology is the number one health care cost driver. However, payers and purchasers frequently lack the necessary information to assess the relative clinical and economic value of new and emerging technologies. Therefore, the parties will support increased funding for technology assessment, including reestablishment of the Office of Technology Assessment or a similar, independent body.

      Universal Coverage: Given the Nation’s 46 million uninsured Americans, the UAW and GM will support public policies at the federal and state level that will enable all Americans to have health insurance.

      The parties agree that the stakes are now so high that reforms are needed at the national and state levels. Preconceptions should be discarded and mutual efforts should be pursued in a spirit of pragmatism. The parties recognize that the task is fraught with difficulty and that we may fail. If we do nothing however, failure is guaranteed.

      The UAW and GM will form coalitions with other stakeholders, including other employers and unions, senior and consumer groups, hospitals, doctors, insurers, state and local governments and policymakers interested in improving quality and reducing costs. The UAW and GM will encourage support for these national solutions to address health care quality and cost.

EX-10.1

exv10w1

EX-10.2

Exhibit 10.2

UAW-GM-DELPHI

SPECIAL ATTRITION PROGRAM

      Due to the extraordinary circumstances in the domestic auto industry and the Delphi bankruptcy, the parties agree to the following special one-time program:

      1. GM and the UAW agree on a Special Attrition Program at GM:

      a. $35,000 for normal or early voluntary retirements retroactive to October 1, 2005.

      b. 50 & 10 Mutually Satisfactory Retirement (MSR).

      c. Any employee with at least 27 and less than 30 years of credited service regardless of age will be eligible for special voluntary placement in a pre-retirement program under the following terms:

      i. Employees electing this pre-retirement program must be eligible no later than July 1, 2006.

      ii. Employees will retire without additional incentives when they first accrue 30 years of credited service under the provisions of the General Motors Hourly-Rate Employees Pension Plan.

      iii. The gross monthly wages while in the program will be:

      1. 29 years credited service $2,900

      2. 28 years credited service $2,850

      3. 27 years credited service $2,800

      Wages will be paid weekly on an hourly basis (2,080 hours per year) and will remain at that rate until 30 years of credited service is accrued.

      d. Due to their unique situations, Oklahoma City, Linden, Muncie, Lansing Craft Centre and Baltimore plants will have the following additional option:

      i. Employees with 26 years of credited service will be eligible for the pre-retirement program.

      ii. The monthly wages while in the program for those who sign up with 26 years credited service will be $2,750 paid weekly on an hourly basis and will remain at that rate until 30 years of credited service is accrued.

      e. Buy out of $140,000 (10 or more years seniority) or $70,000 (less than 10 years seniority) to sever all ties with GM and Delphi except any vested pension benefits.

      f. This program will be offered on a nation-wide basis immediately. The application period, timing of the retirements and release dates will be determined by the joint UAW-GM National Parties.

      2. GM and the UAW agree on the following items related to flowbacks from Delphi:

      a. GM commits to 5,000 Delphi flowbacks. The target date for reaching this level is September 1, 2007. This date may be extended by mutual agreement of the UAW-GM National Parties through December 31, 2007. To further extend the target date will require the agreement of the UAW, GM, and Delphi. The order of placement will continue to be governed by Appendix A and the Flowback Agreement.

      b. Employees who flowed from GM to Delphi will have the same flowback rights as other Delphi employees covered by the Flowback Agreement.

      c. Any Delphi employee with flowback rights who turned down an area hire offer will be given one more area hire offer to return to GM.

      d. The employees who were hired at Delphi after October 18, 1999, who were on-roll at the time the Delphi bankruptcy was declared (October 8, 2005) will be given two opportunities to fill openings at GM after all GM employee or Delphi flowback applications have been exhausted. One will be within a

reasonable distance from their plant (either in the area hire or a location to be determined jointly by GM and the UAW) and one will be anywhere in the country.

      3. Delphi and the UAW agree on the following Special Attrition Program for Delphi employees:

      a. An attrition program will be run for Delphi employees as follows:

      i. $35,000 for normal or early voluntary retirements retroactive to October 1, 2005.

      ii. 50 & 10 Mutually Satisfactory Retirement (MSR).

      b. Any employee with at least 27 and less than 30 years of credited service regardless of age will be eligible for special voluntary placement in a pre-retirement program under the following terms:

      i. Employees electing this pre-retirement program must be eligible no later than July 1, 2006.

      ii. Employees will retire without additional incentives when they first accrue 30 years of credited service under the provisions of the Delphi Hourly-Rate Employees Pension Plan.

      iii. The gross monthly wages while in the program will be:

      1. 29 years credited service $2,900

      2. 28 years credited service $2,850

      3. 27 years credited service $2,800

      Wages will be paid weekly on an hourly basis (2,080 hours per year) and will remain at that rate until 30 years of credited service is accrued.

      iv. Within ten (10) business days after the first date on which any employees are eligible to receive wage payments in accordance with Paragraph 3.b.iii. above, Delphi will establish a segregated payment account (the “Account”) in the amount of $75 million (the “Ceiling Amount”). The funds in the Account will be available to reimburse Delphi for the payment of weekly wage payments (which will be paid through Delphi’s normal payroll process) under Paragraph 3.b.iii. above or for direct wage payments to employees entitled to receive such payments, as described in this Paragraph.

      1. Delphi shall not draw funds from the Account for purposes of this Paragraph until a date (the “Permitted Draw Down Date”), which shall be the later of the Final Election Date or the Adequate Funding Date (see definitions below). Prior to the Permitted Draw Down Date, payments to satisfy the obligations to employee participants pursuant to this Paragraph will be drawn from Delphi’s available cash.

      2. If, on the Permitted Draw Down Date, the Anticipated Liability is less than the Ceiling Amount, Delphi shall be permitted to draw such funds out of the Account so that the balance remaining in the Account is equal to the Anticipated Liability.

      The Final Election Date shall be the first of the month following the last day on which employees at any UAW-Delphi facility can make an election to participate in the pre-retirement program described in Paragraph 3.b., or sooner if determined by the UAW-Delphi National Parties.

      The Adequate Funding Date shall be the date on which the Ceiling Amount is greater than or equal to the Anticipated Liability.

      The Anticipated Liability shall be an amount, calculated after the Final Election Date, sufficient to pay all of the remaining liabilities under Paragraph 3.b.iii. for all employees who have elected to participate in such program for the full remaining duration of such program. The Anticipated Liability shall be calculated based on the number of eligible employees, the remaining duration of the wage payments, and the applicable pay rates.

      3. The funds in the Account shall be available to satisfy the obligations of this Paragraph and for no other purpose. The Bankruptcy Court order approving this Agreement shall specifically provide that under no circumstances (including but not limited to conversion of Delphi’s Chapter 11 cases to Chapter 7 proceedings) shall the assets in the Account be available to satisfy the claims of any party other than the employees. This Agreement is, in its entirety, contingent on entry of an order which, to the satisfaction of the UAW and Delphi National Parties provides the protections described in this Paragraph.

      c. This program will be offered on a nation-wide basis immediately. The application period, timing of retirements, release dates, and number of sign-up dates will be determined jointly by Delphi and the UAW. These dates may vary by location.

      4. GM, the UAW and Delphi agree that any employee electing to retire under option 3.a.i. or 3.a.ii., or electing to retire under 3.b. above will be permitted to either retire from Delphi or flowback to GM for purposes of retirement (“check the box”). Any employee choosing GM under this provision will be considered a flowback to GM effective the day of retirement for purposes of the U.S. Employee Matters Agreement and all GM, UAW and Delphi agreements governing flowbacks, including this Agreement.

      a. Any employee choosing option 3.b. above will be considered a Delphi employee until they retire.

      b. Flowbacks under “check the box” retirements will not reduce the 5,000 commitment in 2.a.

      5. GM and the UAW agree to the following:

      a. Oklahoma City will be given closed plant treatment for purposes of placement under Appendix A.

      b. Lordstown will be included in the area hire for Pittsburgh as of June 1, 2007. Any move greater than 50 miles will be eligible for relocation.

      c. Employees at Spring Hill who have made application for transfer to Bowling Green as of a mutually agreed-upon date will be given on a one-time basis the same preference as volunteers from plants with closed plant treatment.

      d. After the Special Attrition Program has been run, or no later than December 31, 2006, GM and the UAW agree to discuss:

      i. Options to address remaining surplus people at specific locations. These options may include expanding the area hire and other options covered in the National Agreement.

      ii. All areas in which the parties can work together to close GM’s competitive gap with the foreign competition and reduce GM’s structural cost.

      e. Following the implementation of this program, if there are still employees at Delphi who wish to leave Delphi (including those who want to flowback to GM), the UAW, GM, and Delphi agree to implement a mutually acceptable resolution to this matter.

      f. GM will use temporary employees as needed to bridge any difficulties arising from the implementation of the Special Attrition Program subject to the approval of the UAW-GM National Parties.

      g. During the course of this nationwide Special Attrition Program certain obligations from Appendix K will be “frozen.” This means:

      i. No additional obligations from attrition.

      ii. No one for two hires from Delphi flowbacks.

      iii. No credit against obligations from Delphi flowbacks.

      6. Delphi and the UAW agree to the following:

      a. Delphi will use temporary employees as needed to bridge any difficulties arising from the implementation of the Special Attrition Program subject to the approval of the UAW-Delphi National Parties.

      b. Delphi and the UAW may agree to use separated employees as contract personnel on a case by case basis as needed to bridge any difficulties arising from the implementation of the Special Attrition Program.

      c. During the course of the Special Attrition Program, the eligibility of GM employees to flow to Delphi will be suspended and no additional hiring obligations due to attrition or flowbacks from Delphi to GM will accrue.

      7. The parties acknowledge the following matters regarding the Special Attrition Program:

      a. Delphi’s participation in this Agreement is subject to the approval of the U.S. Bankruptcy Court; which approval Delphi will seek promptly at the April 7, 2006 omnibus hearing should this Agreement be finalized in time for Delphi to file a motion by March 22, 2006 or as otherwise permitted by the Case Management Order in Delphi’s Chapter 11 cases. In the event such participation is not allowed by the Bankruptcy Court, GM and the UAW will have no obligations hereunder.

      b. For the avoidance of doubt, any obligations assumed by GM under this Agreement with respect to OPEB under Paragraph 4. above or active health care and life insurance under 7.d. below shall be conclusively deemed to be comprehended by, included within, and shall constitute a prepetition, general unsecured claim assertable by GM against the estate of Delphi Corporation under the U.S. Employee Matters Agreement (including without limitation, related flowback agreements and the UAW-GM-Delphi Memorandum of Understanding — Benefit Plan Treatment and the UAW-GM-Delphi Flowback Agreements contained in the 1999 and 2003 GM-UAW and Delphi-UAW Contract Settlement Agreements), Delphi’s Agreement dated December 22, 1999 to indemnify GM for its liability under the Benefit Guarantee as if all conditions for the triggering of GM’s claim shall have occurred, and Delphi’s general indemnity of GM under the Master Separation Agreement. GM agrees to assume and pay OPEB payments to Delphi employees who “check the box” and/or flow back to GM for purposes of retirement, and to pay the amounts due under Paragraph 3.a.i. above. The presumed triggering of GM’s claim against Delphi Corporation described above is only for purposes of this Agreement and does not trigger any contractual claims against either Delphi or GM beyond their respective obligations under this Agreement.

      c. This Agreement shall not be subject to abrogation, modification or rejection without the mutual consent of the UAW, GM and Delphi (with the exception of bilateral agreements of the UAW and GM that do not affect Delphi such as Paragraphs 1 and 5a.-d., f., and g. obligations, which may be modified by the UAW-GM National Parties), and the order obtained in the Bankruptcy Court by Delphi approving this Agreement shall so provide. The parties further agree (and the Bankruptcy Court order shall also provide) that this Agreement is without prejudice to any interested party (including the parties to this Agreement and the Official Committee of Unsecured Creditors) in all other aspects of Delphi’s Chapter 11 cases, including by illustration, Delphi’s and GM’s respective positions in all commercial discussions and claims matters between them, all collective bargaining matters involving the parties, in any potential proceedings under Sections 1113 and/or 1114 of the Bankruptcy Code with respect to the UAW and under Section 365 of the Bankruptcy Code with respect to GM’s contracts with Delphi, in any pension termination proceeding under ERISA and/or the Bankruptcy Code, and all claims administration and allowance matters.

      d. Nothing in this Agreement shall limit or otherwise modify (a) Delphi’s rights under Section 4041 of ERISA, or (b) Delphi’s rights under Section 1113 and/or 1114 of the Bankruptcy Code with regard to any obligations which pre-existed this Agreement (including pre-existing obligations referenced within this Agreement), such as (by way of illustration only) the obligation to maintain the hourly pension plan or provide retirees or active employees (including employees/retirees participating in the attrition programs contained in this Agreement) with levels of healthcare or other benefits as specified in pre-existing labor agreements. Under no circumstances shall Delphi freeze its pension plan in a manner that prevents employees in the pre-retirement program described in Paragraph 3.b. above from receiving on-going credited service sufficient to reach 30 years of credited service. Delphi shall provide the same healthcare and life insurance coverage to employees participating in Paragraph 3.b. above that it provides to its other active UAW employees; provided, however, that if Delphi reduces or eliminates such coverage provided to its active UAW employees, GM shall subsidize such coverage provided to

employees participating in Paragraph 3.b. above up to the level provided to GM-UAW active employees. Except as otherwise expressly provided herein, nothing in this Agreement shall limit, expand or otherwise modify the rights or obligations of any party under the Benefit Guarantee between GM and the UAW.

      e. Nothing contained herein shall constitute an assumption of any agreement described herein, including, without limitation any collective bargaining agreement between the UAW and Delphi or any commercial agreement between GM and Delphi, nor shall anything herein be deemed to create an administrative or priority claim with respect to GM or convert a prepetition claim into a postpetition claim or an administrative expense with respect to any party.

      f. For the avoidance of doubt, any employee participating in the Special Attrition Program for Delphi Employees under 3. above, who elects to flowback to GM for purposes of retirement (“check the box”), will be eligible to retire in accordance with Sections 3.a.6. and 3.b.6. of the UAW-GM-Delphi Memorandum of Understanding Benefit Plan Treatment (MOU). For illustrative purposes, as provided in the MOU, such Delphi employees will be eligible for pro-rata pension benefits as defined in the MOU, including but not limited to eligibility for all basic benefits and supplements. For example, such employees checking the box who have 100% of his/her credited service in the Delphi Plan will receive 100% of their pension benefit from the Delphi Plan. Similarly, any employee retiring from GM under 1.b. with credited service under the Delphi Plan shall be considered eligible to retire under the Delphi Plan with eligibility for pro-rata pension benefits.

General Motors Corporation	Delphi Corporation	International Union, UAW
General Motors Corporation	Delphi Corporation	International Union, UAW
General Motors Corporation	Delphi Corporation	International Union, UAW

Date:

EX-13

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006, or
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from                      to                     .

Commission file number: 1-3754

GENERAL MOTORS ACCEPTANCE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 38-0572512
(I.R.S. Employer
Identification No.)

200 Renaissance Center

P.O. Box 200 Detroit, Michigan

48265-2000

(Address of principal executive offices)

(Zip Code)

(313) 556-5000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X]  No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as these terms are defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer [ ]     Accelerated filer [ ]     Non-accelerated filer [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]  No [X]

As of May 8, 2006, there were outstanding 10 shares of the issuer’s $.10 par value common stock.

Reduced Disclosure Format

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

INDEX

General Motors Acceptance Corporation

		Page
Part I — Financial Information
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Statement of Income for the Three Months Ended  March 31, 2006 and 2005		3
	Condensed Consolidated Balance Sheet as of March 31, 2006 and December 31, 2005		4
	Condensed Consolidated Statement of Changes in Stockholder’s Equity for the Three Months Ended  March 31, 2006 and 2005		5
	Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2006 and  2005		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		*
Item 4.	Controls and Procedures		38
Part II — Other Information
Item 1.	Legal Proceedings		39
Item 1A.	Risk Factors		39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		*
Item 3.	Defaults Upon Senior Securities		*
Item 4.	Submission of Matters to a Vote of Security Holders		*
Item 5.	Other Information		41
Item 6.	Exhibits		41
Signatures			42
Index of Exhibits			43

*  Item is omitted pursuant to the reduced disclosure format, as set forth on the cover page of this filing.

Condensed Consolidated Statement of Income (unaudited)

General Motors Acceptance Corporation

Three months ended March 31, ($ in millions)		2006		2005
Revenue
Consumer			$2,566		$2,519
Commercial			726		623
Loans held for sale			481		381
Operating leases			1,929		1,665
	Total revenue		5,702		5,188
Interest and discount expense			3,562		3,001
	Net revenue before provision for credit losses		2,140		2,187
Provision for credit losses			135		329
	Net revenue		2,005		1,858
Insurance premiums and service revenue earned			1,010		920
Mortgage banking income			584		695
Investment income			258		250
Other income			1,059		976
	Total net revenue		4,916		4,699
Expense
Depreciation expense on operating lease assets			1,440		1,270
Compensation and benefits expense			718		811
Insurance losses and loss adjustment expenses			597		589
Other operating expenses			1,173		926
	Total noninterest expense		3,928		3,596
Income before income tax expense			988		1,103
Income tax expense			316		375
Net income			$672		$728

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

3

Condensed Consolidated Balance Sheet (unaudited)

General Motors Acceptance Corporation

		March 31,			December 31,
(in millions)		2006			2005
Assets
Cash and cash equivalents			$17,352			$15,424
Investment securities			18,269			18,207
Loans held for sale			18,171			21,865
Reporting segment held for sale			—			19,030
Finance receivables and loans, net of unearned income
	Consumer		139,395			140,411
	Commercial		44,770			44,574
Allowance for credit losses			(2,911	)		(3,116	)
	Total finance receivables and loans, net		181,254			181,869
Investment in operating leases, net			32,567			31,211
Notes receivable from General Motors			4,785			4,565
Mortgage servicing rights			4,526			4,015
Premiums and other insurance receivables			2,116			1,873
Other assets			24,765			22,457
Total assets			$303,805			$320,516
Liabilities
Debt
	Unsecured		$121,654			$133,269
	Secured		124,287			121,138
	Total debt		245,941			254,407
Interest payable			2,829			3,057
Liabilities related to reporting segment held for sale			—			10,941
Unearned insurance premiums and service revenue			5,210			5,054
Reserves for insurance losses and loss adjustment expenses			2,725			2,534
Accrued expenses and other liabilities			20,032			18,381
Deferred income taxes			4,529			4,364
Total liabilities			281,266			298,738
Stockholder’s equity
Common stock, $.10 par value (10,000 shares authorized, 10 shares issued and outstanding) and paid-in capital			5,760			5,760
Retained earnings			15,849			15,190
Accumulated other comprehensive income			930			828
Total stockholder’s equity			22,539			21,778
Total liabilities and stockholder’s equity			$303,805			$320,516

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

4

Condensed Consolidated Statement of Changes in

Stockholder’s Equity (unaudited)

General Motors Acceptance Corporation

Three months ended March 31, ($ in millions)		2006			2005
Common stock and paid-in capital
Balance at beginning of year and at March 31,			$5,760			$5,760
Retained earnings
Balance at beginning of year			15,190			15,491
Net income			672			728
Cumulative effect of a change in accounting principle, net of income taxes						—
	Transfer of unrealized loss for certain available for sale securities to trading securities		(17	)		—
	Recognize mortgage servicing rights at fair value		4			—
Dividends paid			—			(500	)
Balance at March 31,			15,849			15,719
Accumulated other comprehensive income (loss)
Balance at beginning of year			828			1,166
Other comprehensive income (loss)			85			(177	)
Transfer of unrealized loss for certain available for sale securities to trading securities			17			—
Balance at March 31,			930			989
Total stockholder’s equity
Balance at beginning of year			21,778			22,417
Net income			672			728
Recognize mortgage servicing rights at fair value			4			—
Dividends paid			—			(500	)
Other comprehensive income (loss)			85			(177	)
Total stockholder’s equity at March 31,			$22,539			$22,468
Comprehensive income
Net income			$672			$728
Other comprehensive income (loss)			85			(177	)
Recognize mortgage servicing rights at fair value			4			—
Comprehensive income			$761			$551

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

5

Condensed Consolidated Statement of Cash Flows (unaudited)

General Motors Acceptance Corporation

Three months ended March 31, ($ in millions)	2006			2005
Operating activities
Net cash used in operating activities		($1,978	)		($6,729	)
Investing activities
Purchases of available for sale securities		(5,399	)		(6,041	)
Proceeds from sales of available for sale securities		1,290			1,230
Proceeds from maturities of available for sale securities		3,618			1,901
Net increase in finance receivables and loans		(24,943	)		(19,253	)
Proceeds from sales of finance receivables and loans		32,782			29,681
Purchases of operating lease assets		(4,524	)		(3,672	)
Disposals of operating lease assets		1,625			1,395
Change in notes receivable from General Motors		(206	)		1,450
Purchases of mortgage servicing rights, net		(56	)		(104	)
Acquisitions of subsidiaries, net of cash acquired		(322	)		—
Proceeds from sale of business units, net (a)		7,943			—
Other, net (b)		(801	)		(2,061	)
Net cash provided by investing activities		11,007			4,526
Financing activities
Net change in short-term debt		(5,567	)		150
Proceeds from issuance of long-term debt		23,766			10,532
Repayments of long-term debt		(26,749	)		(16,127	)
Other financing activities		1,081			1,566
Dividends paid		—			(500	)
Net cash used in financing activities		(7,469	)		(4,379	)
Effect of exchange rate changes on cash and cash equivalents		(3	)		(76	)
Net increase (decrease) in cash and cash equivalents		1,557			(6,658	)
Cash and cash equivalents at beginning of year (c)		15,795			22,718
Cash and cash equivalents at March 31		$17,352			$16,060

(a)	Includes proceeds from sale of GMAC Commercial Mortgage of approximately $1.5 billion, proceeds from repayment of intercompany loans with GMAC Commercial Mortgage of approximately $7.3 billion, $250 of which was received in preferred equity, and net of cash transferred to buyer of approximately $650.
(b)	Includes $558 and $586 for the three months ended March 31, 2006 and 2005, respectively, related to securities lending transactions where cash collateral is received and a corresponding liability is recorded, both of which are presented in investing activities.
(c)	Includes $371 of cash and cash equivalents in GMAC Commercial Mortgage classified as reporting segment held for sale as of December 31, 2005.

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

6

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

1 Basis of Presentation

General Motors Acceptance Corporation (referred to herein as GMAC, we, our or us) is a wholly owned subsidiary of General Motors Corporation (General Motors or GM). The Condensed Consolidated Financial Statements include our accounts and those of our majority-owned subsidiaries, after eliminating intercompany balances and transactions, as well as all variable interest entities in which we are the primary beneficiary.

The Condensed Consolidated Financial Statements as of March 31, 2006, and for the three months ended March 31, 2006 and 2005, are unaudited but, in management’s opinion, include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation.

The interim period consolidated financial statements, including the related notes, are condensed and are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim reporting. These interim period Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2005, filed with the United States Securities and Exchange Commission (SEC).

On March 23, 2006, we sold approximately 78% of our equity in GMAC Commercial Mortgage for approximately $1.5 billion in cash. At the closing, GMAC Commercial Mortgage also repaid to us approximately $7.3 billion of intercompany loans, bringing our total cash proceeds to $8.8 billion. Prior to March 23, 2006, GMAC Commercial Mortgage’s activity and balances were fully consolidated in the Consolidated Financial Statements. Subsequent to the sale on March 23, 2006, our remaining interest in GMAC Commercial Mortgage is reflected under the equity method investment.

As a result of the sale of GMAC Commercial Mortgage, results of this entity are now included in Note 10 (Segment Information) in the “Other” column to the Condensed Consolidated Financial Statements. Prior to the sale, GMAC Commercial Mortgage was identified as a reportable operating segment under Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS 131). In addition, beginning January 1, 2006, based on changes in the organizational structure and management for the mortgage operations, ResCap is presented as a reportable operating segment. As a result, prior year financial data has been changed to reflect the current period presentation.

Change in Accounting Principle

On January 1, 2006, we adopted Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets (SFAS 156), which provides the following: (1) revised guidance on when a servicing asset and servicing liability should be recognized, (2) requires all separately recognized servicing assets and liabilities to be initially measured at fair value, if practicable, (3) permits an entity to elect to measure servicing assets and liabilities at fair value each reporting date and report changes in fair value in earnings in the period in which the changes occur, (4) upon initial adoption, permits a one time reclassification of available-for-sale securities to trading securities for securities which are identified as offsetting an entity’s exposure to changes in the fair value of servicing assets or liabilities that a servicer elects to subsequently measure at fair value, and (5) requires separate presentation of servicing assets and liabilities subsequently measured at fair value in the balance sheet and additional disclosures.

We define our classes of servicing rights based on both the availability of market inputs and the manner in which we manage the risks of our servicing assets and liabilities. We manage our servicing rights at the reportable operating segment level. For all servicing assets and liabilities recorded on our balance sheet at January 1, 2006, the date of adoption, we identified three classes of servicing rights; those pertaining to residential mortgage in our ResCap reporting segment, auto finance in our North American Operations reporting segment and commercial mortgages. We have elected to measure our residential mortgage servicing rights at fair value for each reporting date and report changes in fair value in earnings during the period in which the changes occur. At March 31, 2006, these assets were valued at $4.5 billion and recorded separately on our Condensed Consolidated Balance Sheet. Refer to Note 6 for further information.

For our servicing assets and liabilities related to our auto finance and commercial mortgage classes of servicing rights, we have elected to continue to use the amortization method of accounting. As a result of the sale of GMAC Commercial Mortgage on March 23, 2006, the commercial mortgage servicing rights are no longer recorded on our balance sheet at March 31, 2006. Our auto finance servicing assets and liabilities at March 31, 2006, totaled $23 million and $26 million, respectively, and are recorded in other assets and other liabilities, respectively, on our Condensed Consolidated Balance Sheet.

7

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

Recently Issued Accounting Standards

Financial Accounting Standards Board (FASB) Staff Position (FSP) FAS 115-1 and 124-1 — In November 2005 the FASB issued FSP FAS 115-1 and 124-1 to address the determination as to when an investment is considered impaired, whether that impairment is other than temporary and the measurement of an impaired loss. This FSP nullified certain requirements of Emerging Issues Task Force 03-1 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (EITF 03-1), and references existing other-than-temporary guidance. Furthermore, this FSP creates a three-step process in determining when an investment is considered impaired, whether that impairment is other than temporary and the measurement of an impairment loss. This FSP is effective for reporting periods beginning after December 15, 2005. Adoption of this FSP did not have a material impact on our financial condition or results of operations.

Statement of Position 05-1 — In September 2005 the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (SOP 05-1). SOP 05-1 provides guidance on accounting for deferred acquisition costs on internal replacements of insurance contracts. SOP 05-1 defines an internal replacement and specifies the conditions that determine whether the replacement contract is substantially or unsubstantially changed from the replaced contract. An internal replacement determined to result in a substantially changed contract should be accounted for as an extinguishment of the replaced contract, and unamortized deferred acquisition costs and unearned revenue liabilities of the replaced contract should be no longer be deferred. An internal replacement determined to result in an unsubstantially changed contract should be accounted for as a continuation of the replaced asset. SOP 05-01 introduces the terms integrated and non-integrated contract features and specifies that non-integrated features do not change the base contract and are to be accounted for in a manner similar to a separately issued contract. Integrated features are evaluated in conjunction with the base contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. Management is assessing the potential impact on our financial condition or results of operations.

Statement of Financial Accounting Standards No. 155 — In February 2006 the Financial Accounting Standards Board issued Statement of Financial Standards No. 155 Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140 (SFAS 155). This standard permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. SFAS 155 allows an entity to make an irrevocable election to measure such a hybrid financial instrument at fair value on an instrument-by-instrument basis. The standard eliminates the prohibition on a QSPE from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 also clarifies which interest-only and principal-only strips are not subject to the requirements of SFAS 133 as well as determines that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of the fiscal year that begins after September 15, 2006. Management is assessing the potential impact on our financial condition or results of operations.

Statement of Financial Accounting Standards No. 154 — In May 2005, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (SFAS 154), that addresses accounting for changes in accounting principle, changes in accounting estimates, changes required by an accounting pronouncement in the instance that the pronouncement does not include specific transition provisions and error correction. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle and error correction unless impracticable to do so. SFAS 154 states an exception to retrospective application when a change in accounting principle, or the method of applying it, may be inseparable from the effect of a change in accounting estimate. When a change in principle is inseparable from a change in estimate, such as depreciation, amortization or depletion, the change to the financial statements is to be presented in a prospective manner. SFAS 154 and the required disclosures are effective for accounting changes and error corrections in fiscal years beginning after December 15, 2005.

8

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

2 Mortgage Banking Income

The following table presents the components of mortgage banking income, which includes GMAC Commercial Mortgage activity through March 23, 2006, the date of sale:

Three months ended March 31, ($ in millions)	2006			2005
Mortgage servicing fees		$413			$397
Amortization and impairment of mortgage servicing rights (MSRs) (a)		(23	)		(165	)
Change in fair value (a)		195			—
Net gains (losses) on derivatives related to MSRs (b)		(381	)		(24	)
Net loan servicing income		204			208
Gains from sales of loans		310			395
Mortgage processing fees		28			30
Other		42			62
Mortgage banking income (c)		$584			$695

(a)	The results for the quarter ended March 31, 2006, reflect the adoption of the fair value measurement method of accounting for MSRs for the ResCap class of servicing assets as permitted by SFAS 156. We have adopted SFAS 156 effective January 1, 2006, and the retrospective application of SFAS 156 is not permitted. For the class of MSR assets on our Condensed Consolidated Balance Sheet during the quarter relating to GMAC Commercial Mortgage, the amortization method of accounting was elected and amounts include additions to the valuation allowance representing impairment considered to be temporary.
(b)	Includes SFAS 133 hedge ineffectiveness, amounts excluded from the hedge effectiveness calculation and the change in value of derivative financial instruments not qualifying for hedge accounting.
(c)	Excludes net gains realized upon the sale of investment securities used to manage risk associated with mortgage servicing rights which are reflected as a component of investment income.

9

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

3 Other Income

The following table presents the components of other income, which includes GMAC Commercial Mortgage activity through March 23, 2006, the date of sale:

Three months ended March 31, ($ in millions)			2006			2005
Automotive receivable securitizations and sales
	Gains (losses) on sales:
		Wholesale securitizations		$149			$145
		Retail automotive whole loan sales transactions		(41	)		(29	)
		Retail automotive securitizations		(54	)		(1	)
	Interest on cash reserves deposits			28			24
	Service fees			59			23
	Other			22			22
Total automotive receivable securitizations and sales				163			184
Real estate services				144			131
Interest and service fees on transactions with GM (a)				147			110
Other interest revenue				120			94
Interest on cash equivalents				119			98
Full service leasing fees				64			44
Late charges and other administrative fees				41			42
Insurance service fees				30			37
Factoring commissions				15			19
Specialty lending fees				15			14
Fair value adjustment on certain derivatives (b)				(8	)		(8	)
Other				209			211
Total other income				$1,059			$976

(a)	Refer to Note 9 to the Condensed Consolidated Financial Statements for a description of interest and service fees on transactions with GM.
(b)	Refer to Note 8 to our Condensed Consolidated Financial Statements for a description of derivative instruments and hedging activities.

4 Other Operating Expenses

The following table presents the components of other operating expenses, which includes GMAC Commercial Mortgage activity through March 23, 2006, the date of sale:

Three months ended March 31, ($ in millions)	2006			2005
Insurance commissions		$243			$235
Technology and communications expense		130			139
Professional services		105			104
Advertising and marketing		84			103
Premises and equipment depreciation		65			73
Rent and storage		67			67
Full service leasing vehicle maintenance costs		60			61
Lease and loan administration		54			43
Auto remarketing and repossession		47			29
Amortization of intangible assets		6			3
Operating lease disposal gain		(49	)		(96	)
Other		361			165
Total other operating expenses		$1,173			$926

10

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

5 Finance Receivables and Loans

The composition of finance receivables and loans outstanding, which excludes GMAC Commercial Mortgage balances, was as follows:

			March 31, 2006						December 31, 2005
($ in millions)			Domestic		Foreign		Total		Domestic		Foreign		Total
Consumer
	Retail automotive			$47,563		$18,079		$65,642		$53,789		$17,663		$71,452
	Residential mortgages			69,899		3,854		73,753		65,040		3,919		68,959
Total consumer				117,462		21,933		139,395		118,829		21,582		140,411
Commercial
	Automotive:
		Wholesale		14,109		7,625		21,734		13,202		7,372		20,574
		Leasing and lease financing		394		741		1,135		461		767		1,228
		Term loans to dealers and other		2,840		708		3,548		2,397		719		3,116
	Commercial and industrial			13,541		1,916		15,457		14,908		2,028		16,936
	Real estate construction			2,722		131		2,853		2,558		119		2,677
	Commercial mortgage			43		—		43		43		—		43
Total commercial				33,649		11,121		44,770		33,569		11,005		44,574
Total finance receivables and loans (a)				$151,111		$33,054		$184,165		$152,398		$32,587		$184,985

(a)  Net of unearned income of $5,448 and $5,868 as of March 31, 2006 and December 31, 2005, respectively.

The following table, which excludes GMAC Commercial Mortgage activity, presents an analysis of the activity in the allowance for credit losses on finance receivables and loans.

			2006									2005
Three months ended March 31, ($ in millions)			Consumer			Commercial			Total			Consumer			Commercial			Total
Allowance at beginning of period				$2,683			$433			$3,116			$2,951			$471			$3,422
	Provision for credit losses			157			(22	)		135			305			24			329
	Charge-offs
		Domestic		(321	)		(46	)		(367	)		(346	)		(7	)		(353	)
		Foreign		(45	)		(1	)		(46	)		(51	)		(4	)		(55	)
	Total charge-offs			(366	)		(47	)		(413	)		(397	)		(11	)		(408	)
	Recoveries
		Domestic		53			5			58			47			2			49
		Foreign		13			2			15			14			—			14
	Total recoveries			66			7			73			61			2			63
	Net charge-offs			(300	)		(40	)		(340	)		(336	)		(9	)		(345	)
	Impacts of foreign currency translation			1			(2	)		(1	)		(9	)		(3	)		(12	)
	Securitization activity			1			—			1			(2	)		(2	)		(4	)
Allowance at March 31,				$2,542			$369			$2,911			$2,909			$481			$3,390

11

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

6 Mortgage Servicing Rights

The following table summarizes activity and related amortization related to MSRs carried at fair value.

Three months ended March 31, ($ in millions)		2006
Estimated fair value at January 1, 2006		$	4,021
Additions obtained from sales of financial assets			310
Changes in fair value:
	Due to changes in valuation inputs or assumptions used in the valuation model		359
	Other changes in fair value		(164	)
Estimated fair value at March 31, 2006		$	4,526

Changes in fair value due to changes in valuation inputs or assumptions used in the valuation models include all changes due to a revaluation by a model or by a benchmarking exercise. This line item also includes changes in fair value due to a change in valuation assumptions and/or model calculations. Other changes in fair value primarily include the accretion of the present value of the discount related to forecasted cash flows and any other factors that impact fair value. Other changes that affect the balance primarily include foreign currency adjustments and the extinguishment of mortgage servicing rights related to clean-up calls of securitization transactions.

At March 31, 2006, we pledged MSRs of $2.6 billion as collateral for borrowings.

Key assumptions used by us in valuing our MSRs:

March 31, 2006	Total
Range of prepayment speeds		7.0-38.4%
Range of discount rate		8.0-14.0%

Our servicing rights’ primary risk is interest rate risk and the resulting impact on prepayments. A significant decline in interest rates could lead to higher than expected prepayments, which could reduce the size of the value of the mortgage servicing rights. We economically hedge the income statement impact of these risks with both derivative and non-derivative financial instruments. These instruments include interest rate swaps, caps and floors, options to purchase these items, futures and forward contracts, and/or purchasing or selling U.S. Treasury and principal-only securities. At March 31, 2006, the fair value of derivative financial instruments and non-derivative financial instruments used to mitigate these risks amounted to $69 million and $1.9 billion, respectively. The change in the fair value of the derivative financial instruments amounted to a loss of $381 million for the three months ended March 31, 2006, and is included in mortgage banking income in the Condensed Consolidated Statement of Income.

The components of servicing fees were as follows:

Three months ended March 31, ($ in millions)	2006
Contractual servicing fees (net of guarantee fees and including subservicing)	$	321
Late fees		30
Ancillary fees		23
Total	$	374

12

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

The following table, which includes GMAC Commercial Mortgage activity, summarizes activity and related amortization of MSRs carried at lower of cost or fair value.

Three months ended March 31, ($ in millions)	2005
Balance at beginning of period		$4,819
Originations and purchases, net of sales		397
Amortization		(269	)
SFAS 133 hedge valuation adjustments		125
Other than temporary impairment		(14	)
Balance at March 31,		5,058
Valuation allowance		(811	)
Carrying value at March 31,		$4,247
Estimated fair value at March 31,		$4,348

The following table summarizes the change in the valuation allowance for mortgage servicing rights.

Three months ended March 31, ($ in millions)	2005
Valuation allowance at beginning of period		$929
Additions (deductions) (a)		(104	)
Other than temporary impairment		(14	)
Valuation allowance at March 31,		$811

(a)  Changes to the valuation allowance are reflected as a component of mortgage banking income.

For a description of MSRs and the related hedging strategy, refer to Notes 1 and 10 to our 2005 Annual Report on Form 10-K.

7 Debt

The presentation of debt in the following table, which excludes GMAC Commercial Mortgage balances, is classified between domestic and foreign based on the location of the office recording the transaction.

			March 31, 2006									December 31, 2005
($ in millions)			Domestic			Foreign			Total			Domestic		Foreign		Total
Short-term debt
	Commercial paper			$162			$318			$480			$227		$297		$524
	Demand notes			5,297			100			5,397			5,928		119		6,047
	Bank loans and overdrafts			1,048			4,777			5,825			1,165		5,487		6,652
	Repurchase agreements and other (a)			20,172			4,803			24,975			22,330		5,954		28,284
Total short-term debt				26,679			9,998			36,677			29,650		11,857		41,507
Long-term debt
	Senior indebtedness:
		Due within one year		29,218			11,685			40,903			31,286		10,443		41,729
		Due after one year		146,180			22,863			169,043			147,307		23,862		171,169
Total long-term debt				175,398			34,548			209,946			178,593		34,305		212,898
Fair value adjustment (b)				(668	)		(14	)		(682	)		—		2		2
Total debt				$201,409			$44,532			$245,941			$208,243		$46,164		$254,407

(a)	Repurchase agreements consist of secured financing arrangements with third parties at our mortgage operations. Other primarily includes non-bank secured borrowings, as well as Notes payable to GM. Refer to Note 9 to the Condensed Consolidated Financial Statements for further details.
(b)	To adjust designated fixed rate debt to fair value in accordance with SFAS 133.

13

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

The following summarizes assets that are restricted as collateral for the payment of the related debt obligation primarily arising from securitization transactions accounted for as secured borrowings and repurchase agreements.

		March 31,				December 31,
		2006				2005
				Related				Related
				secured				secured
($ in millions)		Assets		debt (a)		Assets		debt (a)
Loans held for sale			$14,868		$12,223		$16,147		$12,647
Mortgage assets held for sale or held for investment			81,246		71,957		78,820		71,083
Retail automotive finance receivables			20,242		18,456		20,427		18,888
Wholesale automotive finance receivables			578		442		—		—
Investment securities			3,058		3,817		3,631		4,205
Investment in operating leases, net			16,255		14,130		13,136		11,707
Real estate investments and other assets			6,511		3,262		4,771		2,608
	Total		$142,758		$124,287		$136,932		$121,138

(a)  Included as part of secured debt are repurchase agreements of $9,972 and $9,897 where we have pledged assets, reflected as investment securities, as collateral for approximately the same amount of debt at March 31, 2006, and December 31, 2005, respectively.

Liquidity Facilities

Liquidity facilities represent additional funding sources, if required. The financial institutions providing the uncommitted facilities are not legally obligated to fund such amounts. The following table summarizes the liquidity facilities maintained by us, excluding Commercial Mortgage.

		Committed				Uncommitted				Total liquidity				Unused liquidity
		facilities				facilities				facilities				facilities
		Mar 31,		Dec 31,		Mar 31,		Dec 31,		Mar 31,		Dec 31,		Mar 31,		Dec 31,
($ in billions)		2006		2005		2006		2005		2006		2005		2006		2005
Automotive operations:
	Syndicated multi-currency global credit facility (a)		$7.4		$7.4		$—		$—		$7.4		$7.4		$7.4		$7.4
Mortgage operations (b)			3.9		3.9		0.7		0.9		4.6		4.8		2.2		2.2
Other:
	U.S. asset-backed commercial paper liquidity and receivables facilities (c)		21.5		21.5		—		—		21.5		21.5		21.5		21.5
	Other foreign facilities (d)		2.9		2.9		7.9		7.5		10.8		10.4		1.9		1.7
Total bank liquidity facilities			35.7		35.7		8.6		8.4		44.3		44.1		33.0		32.8
Secured funding facilities (e)			108.0		114.9		—		—		108.0		114.9		72.7		79.1
Total			$143.7		$150.6		$8.6		$8.4		$152.3		$159.0		$105.7		$111.9

(a)	The entire $7.4 is available for use in the U.S., $0.8 is available for use by GMAC (UK) plc and $0.8 is available for use by GMAC International Finance B.V. in Europe.
(b)	In July 2005 ResCap closed a $3.5 syndication of its bank facilities, consisting of a $1.75 syndication term loan, an $875 million syndication line of credit committed through July 2008 and a $875 million syndicated line of credit committed through July 2006.
(c)	Relates to New Center Asset Trust (NCAT) and Mortgage Interest Networking Trust (MINT), which are special purpose entities administered by us for the purpose of funding assets as part of our securitization and mortgage warehouse funding programs. These entities fund assets primarily through the issuance of asset-backed commercial paper and represent an important source of liquidity to us. At March 31, 2006, NCAT had commercial paper outstanding of $12.1, which is not consolidated in the Condensed Consolidated Balance Sheet. At March 31, 2006, MINT had commercial paper outstanding of $2.0, which is reflected as secured debt in the Condensed Consolidated Balance Sheet.
(d)	Consists primarily of credit facilities supporting operations in Canada, Europe, Latin America and Asia-Pacific.
(e)	Consists of committed secured funding facilities with third-parties, including commitments with third-party asset-backed commercial paper conduits, as well as forward flow sale agreements with third-parties and repurchase facilities. Amounts include five year commitments that we entered into in 2005 with remaining capacity to sell up to $59 of retail automotive receivables to a third-party purchaser through June 2010.

The syndicated multi-currency global credit facility includes a $4.35 billion five-year facility (expires June 2008) and a $3.0 billion 364-day facility (expires June 2006). The 364-day facility includes a term out option, which, if exercised by us prior to expiration, carries a one-year term. Additionally, a leverage covenant in the liquidity facilities and certain other funding facilities restricts the ratio of consolidated

14

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

unsecured debt to total stockholder’s equity to no greater than 11.0:1, under certain conditions. More specifically, the covenant is only applicable on the last day of any fiscal quarter (other than the fiscal quarter during which a change in rating occurs) during such times that we have senior unsecured long-term debt outstanding, without third-party enhancement, which is rated BBB+ or less (by Standard & Poor’s), or Baa1 or less (by Moody’s). Our leverage ratio covenant was 6.6:1 at March 31, 2006, and we are, therefore, in compliance with this covenant. The leverage covenant calculation excludes from debt those securitization transactions accounted for as on-balance sheet secured financings.

8 Derivative Instruments and Hedging Activities

We enter into interest rate and foreign currency futures, forwards, options and swaps in connection with our market risk management activities. In accordance with SFAS 133, as amended, we record derivative financial instruments on the balance sheet as assets or liabilities at fair value. Changes in fair value are accounted for depending on the use of the derivative financial instrument and whether it qualifies for hedge accounting treatment. Refer to our 2005 Annual Report on Form 10-K for a more detailed description of our use of and accounting for derivative financial instruments.

The following table, which includes GMAC Commercial Mortgage activity through March 23, 2006, the date of sale, summarizes the pre-tax earnings effect for each type of accounting hedge classification, segregated by the asset or liability being hedged.

Three months ended March 31,
($ in millions)			2006			2005			Income Statement Classification
Fair value hedge ineffectiveness loss:
	Debt obligations			($25	)		($4	)	Interest and discount expense
	Mortgage servicing rights			—			(27	)	Mortgage banking income
Cash flow hedge ineffectiveness gain:
	Debt obligations			1			3		Interest and discount expense
Economic hedge change in fair value:
	Off-balance sheet securitization activities:
		Financing operations		(8	)		(8	)	Other income
		Mortgage operations		—			1		Mortgage banking income
	Foreign currency debt (a)			52			(90	)	Interest and discount expense
	Loans held for sale or investment			110			54		Mortgage banking income
	Mortgage servicing rights			(381	)		(36	)	Mortgage banking income
	Mortgage related securities			(7	)		(43	)	Investment income
	Other			17			10		Other income
Total gain (loss)				($241	)		($140	)

(a)  Amount represents the difference between the changes in the fair values of the currency swap, net of the revaluation of the related foreign denominated debt.

In addition, net gains on fair value hedges excluded from assessment of effectiveness totaled $0 and $39 million for the first quarter of 2006 and 2005, respectively.

15

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

9 Transactions with Affiliates

As a wholly owned subsidiary, we enter into various operating and financing arrangements with our parent GM. A master intercompany operating agreement governs the nature of these transactions to ensure that they are done on an arm’s-length basis, in accordance with commercially reasonable standards and in our best interest as a diversified financial services company. In addition, GM and we agree that our total stockholder’s equity as reflected in our consolidated financial statements at the end of any quarter will be maintained at a commercially reasonable level appropriate to support the amount, quality and mix of our assets.

Balance Sheet

A summary of the balance sheet effect of transactions with GM and affiliated companies is as follows:

($ in millions)		March 31, 2006			December 31, 2005
Assets:
Finance receivables and loans, net of unearned income (a)
	Wholesale auto financing		$964			$1,159
	Term loans to dealers		169			207
Investment in operating leases, net (b)			108			108
Notes receivable from GM (c)			4,785			4,565
Other assets
	Real estate synthetic lease (d)		1,022			1,005
	Receivable related to taxes (due from GM) (e)		635			690
Liabilities:
Unsecured debt
	Notes payable to GM		1,162			1,190
Accrued expenses and liabilities (f)
	Wholesale payable		1,013			802
	Subvention receivables (rate and residual support)		(298	)		(133	)
	Insurance premium and contract receivable, net		(102	)		(81	)
	Lease pull ahead receivable		(102	)		(189	)
	Other		(340	)		(246	)
Stockholder’s equity:
	Dividends paid (g)		—			2,500

(a)	Represents wholesale financing and term loans to certain dealerships wholly owned by GM or in which GM has a controlling interest. All of these amounts are included in finance receivables and loans.
(b)	Includes net balance of buildings and other equipment classified as operating lease assets that are leased to GM affiliated entities.
(c)	Includes borrowing arrangements with GM Opel and GM of Canada and arrangements related to our funding of GM company-owned vehicles, rental car vehicles awaiting sale at auction, our funding of the sale of GM vehicles through the use of overseas distributors and amounts related to a GM trade supplier finance program. In addition, we provide wholesale financing to GM for vehicles in which GM retains title while the vehicles are consigned to us or dealers in the UK. The financing to GM remains outstanding until the title is transferred to the dealers. The amount of financing provided to GM under this arrangement varies based on inventory levels.
(d)	During 2000 we entered into a 16-year lease arrangement with GM, under which we agreed to fund and capitalize improvements to three Michigan properties leased by GM totaling $1.2 billion. In 2004 the lease arrangement was increased to $1.3 billion. The total construction advances as of March 31, 2006, and December 31, 2005, were $987 and $971, respectively.
(e)	In March 2006 GMAC recorded an intercompany tax receivable from GM of $635. The receivable is comprised of federal net operating loss carryforward of $556, charitable contributions carryforward of $12 and foreign tax credit carryforward of $67. We believe that the intercompany tax receivable is realizable as GM has determined that it is more likely than not that the tax attributes will be utilized in the remaining carryforward period.
(f)	Includes (receivables) payables from GM as follows: wholesale settlements payable to GM, subvention receivables due from GM and notes payable due from GM, which are included in accrued expenses, other liabilities and debt, respectively.
(g)	The 2005 amount represents dividends of $500 in each of the first three quarters and $1.0 billion in the fourth quarter.

In October 2005 we repurchased operating lease assets and related deferred tax liabilities from GM previously sold to them under a purchase and sale agreement. The leases were repurchased at fair market value; however, the assets and liabilities were transferred at their carrying value because this was a transaction between related parties. The difference between the net assets acquired and the proceeds remitted to GM was reflected as a reduction to our stockholder’s equity in the fourth quarter of 2005.

16

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

Retail and lease contracts acquired by us that included rate and residual subvention from GM, payable directly to us or indirectly to GM dealers as a percent of total new retail and lease contracts acquired, were as follows:

Three months ended March 31,		2006			2005
GM and affiliates subvented contracts acquired:
	North American operations		89	%		70	%
	International operations		58			60

In addition to subvention programs, GM provides payment guarantees on certain commercial assets we have outstanding with certain third-party customers. As of March 31, 2006, and December 31, 2005, commercial obligations guaranteed by GM were $598 million and $934 million, respectively.

Income Statement

A summary of the income statement effect of transactions with GM and affiliated companies is as follows:

Three months ended March 31, ($ in millions)		2006			2005
Net financing revenue:
	GM and affiliates lease residual value support		$167			$103
	Wholesale subvention and service fees from GM		43			53
	Interest paid on loans from GM		(17	)		(9	)
	Consumer lease payments (a)		40			34
Insurance premiums earned from GM			72			103
Other income:
	Interest on notes receivable from GM and affiliates		69			54
	Interest on wholesale settlements (b)		44			28
	Revenues from GM leased properties		26			18
Service fee income:
	GMAC of Canada operating lease administration (c)		—			6
	Rental car repurchases held for resale (d)		8			4
Expense:
	Employee retirement plan costs allocated by GM		29			46
	Off-lease vehicle selling expense reimbursement (e)		(5	)		(10	)
	Payments to GM for services, rent and marketing expenses		14			53

(a)	GM sponsors lease pull-ahead programs whereby consumers are encouraged to terminate lease contracts early in conjunction with the acquisition of a new GM vehicle with the customer’s remaining payment obligation waived. For certain programs, GM compensates us for the waived payments, adjusted based on the remarketing results associated with the underlying vehicle.
(b)	The settlement terms related to the wholesale financing of certain GM products are at shipment date. To the extent that wholesale settlements with GM are made prior to the expiration of transit, we receive interest from GM.
(c)	GMAC of Canada, Limited administered operating lease receivables on behalf of GM of Canada Limited (GMCL) and received a servicing fee, which was included in other income. As of October 2005, GMAC of Canada no longer administers these operating lease receivables.
(d)	We receive a servicing fee from GM related to the resale of rental car repurchases.
(e)	An agreement with GM provides for the reimbursement of certain selling expenses incurred by us on off-lease vehicles sold by GM at auction.

As a marketing incentive GM may sponsor residual support programs as a way to lower customer monthly payments. Under residual support programs the contractual residual value is adjusted above GMAC’s standard residual rates. GM reimburses us to the extent that remarketing sales proceeds are less than the customer’s contractual residual value. Based on the March 31, 2006 outstanding U.S. operating lease portfolio, the amount that we would expect to be paid by GM under these lease residual support programs would be $2.5 billion. These projections would be paid over the remaining life of the lease portfolio at the time of sale of the related vehicle (on average approximately 2 years) and are based on the expected remarketing performance of the vehicles. The maximum amount that could be paid under the residual support programs is approximately $4.4 billion and would only be paid in the unlikely event that the proceeds from the entire portfolio of lease assets would be lower than both the contractual residual value and GMAC’s standard residual rates.

17

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

In addition to residual support programs, GM also participates in a risk sharing arrangement whereby GM shares equally in residual losses to the extent that remarketing proceeds are below GMAC’s standard residual rates (limited to a floor). Based on the March 31, 2006 outstanding U.S. operating lease portfolio, the amount that we would expect to be paid by GM under the risk sharing program would not be material. The maximum amount that could be paid under the risk sharing arrangements is approximately $1.9 billion and would only be paid in the unlikely event that the proceeds from all outstanding lease vehicles would be lower than GMAC’s standard residual rates. The amounts in the foregoing table represent the amounts paid in the first quarter of 2006 and 2005 under both the residual support and risk sharing programs.

In addition to the financing arrangements summarized in the foregoing table, GM has a $4 billion revolving line of credit from GMAC that expires in September 2006. This credit line is used for general operating and seasonal working capital purposes and to reduce external liquidity requirements. As of March 31, 2006, and December 31, 2005, there were no amounts outstanding on this line.

10 Segment Information

Financial results for our reporting segments are summarized below.

	Financing operations (a)
	North
Three months ended March 31,	American			International						Insurance
($ in millions)	Operations (b)			Operations (b)			ResCap (c)			operations		Other (d)			Consolidated
2006
Net revenue before provision for credit losses		$1,218			$352			$264			$—		$306			$2,140
Provision for credit losses		(14	)		7			(123	)		—		(5	)		(135	)
Other revenue		744			217			800			1,141		9			2,911
Total net revenue		1,948			576			941			1,141		310			4,916
Noninterest expense		1,675			392			602			955		304			3,928
Income before income tax expense		273			184			339			186		6			988
Income tax expense (benefit)		100			55			138			57		(34	)		316
Net income		$173			$129			$201			$129		$40			$672
Total assets		$155,293			$30,288			$121,914			$13,739		($17,429	)		$303,805
2005
Net revenue before provision for credit losses		$1,134			$376			$420			$—		$257			$2,187
Provision for credit losses		(148	)		(30	)		(133	)		—		(18	)		(329	)
Other revenue		618			195			837			1,038		153			2,841
Total net revenue		1,604			541			1,124			1,038		392			4,699
Noninterest expense		1,435			392			595			895		279			3,596
Income before income tax expense		169			149			529			143		113			1,103
Income tax expense		41			42			207			48		37			375
Net income		$128			$107			$322			$95		$76			$728
Total assets		$182,331			$31,189			$98,295			$11,921		($8,508	)		$315,228

(a)	Financing operations in the MD&A also includes the Commercial Finance Group, which is a separate operating segment and is included in Other.
(b)	North American Operations consist of automotive financing in the U.S. and Canada. International Operations consists of automotive financing and full service leasing in all other countries and Puerto Rico. Beginning April 1, 2006, Puerto Rico is now included in the North American Operations.
(c)	Refer to Note 1 to the Condensed Consolidated Financial Statements for a discussion on changes to the reportable operating segments.
(d)	Represents our Commercial Finance Group, GMAC Commercial Mortgage Operations, certain corporate activities related to the Mortgage Group, reclassifications and eliminations between the reporting segments. At March 31, 2006, total assets were $7 billion for the Commercial Finance Group, $500 for the corporate activities of the Mortgage Group and ($25.0) billion in eliminations. As a result of the sale of approximately 78% of its equity in GMAC Commercial Mortgage, the remaining equity method investment is reflected in this segment. Refer to Note 1 to the Condensed Consolidated Financial Statements for a discussion on changes to the reportable operating segments. Net income related to GMAC Commercial Mortgage was $29 and $63 for the period ended March 31, 2006 and 2005, respectively. Additionally, total assets includes our investment in Capmark of $682 at March 31, 2006, and assets related to GMAC Commercial Mortgage of $15.8 billion at March 31, 2005.

18

Notes to Condensed Consolidated Financial Statements (unaudited)

General Motors Acceptance Corporation

11 Subsequent Events

Sale of a Controlling Interest in GMAC

On April 2, 2006, GM and its wholly owned subsidiaries, GMAC and GM Finance Co. Holdings Inc., entered into a definitive agreement pursuant to which GM will sell a 51% controlling interest in GMAC for a purchase price of $7.4 billion to FIM Holdings LLC, a consortium of investors led by Cerberus Capital Management, L.P., a private investment firm, which also includes Citigroup Inc. and Aozora Bank Ltd. as consortium members (FIM Holdings). GM will retain a 49% equity investment interest in GMAC. In addition, GM and the consortium will invest $1.9 billion of cash in new GMAC preferred equity, with $1.4 billion to be invested by GM and $500 million to be invested by FIM Holdings. The transaction is subject to a number of U.S. and international regulatory and other approvals. GM and GMAC expect to close the transaction in the fourth quarter of 2006.

Prior to consummation of the agreement, (i) certain assets with respect to automotive leases and retail installment sales contracts owned by us and our affiliates having a net book value of approximately $4 billion, will be dividended to GM, (ii) GM will assume certain of our post-employment benefit obligations, (iii) we will transfer to GM certain entities which hold a fee interest in certain real properties, (iv) we will pay dividends to GM in an amount up to the amount of our net income prior to the Acquisition, (v) GM will repay certain indebtedness owing to us and specified intercompany unsecured obligations owing to us shall be no greater than $1.5 billion and (vi) we will make a one-time distribution to GM of approximately $2.7 billion of cash to reflect the increase in our equity value resulting from the transfer of a portion of our net deferred tax liabilities arising from our conversion and certain of our subsidiaries’ conversion to limited liability company form. The total value of the cash proceeds and distributions to GM before they purchase our preferred limited liability company interests will be approximately $14 billion over three years, comprised of the $7.4 billion purchase price, the $4 billion of retained assets and the $2.7 billion cash dividend.

As part of the transaction, GM and GMAC will enter into a number of agreements that will require that we continue to allocate capital to automotive financing consistent with historical practices, thereby continuing to provide critical financing support to a significant share of GM’s global sales. While we will retain the right to make individual credit decisions, we will commit to fund a broad spectrum of customers and dealers consistent with historical practice in the relevant jurisdiction. Subject to our fulfillment of certain conditions, GM will grant us exclusivity for 10 years for U.S., Canadian, and international GM-sponsored retail and wholesale marketing incentives around the world, with the exception of Saturn branded products.

As part of the agreement, GM will retain an option, for 10 years after the closing of the transaction, to repurchase certain assets from us related to the automotive finance business of the North American Operations and International Operations of GMAC, subject to certain conditions, including that GM’s credit ratings are investment grade or are higher than our credit ratings.

The agreement is subject to the satisfaction or waiver of customary and other closing conditions, including, among other things, (i) reasonable satisfaction by the members of FIM Holdings, pursuant to an agreement with or other writing from, the PBGC that, following the closing, we and our subsidiaries will not have any liability with respect to the ERISA plans of GM, (ii) receipt of ratings for our senior unsecured long-term indebtedness and the ratings of Residential Capital Corporation, our indirect wholly owned subsidiary, after giving effect to the transactions contemplated by the Agreement, of at least BB and BBB- (or their respective equivalents), respectively, and an A.M.Best rating for our significant insurance subsidiaries of at least B++ (iii) that no material adverse effect will have occurred with respect to our business, financial condition or results of operations of GMAC, which includes any actual downgrading by any of the major rating agencies of GM’s unsecured long-term indebtedness rating below CCC or its equivalent, and (iv) receipt of required regulatory approvals and licenses. The agreement may be terminated upon the occurrence of certain events, including the failure to complete the transaction by March 31, 2007.

19

Management’s Discussion and Analysis

General Motors Acceptance Corporation

Overview

We are a leading global financial services firm with approximately $304 billion of assets and operations in approximately 40 countries. Founded in 1919 as a wholly owned subsidiary of General Motors Corporation, GMAC was originally established to provide GM dealers with the automotive financing necessary to acquire and maintain vehicle inventories and to provide retail customers the means by which to finance vehicle purchases through GM dealers. Our products and services have expanded beyond automotive financing as we currently operate in three primary lines of business — Financing, Mortgage and Insurance. Refer to our 2005 Annual Report on Form 10-K for a more complete description of our business activities, along with the products and services offered and the market competition.

Net income for our businesses is summarized as follows:

Three months ended March 31, ($ in millions)	2006			2005
Financing (a)	$	313		$	248
Mortgage		230			385
Insurance		129			95
Net income	$	672		$	728
Return on average equity (annualized)		12.1	%		12.9	%

(a)  Includes North America and International automotive finance segments, separately identified in Note 10 to the Condensed Consolidated Financial Statements, as well as our Commercial Finance Group operating segment.

We earned $672 million in the first quarter of 2006, down $56 million from first quarter 2005 earnings of $728 million. Earnings benefited from increases in the Financing and Insurance operations largely as a result of continued strong loss performance. However, these increases were more than offset by lower mortgage earnings.

Results for Financing operations were $313 million, up $65 million from $248 million earned in the same period in the prior year. The increase is largely due to lower consumer credit provisions primarily as a result of the impact of automotive whole loan sale activity and favorable international credit performance.

ResCap earnings were $201 million in the first quarter 2006, down from the $322 million earned in the first quarter of 2005. While revenues were strong from higher asset levels, results were negatively impacted by lower net margins resulting from both pricing pressures and higher funding costs. In addition, gains on sale of loans were down due to a significant gain in the first quarter of 2005 realized upon the sale of a portfolio of distressed mortgage loans. Absent this, mortgage loan gains were relatively flat as the favorable impact from higher sales volume was offset by lower margins. ResCap’s credit provision was lower as compared to the first quarter of 2005 as a result of favorable credit trends. Mortgage originations were $41.6 billion for the first quarter of 2006 representing an increase from the $36.4 billion in the first quarter 2005.

Our Insurance operations generated net income of $129 million in the first quarter of 2006, up $34 million from earnings of $95 million in the first quarter of 2005, primarily reflecting the impact of strong underwriting results (in particular loss experience). In addition, first quarter Insurance results also benefited from the strategic acquisition of MEEMIC Insurance Company, a personal lines business that offers automobile and homeowners insurance in the Midwest. Along with increased earnings, GMAC Insurance maintained a strong investment portfolio, with a market value of $7.9 billion at March 31, 2006, including after tax net unrealized capital gains of $622 million.

In addition, on March 23, 2006, we closed on the sale of approximately 78 percent of our equity in GMAC Commercial Mortgage for approximately $1.5 billion in cash. At the closing, GMAC Commercial Mortgage also repaid to us approximately $7.3 billion in intercompany loans, bringing the total cash proceeds from the sale to $8.8 billion. GMAC Commercial Mortgage has changed its name to Capmark Financial Group Inc. (Capmark). Our earnings in the first quarter related to GMAC Commercial Mortgage were $29 million, representing operating income of $50 million and a loss on the sale of $21 million, after closing costs.

We continue to maintain adequate liquidity with cash reserve balances at March 31, 2006, of $22.1 billion, comprised of $17.3 billion in cash and cash equivalents and $4.8 billion invested in marketable securities.

On April 3, 2006, GM announced that it agreed to sell a 51 percent controlling interest in us to a consortium led by Cerberus Capital Management, which is expected to close in the fourth quarter of this year. In addition to continuing to enable us to support the sale of GM vehicles, the transaction is intended to support our strategic goal of a stable investment grade rating and profitable growth.

20

Management’s Discussion and Analysis

General Motors Acceptance Corporation

Financing Operations

Our Financing operations offer a wide range of financial services and products (directly and indirectly) to retail automotive consumers, automotive dealerships and other commercial businesses. Our Finance operations are comprised of two separate reporting segments — North American Automotive Finance Operations and International Automotive Finance Operations — and one operating segment — Commercial Finance Group. The products and services offered by our Financing operations include the purchase of retail installment sales contracts and leases, extension of term loans, dealer floor plan financing and other lines of credit to dealers, fleet leasing and factoring of receivables. Refer to pages 21-31 of our 2005 Annual Report on Form 10-K for further discussion of the business profile of our Financing operations.

Results of Operations

The following table summarizes the operating results of our Financing operations for the periods indicated. The amounts presented are before the elimination of balances and transactions with our other reporting segments.

Three months ended March 31, ($ in millions)		2006			2005			Change			%
Revenue
Consumer			$1,425			$1,710			($285	)		(17	)
Commercial			461			472			(11	)		(2	)
Operating leases			1,930			1,666			264			16
	Total financing revenue		3,816			3,848			(32	)		(1	)
Interest and discount expense			(2,124	)		(2,231	)		107			5
Provision for credit losses			(9	)		(182	)		173			95
	Net financing revenue		1,683			1,435			248			17
Other income			896			777			119			15
Depreciation expense on operating leases			(1,440	)		(1,270	)		(170	)		(13	)
Noninterest expense			(665	)		(602	)		(63	)		(10	)
Income tax expense			(161	)		(92	)		(69	)		(75	)
Net income			$313			$248			$65			26
Total assets			$185,077			$212,806			($27,729	)		(13	)

Financing operations earned $313 million, an increase of 26% in comparison to 2005 first quarter results of $248 million with increases in both the North American and International Automotive operations. The increase in earnings is largely due to lower consumer credit provisions primarily as a result of the impact of automotive whole loan activity and favorable international credit performance. Earnings increases were realized despite a continued decline in net interest margins. While net interest margins were down, the decrease was less than what has been experienced in prior quarters.

Total financing revenue was relatively constant as compared to 2005 with declines in consumer revenue offset by higher operating lease revenues. The decrease in consumer revenue is consistent with the reduction in consumer asset levels as a result of continued whole loan sale activity. Consumer finance receivables have declined by $24 billion, or approximately 27%, since March 31, 2005. Operating lease revenue (along with the related depreciation expense) increased year over year consistent with the increase in the size of the operating lease portfolio (approximately 24% since March 2005). The increase in the portfolio is reflective of the shift in our financing volume mix to more leases in the North American operations.

Interest and discount expense declined 5% as compared to the prior year, partially due to the decreases in asset levels, as well as the favorable impact of derivative hedge ineffectiveness for certain swaps hedging the debt portfolio. Somewhat offsetting this was the negative impact of higher market interest rates. Refer to the Funding and Liquidity section of this MD&A for further discussion.

The provision for credit losses decreased due to a combination of lower consumer asset levels, primarily due to an increase in whole loan sales, and improved loss performance on our international portfolio. Refer to the Credit Risk discussion within this Financing Operations Section of the MD&A for further discussion.

Compensation and benefits expense decreased by $31 million with the most significant impact related to the reduction in the OPEB (other post-employment benefits) liability allocation from GM. In addition, other operating expenses increased from $337 million in the first quarter of 2005 to $432 million in the first quarter of 2006 primarily due to a decrease in the gain realized on the disposal of off-lease vehicles. In

21

Management’s Discussion and Analysis

General Motors Acceptance Corporation

addition, the effective tax rate for the Financing operations was 33.9% for the period ended March 31, 2006, as compared to 27.0% for the comparable period in 2005. The increase in the rate is due to the impact of favorable tax items related to changes in reserve requirements and a lower state and local tax accrual rate in 2005 in our North American Automotive Finance Operations.

Financing Volume

The following table summarizes our new vehicle consumer financing volume, our share of GM retail sales, and our wholesale financing of new vehicles and related share of GM sales to dealers in markets where we operate.

					Share of
			GMAC volume		GM sales
Three months ended March 31, (units in thousands)			2006	2005	2006	2005
New vehicle consumer financing
GM vehicles
	North America
		Retail contracts	188	312	26%	38%
		Leases	165	137	22%	17%
	Total North America		353	449	48%	55%
	International (retail contracts and leases)		135	127	25%	28%
Total GM units financed			488	576	38%	45%
Non-GM units financed			16	15
	Total consumer automotive financing volume		504	591
Wholesale financing of new vehicles
GM vehicles
	North America		920	879	76%	80%
	International		660	573	92%	90%
Total GM units financed			1,580	1,452	82%	84%
Non-GM units financed			41	43
	Total wholesale volume		1,621	1,495

Our consumer financing volume and penetration levels are significantly impacted by the nature, timing and extent of GM’s use of rate, residual and other financing incentives for marketing purposes on consumer retail contracts and leases. Late in 2004 and through the early part of 2005, GM reduced its use of special rate financing programs and utilized marketing programs that provided cash incentives to customers that use us to finance their purchase of a new GM vehicle. As a result, our North America penetration levels were positively impacted in the first quarter of 2005. However, as GM has begun to focus on “value pricing”, the use of special rate marketing incentives was reduced and as a result our share of retail financing volume has declined since the first quarter of 2005. In addition, the reduction in retail contracts as compared to the first quarter of 2005 had the impact of increasing the percentage of lease contracts relative to the total volume financed. Lease financing volume in the first quarter of 2006 also benefited from a shift by GM in some vehicle incentive programs towards more leasing in replacement of retail marketing activities. In our International Automotive Finance Operations, financing volume has increased as we continue to expand (most notably financing in China and providing financing to Chevrolet-Daewoo). However, in Europe as we continue to enter into these growing markets, our penetration share is negatively impacted on a relative basis despite the increased volume. Our wholesale financing continues to be the primary funding source for GM dealer inventories, as total penetration levels in the first quarter of 2006 remained relatively consistent with levels in the first quarter of 2005, and continue to reflect traditionally strong levels.

Consumer Credit

The following tables summarize pertinent loss experience in the consumer managed and on-balance sheet automotive retail contract portfolio. In general, the credit quality of the off-balance sheet portfolio is representative of our overall managed consumer automotive retail contract portfolio. The off-balance sheet portfolio includes receivables securitized and sold that we continue to service and in which we retain an interest or risk of loss, but excludes securitized and sold finance receivables that we continue to service but in which we retain no interest or risk of loss. However, the process of creating a pool of retail finance receivables for securitization or sale typically excludes accounts that are greater than 30 days delinquent at such time. In addition, the process involves selecting from a pool of receivables that

22

Management’s Discussion and Analysis

General Motors Acceptance Corporation

are currently outstanding and, therefore, represent seasoned accounts. A seasoned portfolio that excludes delinquent accounts historically results in better credit performance in the managed portfolio than in the on-balance sheet portfolio of retail finance receivables. In addition, the current off-balance sheet transactions are comprised mainly of subvented rate retail finance receivables, which generally attract higher quality customers (or otherwise cash purchasers) than customers typically associated with non-subvented receivables.

The managed portfolio includes retail receivables held on-balance sheet for investment and receivables securitized and sold that we continue to service and have a continued involvement in (i.e., in which we retain an interest or risk of loss in the underlying receivables), but excludes securitized and sold finance receivables that we continue to service but have no other continuing involvement (serviced-only portfolio). We believe that the disclosure of the credit experience of the managed portfolio presents a more complete presentation of our credit exposure because the managed basis reflects not only on-balance sheet receivables but also securitized assets to which we retain a risk of loss in the underlying assets (typically in the form of a subordinated retained interest). Consistent with the presentation in the Condensed Consolidated Balance Sheet, retail contracts presented in the table represent the principal balance of the finance receivable discounted for any unearned rate support received from GM.

	Average		Charge-offs,
	retail		net of		Annualized net
	contracts		recoveries		charge-off rate
Three months ended March 31, ($ in millions)	2006		2006	2005	2006	2005
Managed
North America		$59,076	$164	$193	1.11%	0.96%
International		14,772	27	35	0.73%	0.93%
Total managed		$73,848	$191	$228	1.03%	0.95%
On-balance sheet
North America		$53,881	$159	$190	1.18%	1.00%
International		14,772	27	35	0.73%	0.93%
Total on-balance sheet		$68,653	$186	$225	1.08%	0.99%

The following table summarizes pertinent delinquency experience in the consumer automotive retail contract portfolio.

	Percent of retail contracts
	30 days or more past due (a)
	Managed		On-balance sheet
March 31,	2006	2005	2006	2005
North America	2.34%	2.09%	2.53%	2.24%
International	2.54%	2.67%	2.54%	2.67%
Total	2.40%	2.24%	2.53%	2.36%

(a)  Past due contracts are calculated on the basis of the average number of contracts delinquent during a month and exclude accounts in bankruptcy.

In addition to the preceding loss and delinquency data, the following table summarizes bankruptcies and repossession information for the United States consumer automotive retail contract portfolio (which represents approximately 61% of our on-balance sheet consumer automotive retail contract portfolio):

	Managed						On-balance sheet
Three months ended March 31,	2006			2005			2006			2005
Average retail contracts in bankruptcy (in units)		103,521			96,279			101,863			91,510
Bankruptcies as a percent of average number of contracts outstanding		2.83	%		1.98	%		2.93	%		2.02	%
Retail contract repossessions (in units)		25,133			27,078			24,883			25,750
Annualized repossessions as a percent of average number of contracts outstanding		2.73	%		2.23	%		2.84	%		2.28	%

23

Management’s Discussion and Analysis

General Motors Acceptance Corporation

The following table summarizes activity related to the consumer allowance for credit losses for our Financing operations.

Period ended March 31, ($ in millions)		2006			2005
Allowance at beginning of period			$1,618			$2,035
Provision for credit losses			28			177
Charge-offs
	Domestic		(193	)		(221	)
	Foreign		(43	)		(50	)
Total charge-offs			(236	)		(271	)
Recoveries
	Domestic		38			36
	Foreign		13			11
Total recoveries			51			47
Net charge-offs			(185	)		(224	)
Impacts of foreign currency translation			1			(10	)
Securitization activity			1			—
Allowance at March 31,			$1,463			$1,978
Allowance coverage (a)			2.23	%		2.21	%

(a)  Represents the related allowance for credit losses as a percentage of total on-balance sheet consumer automotive retail contracts.

Charge-offs in the North American Automotive portfolio decreased consistent with the decline in the level of overall managed and on balance sheet receivables as we continue to execute more whole loan sales. However, similar to securitizations as described above, the process of creating a pool of retail finance receivables for whole loan sales typically involves excluding retail contracts that are greater than 30 days delinquent at such time and selecting from a pool of receivables currently outstanding which, therefore represents seasoned contracts. A seasoned portfolio that excludes delinquent contracts historically results in better credit performance, and as a result the increase in whole loan activity over the past year has impacted the charge-offs as a percentage of the managed and on-balance sheet portfolio when compared to the comparable period in the prior year. This impact of whole loan activity is the primary reason for the increase in charge-offs as a percentage of retail receivables and delinquencies over the past year. On an overall servicing portfolio basis (which includes receivables sold in whole loan transactions but still serviced), both charge-offs and delinquencies for the first quarter 2006 have been relatively consistent with the first quarter 2005. On a servicing portfolio basis, charge-offs in the North American Automotive portfolio were 0.92% and 0.90% for the first three months of 2006 and 2005, respectively. On a servicing portfolio basis, delinquencies in the North American Automotive portfolio increased slightly (2.10% and 2.01% for the quarters ended March 31, 2006 and 2005, respectively) primarily due to customers affected by Hurricane Katrina. The increase in the number of bankruptcies in the U.S. portfolio from the prior year reflects increased activity as a result of legislation effective October 17, 2005, which made it more difficult for U.S. consumers to qualify for bankruptcy protection in the future. As a result, the increase in bankruptcies outstanding reflects an acceleration of bankruptcy filings in the prior year and does not reflect an overall deterioration in credit quality of the portfolio. Since the time of the effective date of the legislation, the number of bankruptcy filings has declined. Credit fundamentals in our International Automotive operations continue to improve with both delinquencies and charge-offs lower than prior period levels.

The allowance for credit losses as a percentage of the total on-balance sheet consumer portfolio remained stable in comparison to the prior period as the consumer allowance quarter over quarter decreased along with automotive retail asset levels.

Commercial Credit

Our credit risk on the commercial portfolio is markedly different than that of our consumer portfolio. Whereas the consumer portfolio represents a homogenous pool of retail contracts that exhibit fairly predictable and stable loss patterns, the commercial portfolio exposures are less predictable. In general, the credit risk of the commercial portfolio is tied to overall economic conditions in the countries in which we operate.

At March 31, 2006, the only commercial receivables that had been securitized and accounted for as off-balance sheet transactions represent wholesale lines of credit extended to automotive dealerships, which historically experience low charge-offs. Since only wholesale

24

Management’s Discussion and Analysis

General Motors Acceptance Corporation

accounts have historically been securitized, the amount of charge-offs on our managed portfolio is the same as the on-balance sheet portfolio. As a result, only the on-balance sheet commercial portfolio credit experience is presented in the following table:

	Total loans		Impaired loans (a)
	March 31,		March 31,			Dec 31,			March 31,
($ in millions)	2006		2006			2005			2005
Wholesale		$21,734		$294			$299			$599
				1.35	%		1.45	%		2.52	%
Other commercial financing		10,444		408			475			616
				3.91	%		4.56	%		5.04	%
Total on-balance sheet		$32,178		$702			$774			$1,215
				2.18	%		2.50	%		3.38	%

(a)  Includes loans where it is probable that we will be unable to collect all amounts due according to the terms of the loan.

	Average		Annualized charge-offs
	loans		net of recoveries
Three months ended March 31, ($ in millions)	2006		2006			2005
Wholesale		$21,232		$—			$1
				—	%		0.02	%
Other commercial financing		10,251		40			5
				1.56	%		0.17	%
Total on-balance sheet		$31,483		$40			$6
				0.51	%		0.06	%

The following table summarizes the activity related to the commercial allowance for credit losses for our Financing operations:

		First Quarter
Three months ended March 31, ($ in millions)		2006			2005
Allowance at beginning of period		$	245		$	322
Provision for credit losses			(18	)		5
Charge-offs
	Domestic		(46	)		(7	)
	Foreign		(1	)		(1	)
Total charge-offs			(47	)		(8	)
Recoveries
	Domestic		5			2
	Foreign		2			—
Total recoveries			7			2
Net charge-offs			(40	)		(6	)
Impacts of foreign currency			—			(3	)
Allowance at end of period		$	187		$	318

Net charge-offs in the commercial portfolio remain at traditionally low levels. Charge-offs in the commercial portfolio increased as compared to 2005 as a result of an increase in the amount of charge-offs at our Commercial Finance Group (included in other commercial financing in the preceding table) related to a few specific accounts that were previously provided for.

25

Management’s Discussion and Analysis

General Motors Acceptance Corporation

Mortgage Operations

Our Mortgage Operations are comprised of one reporting segment: ResCap. Additionally, the Mortgage Operations includes an equity interest in Capmark (formerly GMAC Commercial Mortgage), which is reflected in Note 10 (Segment Information) in the “Other” column. On March 23, 2006, we sold approximately 78% of our equity in GMAC Commercial Mortgage for approximately $1.5 billion in cash. Refer to Note 1 to the Condensed Consolidated Financial Statements for further details.

The principal activities of ResCap involve the origination, purchase, servicing, sale and securitization of consumer (i.e., residential) and commercial mortgage loans and mortgage related products (e.g., real estate services). Typically, mortgage loans are originated and sold to investors in the secondary market, including securitization transactions in which the assets are legally sold but are accounted for as secured financings. For additional information, please refer to ResCap’s quarterly report on Form 10-Q for the period ended March 31, 2006, filed separately with the SEC, which report is not deemed incorporated into any of our filings under the Securities Act or the Exchange Act.

Results of Operations

Net income for our Mortgage operations is summarized as follows:

Three months ended March 31, ($ in millions)	2006		2005
ResCap		$201	$	322
Other (a)		29		63
Net Income		$230	$	385

(a)  Represents GMAC Commercial Mortgage earnings.

Mortgage operations earned $230 million in the first quarter of 2006, a decrease of 40% from $385 million earned in the first quarter of 2005. These results reflect decreases in both ResCap and GMAC Commercial Mortgage. ResCap earned $201 million for the first quarter of 2006, representing a decrease from the $322 million earned in the same period of the prior year. ResCap’s earnings were negatively impacted by lower net margins resulting from both pricing pressures and higher funding costs. Our earnings related to GMAC Commercial Mortgage were $29 million, representing operating income of $50 million prior to the close of the transaction and equity earnings after the close, and a loss on sale of $21 million, after closing costs.

26

Management’s Discussion and Analysis

General Motors Acceptance Corporation

The following describes the results of operations for ResCap.

ResCap

The following table summarizes the operating results for ResCap for the periods indicated. The amounts presented are before the elimination of balances and transactions with our other reporting segments.

Three months ended March 31,
($ in millions)	2006			2005			Change			%
Revenue
Total financing revenue		$1,700			$1,185			$515			43
Interest and discount expense		(1,436	)		(765	)		(671	)		(88	)
Provision for credit losses		(123	)		(133	)		10			8
Net financing revenue		141			287			(146	)		(51	)
Mortgage servicing fees		375			349			26			8
MSR amortization and impairment		—			(140	)		140			100
Change in fair value		195			—			195			100
MSR risk management activities		(381	)		(24	)		(357	)		(1,488	)
Net loan serving income		189			185			4			2
Gains on sale of loans		267			329			(62	)		(19	)
Other income		344			323			21			7
Noninterest expense		(602	)		(595	)		(7	)		(1	)
Income tax expense		(138	)		(207	)		69			33
Net income		$201			$322			($121	)		(38	)
Investment securities		$4,409			$7,144			($2,735	)		(38	)
Loans held for sale		18,171			16,312			1,859			11
Loans held for investment, net		85,084			64,134			20,950			33
Mortgage servicing rights		4,526			3,672			854			23
Other assets		9,724			7,033			2,691			38
Total assets		$121,914			$98,295			$23,619			24

ResCap earned $201 million in the first quarter of 2006, a decrease of 38% from $322 million earned in the first quarter of 2005. Net financing revenue was negatively impacted by higher interest and discount expense driven by an increase in short-term market interest rates and the resulting flattening of the yield curve. However, the increase in interest and discount expense was partially offset by an increase in financing revenues from higher asset levels due to higher loan production as well as continued favorable trends in credit loss provisions. Mortgage loan asset levels increased 32% from $65 billion in the first quarter of 2005 to $86 billion in the first quarter of 2006. Our domestic loan production increased despite the decline in the overall domestic mortgage origination market, resulting in an increase in our market share.

Net loan servicing income remained relatively flat as the favorable impact of higher mortgage servicing fees and lower MSR amortization and impairment was offset by negative hedging results. The decline in MSR amortization and impairment is due to the adoption of SFAS 156 on January 1, 2006. As a result of the adoption, mortgage servicing rights are carried at estimated fair value, and are no longer amortized.

Gains on sales of loans decreased due to a significant gain in 2005 realized upon the sale of a portfolio of distressed mortgage loans. Absent this, mortgage loan gains were relatively consistent with the prior year as the favorable impact from higher sales volume was offset by lower margins due to competitive pricing pressures.

In April 2006 we signed a definitive agreement to sell our equity interest in a regional homebuilder. The agreement provides that completion of the sale is subject to certain conditions. We expect to close this cash transaction during the second quarter of 2006. Upon closing, we expect to record a gain that is estimated to be material to our results of operations. We are selling our entire equity investment in this regional home builder and, under the equity method of accounting, our share of pretax income recorded from this investment approximated $20.1 million and $13.4 million for the three months ended March 31, 2006 and 2005, respectively, and $95.8 million for the year ended December 31, 2005.

27

Management’s Discussion and Analysis

General Motors Acceptance Corporation

Mortgage Loan Production, Sales and Servicing

Our mortgage loan production for the three months ended March 31, 2006 was $41.6 billion, an increase of 14.0% compared to $36.5 billion in the same period in 2005. Our domestic loan production increased 7.5% and international mortgage loan production almost doubled in 2006 compared to the same period in 2005. Our loan production increased, while the overall domestic mortgage origination market declined, resulting in an increase in our market share. The domestic mortgage origination market was estimated to be $526 billion for the three months ended March 31, 2006, a decrease of 12.0%, compared to an estimated $598 billion for the comparable period in 2005. The market share growth has been achieved through effectively changing our product offerings, and pricing in our markets.

The following summarizes mortgage loan production for the periods indicated.

Three months ended March 31, ($ in millions)			2006		2005
Consumer:
	Principal amount by product type:
		Prime conforming		$8,569		$14,188
		Government		861		1,197
		Prime nonconforming		11,727		10,068
		Prime second-lien		5,815		2,488
		Nonprime		9,096		5,616
		Total U.S. production		36,068		33,557
		International		5,512		2,904
		Total		$41,580		$36,461
	Principal amount by origination channel:
		Retail and direct channels		$6,678		$8,481
		Correspondent and broker channels		29,390		25,076
		Total U.S. production		36,068		33,557
		International		5,512		2,904
		Total		$41,580		$36,461
Number of loans (in units):
	Retail and direct channels			60,888		66,401
	Correspondent and broker channels			190,852		153,249
	Total U.S. production			251,740		219,650
	International			26,511		14,621
	Total			278,251		234,271

28

Management’s Discussion and Analysis

General Motors Acceptance Corporation

The following summarizes the residential mortgage servicing portfolio for the periods indicated.

			March 31,			December 31,
($ in millions)			2006			2005
Consumer:
	Principal amount by product type:
		Prime conforming		$189,307			$186,405
		Government		18,160			18,098
		Prime nonconforming		83,103			76,980
		Prime second-lien		20,573			17,073
		Nonprime		57,108			56,373
		Total U.S.		368,251			354,929
		International		24,865			23,711
	Total			$393,116			$378,640
	Principal amount by investor composition:
		Agency		46	%		43	%
		Private investor		47	%		51	%
		Owned and other		7	%		6	%
	Number of loans (in units)			3,045,334			2,965,048
	Average loan size ($ per loan)			$129,088			$129,001
	Weighted average service fee (basis points)			36			37

Consumer Credit

The following table summarizes the nonperforming assets in our Mortgage operations. Nonperforming assets are nonaccrual loans, foreclosed assets and restructured loans. Mortgage loans and lending receivables are generally placed on nonaccrual status when they are 60 days or more past due, or when the timely collection of the principal of the loan, in whole or in part, is doubtful. Management’s classification of a loan as nonaccrual does not necessarily indicate that the principal of the loan is uncollectible in whole or in part.

		March 31,			December 31,			March 31,
($ in millions)		2006			2005			2005
Nonperforming loans:
	Prime conforming		$6			$10			$13
	Government		—			—			14
	Prime non-conforming		343			361			249
	Prime second-lien		190			85			58
	Nonprime (a)		5,680			5,731			4,804
	Total nonaccrual loans		6,219			6,187			5,138
	Foreclosed assets		623			501			562
Total nonperforming assets			$6,842			$6,688			$5,700
As a % of total loan portfolio			9.46	%		9.70	%		10.18	%

(a)  Includes $242, $374 and $895 at March 31, 2006, December 31, 2005 and March 31, 2005, respectively, of loans that were purchased as distressed assets, and as such, were considered nonperforming at the time of purchase.

29

Management’s Discussion and Analysis

General Motors Acceptance Corporation

The following table summarizes the activity related to the consumer allowance for credit losses for our Mortgage operations.

Three months ended March 31, ($ in millions)		2006			2005
Allowance at beginning of period			$1,065			$916
	Provision for credit losses		129			128
	Charge-offs:
	Domestic		(128	)		(125	)
	Foreign		(2	)		(1	)
Total charge-offs			(130	)		(126	)
Recoveries:
	Domestic		15			11
	Foreign		—			3
Total recoveries			15			14
Net charge-offs			(115	)		(112	)
Securitization activity			—			(1	)
Allowance at March 31,			$1,079			$931
Allowance coverage (a)			1.46	%		1.66	%

(a)  Represents the related allowance for credit losses as a percentage of total on-balance sheet residential mortgage loans held for investment at the end of the period.

The decrease in allowance for credit losses as a percentage of the total on-balance sheet residential mortgage loan portfolio is due to favorable severity assumptions driven by home price appreciation and a reduction in the percentage of nonperforming mortgage loans held for investment as a percentage of total mortgage loans held for investment.

Commercial Credit

Our residential mortgage operations have commercial credit exposure through warehouse and construction lending related activities. The following table summarizes the nonperforming assets and net charge-offs in ResCap’s on-balance sheet held for investment lending receivables portfolios for each of the periods presented. Nonperforming lending receivables are nonaccrual loans, foreclosed assets and restructured loans. Lending receivables are generally placed on nonaccrual status when they are 90 days or more past due or when timely collection of the principal of the loan, in whole or in part, is doubtful. Management’s classification of a receivable as nonaccrual does not necessarily indicate that the principal amount of the loan is uncollectible in whole or in part.

		March 31,			December 31,			March 31,
($ in millions)		2006			2005			2005
Nonperforming lending receivables:
	Warehouse		$25			$42			$5
	Construction		9			8			10
	Other		17			17			4
Total nonaccrual lending receivables			51			67			19
Foreclosed assets			3			5			—
Total nonperforming assets			$54			$72			$19
As a % of total lending receivables portfolio			0.43	%		0.54	%		0.21	%

GMAC Commercial Mortgage

On March 23, 2006, we closed on the sale of approximately 78 percent of our equity in GMAC Commercial Mortgage for approximately $1.5 billion in cash. At the closing, GMAC Commercial Mortgage also repaid to us approximately $7.3 billion in intercompany loans, bringing the total cash proceeds from the sale to $8.8 billion. Effective with the date of the sale, GMAC Commercial Mortgage changed its name to Capmark Financial Group Inc.

We retained an equity voting interest in Capmark and have representation on its Board of Directors. We no longer have a majority ownership or a majority controlling interest in Capmark but do have the ability to exercise significant influence, and have accounted for our remaining interest of $432 million under the equity method of accounting. In addition to our equity investment, we have an investment of

30

Management’s Discussion and Analysis

General Motors Acceptance Corporation

$250 million of subordinated indenture notes issued by CapMark. Our total investment of $682 million is reflected in Other assets in the Condensed Consolidated Balance Sheet.

Our net after-tax earnings in the first quarter of 2006 related to GMAC Commercial Mortgage was $29 million, representing operating income of $50 million prior to the close of the transaction and equity earnings after the close, and a loss on the sale of $21 million, after closing costs. This compares to operating net income of $63 million recognized in the first quarter of 2005 when Commercial Mortgage was fully consolidated in our results.

As Capmark achieved certain credit ratings as a result of the sale transaction, prior to, or at the time of closing we were released from all existing financial guarantees related to GMAC Commercial Mortgage. Certain non-financial guarantees did survive closing, but we will be indemnified by Capmark for payments made or liabilities incurred by us in connection with these guarantees. Our maximum exposure under these non-financial guarantees is approximately $350 million. As the potential for loss under these arrangements is remote, no liability for the fair value of our obligation has been recognized for these guarantees in our financial statements as of March 31, 2006.

Insurance Operations

GMAC Insurance insures automobile service contracts and underwrites personal automobile insurance coverages (ranging from preferred to non-standard risks) and selected commercial insurance reinsurance coverages. Refer to pages 42-45 of our 2005 Annual Report on Form 10-K for further discussion of the business profile of our Insurance operations.

Results of Operations

The following table summarizes the operating results of GMAC Insurance for the periods indicated. The amounts presented are before the elimination of balances and transactions with our other operating segments.

Three months ended March 31, ($ in millions)	2006			2005			Change			%
Revenue
Insurance premiums and service revenue earned		$1,004			$911			$93			10
Investment income		105			90			15			17
Other income		32			37			(5	)		(14	)
Total revenue		1,141			1,038			103			10
Insurance losses and loss adjustment expenses		(597	)		(589	)		(8	)		(1	)
Acquisition and underwriting expense		(330	)		(284	)		(46	)		(16	)
Premium tax and other expense		(28	)		(22	)		(6	)		(27	)
Income before income taxes		186			143			43			30
Income tax expense		(57	)		(48	)		(9	)		(19	)
Net income		$129			$95			$34			36
Total assets		$13,739			$11,921			$1,818			15
Insurance premiums and service revenue written		$1,070			$1,090			($20	)		(2	)
Combined Ratio (a)		91.3	%		93.8	%

(a)  Management uses combined ratio as a primary measure of underwriting profitability, with its components measured using GAAP. Underwriting profitability is indicated by a combined ratio under 100% and is calculated as the sum of all reported losses and expenses (excluding interest and income tax expense) divided by the total of premiums and service revenues earned and other income.

Net income from Insurance operations totaled $129 million in the first quarter of 2006, up $34 million or 36% over first quarter 2005 earnings of $95 million. The increase in net income is due to favorable underwriting results, driven by a lower level of incurred losses, as exhibited by the decrease in the combined ratio to 91.3% from 93.8% in the first quarter of 2005 and recognized capital gains. In addition, first quarter 2006 results also benefited from the strategic acquisition of MEEMIC, a personal lines business that offers automobile and homeowners insurance in the Midwest. The favorable impact of these items in the first quarter of 2006 was partially offset by increased acquisition and underwriting expenses commensurate with increased volumes and returns.

Insurance premiums and service revenue earned increased 10% over the same period in the prior year, primarily due to the acquisition of MEEMIC, growth in the extended service contract and international personal lines operations. The increase was partially offset by lower

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Management’s Discussion and Analysis

General Motors Acceptance Corporation

insurance premiums in the existing U.S. personal lines operations, due to competitive pricing pressures, and a decline in the auto dealer physical damage product due to lower dealer inventories.

The increase in investment income quarter over quarter was attributable to higher interest income on a larger fixed income portfolio, partially mitigated by lower yields. The higher level of capital gains over the same period in the prior year is in line with the current business strategy.

Critical Accounting Estimates

We have identified critical accounting estimates that, as a result of judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operations involved could result in material changes to our financial condition, results of operations or cash flows under different conditions or using different assumptions.

Our most critical accounting estimates are:

•  Determination of the allowance for credit losses

•  Valuation of automotive lease residuals

•  Valuation of mortgage servicing rights

•  Valuation of interests in securitized assets

•  Determination of reserves for insurance losses and loss adjustment expenses

The adoption of SFAS 156 as of January 1, 2006, requires us to present our servicing rights at fair value for those classes of servicing rights for which we have elected the fair value method.

There have been no other significant changes in the methodologies and processes used in developing these estimates from what is described in our 2005 Annual Report on Form 10-K.

Funding and Liquidity

Funding Sources and Strategy

Our liquidity and our ongoing profitability is in large part, dependent upon our timely access to capital and the costs associated with raising funds in different segments of the capital markets. Over the past several years, our funding strategy has focused on the development of diversified funding sources across a global investor base, both public and private and, as appropriate, the extension of debt maturities. In addition, we maintain a large cash reserve ($22 billion at March 31, 2006) including certain marketable securities that can be utilized to meet our obligations in the event of any market disruption. As part of our cash management strategy, from time to time, we repurchase previously issued debt but do so in a manner that does not compromise overall liquidity. This multi-faceted strategy, combined with a continuous prefunding of requirements, is designed to enhance our ability to meet our obligations.

The diversity of our funding sources enhances funding flexibility, limits dependence on any one source of funds and results in a more cost effective strategy over the longer term. In developing this approach, management considers market conditions, prevailing interest rates, liquidity needs and the desired maturity profile of our liabilities. This strategy has helped us maintain liquidity during periods of weakness in the capital markets, changes in our business or changes in our credit ratings. Despite our diverse funding sources and strategies, our ability to maintain liquidity may be affected by certain risk factors.

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Management’s Discussion and Analysis

General Motors Acceptance Corporation

The following table summarizes our outstanding debt by funding source, excluding Commercial Mortgage balances, for the periods indicated:

		Outstanding
		March 31,			December 31,
($ in millions)		2006			2005
Commercial paper			$480			$524
Institutional term debt			74,706			82,557
Retail debt programs			32,885			34,482
Secured financings			124,287			121,138
Bank loans, and other			14,265			15,704
	Total debt (a)		246,623			254,405
Customer deposits (b)			8,665			6,855
Off-balance sheet securitizations (c)
	Retail finance receivables		5,467			3,165
	Wholesale loans		20,612			20,724
	Mortgage loans		86,862			77,573
	Total funding		368,229			362,722
Less: cash reserves (d)			(22,114	)		(19,605	)
	Net funding		$346,115			$343,117
Leverage ratio covenant (e)			6.6:1			7.5:1
Funding Commitments ($ in billions)
	Bank liquidity facilities (f)		$44.3			$44.1
	Secured funding facilities (g)		$108.0			$114.9

(a)  Excludes fair value adjustment as described in Note 7 to the Condensed Consolidated Financial Statements.

(b)	Includes consumer and commercial bank deposits and dealer wholesale deposits. Beginning March 2006, includes factored client deposits.
(c)	Represents net funding from securitizations of retail and wholesale automotive receivables and mortgage loans accounted for as sales, further described in Note 8 to the Consolidated Financial Statements in our 2005 Annual Report on Form 10-K.
(d)	Includes $17.3 billion in cash and cash equivalents and $4.8 billion invested in marketable securities at March 31, 2006, and $15.4 billion and $4.2 billion at December 31, 2005, respectively.
(e)	As described in Note 7 to the Condensed Consolidated Financial Statements, our liquidity facilities and certain other funding facilities contain a leverage ratio covenant of 11.0:1, which excludes from debt, securitization transactions that are accounted for on-balance sheet as secured financings (totaling $98,478 and $94,346 at March 31, 2006, and December 31, 2005, respectively). Our debt to equity ratio was 10.9:1 and 11.9:1, at March 31, 2006 and December 31, 2005, respectively, as determined by accounting principles generally accepted in the United States of America, which was the former basis for the leverage ratio covenant.
(f)	Represents both committed and uncommitted bank liquidity facilities. Refer to Note 7 to the Condensed Consolidated Financial Statements for details.
(g)	Represents both committed and uncommitted secured funding facilities. Includes commitments with third-party asset-backed commercial paper conduits as well as forward flow sale agreements with third parties and repurchase facilities. Refer to Note 7 to the Condensed Consolidated Financial Statements for details.

In the second and third quarters of 2005, our unsecured debt ratings (excluding ResCap) were lowered to a non-investment grade rating by three of the four nationally recognized rating agencies that rate us (refer to the Credit Ratings section of this MD&A for further information). These downgrades were a continuation of a series of credit rating actions over the past few years caused by concerns as to the financial outlook of GM, including its overall market position in the automotive industry and its burdensome health care obligations, as well as the uncertainty surrounding the auto parts supplier Delphi Corporation and its impact on GM’s financial condition. As a result of these rating actions, our unsecured credit spreads widened to unprecedented levels in 2005. In anticipation of, and as a result of, these credit rating actions, we modified our diversified funding strategy to focus on secured funding and automotive whole loan sales. These funding sources are generally not directly affected by ratings on unsecured debt and therefore offer both stability in spread and access to the market. In the first quarter of 2006, secured funding and whole loan sales represented 95% of our U.S. automotive term funding volume. The increased use of whole loan sales is part of the migration to an originate and sell model for the U.S. automotive finance business. In the first quarter of 2006, we executed $5.7 billion in whole loan sales.

33

Management’s Discussion and Analysis

General Motors Acceptance Corporation

In addition, through our banking activities in our mortgage and automotive operations, bank deposits (certificates of deposits and brokered deposits) have become an important funding source for us. We have also been able to diversify our unsecured funding through the formation of ResCap. ResCap, an indirect wholly owned subsidiary, was formed as the holding company of our residential mortgage businesses and in the second quarter of 2005 successfully achieved an investment grade rating (separate from GMAC). To date, ResCap has issued $10.5 billion in public and private unsecured debt and closed a $3.5 billion syndication of its bank facilities. The syndication, which closed in July 2005, consisted of a $1.75 billion syndicated term loan; an $875 million syndicated line of credit committed through July 2008 and an $875 million syndicated line of credit committed through July 2006. In the fourth quarter of 2005, ResCap filed a $12 billion shelf registration statement in order to offer senior and/or subordinated debt securities and has issued $5.5 billion in unsecured debt to date from this shelf. In February 2006, $1.75 billion was issued off of this shelf with a portion of the proceeds from the notes used to repay a portion of intercompany borrowings. In April 2006, $2.5 billion was issued off of this shelf and $1 billion in subordinated notes was privately placed with the proceeds from these issuances, used to repay a portion of the remaining $3.6 billion subordinated note to us, thus providing additional liquidity.

As previously disclosed, on March 23, 2006, we completed the sale of 78% of our equity in GMAC Commercial Mortgage. Under the terms of the transaction, we received $8.8 billion at closing which is comprised of sale proceeds and repayment of intercompany debt, thereby increasing our liquidity position and reducing the amount of funding required. Please refer to Note 1 of our Condensed Consolidated Financial Statements for further details.

The change in focus in the funding strategy has allowed us to maintain adequate access to capital and a sufficient liquidity position despite reductions in and limited access to traditional unsecured funding sources (i.e., commercial paper, term debt, bank loans and lines of credit) due to the deterioration in our unsecured credit rating. Unsecured sources most impacted by the reduction in our credit rating have been our commercial paper programs, the term debt markets, certain bank loan arrangements primarily in Mortgage and International Automotive operations, as well as Fannie Mae custodial borrowing arrangements at ResCap.

A further reduction of our credit rating could increase borrowing costs and further constrain our access to unsecured debt markets, including capital markets for retail debt. In addition, a further reduction of our credit ratings could increase the possibility of additional terms and conditions in any new or replacement financing arrangements and impact elements of certain existing secured borrowing arrangements. However, our funding strategy has increased our focus on expanding and developing diversified secured funding sources and increased use of automotive whole loan sales that are not directly impacted by ratings on our unsecured debt.

With limited access to traditional unsecured funding sources, management will continue to diversify and expand our use of asset-backed funding and we believe that our funding strategy will provide sufficient access to the capital markets to meet our short- and medium-term funding needs. Notwithstanding the foregoing, management believes that the current ratings situation and outlook increases the level of risk to our long-term ability to sustain the current level of asset originations. In an effort to mitigate this risk, on April 3, 2006, GM announced that it agreed to sell a 51 percent controlling interest in us to a consortium led by Cerberus Capital Management, which is expected to close in the fourth quarter of this year. In addition to continuing to enable us to support the sale of GM vehicles, the transaction is intended to support our strategic goal of a stable investment grade rating and profitable growth. In connection with the targeted fourth quarter sale closing, we plan to arrange two asset-backed funding facilities that total $25 billion, which will support our ongoing business and enhance our liquidity position. A $10 billion facility is expected to be available before closing and the other facility is expected to be available on or after closing. Citigroup has committed $12.5 billion in the aggregate to these two facilities. The funding facilities are in addition to Citigroup’s initial equity investment in us. There can be no assurance that this transaction will be successful in achieving a stable investment grade rating and therefore we plan to maintain the current conservative funding strategy until risks to closing the transaction are reduced.

Credit Ratings

The cost and availability of unsecured financing is influenced by credit ratings, which are intended to be an indicator of the creditworthiness of a particular company, security, or obligation. Lower ratings generally result in higher borrowing costs as well as reduced access to capital markets. This is particularly true for certain term debt institutional investors whose investment guidelines require investment grade term ratings and for short-term institutional investors (money markets in particular) whose investment guidelines require the two highest rating categories for short-term debt. Substantially all of our debt has been rated by nationally recognized statistical rating organizations. Concerns over the competitive and financial strength of GM, including how it will fund its burdensome health care liabilities and uncertainties at Delphi Corporation, have resulted in a series of credit rating actions, which commenced late in 2001. In the second and third quarters of 2005, Standard & Poor’s, Fitch and Moody’s downgraded GMAC’s (excluding ResCap) senior debt to a non-investment grade rating with DBRS continuing to maintain an investment grade rating on our senior debt. As a result of GM’s announcement on October 17, 2005 that it was exploring the possible sale of a controlling interest in us to a strategic partner, the

34

Management’s Discussion and Analysis

General Motors Acceptance Corporation

four rating agencies changed our review status to either evolving or developing. Most recently, on March 16, 2006, Moody’s placed our senior unsecured ratings under review for a possible downgrade following GM’s announcement that it would delay filing its annual report on Form 10-K with the SEC. Following the April 3, 2006 announcement by GM that it agreed to sell a 51 percent controlling interest in us, Fitch revised our rating watch status to positive from evolving, indicating that the ratings may be upgraded or maintained at current levels.

The following summarizes our current ratings, outlook and the date of last rating action by the respective nationally recognized rating agencies.

Rating	Commercial		Senior
Agency	Paper		Debt		Outlook		Date of Last Rating Action
Fitch		B		BB		Positive		September 26, 2005 (a)
						Possible
Moody’s		Not-Prime		Ba1		downgrade		August 24, 2005 (b)
S&P		B-1		BB		Developing		May 5, 2005 (c)
DBRS		R-2 (low)		BBB (low)		Developing		August 2, 2005 (d)

(a)	Fitch downgraded our senior debt to BB from BB+, affirmed the commercial paper rating of B, and on October 17, 2005, placed the ratings on Rating Watch Evolving, and on April 3, 2006, changed the rating watch status to Positive.
(b)	Moody’s lowered our senior debt to Ba1 from Baa2, downgraded the commercial paper rating to Not-Prime from Prime-2, and on October 17, 2005, changed the review status of the long-term debt ratings to direction uncertain and on March 16, 2006 changed the review status of the senior debt ratings to possible downgrade.
(c)	Standard & Poor’s downgraded our senior debt to BB from BBB-, downgraded the commercial paper rating to B-1 from A-3, and on October 10, 2005, changed the outlook to CreditWatch with developing implications.
(d)	DBRS downgraded our senior debt to BBB (low) from BBB, downgraded the commercial paper rating to R-2 (low) from R-2 (middle), and on October 11, 2005, placed the ratings under review with developing implications and affirmed the review status on October 17, 2005.

In addition, ResCap, our indirect wholly owned subsidiary, has investment grade ratings (separate from GMAC) from the nationally recognized rating agencies. The following table summarizes ResCap’s current ratings, outlook and the date of the last rating or outlook change by the respective agency.

Rating	Commercial		Senior
Agency	Paper		Debt		Outlook		Date of Last Rating Action
Fitch		F3		BBB-		Positive		September 26, 2005 (a)
						Possible
Moody’s		P3		Baa3		downgrade		August 24, 2005 (b)
S&P		A-3		BBB-		Developing		June 9, 2005 (c)
DBRS		R-2 (middle)		BBB		Developing		June 9, 2005 (d)

(a)	Fitch downgraded the senior debt of ResCap to BBB- from BBB, downgraded the commercial paper rating to F3 from F2, and on October 17, 2005, placed the ratings on Rating Watch Evolving, and on April 3, 2006, changed the rating watch status to Positive.
(b)	Moody’s downgraded the senior debt of ResCap to Baa3 from Baa2, downgraded the commercial paper rating to P3 from P2, on October 17, 2005, changed the review status of the long-term debt ratings to direction uncertain and on March 16, 2006, changed the review status of the senior debt ratings to possible downgrade.
(c)	Standard & Poor’s initial ratings for ResCap were assigned, and on October 10, 2005, S&P changed the outlook to CreditWatch with developing implications.
(d)	DBRS initial ratings for ResCap were assigned, and on October 11, 2005, DBRS placed the ratings under review with developing implications and affirmed the review status on October 17, 2005.

35

Management’s Discussion and Analysis

General Motors Acceptance Corporation

Off-balance Sheet Arrangements

We use off-balance sheet entities as an integral part of our operating and funding activities. For further discussion of our use of off-balance sheet entities, refer to the Off-balance Sheet Arrangements section in our 2005 Annual Report on the Form 10-K.

The following table, which excludes GMAC Commercial Mortgage activity, summarizes assets carried off-balance sheet in these entities.

		March 31,		December 31,
($ in billions)		2006		2005
Securitization (a)
	Retail finance receivables		$8.2		$6.0
	Wholesale loans		21.3		21.4
	Mortgage loans		89.4		79.4
Total securitization			118.9		106.8
Other off-balance sheet activities
	Mortgage warehouse		0.6		0.6
	Other mortgage		0.2		0.2
Total off-balance sheet activities			$119.7		$107.6

(a)  Includes only securitizations accounted for as sales under SFAS 140, as further described in Note 8 to the Consolidated Financial Statements to our 2005 Annual Report on Form 10-K.

Accounting and Reporting Developments

FSP FAS 115-1 and 124-1 — In November 2005 the FASB issued FSPs FAS 115-1 and 124-1 to address the determination as to when an investment is considered impaired, whether that impairment is other than temporary and the measurement of an impaired loss. This FSP nullified certain requirements of Emerging Issues Task Force 03-1 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (EITF 03-1), and references existing other-than-temporary guidance. Furthermore, this FSP creates a three-step process in determining when an investment is considered impaired, whether that impairment is other than temporary and the measurement of an impairment loss. This FSP is effective for reporting periods beginning after December 15, 2005. Adoption of this FSP did not have a material impact on our financial condition or results of operations.

Statement of Position 05-1 — In September 2005 the AICPA issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (SOP 05-1). SOP 05-1 provides guidance on accounting for deferred acquisition costs on internal replacements of insurance contracts. SOP 05-1 defines an internal replacement, and specifies the conditions that determine whether the replacement contract is substantially or unsubstantially changed from the replaced contract. An internal replacement determined to result in a substantially changed contract should be accounted for as an extinguishment of the replaced contract, and unamortized deferred acquisition costs and unearned revenue liabilities of the replaced contract should be no longer be deferred. An internal replacement determined to result in an unsubstantially changed contract should be accounted for as a continuation of the replaced asset. SOP 05-01 introduces the terms integrated and non-integrated contract features and specifies that non-integrated features do not change the base contract and are to be accounted for in a manner similar to a separately issued contract. Integrated features are evaluated in conjunction with the base contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. Management is assessing the potential impact on our financial condition or results of operations.

Statement of Financial Accounting Standards No. 155 — In February 2006 the Financial Accounting Standards Board issued Statement of Financial Standards No. 155 Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140 (SFAS 155). This standard permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. SFAS 155 allows an entity to make an irrevocable election to measure such a hybrid financial instrument at fair value on an instrument-by-instrument basis. The standard eliminates the prohibition on a QSPE from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 also clarifies which interest-only and principal-only strips are not subject to the requirements of SFAS 133 as well as determines that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of the fiscal year that begins after September 15, 2006. Management is assessing the potential impact on our financial condition or results of operations.

Statement of Financial Accounting Standards No. 154 — In May 2005, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (“SFAS 154”), that addresses accounting for changes in accounting principle, changes in accounting estimates, changes required by an accounting pronouncement in the instance that the pronouncement does not include specific transition provisions and error correction. SFAS 154 requires retrospective application to prior

36

Management’s Discussion and Analysis

General Motors Acceptance Corporation

periods’ financial statements of changes in accounting principle and error correction unless impracticable to do so. SFAS 154 states an exception to retrospective application when a change in accounting principle, or the method of applying it, may be inseparable from the effect of a change in accounting estimate. When a change in principle is inseparable from a change in estimate, such as depreciation, amortization or depletion, the change to the financial statements is to be presented in a prospective manner. SFAS 154 and the required disclosures are effective for accounting changes and error corrections in fiscal years beginning after December 15, 2005.

Consolidated Operating Results

The following section provides a discussion of our consolidated results of operations as displayed in the Condensed Consolidated Statement of Income. The individual business segment sections of this MD&A provide a further discussion of the operating results.

Revenues

Total revenue increased by $514 million in the first three months of 2006, compared to the same period of 2005, primarily due to increases in operating lease income, revenue from mortgage loans held for sale and mortgage consumer interest income. These increases were partially offset by a decline in consumer auto revenue.

Interest and discount expense increased by $561 million in the first three months of 2006, as compared to the same period of the prior year. This increase is the result of the negative impact of higher funding costs due to an increase in overall market interest rates and wider corporate credit spreads as a result of our lower credit ratings. The provision for credit losses decreased by $194 million in the first three months of 2006 as compared to the same period of 2005. The decrease is primarily due to lower consumer asset levels as a result of automotive whole loan sale activity, improved loss performance in our automotive international portfolio and favorable credit trends in our Mortgage operations.

Insurance premiums and service revenue earned increased by 10% in the first three months of 2006 as compared with the same period in 2005, as a result of the acquisition of MEEMIC, growth in the extended service contract line and international personal lines operations. Mortgage banking income decreased by $111 million in the first three months of 2006 compared with the same period in the prior year, primarily as a result of a decrease in the gain on sale of loans due to a significant gain in 2005 realized upon the sale of a portfolio of distressed mortgage loans.

Investment and other income increased by $91 million in the first three months of 2006 as compared to the same period in the prior year. The increases are primarily due to interest income from cash and cash reserve balances.

Expenses

Noninterest expense increased by $332 million for the first three months of 2006 as compared to the same period in the prior year. Depreciation expense on operating lease assets increased as a result of higher average operating lease asset levels as compared to the first quarter of 2005. Compensation and benefits expense decreased from a reduction in the OPEB liability allocation from GM. In addition, other operating expenses increased due to a decrease in the gain realized on the disposal of off-lease vehicles.

Forward Looking Statements

The foregoing Management’s Discussion and Analysis of Financial Condition and Results of Operations and other portions of this Form 10-Q contains various forward-looking statements within the meaning of applicable federal securities laws, including the Private Securities Litigation Reform Act of 1995, that are based upon our current expectations and assumptions concerning future events, which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.

The words “anticipate,” “estimate,” “believe,” “expect,” “intend,” “may,” “plan,” “project,” “future” and “should” and any similar expressions are intended to identify forward-looking statements. Forward-looking statements involve a number of risks, uncertainties and other factors, including (but not limited to) the Risk Factors described in Item 1A of our 2005 Form 10-K, as updated in this Form 10-Q and which may be revised or supplemented in subsequent reports on SEC forms 10-Q and 8-K. Such factors include, among others, the following: the ability of GM to complete the previously announced transaction with a strategic investor regarding a controlling interest in us while maintaining a significant stake in us, securing separate credit ratings and low cost funding to sustain growth for us and ResCap and maintaining the mutually beneficial relationship between us and GM; changes in economic conditions, currency exchange rates, significant terrorist attacks or political instability in the major markets where we operate; changes in the laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates; and the threat of terrorism, the outbreak or escalation of hostilities between the United States and any foreign power or territory and changes in international political conditions may continue to affect both the United States and the global economy and may increase other risks.

37

Controls and Procedures

General Motors Acceptance Corporation

Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods. As of the end of the period covered by this report, our Principal Executive Officer and our Principal Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures. Based on management’s evaluation, GMAC’s Principal Executive and Principal Financial Officer each concluded that our disclosure controls and procedures were not effective as of March 31, 2006 solely because of the material weakness in internal control over financial reporting with respect to the preparation, review, presentation and disclosure of the Consolidated Statement of Cash Flows as disclosed in our report on Form 10-K for year ended December 31, 2005.

In order to remediate this material weakness in our internal control over financial reporting, management is in the process of designing and implementing and continuing to enhance controls to aid in the correct preparation, review, presentation and disclosures of our Consolidated Statement of Cash Flows. We are continuing to monitor, evaluate and test the operating effectiveness of these controls.

There were no other changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

38

Other Information

General Motors Acceptance Corporation

Legal Proceedings

We are subject to potential liability under laws and government regulations and various claims and legal actions that are pending or may be asserted against it. On February 17, 2006, Alex Mager filed a purported class action alleging certain violations of the Securities Act of 1933. Please refer to the Legal Proceedings section in our 2005 Annual Report on Form 10-K for the Mager matter and other information regarding pending governmental proceedings, claims and legal actions.

Risk Factors

Other than with respect to the risk factor below, there have been no material changes to the Risk Factors section of our 2005 Annual Report on Form 10-K. The risk factor below, which was disclosed on Form 10-K, has been modified to provide updated disclosure related to the sale of a controlling interest of GMAC by GM.

Risks Related to Our Controlling Stockholder

GM has agreed to sell a controlling interest in GMAC. There is a risk that the sale may not occur or, if it does occur, may not restore our investment grade rating or maintain ResCap’s investment grade ratings.

As previously announced, GM has agreed to sell 51% of the common liability company interests of GMAC (subsequent to the conversion of GMAC and most of our U.S. direct and indirect subsidiaries into limited liability companies) to a consortium of investors led by Cerberus Capital Management, L.P., a private investment firm which also includes Citigroup Inc. and Aozora Bank Ltd. as consortium members. Completion of the sale is subject to a number of conditions, including regulatory approvals, and there can be no assurance that the sale will occur. If the sale does not occur, this will put further pressure on both GM’s and our credit profiles, potentially resulting in further downgrades with our ratings likely re-linked to those of GM. Moreover, any reduction in the automotive finance capacity of GMAC could materially adversely affect GM’s business, to the extent that third party financing is not available to fund GM’s automotive sales. In the absence of a transaction:

•  Our access to capital may be seriously constrained, as most unsecured funding sources may decline, including bank funding;

•  The cost of funds related to borrowings that are secured by assets (known as ’secured funding’) may increase and this could lead to a reduction in liquidity for certain asset classes;

•  It may be increasingly difficult to securitize assets, resulting in reduced capacity to support overall automotive originations as well as reduced advances on future securitizations;

•  Uncompetitive funding costs may result in a lower return on capital and significantly lower earnings and dividends; and

•  We may need to consider divesting of certain businesses in order to maintain adequate liquidity to fund new originations or otherwise preserve the value of our business.

Other Risk Factors

The following risk factors, which were disclosed in our 2005 Form 10-K, have not materially changed since we filed our 2005 Form 10-K. See our Form 10-K for a complete discussion of these risk factors.

Risks Related to Our Business

•  We have recently experienced a series of credit rating actions, resulting in the downgrade of our credit ratings to historically low levels. Any further reduction of our credit ratings or failure to restore our credit ratings to higher levels could have a material adverse effect on our business.

•  Our business requires substantial capital, and if we are unable to maintain adequate financing sources, our profitability and financial condition will suffer and jeopardize our ability to continue operations.

•  Our indebtedness and other obligations are significant and could materially adversely affect our business.

•  The profitability and financial condition of our operations are dependent upon the operations of our parent, General Motors.

•  We have substantial credit exposure to General Motors.

39

Other Information

General Motors Acceptance Corporation

•  As a wholly owned subsidiary of GM, we are jointly and severally responsible with GM and its other subsidiaries for funding obligations under GM’s and its subsidiaries’ qualified U.S. defined benefit pension plans. Our financial condition and our ability to repay unsecured debt could be impaired if we were required to pay significant funding obligations for the GM plans.

•  We are exposed to credit risk which could affect our profitability and financial condition.

•  Our earnings may decrease because of increases or decreases in interest rates.

•  Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates and could affect our profitability and financial condition.

•  Our residential mortgage subsidiary’s ability to pay dividends and to prepay subordinated debt obligations to us is restricted by contractual arrangements.

•  A failure of or interruption in the communications and information systems on which we rely to conduct our business could adversely affect our revenues and profitability.

•  We use estimates and assumptions in determining the fair value of certain of our assets, in determining our allowance for credit losses, in determining lease residual values and in determining our reserves for insurance losses and loss adjustment expenses. If our estimates or assumptions prove to be incorrect, our cash flow, profitability, financial condition and business prospects could be materially adversely affected.

•  Our business outside the United States exposes us to additional risks that may cause our revenues and profitability to decline.

•  Our business could be adversely affected by changes in currency exchange rates.

•  General business and economic conditions of the industries and geographic areas in which we operate affect our revenues, profitability and financial condition.

•  Our profitability and financial condition may be materially adversely affected by decreases in the residual value of off-lease vehicles.

•  Fluctuations in valuation of investment securities or significant fluctuations in investment market prices could negatively affect revenues.

•  Changes in existing U.S. government-sponsored mortgage programs, or disruptions in the secondary markets in the United States or in other countries in which our mortgage subsidiaries operate, could adversely affect the profitability and financial condition of our mortgage business.

•  We may be required to repurchase contracts and provide indemnification if we breach representations and warranties from our securitization and whole loan transactions, which could harm our profitability and financial condition.

•  Significant indemnification payments or contract, lease or loan repurchase activity of retail contracts or leases or mortgage loans could harm our profitability and financial condition.

•  A loss of contractual servicing rights could have a material adverse effect on our financial condition, liquidity and results of operations.

•  The regulatory environment in which we operate could have a material adverse effect on our business and earnings.

•  The worldwide financial services industry is highly competitive. If we are unable to compete successfully or if there is increased competition in the automotive financing, mortgage and/or insurance markets or generally in the markets for securitizations or asset sales, our margins could be materially adversely affected.

40

Other Information

General Motors Acceptance Corporation

Other Information

None.

Exhibits

The exhibits listed on the accompanying Index of Exhibits are filed as a part of this report. Such Index is incorporated herein by reference.

41

Signatures

General Motors Acceptance Corporation

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 thereunto duly authorized, this 8th day of May, 2006.

General Motors Acceptance Corporation

(Registrant)

/s/ Sanjiv Khattri

Sanjiv Khattri

Executive Vice President and

Chief Financial Officer

/s/ Linda K. Zukauckas

Linda K. Zukauckas

Vice President and Corporate Controller

42 EX-31.1 5 k05088exv31w1.htm 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Exhibit 31.1

CERTIFICATION

I, G. Richard Wagoner, Jr., certify that:

      1. I have reviewed this quarterly report for the period ended March 31, 2006 on Form 10-Q of General Motors Corporation;

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

      a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

      c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

      a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ G. RICHARD WAGONER, JR.

G. Richard Wagoner, Jr.

Chairman and Chief Executive Officer

Date: May 10, 2006

EX-31.1

exv31w1

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Frederick A. Henderson, certify that:

      1. I have reviewed this quarterly report for the period ended March 31, 2006 on Form 10-Q of General Motors Corporation;

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

      a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

      c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of the directors (or persons performing the equivalent function):

      a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ FREDERICK A. HENDERSON

FREDERICK A. HENDERSON

Vice Chairman and Chief Financial Officer

Date: May 10, 2006

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Quarterly Report of General Motors Corporation (the “Corporation”) on Form 10-Q for the period ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, G. Richard Wagoner, Jr., Chairman and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

      1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ G. RICHARD WAGONER, JR.

G. Richard Wagoner, Jr.

Chairman and Chief Executive Officer

May 10, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Quarterly Report of General Motors Corporation (the “Corporation”) on Form 10-Q for the period ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frederick A. Henderson, Vice Chairman and Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

      1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ FREDERICK A. HENDERSON

Frederick A. Henderson

Vice Chairman and Chief Financial Officer

May 10, 2006