-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, c/nSYwEoOea5M/COD01TSDHXoz/gvjQvPW7sjmGzjh+z1rpqzGfGZXZ+JWmotgIY KLY/8J3Hl9mJAP9ZMpO1HA== 0000950124-95-000665.txt : 19950615 0000950124-95-000665.hdr.sgml : 19950615 ACCESSION NUMBER: 0000950124-95-000665 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950313 SROS: MSE SROS: NASD SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-00143 FILM NUMBER: 95520270 BUSINESS ADDRESS: STREET 1: 3044 W GRAND BLVD CITY: DETROIT STATE: MI ZIP: 48202 BUSINESS PHONE: 3135565000 10-K405 1 FORM 10-K405 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549-1004 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 OR TRANSITION REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-143 GENERAL MOTORS CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) STATE OF DELAWARE 38-0572515 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 767 FIFTH AVENUE, NEW YORK, NEW YORK 10153-0075 3044 WEST GRAND BOULEVARD, DETROIT, MICHIGAN 48202-3091 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (313)-556-5000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - ---------------------------------------------------------------------------------- ----------------------------- *COMMON, $1 2/3 PAR VALUE (752,651,957 SHARES OUTSTANDING AS OF FEBRUARY 28, 1995)........................................................................... NEW YORK STOCK EXCHANGE, INC. CLASS E COMMON, $0.10 PAR VALUE (262,999,707 SHARES OUTSTANDING AS OF FEBRUARY 28, 1995)........................................................................... NEW YORK STOCK EXCHANGE, INC. CLASS H COMMON, $0.10 PAR VALUE (94,528,112 SHARES OUTSTANDING AS OF FEBRUARY 28, 1995)........................................................................... NEW YORK STOCK EXCHANGE, INC. PREFERENCE, $0.10 PAR VALUE, SERIES B 9 1/8% DEPOSITARY SHARES, STATED VALUE $25 PER SHARE, DIVIDENDS CUMULATIVE (44,300,000 DEPOSITARY SHARES OUTSTANDING AS OF FEBRUARY 28, 1995).............................................................. NEW YORK STOCK EXCHANGE, INC. PREFERENCE, $0.10 PAR VALUE, SERIES C DEPOSITARY SHARES, CONVERTIBLE INTO CLASS E COMMON STOCK, LIQUIDATION PREFERENCE $50 PER SHARE, DIVIDENDS CUMULATIVE (31,880,600 DEPOSITARY SHARES OUTSTANDING AS OF FEBRUARY 28, 1995).............. NEW YORK STOCK EXCHANGE, INC. PREFERENCE, $0.10 PAR VALUE, SERIES D 7.92% DEPOSITARY SHARES, STATED VALUE $25 PER SHARE, DIVIDENDS CUMULATIVE (15,700,000 DEPOSITARY SHARES OUTSTANDING AS OF FEBRUARY 28, 1995).............................................................. NEW YORK STOCK EXCHANGE, INC. PREFERENCE, $0.10 PAR VALUE, SERIES G 9.12% DEPOSITARY SHARES, STATED VALUE $25 PER SHARE, DIVIDENDS CUMULATIVE (23,000,000 DEPOSITARY SHARES OUTSTANDING AS OF FEBRUARY 28, 1995).............................................................. NEW YORK STOCK EXCHANGE, INC. $500,000,000 8 1/8% DEBENTURES DUE APRIL 15, 2016................................. NEW YORK STOCK EXCHANGE, INC.
*ALSO LISTED ON THE CHICAGO STOCK EXCHANGE, INC., PACIFIC STOCK EXCHANGE, INC., AND PHILADELPHIA STOCK EXCHANGE, INC. NOTE: THE $1 2/3 PAR VALUE COMMON STOCK OF THE REGISTRANT IS ALSO LISTED FOR TRADING ON: MONTREAL STOCK EXCHANGE................................. MONTREAL, QUEBEC, CANADA TORONTO STOCK EXCHANGE.................................. TORONTO, ONTARIO, CANADA BORSE FRANKFURT AM MAIN................................. FRANKFORT ON THE MAIN, GERMANY BORSE DUSSELDORF........................................ DUSSELDORF, GERMANY BOURSE DE BRUXELLES..................................... BRUSSELS, BELGIUM COURTIERS EN VALEURS MOBILIERES......................... PARIS, FRANCE THE STOCK EXCHANGE, LONDON.............................. LONDON, ENGLAND
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X . NO . INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. (X) THE AGGREGATE MARKET VALUE (BASED UPON THE AVERAGE OF THE HIGHEST AND LOWEST SALES PRICES ON THE COMPOSITE TAPE ON FEBRUARY 28, 1995) OF GENERAL MOTORS CORPORATION $1 2/3 PAR VALUE, CLASS E, AND CLASS H COMMON STOCKS HELD BY NONAFFILIATES ON FEBRUARY 28, 1995 WAS APPROXIMATELY $32,059.7 MILLION, $9,862.1 MILLION, AND $3,539.4 MILLION, RESPECTIVELY. DOCUMENTS INCORPORATED BY REFERENCE:
PART AND ITEM NUMBER OF FORM 10-K DOCUMENT INTO WHICH INCORPORATED - -------------------------------------------------------------------------------- ------------------------------ GENERAL MOTORS NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 26, 1995.................... PART III, ITEMS 10 THROUGH 13
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I GENERAL MOTORS CORPORATION AND SUBSIDIARIES THE CORPORATION General Motors Corporation, incorporated in 1916 under the laws of the State of Delaware, is hereinafter sometimes referred to as the "Registrant" or the "Corporation" and, together with its subsidiaries, is hereinafter sometimes referred to as "General Motors" or "GM." ITEM 1. BUSINESS GENERAL The following information is incorporated herein by reference to the indicated pages in Part II:
ITEM PAGE ----------------------------------------------------------------------- ----- Worldwide Wholesale Sales.............................................. II-51 Employment and Payrolls................................................ II-53 Note 18 of Notes to Financial Statements (Segment Reporting)........... II-35
While the major portion of the Corporation's operations is derived from the automotive products industry segment, GM also has financing and insurance operations and produces products and provides services in other industry segments. The automotive products segment consists of the design, manufacture, assembly, and sale of automobiles, trucks, and related parts and accessories. The financing and insurance operations assist in the merchandising of General Motors' products as well as other products. General Motors Acceptance Corporation (GMAC) and its subsidiaries offer financial services and certain types of insurance to dealers and customers. In addition, GMAC and its subsidiaries are engaged in mortgage banking and investment services. The other products segment consists of military vehicles, radar and weapon control systems, guided missile systems, and defense and commercial satellites; the design, installation, and operation of business information and telecommunication systems; as well as the design, development, and manufacture of locomotives. Substantially all of the products in the automotive segment are marketed through retail dealers and through distributors and jobbers in the United States and Canada and through distributors and dealers overseas. At December 31, 1994, there were approximately 9,200 General Motors motor vehicle dealers in the United States, 900 in other North America (Canada and Mexico), and approximately 5,500 outlets overseas. BACKLOG OF ORDERS Shipments of General Motors' automotive products are made as promptly as possible after receipt of firm sales orders; therefore, no significant backlog of unfilled orders accumulates. GM Hughes Electronics Corporation had a $13.2 billion and $13.4 billion backlog of defense and commercial contracts at the end of 1994 and 1993, respectively. RAW MATERIALS AND SERVICES General Motors purchases materials, parts, supplies, freight transportation, energy, and other services from numerous unaffiliated firms. Interruptions in production or delivery of these goods or services could adversely affect General Motors. COMPETITIVE POSITION General Motors' principal competitors in passenger cars and trucks in the United States and Canada include Ford Motor Company, Chrysler Corporation, Toyota Corporation, Nissan Motor Corporation, Ltd., Honda Motor Company, Ltd., Mazda Motor Corporation, Mitsubishi Motors Corporation, Fuji Heavy Industries, Ltd. (Subaru), Volkswagen A.G., Hyundai Motor Company, Ltd., Daimler-Benz A.G. (Mercedes), Bayerische Motoren Werke AG (BMW), and Volvo AB. All but Volkswagen and Daimler-Benz currently operate vehicle manufacturing facilities in the United States or Canada although Mercedes has I-1 3 announced plans to build an assembly plant in the United States. Toyota and GM operate the New United Motor Manufacturing, Inc. facility in Fremont, California as a joint venture which currently builds passenger cars and light-duty trucks. Worldwide wholesale unit sales of General Motors passenger cars and trucks during the three years ended December 31, 1994 are summarized in Management's Discussion and Analysis in Part II. Total industry new motor vehicle (passenger cars, trucks, and buses) registrations of domestic and foreign makes and General Motors' competitive position during the three years ended December 31, 1994 were as follows:
1994(1) 1993 1992 ------- ------ ------ (UNITS IN THOUSANDS) Total industry registrations In the United States............................... 15,257 13,941 12,867 In other North America(2).......................... 1,838 1,778 1,881 In other countries................................. 31,802 30,806 31,288 ------- ------ ------ Total industry registrations -- all countries........ 48,897 46,525 46,036 ======= ====== ======
1994(1) 1993 1992 ------- ---- ---- (PERCENT OF TOTAL INDUSTRY) General Motors' registrations In the United States............................... 33% 33% 34% In other North America(2).......................... 28 27 27 In other countries................................. 9 9 9 Total General Motors' registrations -- all countries.......................................... 17 18 18
- ------------------------- (1) Preliminary (2) Includes Canada and Mexico. The above information on registrations of new cars, trucks, and buses was obtained from outside sources and that pertaining to General Motors' registrations includes units which are manufactured overseas by other companies and which are imported and sold by General Motors and affiliates. RESEARCH AND DEVELOPMENT In 1994, General Motors spent $7,035.8 million for research, manufacturing engineering, product engineering, and development activities related primarily to the development of new products or services or the improvement of existing products or services, including activities related to vehicle emissions control, improved fuel economy, and the safety of persons using General Motors products. In addition, $1,495.7 million was spent for customer-sponsored activities, the majority of which were government related. Comparable data for 1993 were $6,029.9 million for company-sponsored activities and $1,340.3 million for customer-sponsored activities and for 1992, $5,916.9 million and $1,185.5 million, respectively. ENVIRONMENTAL MATTERS Automotive Emissions Control Both the Federal and California governments currently impose stringent emission control requirements on motor vehicles sold in their respective jurisdictions. These requirements include pre-production testing of vehicles, testing of vehicles after assembly, the imposition of emission defect and performance warranties, and the obligation to recall and repair customer-owned vehicles determined to be non-compliant with emissions requirements. Both the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) continue to place great emphasis on compliance testing of customer-owned vehicles. Failure to comply with the emission standards or defective emission control hardware discovered during such testing can I-2 4 lead to substantial cost for General Motors related to emissions recalls. New CARB and Federal requirements will increase the time and mileage over which manufacturers are responsible for a vehicle's emission performance. Both the EPA and the CARB emission requirements will become even more stringent in the future. A new tier of exhaust emission standards for cars and light-duty trucks, the "Tier 1" standards began phasing in for California vehicles in the 1993 model year and for Federal vehicles in the 1994 model year. The phase-in of these "Tier 1" standards will be completed by the 1997 model year. In addition to the Tier 1 standards is the CARB Low Emission Vehicle (LEV) Program that begins with the 1994 model year and defines requirements through model year 2003 and beyond. This program sets even more stringent exhaust emission standards for cars and trucks sold in California. General Motors will have to meet the LEV Program requirements by marketing a mix of vehicles complying with the Tier 1 standards, Transitional Low Emission Vehicles (TLEVs), Low Emission Vehicles (LEVs), Ultra-Low Emission Vehicles (ULEVs), or Zero Emission Vehicles (ZEVs). From model years 1998 to 2000, 2% of cars and small light-duty trucks (up to 3,750 lb Loaded Vehicle Weight) sold in California must be ZEVs. This requirement increases to 5% in 2001 and 10% in 2003 and thereafter. The Clean Air Act permits states that have areas with air quality problems to adopt the California car and truck emission standards in lieu of the Federal requirements and two states (New York and Massachusetts) have done so. In addition, the Ozone Transport Commission, representing twelve Northeast states and the District of Columbia, asked the EPA to impose the California LEV program requirements throughout the Northeast Ozone Transport Region (OTR). The EPA granted this request on January 24, 1995. This could mean that vehicles designed for the California LEV program, including ZEVs, would have to be offered for sale in that region of the country. In addition to the above-mentioned exhaust emission programs, onboard diagnostic (OBD) devices, far more complex than those currently used to diagnose problems with emission control systems, will be required both Federally and in California effective with the 1996 model year. This new system has the potential of increasing warranty costs and the chance for recall. New evaporative emission control requirements for cars and trucks begin phasing in with the 1995 model year in California and the 1996 model year Federally. Systems will need to be further modified to accommodate Federal onboard refueling vapor recovery (ORVR) control standards. ORVR phases in on passenger cars in the 1998 through 2000 model years and on light-duty trucks in the 2001 through 2006 model years. Industrial Environmental Control General Motors is subject to various laws relating to the protection of the environment, and is in various stages of investigation or remediation for sites where contamination has been alleged. GM has recorded an accrued liability of $694 million at December 31, 1994 and $659 million at December 31, 1993 for worldwide environmental cleanup as summarized below: - GM has been identified as a potentially responsible party at sites identified by the EPA and state regulatory agencies for cleanup under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar state statutes. GM voluntarily and actively participates in cleanup activity where such involvement is verified. The foreseeable total liability for 1995 and beyond for sites involving GM is estimated to be $223 million, which was recorded at December 31, 1994. This compares to $231 million at December 31, 1993. - For closed or closing plants owned by the Corporation, an estimated liability for environmental cleanup is typically recognized at the time the closure decision is made for actions which are not specifically required by regulations or government action but which serve to minimize future liability. Such liability, which is based on an environmental assessment of the plant property, is estimated at $141 million, which was recorded at December 31, 1994. This compares to $187 million at December 31, 1993. I-3 5 - GM is involved in cleanup actions at additional locations worldwide with a foreseeable liability of approximately $330 million, which was recorded at December 31, 1994. This compares to $241 million at December 31, 1993. Various state and Federal regulations require an owner/operator of hazardous waste management facilities to demonstrate annually that it can provide funds for closure and post-closure care of its hazardous waste management facilities (HWMFs). In most instances, GM demonstrates its financial liability by meeting a financial test established by the various regulations. In some cases, financial instruments must be used to comply with the financial assurance requirements. As of December 31, 1994, GM's financial assurance requirement to cover total closure, post-closure, and mandated liability coverage totaled $151.9 million ($124.9 million closure and post-closure costs and $27 million aggregated liability) for the HWMFs owned and/or operated by the Corporation. These costs will be incurred only when an HWMF is closed and only for the amount covered for the individual HWMF. The annual inflator used by the EPA is projected to be 1.53% for 1994 (this is applied to the closure and post-closure costs); therefore, the total financial assurance for 1995 to cover the closure and post-closure cost amounts is estimated to be approximately $126.8 million. Nuclear Regulatory Commission rules require the GM Technical Center Research Laboratories to demonstrate financial assurance for decommissioning certain licensed facilities in the amount of $155,440. The intent of this rule is to ensure that decommissioning will be accomplished in a safe and timely manner and that licensees will provide adequate funds to cover all costs associated with decommissioning. The capital cost impact of the Clean Air Act Amendments of 1990 on GM stationary sources will depend on the specific requirements of new state and Federal regulations which must be developed and implemented over the next 10 years. These regulations include operating permit programs, nitrogen oxide control programs, chloro-fluoro-carbon phase out, and hazardous air pollutant control programs. The estimated cost of these programs over the next 10-15 years is approximately $1 billion. Annual operating permit emission fees will be approximately $9 million, and the fees are expected to be fully effective in 1995. Expenditures by General Motors in the United States for industrial environmental control facilities during the three years ended December 31, 1994 were (in millions): 1994-$118; 1993-$186; and 1992-$150. The Corporation currently estimates that future expenditures for industrial environmental control facilities through 1998 will be (in millions): 1995-$181; 1996-$114; 1997-$89; and 1998-$67. Specific environmental expenses are difficult to isolate since expenditures may be made for more than one purpose, making precise classification difficult. Vehicular Noise Control The Federal Truck Regulation preempts all state/local noise regulations for trucks over 10,000 lb Gross Vehicle Weight Rating (GVWR). All jurisdictions regulating noise levels of school buses which are built on medium-duty truck chassis have adopted standards compatible with Federal regulations for medium-duty trucks. The Federal Truck Regulations contain label and owner's manual requirements. Passenger cars and light-duty trucks are subject to state and local motor vehicle noise regulations. The current standard for vehicles in these classes, 80 dB as measured at 50 feet, has been in effect since 1975. Since the end of 1991, manufacturers have the option of meeting the 80 dB light vehicle standard using the test protocol for vehicle exports as measured at 25 feet. This option must be renewed with some state/local jurisdictions beginning with the 1997 model year. Future implementation of more stringent exhaust emission regulations and more stringent fuel economy regulations will require an assessment of increased costs of noise control. Safety Affairs and Regulations Expenditures to maintain the operational safety, occupant protection, and vehicle theft deterrence capability of new GM models continue. These expenditures include amounts for the study of alternative approaches for meeting the needs of all three areas. I-4 6 A final rule allowing use of Daytime Running Lights (DRL) as an option was issued by the National Highway Traffic Safety Administration (NHTSA). As a result, GM has announced its intent to provide DRL starting in 1995 on selected models. It is believed that this feature will enhance the overall crash avoidance capability of GM vehicles thus reducing crashes and increasing product sales. GM is meeting the government requirement for passive restraints by selectively installing automatic lap/shoulder belts or driver supplemental inflatable restraints (air bags) on all passenger cars. The driver-side air bag concept has been approved for all remaining passenger cars, light-duty trucks, and vans during the 1994 through 1997 model years. Current plans call for a phase-in of the passenger-side air bag in these same cars from the 1994 through 1999 model years. A new government requirement for passenger car side impact protection was issued in 1990 affecting future model year cars. A phase-in of the new requirement began September 1, 1993. The NHTSA proposed that new dynamic side impact protection requirements be applied to light-duty trucks and vans. If a final rule which is similar to the proposal is promulgated, side structure and interior trim designs of future models will be affected. Regarding GM light-duty trucks and vans, a final rule required center high-mounted stop lamps by September 1, 1993. Also, head restraints are now required on all light-duty trucks and vans. A final rule covering roof crush resistance has also been issued by the NHTSA for light-duty trucks and vans that is more stringent than for passenger cars. This rule addresses vehicles with a GVWR less than or equal to 6,000 lb and was effective September 1, 1994. A final rule has been issued by NHTSA that extends the passenger car automatic restraint requirements to light-duty trucks and vans on a phased-in basis beginning September 1, 1994. Lastly, a final rule has been issued by NHTSA that will require air bags be the only means used to meet the automatic restraint requirements for passenger cars and light-duty trucks and vans on a phased-in basis beginning September 1, 1996. The NHTSA currently is considering the effects of fuel system crash integrity requirements of the Federal Motor Vehicle Safety Standard (FMVSS) (301). If any of the considerations ultimately are adopted as final rules, some undetermined redesign, cost, and weight increase could be expected for most of GM's vehicles. See Item 3, Legal Proceedings, Other Matters. With the passage of the Anti-Car Theft Act of 1992, implementation costs for the 1993 calendar year affected approximately 22 passenger car assembly plants and 9 light-duty truck plants. For the affected truck plants, the major expenditures were for new label printer installations and additional stamping equipment. Both passenger car and truck plants affected will probably require some extra tooling to accommodate full VIN-stamping on the frame of each vehicle and noise-pollution reduction facilities to alleviate noise associated with VIN-stamping operations. A bill has been introduced into Congress by Representative Danforth that would change the current Federal bumper impact requirement from 2.5 mph to 5 mph. The bill also calls for labeling that would define bumper performance. This bill may have an effect on future GM products that are designed to meet the existing FMVSS requirements. Additionally, performance labeling may cause additional testing that will lead to increased costs. This legislation also proposes to extend the requirement to minivans. AUTOMOTIVE FUEL ECONOMY The Energy Policy and Conservation Act passed in 1975 provided for production-weighted average fuel economy standards for passenger cars for 1978 and thereafter. Based on EPA combined city-highway test data, the General Motors 1994 model year domestic passenger car fleet is projected to attain a Corporate Average Fuel Economy (CAFE) of 27.4 miles per gallon (mpg) versus the standard of 27.5 mpg. The CAFE estimate for 1995 model year passenger cars is projected at 27.2 mpg versus the standard of 27.5 mpg. The projected shortfalls for 1993 through 1995 will be offset by credits projected to be earned in future model years. I-5 7 Fuel economy standards for light-duty trucks became effective in 1979. General Motors' CAFE fleet average for the 1994 model year is projected to be 19.9 mpg versus the standard of 20.5 mpg. For the 1995 model year, GM's truck CAFE is projected to be 20.0 mpg versus a standard of 20.6 mpg. The shortfall for 1994 will be partially offset by credits earned in 1991 and 1992. It is expected that the remaining 1994 shortfall and the 1995 shortfall will be offset by credits from future model years. However, the exact amount cannot be determined because standards have not been set beyond 1997. GM's ability to meet increased CAFE standards is contingent on various future economic, consumer, legislative, and regulatory factors that GM cannot control and cannot predict with certainty. If GM could not comply with any new CAFE standards, GM could be subject to sizable civil penalties and could have to close plants or severely restrict product offerings to remain in compliance. SEASONAL NATURE OF BUSINESS In the automotive business, there are retail sales fluctuations of a seasonal nature, so that production varies from month to month. In addition, the changeover period related to the annual new model introduction has traditionally occurred in the third quarter of each year. For this reason, third quarter operating results are, in general, less favorable than those in the other three quarters of the year, depending on the magnitude of the changeover needed to commence production of new models incorporating, for example, design modifications related to more fuel-efficient vehicle packaging, stricter government standards for safety and emission controls, and consumer-oriented improvements in performance, comfort, convenience, and style. SEGMENT REPORTING DATA Industry segment and geographic segment data for 1994, 1993, and 1992 are summarized in Note 18 of Notes to Financial Statements in Part II. ****** The Registrant makes no attempt herein to predict the future trend of its business and earnings or the effect thereon of the results of changes in general economic, industrial, regulatory, and international conditions. ITEM 2. PROPERTIES The Corporation, excluding General Motors Acceptance Corporation, has 295 locations operating in 37 states and 171 cities in the United States. Of these, 25 are engaged in the final assembly of GM cars and trucks; 26 are service parts operations responsible for distribution or warehousing; 13 are associated with Electronic Data Systems Corporation as large information processing centers; 36 major plants, offices, and research facilities relate to the operations of Hughes Aircraft Company; and the remainder are offices or involved primarily in the testing of vehicles or the manufacture of automotive components and power products. In addition, the Corporation has 20 locations in Canada and assembly, manufacturing, distribution, or warehousing operations in 51 other countries, including equity interests in associated companies which conduct assembly, manufacturing, or distribution operations. The major facilities outside the United States and Canada, which are principally vehicle manufacturing and assembly operations, are located in Germany, the United Kingdom, Brazil, Mexico, Austria, Belgium, and Spain. Most facilities are owned by the Corporation or its subsidiaries. Leased properties consist primarily of warehouses and administration, engineering, and sales offices. The leases for warehouses generally provide for an initial period of five years and contain renewal options. Leases for sales offices are generally for shorter periods. Properties of the Registrant and its subsidiaries include facilities which, in the opinion of management, are suitable and adequate for the manufacture, assembly, and distribution of their products. Additional information regarding worldwide expenditures for plants and equipment is presented under Management's Discussion and Analysis in Part II. I-6 8 ITEM 3. LEGAL PROCEEDINGS Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Corporation is a party as of December 31, 1994 are summarized on the following pages. Reference should also be made to Note 21 of notes to financial statements in Part II. ENVIRONMENTAL MATTERS On February 19, 1991, a complaint was filed in the Superior Court of Connecticut by the Connecticut Commissioner of Environmental Protection alleging that the plant in Bristol, Connecticut operated by GM's Delco Moraine NDH Division (now part of the Delco Chassis Division) had violated Connecticut's hazardous waste regulations in connection with its inspection, recordkeeping, and remediation of a spill of chromic acid at the plant site. The complaint seeks penalties of up to $25,000 per day for a period commencing sometime prior to April 1989 and running through November 1990. GM contends that its inspection, recordkeeping, and remediation practices in relation to the spill complied with applicable rules and regulations. * * On March 12, 1991, the Region II office of the Environmental Protection Agency (EPA) issued a Civil Administrative Complaint alleging that the plant operated by GM's Central Foundry Division (now part of the GM Powertrain Division) in Massena, New York had improperly disposed of polychlorinated biphenyl contaminated sludge during the period February 1984 through October 1987. The complaint seeks a fine of $14,176,000. GM believes that its disposal practices at Massena were in general compliance with applicable rules and regulations. * * On March 1, 1993, the U.S. EPA Region V issued a civil administrative complaint alleging that stormwater from the Chevrolet-Pontiac-GM of Canada Group's Pontiac Fiero plant in Pontiac, Michigan exceeded the facility's National Pollutant Discharge System Permit from May 1989 through May 1992. The EPA complaint, as amended, cites the Corporation for 94 exceedances of copper, lead, and zinc and is seeking $125,000 in penalties. There has been no production at the Fiero Plant since August 1988. The Corporation believes that the very low concentrations of metals found in the stormwater during the specified time period occurred as a result of acid rain dissolving metal from the gutters and roof. General Motors is contesting the allegations and has requested a hearing. * * On March 26, 1993, the Region V office of the EPA issued a Civil Administration Complaint against the Corporation alleging that 65 petroleum and hazardous substance underground storage tanks (USTs) which it has operated at its Technical Center in Warren, Michigan have been in violation of certain of the EPA UST regulations. The EPA has proposed a civil penalty of $267,447. Based upon its current evaluation of this matter, General Motors believes that the operations cited by the EPA's complaint have been and remain in substantial compliance with applicable UST regulations. * * In March 1993, the Michigan Department of National Resources (MDNR) notified the Corporation's Powertrain Division (PD) that MDNR was making a referral to the Michigan Attorney General for resolution of allegations by MDNR that a PD facility in Saginaw, Michigan had failed to conduct a timely environmental investigation to MDNR's satisfaction of a landfill and certain other areas at the facility's property, and that PD's on-site water recycling basins were improperly discharging contaminants to the groundwater and the Saginaw River. * * I-7 9 On June 28, 1994, the Attorney General for the State of Michigan, on behalf of the Michigan Department of Natural Resources (DNR), filed a complaint in Circuit Court of the 30th Judicial Circuit in Ingham County, Michigan alleging that several of GM's plants released polychlorinated biphenyls (commonly referred to as "PCBs") into the Saginaw River thereby causing damage to natural resources in the river and Saginaw Bay. The complaint also named the City of Saginaw and Bay City as defendants. The State has not asserted that it is seeking fines or penalties and no amount is specified in the complaint as damages, but the State is seeking reimbursement of all its past and future response costs, including enforcement costs, and natural resource damages relating to the Saginaw River and Bay. In this regard, representatives of the State have indicated that the State will be seeking "tens of millions of dollars" in damages as well as several million dollars in past response costs. GM is currently in discussions with representatives of the Michigan Attorney General and the DNR regarding this matter. GM has also been advised that the U.S. Department of Interior ("DOI") may be conducting an investigation of these matters and any related damage to the environment, and that DOI may pursue independent claims against GM, the City of Saginaw and Bay City. * * On November 25, 1994, GM was notified that the U.S. EPA has requested that the U.S. Department of Justice (DOJ) commence a civil action against GM for injunctive relief and civil penalties for alleged violation of vehicle emissions standards and certification procedures under the Clean Air Act with respect to several recent model year vehicles and engines produced by GM's North American Automotive Operations (NAO). No claim has been filed and GM and DOJ/EPA have agreed to toll the running of any deadlines for filing claims through February 12, 1995 in order to avoid litigation and promote opportunities for settlement. DOJ/EPA have not specified the nature of any injunctive relief for the amount of civil penalties the government might seek. GM believes that the subject vehicles and engines were produced in compliance with the Clean Air Act. * * OTHER MATTERS Two suits, denominated by plaintiffs as class actions, were filed in Delaware Chancery Court, Stephen A. Solomon v. General Motors Corporation, et al., on May 13, 1994 and TRV Holding Company v. General Motors Corporation, et al., on May 18, 1994. Both actions purport to be brought on behalf of holders of Class E common stock against the Corporation and its directors. The complaints make essentially the same allegations, namely, that defendants have breached and are continuing to breach their fiduciary duties to holders of Class E common stock by, among other things, planning and announcing a contribution of Class E common stock to the Corporation's U.S. Hourly-Rate Pension Plan, which plan and announcement were allegedly made for the purpose of -- setting the stage for GM's disposition of Electronic Data Systems Corporation (EDS) assets in a manner which will deprive holders of Class E common stock of the full value of their shares, and -- artificially capping the market price of Class E common stock to limit the price to be paid to holders of Class E common stock in connection with plaintiff's alleged design on behalf of GM to either sell EDS assets or tender for Class E common stock. The complaints seek monetary damages and an injunction to enjoin GM from contributing Class E common stock to its U.S. Hourly-Rate Pension Plan. The contribution of Class E common stock to GM's U.S. Hourly-Rate Pension Plan is described by GM under Item 2 of its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1994. GM believes the suits are without merit, intends to defend them vigorously, and does not believe that they will materially interfere with the Corporation's plan to complete the contribution of Class E common stock. * * I-8 10 U.S. Government contracts held by the Corporation and its subsidiaries are subject to termination by the U.S. Government either for its convenience or for default by the contractor. The costs recovered for terminations for convenience do not always fully reimburse the contractor, and the profit or fee received by the contractor may be lower than that which it had expected for the portion of the contract performed. In cases of termination for default, normal contract remedies generally apply. In addition, the U.S. Government has broad discretion to suspend or debar a contractor from engaging in new government business, including discretion as to the period of suspension and activities affected. A contractor may be debarred based on a conviction or civil judgment involving certain offenses, including fraud in connection with obtaining or performing a public contract, or subcontract thereunder, and may be suspended if indicted for such an offense or if there is other adequate evidence that such an offense has been committed. Like other government contractors, GM and its subsidiaries are subject to civil audits and criminal investigations relating to their contracting activity. * * In September 1973, Hughes Aircraft Company (Hughes) filed suit against the U.S. Government in the U.S. Court of Claims seeking reasonable and entire compensation for the unauthorized manufacture or use by the United States of the invention claimed in a Hughes patent (the "Williams Patent") covering "Velocity Control and Orientation of a Spin Stabilized Body," principally satellites. In late 1983, the United States Court of Appeals for the Federal Circuit (the U.S. Court with appellate jurisdiction for patent cases) ruled that the Williams Patent was valid and that the Government had infringed that patent. The compensation which Hughes is entitled to recover as a result of the Government's infringement is now being determined by the U.S. Court of Claims, as well as whether additional U.S. Government satellites also infringe. The trial concluded in December 1988. Hughes contends that its recovery should be calculated in accordance with either of two methods for computing delay compensation and introduced evidence to support an award of approximately $4.8 billion or $1.5 billion depending upon the methods used. The Government sought to demonstrate to the Court that any damages awarded to Hughes in this case should not exceed $20-30 million. In August 1993, the Court determined that approximately $4 billion in satellite purchases infringed the patent. On June 17, 1994, the Court issued a decision awarding Hughes damages of $114 million. Hughes believes that the record supports a higher royalty rate, and, accordingly, on August 3, 1994 filed a notice of appeal pursuant to which Hughes will be seeking a higher award. Hughes is unable to estimate the duration of these appeal efforts. * * On August 21, 1992, EDS filed a breach of contract suit against the State of Florida (the "State") in the Circuit Court of the Second Judicial Circuit in Leon County, Florida, seeking recovery under various counts of more than $46 million in payment for unpaid computer equipment and information technology services. The suit arises out of a 1989 contract entered into between EDS and the Department of Health and Rehabilitative Services ("DHRS") of the State of Florida under which EDS had agreed to provide an information management system to the DHRS that would integrate its offices and computer programs statewide. EDS completed the system and turned it over to the Department in May 1992. On September 21, 1993, the State filed an Answer and Counterclaims, alleging principally breach of contract and breach of warranty. Under various counts, the State is requesting approximately $90 million in damages and approximately $140 million in indemnification for potential liability of the State to the Federal government. EDS and the State have agreed to resolve this matter through a final and binding Alternative Dispute Resolution process (ADR) which commenced on January 5, 1995. The ADR judge will make recommendations to the Circuit Court with respect to the final judgment that should be entered. Other than submitting exceptions to the Circuit Court prior to its consideration and adoption of the recommendations, there is no appeal. The parties have submitted motions for summary judgment to the ADR judge and, at this point, the ADR judge has recommended that summary judgments in the amount of approximately $27.5 million be awarded to EDS. Although the Circuit Court has refused to enter final judgment on these claims before the entire matter is I-9 11 resolved, it noted that DHRS had not filed exceptions to the recommendations and therefore entry of judgment on these claims appears likely. EDS management believes that it has strong and meritorious defenses to any counterclaims which the State may assert and intends to defend itself vigorously while continuing to pursue recovery against the State under the claims which it has filed. * * Several actions seeking compensatory and punitive damages in unspecified amounts have been filed against Hughes by plaintiffs alleging that they suffered injuries as a result of the migration into the Tucson, Arizona water supply of toxic substances that were disposed of at a facility owned by the United States Government which Hughes operates under a contract with the U.S. Air Force. These actions include a class action filed in Arizona State Court, Cordova v. Hughes Aircraft Company (formerly Bahrs, et al. v. Hughes Aircraft Company, et al. (Super. Ct. Pima County)), an individual action filed on behalf of approximately 500 plaintiffs in Federal District Court in Arizona, Yslaja v. Hughes Aircraft Company (formerly Acevedo, et al. v. Hughes Aircraft Company), and a class action filed in Federal District Court in Arizona, Lanier v. Hughes Aircraft Company. Other governmental and private entities are known to have also been the source of toxic substances which may have migrated into the Tucson water supply. Hughes believes that it has strong defenses to the claims asserted against it and that it may have claims for contribution against the other entities. The facts alleged in these cases are similar to the facts alleged in the previously reported action entitled Valenzuela v. Hughes Aircraft Company. As previously reported, the Valenzuela action was settled pursuant to an agreement under which Hughes' principal insurers provided $70.7 million and Hughes provided $13.8 million. At the time of such settlement, Hughes and its insurers were litigating in the United States District Court in Arizona their respective ultimate liability to one another for the amounts paid in the Valenzuela settlement. This litigation, entitled Smith, et al. v. Hughes Aircraft Company, was commenced in 1988 by various insurers seeking a declaratory judgment that the Valenzuela claims are not covered under the terms of the insurance policies issued to Hughes. These insurers have taken a similar position with respect to the more recently filed actions. In September 1991, the Smith court entered summary judgment in favor of Hughes' insurers who issued policies from 1971 to 1985, based upon "pollution exclusions" contained in those policies. In September 1992, the Smith court entered summary judgment in favor of Hughes' pre-1971 insurers based upon findings and conclusions that could have been adverse to Hughes with respect to other claims and proceedings. Hughes appealed these rulings to the Ninth Circuit Court of Appeals. In November 1993, the Ninth Circuit affirmed in substantial part the District Court's summary judgment on the "pollution exclusion" policies, but reversed the District Court's summary judgment on pre-1971 policies. The Ninth Circuit remanded the case for further proceedings in the District Court. Contracts under which Hughes has operated the Air Force facility contain provisions under which indemnification from the Air Force may be provided for certain liabilities which Hughes may incur in connection with its operation of the facility to the extent such liabilities are not covered by insurance. Hughes intends to prosecute all appropriate claims it may have for insurance coverage and, if necessary, to pursue all appropriate claims for indemnification or contribution relating to the actions described above. * * In December 1992, the National Highway Traffic Safety Administration (NHTSA) of the U.S. Department of Transportation (DOT), granting a petition previously filed by the Center for Auto Safety and Public Citizen, opened an investigation to determine whether 1973-1987 model Chevrolet and GMC full-size pickup trucks contain a safety defect resulting in an unreasonably high incidence of fuel-fed fires in side impact collisions. NHTSA emphasized then and has repeated that granting the petition does not indicate that the agency has determined that a safety-related defect exists in these vehicles. I-10 12 On April 9, 1993, NHTSA made an informal request of GM that it voluntarily conduct a safety-related recall campaign on the vehicles. Although in its April 9, 1993 letter, NHTSA stated that its Office of Defects Investigation "believes that GM's fuel tank system in the subject vehicles contains a defect that relates to motor vehicle safety", it nevertheless stated that "this recommendation to conduct a safety recall does not reflect a formal conclusion by the agency, . . . should not be confused with an Initial or Final Determination of a safety defect pursuant to . . . the National Traffic and Motor Vehicle Safety Act, . . . (and) should (not) be confused with a recall order . . . " A recall order can only be issued by the agency if it makes a Final Determination (which it has not done in this case) that a defect exists which presents an unreasonable risk to motor vehicle safety. On April 30, 1993, in a written response to NHTSA's letter of April 9, 1993, General Motors stated that based upon its evaluation of the data which NHTSA had then made available to GM as having been the basis for requesting the voluntary recall in its letter, General Motors continued to believe that its 1973-1987 pickup trucks are neither defective nor present an unreasonable risk, and that consequently no safety recall of such trucks is warranted. General Motors stated that it remained strongly of this view, and intended to press its position vigorously while continuing to cooperate with NHTSA's investigative efforts. On October 17, 1994, the Secretary of Transportation, Federico Pena, (the Secretary), announced his initial decision that a safety-related defect exists in 1971-91 GM C/K pickup trucks having side-mounted fuel tanks. In his announcement, it was indicated that his final decision as to whether a safety-related defect exists or to close the investigation, would be made after a public meeting scheduled for December 6, 1994. In an October 31, 1994 letter to DOT, GM offered to treat the Secretary's October 17 decision as his final decision and order for the purposes of allowing DOT to proceed directly and promptly to Federal court, in order that the matter might be resolved in a judicial forum. On November 17, 1994, General Motors filed suit against the Secretary, DOT, and NHTSA in the U.S. District Court for the Eastern District of Michigan. In that action, GM requested a declaratory judgment and injunctive relief vacating the Secretary's initial decision of October 17, 1994 (that the C/K pickup trucks contain a defect related to motor vehicle safety) and enjoining the defendants from taking any further action to compel a recall of the C/K pickup trucks. On December 2, 1994, the Secretary announced that a comprehensive settlement had been agreed to between the Government and General Motors with respect to the Government investigation, the Government attempt to compel a GM recall of the C/K pickup trucks, and the suit filed by General Motors on November 17, 1994. Under this settlement, both General Motors and the Government commit to provide funding for certain national highway safety programs. Specifically, General Motors will fund over $51 million and the Government an additional $27 million toward certain highway safety programs during the next five years. The settlement agreement further provides that the Government's C/K pickup truck investigation will be closed, recall efforts terminated, and GM's lawsuit dismissed. General Motors will continue to cooperate with the Government in its efforts to enhance the applicable Federal safety standard for vehicle fuel system integrity. GM presently plans to make its expenditures pursuant to the settlement in research (focusing on fire safety, burn and trauma injuries, driver impairment, and crash dummies) and in the areas of public education, computer modeling, and child safety seats. Throughout the investigation and settlement, GM has consistently maintained that there is no basis for a determination by the Secretary of Transportation or any other party that the trucks' side-mounted fuel tanks are in violation of Federal safety standards or that a safety-related defect exists with respect to such tanks. GM remains prepared to defend the safety of the trucks in any court. There are also pending individual product liability claims and lawsuits involving allegations of defects in the design of such vehicles resulting in fuel-fed fires following side impact collisions. GM intends to defend these cases vigorously. In addition to the NHTSA investigation and the product liability cases, 38 class actions were filed in state and Federal courts against the Corporation, claiming that 1973-1987 model Chevrolet and GMC full-size pickup trucks are defective because their fuel tanks are mounted below the cab and outside the frame rails. 24 I-11 13 Federal court class actions were transferred to the Federal court in Philadelphia, Pennsylvania by the Judicial Panel on Multidistrict Litigation. In these actions, plaintiffs claimed that the fuel tank locations make the vehicles unreasonably susceptible to fuel-fed fires following side impact collisions. Plaintiffs alleged breach of contract and warranty, negligence, fraud, and negligent misrepresentation, as well as violation of various state consumer protection laws. The lawsuits seek compensatory and punitive damages and injunctions requiring notice to owners, repairs, retrofitting, and "disgorgement" of revenues. In July 1993, a nationwide class action settlement of the C/K pickup truck class actions was submitted to the Pennsylvania Federal court and a state court in Texas. After notice of the proposed settlement was sent to 6.3 million registered owners, the Pennsylvania and Texas courts held hearings to determine if the settlement was fair, reasonable and adequate. Both courts subsequently entered orders giving final approval of the settlement. Certain objectors filed appeals of those approvals to the U.S. Third Circuit Court of Appeals and a Texas State Court of Appeals. The Texas Court of Appeals in Texarkana on June 22, 1994 reversed the approval of the settlement affecting Texas residents. GM appealed that reversal before the Texas Supreme Court and that Court granted leave to proceed with the appeal. GM believes that it has a sound basis for prevailing in its appeal. The Philadelphia Federal Court approval of substantially the same settlement is on appeal in the U.S. Third Circuit Court of Appeals and after argument before the Court of Appeals for the Third Circuit in August of 1994, that appeal is still pending. Additionally, on October 14, 1993, Crowder, et al v. General Motors Corporation was filed as a purported class action in the Federal court in Dallas, Texas on behalf of owners of full-size pickup trucks and chassis cabs covered by the class action settlements who elected to be excluded from the settlements or purchased their trucks used after July 19, 1993. the allegations are essentially the same as those made in the other class actions. No determination has been made that the case may proceed as a class action. GM intends to vigorously defend the case and oppose certification of a class. The settlement provides for owners of 1973-1986 model C/K and 1987-1991 R/V pickup trucks and chassis cabs as of July 19, 1993, the date the settlement was announced, to receive $1,000 Certificates from General Motors which may be used in connection with the purchase of any new GMC Truck or Chevrolet light-duty truck. The Certificates can be used in combination with other GM and GMAC incentive programs during the 15-month period after eligible owners are notified of the procedures for obtaining their Certificates. The Certificates are redeemable by the eligible owner or immediate family members residing at the same address. Within the original redemption period, Certificates also can be transferred at face value with the truck. Original Certificate holders also can elect to exchange the $1,000 Certificate for a non-transferable $500 Certificate issuable in the name of another person, such certificate being redeemable only toward the purchase of a new C/K pickup truck, and not being usable in combination with other incentives offered by GM or GMAC. Both the $1,000 and $500 Certificates can only be used at authorized Chevrolet and GMC Truck dealers and cannot be redeemed for cash or any other consideration. The Corporation believes that the settlement will not have a material adverse impact on its operations or financial condition. * * On June 1, 1994, the Corporation was informed by prosecutors with the U.S. Department of Justice ("DOJ") that the Corporation's wholly-owned subsidiary, Delco Electronics Corporation ("Delco Electronics"), is a target for criminal prosecution and subject to civil suit in connection with allegations that Delco Electronics is responsible for the transportation of hazardous wastes from its Maquiladora plant in Reynosa, Mexico into the United States. The related Government investigation is focused on four shipments of recyclable waste solvents during the period 1987-1990 which allegedly violated the U.S. Resource Conservation and Recovery Act ("RCRA") and the treaty with Mexico which established the Maquiladora industry. Representatives of the DOJ have not indicated what fines, penalties, or other damages they may seek to recover in their continued pursuit of this matter. Based on its own investigation, Delco Electronics believes it has strong defenses to any criminal prosecution and will defend itself vigorously. * * I-12 14 On October 24, 1994, a jury sitting in two cases consolidated for trial in the California Superior Court for the County of Los Angeles, both of which cases had been brought by individual plaintiffs, Jeffrey Lane v. Hughes Aircraft Company and David Villalpando v. Hughes Aircraft Company, rendered verdicts resulting in an aggregate award against Hughes in the amount of $89.5 million. $80 million of the award was for punitive damages and the remainder was for emotional distress and lost wages and benefits. One plaintiff alleged racial discrimination by Hughes with respect to pay and promotion, and both plaintiffs alleged retaliation by Hughes. Hughes vigorously denied plaintiffs' allegations. On December 15, 1994, Superior Court Judge Malcolm H. Mackey granted Hughes' motion for judgment in its favor notwithstanding the verdict, overturning the entire $89.5 million judgment against Hughes. The court also granted Hughes' alternative motion for an order for a new trial in the event that a court of appeals reverses Judge Mackey's ruling in favor of Hughes. * * ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable (N/A). * * * I-13 15 PART II GENERAL MOTORS CORPORATION AND SUBSIDIARIES CROSS REFERENCE SHEET
10-K ITEM PAGE (AND CAPTION) IN PART II --------- ------------------------------ 5. Market for Registrant's Common Equity and Related Stockholder Matters (a) Market information....................... II-45 -- Selected Quarterly Data (b) Approximate number of holders of common stocks........................... II-45 -- Selected Quarterly Data (c) Dividends (1) History............................. II-45 -- Selected Quarterly Data (2) Policy.............................. II-22 -- Dividends on Common Stocks 6. Selected Financial Data........................ II-47 -- Selected Financial Data 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... II-50 -- Management's Discussion and Analysis 8. Financial Statements and Supplementary Data.... II-2 -- Responsibilities for Consolidated Financial Statements II-3 -- Independent Auditors' Report II-4 -- Statement of Consolidated Operations for the Years Ended December 31, 1994, 1993, and 1992 II-5 -- Consolidated Balance Sheet, December 31, 1994 and 1993 II-6 -- Statement of Consolidated Cash Flows for the Years Ended December 3l, 1994, 1993, and 1992 II-8 -- Notes to Financial Statements II-44 -- Selected Quarterly Data 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... None
II-1 16 RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS The following consolidated financial statements of General Motors Corporation and subsidiaries were prepared by management which is responsible for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles and, as such, include amounts based on judgments of management. Financial information elsewhere in Part II is consistent with that in the consolidated financial statements. Management is further responsible for maintaining a system of internal accounting controls, designed to provide reasonable assurance that the books and records reflect the transactions of the companies and that its established policies and procedures are carefully followed. From a stockholder's point of view, perhaps the most important feature in the system of control is that it is continually reviewed for its effectiveness and is augmented by written policies and guidelines, the careful selection and training of qualified personnel, and a strong program of internal audit. Deloitte & Touche LLP, an independent auditing firm, is engaged to audit the consolidated financial statements of General Motors Corporation and its subsidiaries and issue reports thereon. The audit is conducted in accordance with generally accepted auditing standards which comprehend the consideration of internal accounting controls and tests of transactions to the extent necessary to form an independent opinion on the financial statements prepared by management. The Independent Auditors' Report appears on the next page. The Board of Directors, through the Audit Committee (composed entirely of non-employee Directors), is responsible for assuring that management fulfills its responsibilities in the preparation of the consolidated financial statements. The Committee selects the independent auditors annually in advance of the Annual Meeting of Stockholders and submits the selection for ratification at the Meeting. In addition, the Committee reviews the scope of the audits and the accounting principles being applied in financial reporting. The independent auditors, representatives of management, and the internal auditors meet regularly (separately and jointly) with the Committee to review the activities of each, to ensure that each is properly discharging its responsibilities, and to assess the effectiveness of the system of internal accounting controls. It is management's conclusion that the system of internal accounting controls at December 31, 1994 provides reasonable assurance that the books and records reflect the transactions of the companies and that its established policies and procedures are complied with. To ensure complete independence, Deloitte & Touche LLP has full and free access to meet with the Committee, without management representatives present, to discuss the results of the audit, the adequacy of internal accounting controls, and the quality of the financial reporting. /s/ John F. Smith, Jr. /s/ J. Michael Losh - --------------------------------------------- --------------------------------------------- John F. Smith, Jr. J. Michael Losh Chief Executive Officer and President Chief Financial Officer
II-2 17 INDEPENDENT AUDITORS' REPORT General Motors Corporation, its Directors, and Stockholders: We have audited the Consolidated Balance Sheets of General Motors Corporation and subsidiaries as of December 31, 1994 and 1993 and the related Statements of Consolidated Operations and Consolidated Cash Flows for each of the three years in the period ended December 31, 1994. Our audits also included the financial statement schedule listed at Item 14. These financial statements and financial statement schedule are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of General Motors Corporation and subsidiaries at December 31, 1994 and 1993 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 1 to the financial statements, effective January 1, 1994 the Corporation changed its methods of accounting for postemployment benefits and certain investments in debt and equity securities. Also, as discussed in Notes 1 and 5 to the financial statements, effective January 1, 1992 the Corporation changed its method of accounting for postretirement benefits other than pensions and its revenue recognition policy for a subsidiary. /s/ DELOITTE & TOUCHE LLP - ------------------------------------------------------ DELOITTE & TOUCHE LLP Detroit, Michigan January 30, 1995 II-3 18 GENERAL MOTORS CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED OPERATIONS
YEARS ENDED DECEMBER 31, -------------------------------------- 1994 1993 1992 ---------- ---------- ---------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net Sales and Revenues (Note 1) Manufactured products...................................... $134,759.8 $119,686.3 $113,323.9 Financial services......................................... 9,418.8 8,752.0 10,402.1 Computer systems services.................................. 6,412.9 5,183.6 4,806.7 Other income (Note 2)...................................... 4,359.7 4,597.6 3,709.5 ---------- ---------- ---------- Total Net Sales and Revenues.......................... 154,951.2 138,219.5 132,242.2 ---------- ---------- ---------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below....................................... 117,220.5 106,421.9 105,248.4 Selling, general, and administrative expenses.............. 12,233.7 11,531.9 11,232.2 Interest expense (Note 15)................................. 5,431.9 5,673.7 7,096.8 Depreciation of real estate, plants, and equipment (Note 1)................................................. 7,124.4 6,576.3 6,144.8 Amortization of special tools (Note 1)..................... 2,900.7 2,535.3 2,504.0 Amortization of intangible assets (Notes 1 and 14)......... 226.2 330.4 310.2 Other deductions (Note 2).................................. 1,460.5 1,624.7 1,801.9 Special provision for scheduled plant closings and other restructurings (Note 6).................................. -- 950.0 1,237.0 ---------- ---------- ---------- Total Costs and Expenses.............................. 146,597.9 135,644.2 135,575.3 ---------- ---------- ---------- Income (Loss) before Income Taxes.......................... 8,353.3 2,575.3 (3,333.1) United States, foreign, and other income taxes (credit) (Note 8)................................................. 2,694.6 109.5 (712.5) ---------- ---------- ---------- Income (Loss) before cumulative effect of accounting changes.................................................. 5,658.7 2,465.8 (2,620.6) Cumulative effect of accounting changes (Notes 1 and 5).... (758.1) -- (20,877.7) ---------- ---------- ---------- Net Income (Loss).......................................... 4,900.6 2,465.8 (23,498.3) Dividends and accumulation of redemption value on preferred and preference stocks (Note 17)................ 320.7 356.8 306.3 ---------- ---------- ---------- Income (Loss) on Common Stocks............................. $ 4,579.9 $ 2,109.0 $(23,804.6) ========== ========== ========== Earnings (Loss) Attributable to Common Stocks $1 2/3 par value before cumulative effect of accounting changes............................................... $ 4,645.2 $ 1,537.3 $ (3,220.6) Cumulative effect of accounting changes (Notes 1 and 5)................................................ (751.3) -- (20,720.1) ---------- ---------- ---------- Net earnings (loss) attributable to $1 2/3 par value..... $ 3,893.9 $ 1,537.3 $(23,940.7) ========== ========== ========== Net earnings attributable to Class E..................... $ 444.4 $ 367.2 $ 278.4 ========== ========== ========== Class H before cumulative effect of accounting changes... $ 248.4 $ 204.5 $ 15.3 Cumulative effect of accounting changes (Notes 1 and 5).................................................... (6.8) -- (157.6) ---------- ---------- ---------- Net earnings (loss) attributable to Class H.............. $ 241.6 $ 204.5 $ (142.3) ========== ========== ========== Average number of shares of common stocks outstanding (in millions) $1 2/3 par value......................................... 741.3 710.2 670.5 Class E.................................................. 260.3 243.0 209.1 Class H.................................................. 92.1 88.6 75.3 Earnings (Loss) Per Share Attributable to Common Stocks (Note 9) $1 2/3 par value before cumulative effect of accounting changes............................................... $ 6.20 $ 2.13 $ (4.85) Cumulative effect of accounting changes (Notes 1 and 5).................................................... (1.05) -- (33.43) ---------- ---------- ---------- Net earnings (loss) attributable to $1 2/3 par value..... $ 5.15 $ 2.13 $ (38.28) ========== ========== ========== Net earnings attributable to Class E..................... $ 1.71 $ 1.51 $ 1.33 ========== ========== ========== Class H before cumulative effect of accounting changes... $ 2.70 $ 2.30 $ (0.11) Cumulative effect of accounting changes (Notes 1 and 5).................................................... (0.08) -- (2.18) ---------- ---------- ---------- Net earnings (loss) attributable to Class H.............. $ 2.62 $ 2.30 $ (2.29) ========== ========== ==========
Reference should be made to the Notes to Financial Statements. II-4 19 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER 31, --------------------------- 1994 1993 ---------- ---------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) ASSETS Cash and cash equivalents (Note 1).......................................... $ 10,939.0 $ 13,790.5 Other marketable securities................................................. 5,136.6 4,172.2 ---------- ---------- Total cash and marketable securities.................................... 16,075.6 17,962.7 ---------- ---------- Finance receivables -- net (Note 10)........................................ 54,077.3 53,874.7 Accounts and notes receivable (less allowances)............................. 8,977.8 6,389.2 Inventories (less allowances) (Note 12)..................................... 10,127.8 8,615.1 Contracts in process (less advances and progress payments of $2,311.2 and $2,739.2) (Note 1)........................................................ 2,265.4 2,376.8 Net equipment on operating leases (less accumulated depreciation of $5,374.7 and $4,579.6)............................................................. 20,061.6 13,095.3 Deferred income taxes (Note 8).............................................. 19,693.3 20,798.1 Other assets (less allowances).............................................. 20,625.5 17,757.3 Property (Note 1) Real estate, plants, and equipment -- at cost (Note 13)................... 69,807.9 67,966.4 Less accumulated depreciation............................................. 42,586.4 41,725.5 Net real estate, plants, and equipment.................................. 27,221.5 26,240.9 Special tools -- at cost (less amortization).............................. 7,559.1 7,983.9 ---------- ---------- Total property........................................................ 34,780.6 34,224.8 ---------- ---------- Intangible assets -- at cost (less amortization) (Notes 1 and 14)........... 11,913.8 13,106.9 ---------- ---------- Total Assets.......................................................... $198,598.7 $188,200.9 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable (principally trade)........................................ $ 11,635.0 $ 10,276.5 Notes and loans payable (Note 15)........................................... 73,730.2 70,441.2 United States, foreign, and other income taxes -- deferred and payable (Note 8)........................................................................ 2,721.0 2,409.3 Postretirement benefits other than pensions (Note 5)........................ 40,018.2 37,920.0 Pensions (Note 4)........................................................... 14,353.2 22,631.6 Other liabilities and deferred credits (Note 16)............................ 42,867.3 38,474.8 ---------- ---------- Total Liabilities..................................................... 185,324.9 182,153.4 ---------- ---------- Stocks Subject to Repurchase (Note 17)...................................... 450.0 450.0 ---------- ---------- Stockholders' Equity (Notes 3 and 17) Preference stocks........................................................... 2.4 4.2 Common stocks $1 2/3 par value (issued, 754,345,782 and 720,105,471 shares)............. 1,257.2 1,200.2 Class E (issued, 268,125,255 and 263,089,320 shares)...................... 26.8 26.3 Class H (issued, 78,720,022 and 75,705,433 shares)........................ 7.9 7.6 Capital surplus (principally additional paid-in capital).................... 13,149.4 12,003.4 Net income retained for use in the business (accumulated deficit)........... 1,785.8 (2,002.9) ---------- ---------- Subtotal.............................................................. 16,229.5 11,238.8 Minimum pension liability adjustment (Note 4)............................... (3,548.4) (5,311.2) Accumulated foreign currency translation adjustments........................ (100.4) (494.4) Net unrealized gains on investments in certain debt and equity securities (Note 1).................................................................. 243.1 164.3 ---------- ---------- Total Stockholders' Equity............................................ 12,823.8 5,597.5 ---------- ---------- Total Liabilities and Stockholders' Equity............................ $198,598.7 $188,200.9 ========== ==========
Reference should be made to the Notes to Financial Statements. II-5 20 GENERAL MOTORS CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS
YEARS ENDED DECEMBER 31, ----------------------------------- 1994 1993 1992 --------- --------- --------- (DOLLARS IN MILLIONS) Cash Flows from Operating Activities Income (Loss) before cumulative effect of accounting changes................................................ $ 5,658.7 $ 2,465.8 $(2,620.6) Adjustments to reconcile income (loss) before cumulative effect of accounting changes to net cash provided by operating activities Depreciation of real estate, plants, and equipment..... 3,688.7 3,682.7 3,646.3 Depreciation of equipment on operating leases.......... 3,435.7 2,893.6 2,498.5 Amortization of special tools.......................... 2,900.7 2,535.3 2,504.0 Amortization of intangible assets...................... 226.2 330.4 310.2 Amortization of discount and issuance costs on debt issues............................................... 71.3 90.5 118.1 Provision for financing losses......................... 177.3 300.8 371.0 Special provision for scheduled plant closings and other restructurings................................. -- 950.0 1,237.0 Provision for inventory allowances..................... 53.1 44.1 28.5 Pension expense, net of cash contributions............. (5,096.1) (1,548.2) 273.4 Pre-tax (gain) loss on sales of various assets......... (17.6) 305.6 (162.8) Write-down of investment in National Car Rental System Inc.................................................. -- -- 813.2 Provision for ongoing postretirement benefits other than pensions, net of cash payments.................. 2,252.6 2,396.7 2,198.8 Origination and purchase of mortgage loans............. (10,135.7) (21,583.7) (17,232.9) Proceeds on sale of mortgage loans..................... 10,719.2 22,309.5 16,859.0 Change in other investments, miscellaneous assets, deferred credits, etc................................ (1,628.2) 340.2 (523.4) Change in other operating assets and liabilities Accounts receivable.................................. (2,582.1) (480.9) 34.7 Inventories*......................................... (1,750.3) 240.3 886.4 Prepaid expenses and other deferred charges.......... (725.5) 60.2 (399.3) Deferred taxes and income taxes payable*............. 903.8 (1,512.8) (2,131.8) Other liabilities*................................... 2,683.5 (189.3) 1,181.3 Other*............................................... 1,113.4 1,115.6 (123.4) --------- --------- --------- Net Cash Provided by Operating Activities................... $11,948.7 $14,746.4 $ 9,766.2 --------- --------- ---------
- ------------------------- Certain amounts for 1993 and 1992 have been reclassified to conform with 1994 classifications. * Excluding effect of accounting changes. Reference should be made to the Notes to Financial Statements. II-6 21 GENERAL MOTORS CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS -- CONCLUDED
YEARS ENDED DECEMBER 31, ----------------------------------------- 1994 1993 1992 ----------- ----------- ----------- (DOLLARS IN MILLIONS) Cash Flows from Investing Activities Investment in companies, net of cash acquired....... $ (246.6) $ (232.4) $ (134.7) Expenditures for real estate, plants, and equipment........................................ (4,883.7) (3,822.1) (4,336.7) Expenditures for special tools...................... (2,341.4) (2,648.6) (2,252.9) Proceeds from disposals of real estate, plants, and equipment........................................ 351.0 534.9 229.0 Proceeds from sale and leaseback of capital assets........................................... -- -- 654.9 Proceeds from the sale of various assets............ 518.4 231.5 162.8 Change in other investing assets Investments in other marketable securities -- acquisitions................................... (14,482.3) (13,545.4) (14,408.8) Investments in other marketable securities -- liquidations................................... 13,906.0 13,377.0 14,129.3 Finance receivables -- acquisitions.............. (156,579.8) (103,396.3) (120,829.8) Finance receivables -- liquidations.............. 137,598.4 92,808.6 119,453.1 Finance receivables -- other..................... 610.6 8,528.3 1,895.5 Proceeds from sales of finance receivables....... 18,800.0 13,072.2 11,201.8 Notes receivable................................. 101.9 (102.3) 2.0 Operating leases -- net.......................... (10,239.8) (4,887.7) (4,222.7) Other............................................ (612.5) 449.1 224.7 ----------- ----------- ----------- Net Cash Provided by (Used in) Investing Activities... (17,499.8) 366.8 1,767.5 ----------- ----------- ----------- Cash Flows from Financing Activities Net increase (decrease) in short-term loans payable.......................................... 3,877.7 (4,278.3) (11,512.1) Increase in long-term debt.......................... 12,997.4 9,634.7 18,886.4 Decrease in long-term debt.......................... (14,259.9) (17,029.6) (17,907.0) Redemption of Series H preference stocks............ -- -- (243.9) Redemption of Howard Hughes Medical Institute put options...................................... -- (315.0) (300.0) Repurchases of common and preferred stocks.......... -- (265.6) (7.2) Proceeds from issuing common and preference stocks........................................... 1,184.9 860.2 5,555.7 Cash dividends paid to stockholders................. (1,111.9) (1,083.9) (1,376.8) ----------- ----------- ----------- Net Cash Provided by (Used in) Financing Activities... 2,688.2 (12,477.5) (6,904.9) ----------- ----------- ----------- Effect of Exchange Rate Changes on Cash and Cash Equivalents......................................... 11.4 76.2 58.1 ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents......................................... (2,851.5) 2,711.9 4,686.9 Cash and cash equivalents at beginning of the year.... 13,790.5 11,078.6 6,391.7 ----------- ----------- ----------- Cash and cash equivalents at end of the year.......... $ 10,939.0 $ 13,790.5 $ 11,078.6 ========== ========== ==========
- ------------------------- Certain amounts for 1993 and 1992 have been reclassified to conform with 1994 classifications. Reference should be made to the Notes to Financial Statements. II-7 22 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of General Motors Corporation (General Motors, GM, or the Corporation) and domestic and foreign subsidiaries which are more than 50% owned. During 1992, the Corporation obtained a majority interest in National Car Rental System Inc. (NCRS). The accounts of NCRS were consolidated effective December 31, 1992. General Motors' share of earnings or losses of associates in which at least 20% of the voting securities is owned is included in consolidated operating results under the equity method of accounting (see Note 2). REVENUE RECOGNITION Sales are generally recorded by the Corporation when products are shipped to independent dealers. Provisions for normal dealer sales incentives, returns and allowances, and GM Card rebates are made at the time of vehicle sale. Costs related to special sales incentive programs are recognized as reductions to sales when determinable. Certain sales under long-term contracts, primarily in the defense business, are recorded using the percentage-of-completion (cost-to-cost) method of accounting. Effective January 1, 1992, Hughes Aircraft Company (Hughes) changed its revenue recognition policy for certain commercial businesses from the cost- to-cost method commonly followed by defense contractors to the units-of-delivery method which is more appropriate for a commercial business. The unfavorable cumulative effect of this change was $40.0 million, or $0.05 per share of $1 2/3 par value and $0.10 per share of Class H common stock. Profits expected to be realized on contracts are based on the Corporation's estimates of total sales value and costs at completion. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are recorded in the accounting period in which the revisions are made. Estimated losses on contracts are recorded in the period in which they are identified. In the case of finance receivables in which the face amount includes the finance charge (principally retail financing), earnings are recorded in income over the terms of the receivables using the interest method. On finance receivables in which the face amount represents the principal (principally wholesale, interest-bearing financing, and fleet leasing), the interest is taken into income as earned. Certain loan origination costs are deferred and amortized to financing revenue over the life of the related loans using the interest method. Insurance premiums are earned on a basis related to coverage provided over the terms of the policies. Commission costs and premium taxes incurred in acquiring new business are deferred and amortized over the terms of the related policies on the same basis as premiums are earned. Acquisition costs associated with direct mail programs are amortized over a three year period. The liability for losses and claims includes a provision for unreported losses, based on past experience, net of the estimated salvage and subrogation recoverable. ALLOWANCE FOR FINANCING LOSSES An allowance for credit losses is generally established during the period in which receivables are acquired and is maintained in amounts considered by management to be appropriate in relation to receivables outstanding. Losses arising from repossession of the collateral supporting doubtful accounts are recognized upon repossession of the collateral. Repossessed collateral is recorded at estimated realizable value in other assets and adjustments to the related valuation allowance are included in operating expense. Where repossession has II-8 23 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED not been effected, losses are charged off as soon as it is determined that the collateral cannot be repossessed, generally not more than 150 days after default. Nonretail finance receivables are reduced to the estimated fair value of collateral when determined to be impaired or uncollectible. CASH AND CASH EQUIVALENTS Cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less. Supplemental disclosure of cash flow information is as follows:
1994 1993 1992 -------- -------- -------- (DOLLARS IN MILLIONS) Cash paid during the years for Interest..................................................... $5,499.3 $5,938.0 $7,410.4 Income taxes................................................. 2,045.8 1,545.7 1,608.5
With respect to noncash transactions, 18.8 million and 15.2 million shares of $1 2/3 par value common stock were contributed to the U.S. pension plans in 1993 and 1992, respectively, and 21.5 million shares of Class H common stock were issued to General Dynamics Corporation (GD) for the purchase of its missile business in 1992. The 1993 contribution of $1 2/3 par value shares consisted of shares sold to the Corporation from individual employee accounts in various stock savings plans of the Corporation. Also, the Corporation entered capital lease agreements totaling $25.0 million, $13.7 million, and $76.0 million, in 1994, 1993, and 1992, respectively. CONTRACTS IN PROCESS Contracts in process are stated at costs incurred plus estimated profit, less amounts billed to customers and advances and progress payments applied. Engineering, tooling, manufacturing, and applicable overhead costs, including administrative, research and development, and selling expenses, are charged to costs and expenses when incurred. Under certain contracts with the U.S. Government, progress payments are received based on costs incurred on the respective contracts. Title to the inventories related to such contracts (included in contracts in process) vests with the U.S. Government. DEPRECIATION AND AMORTIZATION Depreciation is provided based on estimated useful lives of groups of property generally using accelerated methods, which accumulate depreciation of approximately two-thirds of the depreciable cost during the first half of the estimated useful lives. The cost of each leasehold improvement is amortized over the period of the lease or the life of the property, whichever is shorter, with the amortization applied directly to the asset account and charged to costs and expenses. Depreciation on capitalized leases with a term of five years or less is provided using the straight-line method; leases with a term in excess of five years are depreciated using the foregoing accelerated methods. Expenditures for special tools are amortized over their estimated useful lives. Amortization is applied directly to the asset account. Replacement of special tools for reasons other than changes in products is charged directly to cost of sales. General Motors Acceptance Corporation (GMAC) provides for depreciation of vehicles and other equipment on operating leases or in company use generally on a straight-line basis. The difference between the II-9 24 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED net book value and the proceeds of sale or salvage on items disposed of is included in income as a charge against or credit to the provision for depreciation. PRODUCT-RELATED EXPENSES Expenditures for advertising and sales promotion and for other product-related expenses are charged to costs and expenses as incurred; provisions for estimated costs related to product warranty are made at the time the products are sold. Expenditures for advertising amounted to $2,805.9 million in 1994, $2,574.4 million in 1993, and $2,414.1 million in 1992. Expenditures for research and development are charged to expenses as incurred and amounted to $7,035.8 million in 1994, $6,029.9 million in 1993, and $5,916.9 million in 1992. FOREIGN CURRENCY TRANSLATION Exchange and translation gains (losses) on an after-tax basis included in consolidated operating results in 1994, 1993, and 1992 amounted to $206.9 million, $189.0 million, and ($169.0) million, respectively. INTANGIBLE ASSETS The Corporation periodically evaluates the recoverability of goodwill and other intangible assets, by assessing whether the unamortized intangible asset can be recovered over its remaining life through cash flows generated by underlying tangible assets. FINANCIAL INSTRUMENTS The Corporation is party to a variety of foreign exchange and interest rate forward contracts and options entered into in connection with GM and its consolidated subsidiaries' management of its exposure to fluctuations in foreign exchange rates and interest rates. Foreign exchange forward contracts are accounted for as hedges to the extent they are designated as, and are effective as, hedges of firm foreign currency commitments. Other such foreign exchange contracts and options are marked to market on a current basis. Interest rate forward contracts used to hedge an underlying debt obligation are not marked to market, but are used to adjust interest expense recognized over the life of the underlying debt agreement. Gains and losses from terminated contracts are deferred and amortized over the remaining period of the original swap. Open interest rate forward contracts are reviewed regularly to ensure that they remain effective. Written options (including swaptions and interest rate caps and collars) are marked to market on a current basis. The Corporation also enters into commodity forward contracts and options contracts. Since the Corporation has the discretion to settle these transactions either in cash or by taking physical delivery, these contracts are not considered financial instruments. Commodity forward contracts and options are accounted for as hedges to the extent they are designated as, and are effective as, hedges of firm or anticipated commodity purchase contracts. ENVIRONMENTAL LIABILITIES The Corporation recognizes environmental liabilities when a loss is probable and can be reasonably estimated. Such obligations are generally not subject to insurance coverage. Each environmental obligation is estimated by engineering and legal specialists within the Corporation based on current law and existing technologies. Such estimates are based primarily upon the estimated cost of investigation and remediation required and the likelihood that other potentially responsible parties (PRPs) will be able to fulfill their commitments at the sites where the Corporation may be jointly and severally liable. II-10 25 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED At sites being addressed under the U.S. Comprehensive Environmental Response, Compensation, and Liability Act or similar state laws (the "Superfund Sites"), the Corporation typically recognizes an estimated liability once it has been named as a PRP and has determined that such estimated liability is probable. The Superfund Sites are primarily multi-PRP sites not owned or operated by the Corporation. For the Corporation's operating plants, an estimated liability is typically recognized either upon completion of an environmental assessment or when the Corporation proposes an agreement with the appropriate regulatory agency to take action at a site. For closed or closing plants owned by the Corporation and properties being sold, an estimated liability is typically recognized at the time the closure decision is made or sale is recorded and is based on an environmental assessment of the plant property. The Corporation periodically evaluates and revises estimates for environmental obligations based on expenditures against established reserves and the availability of additional information. ACCOUNTING CHANGES GMAC adopted Statement of Financial Accounting Standards (SFAS) No. 113, Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts, effective January 1, 1993 and the resulting increase in the Corporation's assets and liabilities was not material. Effective January 1, 1994, the Corporation adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits. The Standard requires accrual of the costs of benefits provided to former or inactive employees after employment, but before retirement. The unfavorable cumulative effect of adopting this Standard, determined on a discounted basis, was $1,220.1 million ($758.1 million after tax), or $751.3 million ($1.05 per share) attributable to $1 2/3 par value common stock and $6.8 million ($0.08 per share) attributable to GM Class H common stock. The non-cash charge is primarily related to GM's extended-disability benefit program in the U.S. which, under the new accounting Standard, will be accrued on a service-driven basis. The ongoing effect was not material in 1994 and is not expected to be material in subsequent periods. Also effective January 1, 1994, the Corporation adopted SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, which resulted in a $241.0 million after-tax increase in Stockholders' Equity. This Standard requires the recording at fair value of debt securities which are not expected to be held to maturity and equity securities which have a readily determinable fair value. Unrealized gains and losses resulting from changes in fair value are included as a separate component of Stockholders' Equity. The primary effect of this Standard for the Corporation relates to debt securities held by Motors Insurance Corporation and certain equity securities. The ongoing 1994 effect was a $121.2 million decrease in Stockholders' Equity. Marketable securities, other than certain securities held by GMAC and its subsidiaries (and described in Note 11), are considered available for sale; $869.4 million mature within one year, $248.2 million mature in two to five years, and a substantial amount of the remaining $127.4 million matures after 10 years. II-11 26 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE 2. OTHER INCOME AND OTHER DEDUCTIONS
1994 1993 1992 -------- -------- -------- (DOLLARS IN MILLIONS) Other Income Insurance premiums........................................... $ 873.8 $ 799.3 $ 768.9 Nonfinancing interest........................................ 1,507.7 1,886.2 1,839.7 Equity in earnings (losses) of associates, net............... 205.5 (172.5) (508.3) Gain on the sale of Daewoo Motor Co.......................... -- -- 162.8 Claims, commissions, and grants.............................. 467.4 489.7 328.2 Gain on the sale of finance receivables...................... 30.8 436.4 588.8 Revenue from mortgage operations............................. 208.5 349.5 318.8 Other........................................................ 1,066.0 809.0 210.6 -------- -------- -------- Total other income...................................... $4,359.7 $4,597.6 $3,709.5 ======= ======= ======= Other Deductions Insurance losses and loss adjustment expenses................ $ 749.7 $ 614.4 $ 587.3 Provision for financing losses............................... 177.3 300.8 371.0 Write-down of investment in NCRS............................. -- -- 813.2 Loss on the sale of Allison Gas Turbine Division............. -- 305.6 -- Other........................................................ 533.5 403.9 30.4 -------- -------- -------- Total other deductions.................................. $1,460.5 $1,624.7 $1,801.9 ======= ======= =======
NOTE 3. STOCK AND OTHER INCENTIVE PLANS The Corporation's incentive plans consist of the General Motors Amended 1987 Stock Incentive Plan (the "GMSIP"), the General Motors 1992 Performance Achievement Plan (the "GMPAP"), the 1984 Electronic Data Systems Corporation Stock Incentive Plan (the "EDS Plan"), and the GM Hughes Electronics Corporation Incentive Plan (the "GMHE Plan"). The GMSIP and GMPAP plans are administered by the Executive Compensation Committee of the Board of Directors (the "Committee"). Under the GMSIP, 39.8 million shares of $1 2/3 par value, 12.2 million shares of Class E, and 5.9 million shares of Class H common stock may be granted from June 1, 1992 through May 31, 1997 of which 24.8 million, 12.1 million, and 5.4 million shares, respectively, may still be granted at December 31, 1994. 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 EDS Plan, EDS may grant shares and rights or options to acquire up to 160 million shares of Class E common stock during the 10 year life (extended an additional 10 years in 1994) of the EDS Plan of which 99.6 million shares may still be granted at December 31, 1994. No options were outstanding as of December 31, 1994, 1993, or 1992. Under the EDS Plan, approximately 48.6 million shares of Class E common stock have also been granted to key employees at stock prices up to $0.025 per share. Such shares generally vest over a 10-year period from the date of grant. Approximately 17.4 million shares were not yet vested at December 31, 1994. Under the GMHE Plan, GMHE may grant shares, rights, or options to acquire up to 20 million shares of Class H common stock through May 31, 1997 (extended an additional two years in 1995) of which 5.5 million shares may still be granted at December 31, 1994. 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. II-12 27 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED Changes in the status of outstanding options under the GMSIP and GMHE Plan were as follows:
GMSIP OPTION SHARES UNDER $1 2/3 PAR VALUE COMMON PRICES OPTION - ----------------------- ------------- ------------ Outstanding at January 1, 1992.................................... $19.13-$48.07 17,829,132 Granted........................................................... 37.32- 37.75 5,302,140 Exercised......................................................... 19.13- 41.50 (197,851) Terminated........................................................ 19.13- 48.07 (864,675) ------------- ------------ Outstanding at December 31, 1992.................................. 33.97- 48.07 22,068,746 Granted........................................................... 33.88- 44.00 5,526,855 Exercised......................................................... 33.97- 48.07 (4,303,326) Terminated........................................................ 33.88- 48.07 (531,218) ------------- ------------ Outstanding at December 31, 1993.................................. 33.88- 48.07 22,761,057 Granted........................................................... 37.32- 59.07 6,159,395 Exercised......................................................... 33.88- 48.07 (3,305,513) Terminated........................................................ 33.88- 59.07 (340,161) ------------- ------------ Outstanding at December 31, 1994.................................. $33.88-$59.07 25,274,778 ============= =========== Memo: Options exercisable at December 31, 1994.......................... -- 16,962,654 ============= =========== GMHE PLAN CLASS H COMMON - -------------- Outstanding at January 1, 1992.................................... $17.07-$30.25 5,061,209 Granted........................................................... 23.63- 25.38 1,927,860 Exercised......................................................... 17.07- 24.35 (136,764) Terminated........................................................ 17.07- 30.25 (335,550) ------------- ------------ Outstanding at December 31, 1992.................................. 17.07- 30.25 6,516,755 Granted........................................................... 28.00- 28.56 2,027,260 Exercised......................................................... 17.07- 30.25 (1,960,162) Terminated........................................................ 17.07- 30.25 (217,845) ------------- ------------ Outstanding at December 31, 1993.................................. 17.07- 30.25 6,366,008 Granted........................................................... 36.75 1,612,640 Exercised......................................................... 17.07- 30.25 (712,107) Terminated........................................................ 17.07- 36.75 (202,220) ------------- ------------ Outstanding at December 31, 1994.................................. $17.07-$36.75 7,064,321 ============= =========== Memo: Options exercisable at December 31, 1994.......................... -- 4,739,664 ============= ===========
NOTE 4. PENSIONS The Corporation and its subsidiaries have a number of defined benefit pension plans covering substantially all employees. Plans covering U.S. and Canadian represented employees generally provide benefits of negotiated stated amounts for each year of service as well as significant supplemental benefits for employees who retire with 30 years of service before normal retirement age. The benefits provided by the plans covering its U.S. and Canadian salaried employees, and employees in certain foreign locations, are generally based on years of service and the employee's salary history. The Corporation and its subsidiaries also have certain II-13 28 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED nonqualified pension plans covering executives which are based on targeted wage replacement percentages and are unfunded. The measurement date used for the Corporation's principal U.S. plans has been changed from October 1 to December 31, primarily to align the measurement date with the year-end financial statement date. The impact of this change on the Corporation's 1994 net income and Stockholders' Equity was not material. Measurement dates used for the Corporation's other U.S. plans are October 1 for EDS plans, and December 1 for Hughes' plans. For non-U.S. plans, the measurement dates used are October 1 for certain foreign plans and December 1 for Canadian plans. Plan assets are primarily invested in U.S. Government obligations, equity and fixed income securities, commingled pension trust funds, insurance contracts, and GM $1 2/3 par value and Class E common stock (valued as of the 1994 measurement date at $1,213.9 million and $1,024.6 million, respectively). The Corporation's funding policy with respect to its qualified plans is to contribute annually not less than the minimum required by applicable law and regulation. The Corporation made pension contributions to the U.S. plans of $7,655.6 million in 1994, $4,387.9 million in 1993, and $1,365.2 million in 1992. Total pension expense of the Corporation and its subsidiaries amounted to $3,677.4 million in 1994, $2,684.9 million in 1993, and $1,981.5 million in 1992. Programs for early retirement were offered to certain employees during 1994, 1993, and 1992. The pension related cost of these programs was $88.9 million, $659.3 million, and $564.1 million, respectively, of which $88.9 million, $229.4 million, and $359.5 million was expensed during 1994, 1993, and 1992, respectively. In 1993, the remainder was charged against certain training fund accruals, based upon an agreement with represented hourly employees, and in 1992, the remainder was charged against the restructuring reserve. Net periodic pension cost and total pension expense for 1994, 1993, and 1992 of U.S. plans and plans of subsidiaries outside the United States included the components shown in the tables below and on the following page.
U.S. PLANS NON-U.S. PLANS ---------- -------------- (DOLLARS IN MILLIONS) 1994 Benefits earned during the year..................................... $ 1,207.0 $ 223.7 Interest accrued on benefits earned in prior years.................. 4,466.6 617.7 Return on assets -- Actual gain.................................................... (1,161.3) (105.0) -- Plus deferred loss............................................. (3,312.0) (285.2) Net amortization.................................................... 1,323.5 174.0 ---------- -------------- Net periodic pension cost........................................... 2,523.8 625.2 Termination, curtailment, and settlement benefits................... 399.6 61.4 Other-primarily minor pension plans................................. 12.9 54.5 ---------- -------------- Total pension expense........................................ $ 2,936.3 $ 741.1 ======== ===========
II-14 29 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED
U.S. PLANS NON-U.S. PLANS ---------- -------------- (DOLLARS IN MILLIONS) 1993 Benefits earned during the year..................................... $ 939.9 $133.1 Interest accrued on benefits earned in prior years.................. 4,258.9 473.9 Return on assets -- Actual gain.................................................... (7,159.0) (775.6) -- Less deferred gain............................................. 3,329.1 453.1 Net amortization.................................................... 647.7 67.7 ---------- ------- Net periodic pension cost........................................... 2,016.6 352.2 Termination, curtailment, and settlement benefits................... 202.8 26.6 Other-primarily minor pension plans................................. 12.1 74.6 ---------- ------- Total pension expense........................................ $2,231.5 $453.4 ======== =========== 1992 Benefits earned during the year..................................... $ 859.9 $135.1 Interest accrued on benefits earned in prior years.................. 4,089.9 469.2 Return on assets -- Actual gain.................................................... (2,770.9) (147.6) -- Plus deferred loss............................................. (1,320.9) (217.0) Net amortization.................................................... 403.9 39.0 ---------- ------- Net periodic pension cost........................................... 1,261.9 278.7 Termination, curtailment, and settlement benefits................... 332.9 26.6 Other-primarily minor pension plans................................. (0.1) 81.5 ---------- ------- Total pension expense........................................ $1,594.7 $386.8 ======== ===========
II-15 30 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED The following tables reconcile the funded status of the Corporation's U.S. and non-U.S. plans for which SFAS No. 87, Employers' Accounting for Pensions, has been adopted with amounts recognized in the Corporation's Consolidated Balance Sheet at December 31, 1994 and 1993.
1994 1993 ----------------------- ----------------------- ASSETS ACCUM. ASSETS ACCUM. EXCEED BENEFITS EXCEED BENEFITS ACCUM. EXCEED ACCUM. EXCEED BENEFITS ASSETS BENEFITS ASSETS --------- ---------- --------- ---------- U.S. PLANS Actuarial present value of benefits based on service to date and present pay levels Vested........................................ $20,631.9 $ 28,799.4 $23,137.6 $ 30,991.6 Nonvested..................................... 1,654.7 6,488.0 1,392.2 7,503.8 --------- ---------- --------- ---------- Accumulated benefit obligation.................. 22,286.6 35,287.4 24,529.8 38,495.4 Additional amounts related to projected pay increases..................................... 1,985.5 192.4 2,189.8 213.0 --------- ---------- --------- ---------- Total projected benefit obligation (PBO) based on service to date............................ 24,272.1 35,479.8 26,719.6 38,708.4 Plan assets at fair value....................... 25,827.9 24,579.7 27,323.5 19,626.4 --------- ---------- --------- ---------- PBO (in excess of) less than plan assets........ 1,555.8 (10,900.1) 603.9 (19,082.0) Unamortized net amount resulting from changes in plan experience and actuarial assumptions..... 4,180.1 5,567.4 5,174.7 7,887.8 Unamortized prior service cost.................. 1,357.5 5,887.2 1,396.1 6,373.5 Unamortized net obligation (asset) at date of adoption...................................... (1,035.7) 624.3 (1,170.3) 944.1 Adjustment for unfunded pension liabilities..... -- (11,886.5) -- (14,992.4) --------- ---------- --------- ---------- Net prepaid pension cost (accrued liability) recognized in the Consolidated Balance Sheet......................................... $ 6,057.7 $(10,707.7) $ 6,004.4 $(18,869.0) ======== ========= ======== ========= NON-U.S. PLANS Actuarial present value of benefits based on service to date and present pay levels Vested........................................ $ 1,945.8 $ 4,535.9 $ 1,354.2 $ 5,558.0 Nonvested..................................... 68.8 148.0 56.1 234.7 --------- ---------- --------- ---------- Accumulated benefit obligation.................. 2,014.6 4,683.9 1,410.3 5,792.7 Additional amounts related to projected pay increases..................................... 316.6 425.4 132.0 526.4 --------- ---------- --------- ---------- Total PBO based on service to date.............. 2,331.2 5,109.3 1,542.3 6,319.1 Plan assets at fair value....................... 2,673.3 1,543.1 1,661.4 2,414.3 --------- ---------- --------- ---------- PBO (in excess of) less than plan assets........ 342.1 (3,566.2) 119.1 (3,904.8) Unamortized net amount resulting from changes in plan experience and actuarial assumptions..... 455.4 394.7 510.9 1,318.7 Unamortized prior service cost.................. 192.1 962.1 146.4 1,154.0 Unamortized net obligation (asset) at date of adoption...................................... (218.6) 229.9 (192.6) 137.2 Adjustment for unfunded pension liabilities..... -- (1,206.7) -- (2,112.7) --------- ---------- --------- ---------- Net prepaid pension cost (accrued liability) recognized in the Consolidated Balance Sheet......................................... $ 771.0 $ (3,186.2) $ 583.8 $ (3,407.6) ======== ========= ======== =========
II-16 31 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED The assumptions for non-U.S. plans were developed on a basis consistent with that for U.S. plans, adjusted to reflect prevailing economic conditions and interest rate environments. Assumptions used to determine the pension expense and the actuarial value of the PBO were:
DECEMBER 31, ------------ 1994 1993 ---- ---- Weighted average discount rate U.S. plans.................................................................... 8.5% 7.1% Non-U.S. plans................................................................ 9.0 8.0 Rate of increase in future compensation levels* U.S. plans.................................................................... 5.2 5.2 Non-U.S. plans................................................................ 4.8 5.0 Expected long-term rate of return on plan assets U.S. plans.................................................................... 10.0 10.1 Non-U.S. plans................................................................ 9.8 10.0
- ------------------------- * Benefits under the hourly plans are generally not based on wages and therefore no benefit escalation beyond existing negotiated or anticipated increases was included. NOTE 5. OTHER POSTRETIREMENT BENEFITS The Corporation and certain of its domestic subsidiaries maintain hourly and salaried benefit plans that provide postretirement medical, dental, vision, and life insurance to retirees and eligible dependents. These benefits are funded as incurred from the general assets of the Corporation. Effective January 1, 1992, the Corporation adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. This Statement requires that the cost of such benefits be recognized in the financial statements during the period employees provide service to the Corporation. The Corporation's previous practice was to recognize the cost of such postretirement benefits when incurred (i.e., pay-as-you-go method). The medical, dental, vision, and life insurance costs for active employees during active service are not covered by this Standard and are charged directly to expense on a pay-as-you-go basis. The cumulative effect of this accounting change as of January 1, 1992 was $33,116.1 million, or $20,837.7 million after-tax ($33.38 per share of $1 2/3 par value and $2.08 per share of Class H common stock). The incremental ongoing effect in 1992 of this accounting change was to increase the loss before cumulative effect of accounting changes by $2,198.8 million, or $1,384.2 million after-tax ($2.05 per share of $1 2/3 par value and $0.11 per share of Class H common stock). The incremental ongoing effect in 1993 reduced net income by $1,486.8 million after-tax ($2.08 per share of $1 2/3 par value and $0.14 per share of Class H common stock). The incremental ongoing effect in 1994 reduced net income by $1,398.6 million after-tax ($1.87 per share of $1 2/3 par value and $0.15 per share of Class H common stock). The Corporation has disclosed in the financial statements certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "accumulated postretirement benefit obligations", "liabilities", or "obligations". Notwithstanding the recording of such amounts and the use of these terms, the Corporation does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of the Corporation (other than pensions) represent legally enforceable liabilities of the Corporation. At the date of adoption, the substantive terms of such plans were generally consistent with the written plan provisions, except that the substantive plan included certain adjustments to the deductibles, co-pays, and premiums paid by salaried employees, which the Corporation implemented in 1992. II-17 32 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED Certain of the Corporation's subsidiaries outside of the U.S. have postretirement plans, although most participants are covered by government sponsored or administered programs, and the postretirement cost of such programs generally is not significant to the Corporation. The total non-pension postretirement benefit cost to the Corporation and its subsidiaries, other than the cumulative effect of adopting SFAS No. 106, amounted to $4,122.3 million in 1994, $4,163.4 million in 1993, and $3,700.7 million in 1992, and included the components set forth as follows:
1994 1993 1992 -------- -------- -------- (DOLLARS IN MILLIONS) Benefits earned during the year................................ $ 955.4 $ 811.5 $ 717.9 Interest accrued on benefits earned in prior years............. 3,114.2 3,177.5 2,982.8 Termination, curtailment, and settlement benefits.............. (233.0) 174.4 -- Amortization of net actuarial losses........................... 407.4 -- -- Amortization of prior service costs due to plan changes........ (121.7) -- -- -------- -------- -------- Total non-pension postretirement benefit cost................ $4,122.3 $4,163.4 $3,700.7 ======= ======= =======
The table below displays the components of the Corporation's postretirement benefit plans with the obligation recognized in the Consolidated Balance Sheet at December 31, 1994 and 1993:
DECEMBER 31, ---------------------- 1994 1993 --------- --------- (DOLLARS IN MILLIONS) Accumulated postretirement benefit obligation (APBO) attributable to Current retirees..................................................... $21,562.3 $24,133.2 Fully eligible active plan participants.............................. 3,984.7 3,913.3 Other active plan participants....................................... 11,196.1 17,577.1 --------- --------- APBO................................................................... 36,743.1 45,623.6 Unamortized prior service costs due to plan changes.................... 958.3 1,080.0 Unamortized net amount resulting from changes in plan experience and actuarial assumptions................................................ 2,316.8 (8,783.6) --------- --------- Net obligation recognized in the Consolidated Balance Sheet............ $40,018.2 $37,920.0 ======== ========
The following table summarizes the principal assumptions used in determining the actuarial value of the APBO:
DECEMBER 31, -------------- 1994 1993 ---- ---- Weighted average discount rate................................................ 8.8 % 7.0% Weighted average rate of increase in future compensation levels related to pay-related life insurance.................................................. 4.2 % 4.2% Base weighted average health-care cost trend rate (a): 1994........................................................................ 9.12% 1995........................................................................ 8.7 % Ultimate sustained weighted average health-care cost trend rate in 2006 (b)... 5.5 % 5.5%
- ------------------------- (a) Current year trend rate assumed at beginning of year is adjusted to actual in determining year-end obligations. (b) Rate decreases on a linear basis through 2002, reaches an ultimate weighted average trend rate in 2006. II-18 33 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED The following decreases would result from a one percentage point increase in the weighted average discount rate:
1994 1993 ------ ------ (DOLLARS IN MILLIONS) APBO..................................................................... $3,800 $5,500
The following increases would result from a one percentage point increase in the weighted average health-care cost trend rates:
1994 1993 ------ ------ (DOLLARS IN MILLIONS) APBO..................................................................... $3,950 $5,700 Service and interest components of postretirement expense................ $ 600 $ 550
NOTE 6. SPECIAL PROVISION FOR SCHEDULED PLANT CLOSINGS AND OTHER RESTRUCTURINGS The 1993 operating results included a pre-tax increase of $950.0 million to the Corporation's previously announced plant closing reserve ($589.0 million after taxes, or $0.83 per share of $1 2/3 par value common stock). The increase in the reserve resulted from changes in assumptions, primarily regarding the amount and duration of job security and supplemental unemployment benefits expected to be paid to employees, given the terms of the Corporation's collective bargaining agreements, which mainly include payments for employee job security, and facility holding costs. The 1992 operating results included a special restructuring charge of $1,237.0 million ($749.4 million after taxes, or $0.97 per share of $1 2/3 par value common stock and $1.87 per share of Class H common stock) primarily attributable to redundant facilities and related employment costs at Hughes. The special charge comprehends a reduction of Hughes worldwide employment, a major facilities consolidation, and a re-evaluation of certain business lines that no longer meet Hughes' strategic objectives. During 1994, 1993, and 1992, a net of $727.1 million, $1,127.2 million, and $974.3 million, respectively, was charged against these reserves, primarily related to employee job security costs. In addition, in 1994 and 1993 the GMHE restructuring reserve was increased by $35 million and $78 million, respectively, primarily due to changes in the estimated loss on disposition of two subsidiaries. In 1994, the reserve was decreased to reflect the discounting of only the postemployment benefits portion of the reserve due to the Corporation's use of discounting in its method of adoption of SFAS No. 112. At December 31, 1994, the discount was $401.9 million. NOTE 7. PROFIT SHARING PLANS The profit sharing formula provides a range of percentage payouts when the Corporation's manufacturing, wholesale marketing, defense, electronics, and computer service operations U.S. income before income taxes with the financing and insurance operations reflected on an equity basis exceeds various minimum annual returns on U.S. sales and revenues. Both the percentage payout and the minimum returns are as agreed to by the Corporation and eligible U.S. employees. GM's 1994 pre-tax income from U.S. operations will result in a profit sharing payout of approximately $185 million. GM's pre-tax losses from U.S. operations in 1993 and 1992 precluded a payment under the profit sharing formula. II-19 34 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE 8. UNITED STATES, FOREIGN, AND OTHER INCOME TAXES -- DEFERRED AND PAYABLE
1994 1993 1992 -------- ------- --------- (DOLLARS IN MILLIONS) Taxes estimated to be payable (refundable) currently U.S. Federal................................................. $ 544.7 ($230.5) $ 183.7 Foreign...................................................... 1,029.9 783.8 1,593.0 U.S. state and local......................................... 69.7 188.9 85.8 -------- ------- --------- Total..................................................... 1,644.3 742.2 1,862.5 -------- ------- --------- Deferred tax (benefits) liabilities -- net U.S. Federal................................................. 576.0 (86.2) (2,313.6) Increase in U. S. corporate income tax rate.................. -- (444.3) -- Foreign...................................................... 421.7 (28.3) 60.8 U.S. state and local......................................... 108.5 (5.3) (224.9) -------- ------- --------- Total..................................................... 1,106.2 (564.1) (2,477.7) -------- ------- --------- Investment tax credits amortized -- net U.S. Federal................................................. (48.1) (58.6) (72.5) Foreign...................................................... (7.8) (10.0) (24.8) -------- ------- --------- Total..................................................... (55.9) (68.6) (97.3) -------- ------- --------- Total taxes (credit).................................... $2,694.6* $ 109.5 $ (712.5)* ======== ======= =========
- ------------------------- *Excluding effect of accounting changes. Deferred income tax assets and liabilities for 1994 and 1993 reflect the impact of temporary differences between amounts of assets and liabilities for financial reporting purposes and the bases of such assets and liabilities as measured by tax laws. The net deferred tax asset in the U.S. was $18,171.0 million and $19,165.5 million at December 31, 1994 and 1993, respectively. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities at December 31, 1994 and 1993 are as follows:
1994 DEFERRED TAX 1993 DEFERRED TAX ------------------------ ------------------------ ASSETS LIABILITIES ASSETS LIABILITIES --------- ----------- --------- ----------- (DOLLARS IN MILLIONS) Postretirement benefits other than pensions....... $15,184.7 $ -- $14,330.7 $ -- Depreciation...................................... 465.3 4,915.6 442.7 4,477.7 Sales and product allowances...................... 1,615.2 241.3 1,887.1 367.7 Policy and warranty............................... 2,041.9 -- 2,165.0 -- Benefit plans..................................... 1,606.3 3,757.4 1,204.3 2,623.0 Lease transactions................................ -- 2,321.3 -- 1,704.7 Alternative minimum tax........................... 939.3 -- 638.8 -- Minimum pension liability adjustment.............. 2,213.4 -- 3,209.2 -- Capitalized research and experimentation.......... 780.3 -- 884.7 -- Special provision for scheduled plant closings and other restructurings............................ 1,807.4 -- 2,206.3 -- Profits on long-term contracts.................... 387.7 632.4 -- 543.3 U.S. state NOL carryforward....................... 314.2 -- 301.2 -- Financing losses.................................. 253.2 -- 332.5 -- Tax on unremitted profits......................... -- 353.1 -- 399.8 Miscellaneous foreign............................. 1,422.2 638.3 638.9 180.8 All other......................................... 4,721.6 2,681.7 4,712.9 2,815.5 --------- ----------- --------- ----------- Subtotal........................................ 33,752.7 15,541.1 32,954.3 13,112.5 Valuation allowance............................... (1,074.4) -- (1,027.6) -- --------- ----------- --------- ----------- Total deferred taxes......................... $32,678.3 $ 15,541.1 $31,926.7 $ 13,112.5 ========= ========== ========= ==========
Certain amounts for 1993 have been reclassified to conform with 1994 classifications. II-20 35 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED Provisions are made for estimated U.S. and foreign income taxes, less available tax credits and deductions, which may be incurred on the remittance of the Corporation's share of subsidiaries' undistributed earnings not deemed to be permanently invested. Taxes have not been provided on foreign subsidiaries' earnings which are deemed essentially permanently reinvested of approximately $5.8 billion at December 31, 1994 and 1993. Quantification of the deferred tax liability, if any, associated with permanently reinvested earnings is not practicable. Income (Loss) before income taxes included the following components:
1994 1993 1992 -------- -------- --------- (DOLLARS IN MILLIONS) U.S. income (loss)................................... $3,152.1 $ (512.7) $(6,767.3) Foreign income....................................... 5,201.2 3,088.0 3,434.2 -------- -------- --------- Total........................................... $8,353.3 $2,575.3 $(3,333.1) ======== ======== =========
The consolidated income tax (credit) was different than the amount computed using the U.S. statutory income tax rate for the reasons set forth in the table below:
1994 1993 1992 -------- -------- --------- (DOLLARS IN MILLIONS) Expected tax (credit) at U.S. statutory income tax rate(1)............................................ $2,923.7 $ 901.4 $(1,133.3) U.S. state and local income taxes.................... 130.8 129.7 (154.7) Deferred tax impact of Federal rate increase......... -- (444.3 ) -- Investment tax credits amortized..................... (62.2) (77.1 ) (98.0) NCRS charge -- primarily goodwill.................... -- -- 208.9 U.S. tax effect of foreign earnings and dividends.... 126.5 80.9 229.9 Foreign rates other than 35%/34%(1).................. (453.6) (433.4 ) 214.6 Taxes on unremitted earnings of subsidiaries......... 123.5 54.3 42.3 Equity effect in pre-tax income...................... (71.9) 60.4 172.8 Other adjustments.................................... (22.2) (162.4 ) (195.0) -------- -------- --------- Consolidated income tax (credit)................ $2,694.6(2) $ 109.5 $ (712.5)(2) ======== ======= =========
- ------------------------- (1) 35% in 1994 and 1993 and 34% in 1992. (2) Excluding effect of accounting changes. II-21 36 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE 9. EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO AND DIVIDENDS ON COMMON STOCKS Earnings (Loss) per share attributable to common stocks have been determined based on the relative amounts available for the payment of dividends to holders of $1 2/3 par value, Class E, and Class H common stocks. The allocation of earnings (loss) attributable to such common stocks and the calculation of the related amounts per share are computed by considering the weighted average number of common shares outstanding and common stock equivalents, to the extent the effect of such equivalents is not antidilutive. Operations of the incentive plans and the assumed exercise of stock options do not have a material dilutive effect on earnings per share at this time. Dividends on the $1 2/3 par value common stock are declared out of the earnings of GM and its subsidiaries, excluding the Available Separate Consolidated Net Income (Loss) of EDS and GMHE. Dividends on the Class E and Class H common stocks are declared out of the Available Separate Consolidated Net Income (Loss) of EDS and GMHE, respectively, earned since the acquisition by GM. The Available Separate Consolidated Net Income (Loss) of EDS and GMHE is determined quarterly and is equal to the separate consolidated net income (loss) of EDS and GMHE, respectively, excluding the effects of purchase accounting adjustments arising at the time of acquisition, multiplied by a fraction, the numerator of which is a number equal to the weighted average number of shares of Class E or Class H common stock outstanding during the period and the denominator of which was 481.7 million for Class E stock and 399.9 million for Class H stock during the fourth quarter of 1994. Comparable denominators for the fourth quarters of 1993 and 1992 were 480.6 million and 479.3 million, respectively, for Class E stock and 399.9 million for Class H stock in the fourth quarters of both years. The denominators used in determining the Available Separate Consolidated Net Income (Loss) of EDS and GMHE are adjusted as deemed appropriate by the Board of Directors to reflect subdivisions or combinations of the Class E and Class H common stocks and to reflect certain transfers of capital to or from EDS and GMHE. The Board's discretion to make such adjustments is limited by criteria set forth in GM's Certificate of Incorporation. In this regard, the Board has generally caused the denominators to decrease as shares are purchased by EDS or GMHE, and to increase as such shares are used, at EDS or GMHE expense, for EDS or GMHE employee benefit plans or acquisitions. Dividends may be paid on common stocks only when, as, and if declared by the Board of Directors in its sole discretion. The Board's policy with respect to $1 2/3 par value common stock is to distribute dividends based on the outlook and the indicated capital needs of the business. The current policy of the Board with respect to the Class E and Class H common stocks is to pay cash dividends approximately equal to 30% and 35% of the Available Separate Consolidated Net Income of EDS and GMHE, respectively, for the prior year. Notwithstanding the current dividend policy, the Board of Directors declared a dividend on the Class H common stock for each of the quarters of 1994, 1993, and 1992, which exceeded 35% of the Available Separate Consolidated Net Income (Loss) of GMHE for the preceding year (excluding the effect of the $749.4 million after-tax special restructuring charge at Hughes in 1992). For the purpose of determining earnings (loss) per share and amounts available for dividends on common stocks, the amortization of intangible assets arising from the acquisitions of Hughes and EDS is charged against earnings (loss) attributable to $1 2/3 par value common stock. The resulting effect on the 1994, 1993, and 1992 earnings (loss) attributable to $1 2/3 par value common stock was a net credit (charge) of $112.8 million, $149.8 million, and ($827.0) million, respectively, for the Hughes acquisition and $56.0 million, $39.2 million, and $61.5 million, respectively, for the EDS acquisition. Such amounts consist of the amortization of the intangible assets arising from the acquisitions, the profit on intercompany transactions, and the earnings (loss) of GMHE or EDS attributable to $1 2/3 par value common stock. II-22 37 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE 10. FINANCE RECEIVABLES -- NET The composition of finance receivables outstanding at December 31, 1994 and 1993 is summarized as follows:
1994 1993 --------- --------- (DOLLARS IN MILLIONS) U.S. Retail............................................................... $23,486.8 $22,322.2 Wholesale............................................................ 14,560.9 16,663.5 Leasing and lease financing.......................................... 1,613.4 2,372.1 Term loans to dealers and others..................................... 3,670.0 3,902.1 --------- --------- Total U.S....................................................... 43,331.1 45,259.9 --------- --------- Canada, Mexico, and International Retail............................................................... 7,747.9 6,846.4 Wholesale............................................................ 4,850.6 3,832.3 Leasing and lease financing.......................................... 1,666.7 1,491.3 Term loans to dealers and others..................................... 484.2 387.9 --------- --------- Total Canada, Mexico, and International......................... 14,749.4 12,557.9 --------- --------- Total finance receivables.............................................. 58,080.5 57,817.8 Less -- Unearned income................................................ (3,309.9) (3,195.1) Allowance for financing losses................................... (693.3) (748.0) --------- --------- Total finance receivables -- net................................. $54,077.3 $53,874.7 ======== ========
Retail, lease financing, and leasing receivable installments past due over 30 days amounted to $28.5 million and $79.2 million at December 31, 1994 and 1993, respectively. Installments on term loans to dealers and others past due over 30 days aggregated $70.7 million at December 31, 1994 and $82.0 million at December 31, 1993. The aggregate amount of total finance receivables maturing in each of the five years following December 31, 1994 is as follows: 1995-$34,453.1 million; 1996-$10,670.7 million; 1997-$7,361.2 million; 1998-$3,873.8 million; 1999-$1,531.4 million; and 2000 and thereafter-$190.3 million. The following table presents an analysis of the allowance for financing losses for 1994 and 1993:
1994 1993 ------- ------- (DOLLARS IN MILLIONS) Allowance for financing losses at beginning of the year................... $ 748.0 $ 817.0 ------- ------- Charge-offs U.S..................................................................... (310.7) (365.3) Other countries......................................................... (50.3) (72.6) ------- ------- Total charge-offs......................................................... (361.0) (437.9) Recoveries and other...................................................... 116.0 74.5 Transfers to other nonearning assets...................................... -- (40.2) Transfers from sold receivables allowance................................. 13.0 33.8 Provisions charged to income.............................................. 177.3 300.8 ------- ------- Allowance for financing losses at end of the year......................... $ 693.3 $ 748.0 ======= =======
II-23 38 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED GMAC sold finance receivables through special purpose subsidiaries. These subsidiaries generally retain a subordinated investment of no greater than 9% of the total receivables pool and market the remaining portion. These subordinated investments absorb losses related to sold receivables to the extent that such losses are greater than the excess cash flows from those receivables and cash reserves related to the sale transaction. Pre-tax gains relating to such sales recorded in Other Income (excluding limited recourse loss provisions which generally have been provided at the time the contracts were originally acquired) amounted to $30.8 million in 1994, $436.4 million in 1993, and $588.8 million in 1992. GMAC continues to service these receivables for a fee. GMAC's retail finance receivable servicing portfolio amounted to $9.9 billion, $14.9 billion, and $10.9 billion at December 31, 1994, 1993, and 1992, respectively. During 1994, GMAC completed its first wholesale receivable sale which included floating rate term notes sold to the public and floating rate subordinated certificates and a floating rate revolving note privately placed. Wholesale receivable sales resulted in a decrease in outstandings of $2.6 billion which comprised GMAC's wholesale finance servicing portfolio at December 31, 1994. The certificates, when taken together with the reserve fund, provide credit support for the notes. NOTE 11. GENERAL MOTORS ACCEPTANCE CORPORATION AND SUBSIDIARIES CONDENSED GMAC CONSOLIDATED BALANCE SHEET
1994 1993 --------- --------- (DOLLARS IN MILLIONS) Cash and cash equivalents............................................. $ 1,339.5 $ 4,028.1 Investments in securities............................................. 3,891.7 3,449.7 Finance receivables -- net............................................ 54,625.1 54,134.8 Net investment in operating leases.................................... 17,809.2 11,363.5 Receivables -- General Motors Corporation............................. 1,080.5 1,355.5 Other assets.......................................................... 6,791.4 6,419.2 --------- --------- Total Assets..................................................... $85,537.4 $80,750.8 ======== ======== Short-term debt....................................................... $35,114.8 $35,084.4 Accounts payable and other liabilities (including GM and affiliates -- $1,867.3 and $2,487.5).............................................. 10,989.3 10,125.3 Long-term debt........................................................ 31,539.6 27,688.8 Stockholder's equity.................................................. 7,893.7 7,852.3 --------- --------- Total Liabilities and Stockholder's Equity....................... $85,537.4 $80,750.8 ======== ========
II-24 39 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED CONDENSED GMAC CONSOLIDATED STATEMENT OF INCOME
1994 1993 1992 ----------- ----------- ----------- (DOLLARS IN MILLIONS) Financing Revenue Retail and lease financing.................................... $ 2,955.0 $ 3,673.4 $ 5,507.0 Leasing....................................................... 4,855.7 3,870.9 3,527.9 Wholesale and term loans...................................... 1,608.1 1,207.7 1,367.2 --------- --------- --------- Total financing revenue......................................... 9,418.8 8,752.0 10,402.1 Interest and discount........................................... 4,230.9 4,721.2 5,828.6 Depreciation on operating leases................................ 3,233.8 2,702.0 2,429.6 --------- --------- --------- Net financing revenue........................................... 1,954.1 1,328.8 2,143.9 Insurance premiums earned....................................... 1,127.6 1,107.2 1,159.7 Other income.................................................... 1,598.6 2,624.3 2,177.5 --------- --------- --------- Net Financing Revenue and Other................................. 4,680.3 5,060.3 5,481.1 Expenses........................................................ 3,240.5 3,487.5 3,380.1 --------- --------- --------- Income before income taxes...................................... 1,439.8 1,572.8 2,101.0 Income taxes.................................................... 512.7 591.7 882.3 --------- --------- --------- Income before cumulative effect of accounting changes........... 927.1 981.1 1,218.7 Cumulative effect of accounting changes......................... (7.4)* -- (282.6)* --------- --------- --------- Net Income...................................................... $ 919.7 $ 981.1 $ 936.1 ========= ========= ========= Cash dividends paid to GM....................................... $ 875.0 $ 1,250.0 $ 1,100.0 ========= ========= =========
- ------------------------- *GMAC adopted SFAS No. 112 effective January 1, 1994 and SFAS No. 106 effective January 1, 1992. CONDENSED GMAC CONSOLIDATED STATEMENT OF CASH FLOWS
1994 1993 1992 ----------- ----------- ----------- (DOLLARS IN MILLIONS) Net cash provided by operating activities....................... $ 4,735.8 $ 4,901.8 $ 5,166.8 ----------- ----------- ----------- Cash flows from investing activities Finance receivables -- acquisitions............................. (156,579.8) (103,396.3) (120,829.8) liquidations............................. 137,598.4 92,808.6 119,453.1 Notes receivable from General Motors Corporation................ 275.0 10,207.7 2,303.0 Operating leases -- acquisitions................................ (13,086.8) (6,971.3) (6,182.8) liquidations................................ 3,569.5 2,572.7 1,912.7 Investments in securities -- acquisitions....................... (11,715.3) (10,976.1) (9,714.8) liquidations....................... 11,495.2 10,676.7 9,717.7 Proceeds from sales of receivables.............................. 18,800.0 13,072.2 11,201.8 Due and deferred from receivable sales.......................... 322.9 (618.4) (854.3) Other........................................................... (612.5) 449.1 224.7 ----------- ----------- ----------- Net cash provided by (used in) investing activities............. (9,933.4) 7,824.9 7,231.3 ----------- ----------- ----------- Cash flows from financing activities Debt with original maturities 90 days and over -- proceeds...... 46,348.0 38,577.4 50,507.6 liquidations.. (46,541.3) (45,148.0) (54,475.9) Debt with original maturities less than 90 days -- net change... 3,540.8 (4,744.0) (5,866.1) Cash dividends paid to GM....................................... (875.0) (1,250.0) (1,100.0) Proceeds from issuance of stock to GM........................... 35.0 -- -- ----------- ----------- ----------- Net cash provided by (used in) financing activities............. 2,507.5 (12,564.6) (10,934.4) ----------- ----------- ----------- Effect of exchange rate changes on cash and cash equivalents.... 1.5 (5.1) (5.1) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents............ (2,688.6) 157.0 1,458.6 Cash and cash equivalents at beginning of the year.............. 4,028.1 3,871.1 2,412.5 ----------- ----------- ----------- Cash and cash equivalents at end of the year.................... $ 1,339.5 $ 4,028.1 $ 3,871.1 =========== =========== =========== Supplementary cash flow information Interest paid................................................. $ 4,223.7 $ 4,819.1 $ 5,824.0 Income taxes paid (refundable)................................ $ (16.0) $ 430.5 $ 541.8
II-25 40 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED INVESTMENTS IN SECURITIES As a result of GMAC's adoption of SFAS No. 115, GMAC's bonds, notes, certificates of deposit, other investments, and preferred stocks with mandatory redemption terms are carried at market value. In prior years, these investments were carried at amortized cost. Equity securities are carried at market (fair) value for both years.
DECEMBER 31, 1994 --------------------------------------------------- FAIR UNREALIZED UNREALIZED TYPE OF SECURITY COST VALUE GAINS LOSSES - -------------------------------------------------- -------- -------- ---------- ---------- (DOLLARS IN MILLIONS) Bonds, notes, and other securities United States Government and governmental agencies and authorities..................... $ 298.5 $ 285.0 $ 0.3 $ (13.8) States, municipalities, and political subdivisions................................. 1,813.3 1,747.4 38.0 (103.9) Other........................................... 1,417.0 1,387.3 4.2 (33.9) -------- -------- ---------- ---------- Total debt securities............................. 3,528.8 3,419.7 42.5 (151.6) Equity securities................................. 280.9 472.0 203.2 (12.1) -------- -------- ---------- ---------- Total investments in securities................... $3,809.7 $3,891.7 $245.7 $ (163.7) ======= ======= ======== ========
DECEMBER 31, 1993 --------------------------------------------------- Bonds, notes, and other securities United States Government and governmental agencies and authorities..................... $ 195.1 $ 206.3 $ 11.4 $ (0.2) States, municipalities, and political subdivisions................................. 1,997.7 2,137.6 146.2 (6.3) Other........................................... 735.9 781.0 48.3 (3.2) -------- -------- ---------- ---------- Total debt securities............................. 2,928.7 3,124.9 205.9 (9.7) Equity securities................................. 266.2 521.0 270.9 (16.1) -------- -------- ---------- ---------- Total investments in securities................... $3,194.9 $3,645.9 $476.8 $ (25.8) ======= ======= ======== ========
The distribution of maturities of GMAC's debt securities at December 31, 1994 and 1993 is summarized below:
1994 1993 --------------------- --------------------- FAIR FAIR MATURITY COST VALUE COST VALUE - -------------------------------------------------- -------- -------- -------- -------- (DOLLARS IN MILLIONS) Due in one year or less........................... $ 177.6 $ 179.0 $ 168.0 $ 173.5 Due after one year through five years............. 637.9 631.5 621.6 663.7 Due after five years through 10 years............. 997.9 968.8 876.6 931.8 Due after 10 years................................ 1,094.3 1,027.4 1,080.0 1,162.2 Mortgage-backed securities........................ 621.1 613.0 182.5 193.7 -------- -------- -------- -------- Total debt securities............................. $3,528.8 $3,419.7 $2,928.7 $3,124.9 ======= ======= ======= =======
Proceeds from the sale of debt securities amounted to $1,036.4 million in 1994, $2,093.4 million in 1993, and $1,690.3 million in 1992. Gross realized gains amounted to $15.0 million in 1994, $58.6 million in 1993, and $54.7 million in 1992. Gross realized losses amounted to $18.9 million in 1994, $13.3 million in 1993, and $5.4 million in 1992. II-26 41 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED Proceeds from the sale of equity securities amounted to $185.1 million in 1994, $258.6 million in 1993, and $232.4 million in 1992. Gross realized gains amounted to $80.5 million in 1994, $160.5 million in 1993, and $79.3 million in 1992. Gross realized losses amounted to $11.9 million in 1994, $2.3 million in 1993, and $6.3 million in 1992. NOTE 12. INVENTORIES MAJOR CLASSES OF INVENTORIES
1994 1993 --------- -------- (DOLLARS IN MILLIONS) Productive material, work in process, and supplies...................... $ 5,478.3 $4,671.9 Finished product, service parts, etc. .................................. 4,649.5 3,943.2 --------- -------- Total................................................................. $10,127.8 $8,615.1 ======== ======= Memo: Increase in LIFO inventories if valued at first-in, first-out (FIFO)............................................................ $ 2,535.9 $2,519.0 ======== =======
Inventories are stated generally at cost, which is not in excess of market. The cost of substantially all U.S. inventories other than the inventories of Saturn Corporation (Saturn) and GMHE is determined by the last-in, first-out (LIFO) method. The cost of non-U.S., Saturn, and GMHE inventories is determined generally by FIFO or average cost methods. As a result of decreases in U.S. inventories, certain inventory quantities carried at lower LIFO costs prevailing in prior years, as compared with the costs of current purchases, were liquidated in 1993 and 1992. These inventory adjustments improved pre-tax operating results by approximately $134.4 million in 1993, primarily from the sale of the Allison Gas Turbine Division, and $294.7 million in 1992. NOTE 13. REAL ESTATE, PLANTS, AND EQUIPMENT
ESTIMATED USEFUL LIVES (YEARS) 1994 1993 ---------------- --------- --------- (DOLLARS IN MILLIONS) Real estate, plants, and equipment Land................................................... -- $ 799.1 $ 806.8 Land improvements...................................... 20-31 1,849.7 1,830.9 Leasehold improvements -- less amortization............ 8-10 306.8 281.3 Buildings.............................................. 29-40 13,651.6 13,577.0 Machinery and equipment................................ 5-27 43,890.2 43,816.7 Furniture and office equipment......................... 8-20 5,306.7 4,453.1 Capitalized leases..................................... 5-40 1,199.7 1,135.8 Construction in progress............................... -- 2,804.1 2,064.8 --------- --------- Total............................................... $69,807.9 $67,966.4 ======== ========
The lease payments to be received relate to equipment on operating leases maturing in each of the five years following December 31, 1994 and are as follows: 1995-$4,988.8 million; 1996-$3,267.2 million; 1997-$1,415.5 million; 1998-$229.9 million; and 1999-$99.4 million. II-27 42 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE 14. INTANGIBLE ASSETS
1994 1993 --------- --------- (DOLLARS IN MILLIONS) Pensions (Note 4)...................................................... $ 7,373.8 $ 8,627.0 Purchased mortgage servicing rights.................................... 222.3 194.9 Acquisition of Hughes.................................................. 3,005.2 3,129.1 Goodwill relating to all other acquisitions............................ 1,214.1 1,040.5 All Other.............................................................. 98.4 115.4 --------- --------- Total............................................................. $11,913.8 $13,106.9 ======== ========
Purchased mortgage servicing rights are being amortized over periods that generally match future net mortgage servicing revenues. Intangible assets arising from the acquisition of Hughes relate to patents and related technology and other intangible assets which were originally recorded in 1985 and are principally being amortized over 40 years. Goodwill resulting from other past acquisitions is being amortized over periods of eight to 40 years. Certain purchased software is being amortized over five to eight years. In 1992, GMHE acquired the missile business of General Dynamics Corporation in exchange for 21.5 million shares of Class H common stock and cash of $62.8 million. The acquisition was accounted for as a purchase and, accordingly, the operating results of such operations have been consolidated since the acquisition date. The excess of the purchase price over the fair value of the acquired net assets, and the pro forma effect on 1992 operating results, were not material. NOTE 15. NOTES AND LOANS PAYABLE
WEIGHTED AVERAGE INTEREST RATE(1) 1994 1993 ---------------- --------- --------- (DOLLARS IN MILLIONS) Notes, loans, and debentures Payable within one year Current portion of long-term debt.................. 8.1% $ 8,381.8 $13,580.8 Commercial paper(2)................................ 6.1% 18,644.4 14,521.1 All other(2)....................................... 6.5% 9,213.9 8,493.6 Payable beyond one year 1995............................................. -- -- 7,958.9 1996............................................. 7.2% 11,953.4 7,972.5 1997............................................. 7.0% 10,158.8 6,168.9 1998............................................. 6.8% 2,795.6 1,875.1 1999............................................. 7.5% 4,151.2 2,121.6 2000 and after 8.5% 9,367.6 8,639.3 Unamortized discount.................................. (936.5) (890.6) --------- --------- Total......................................... $73,730.2 $70,441.2 ======== ========
- ------------------------- (1) The weighted average interest rate includes the impact of interest rate swap agreements. (2) The weighted average interest rate for commercial paper and all other short-term borrowings was 3.6% and 4.9%, respectively, at December 31, 1993. II-28 43 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED After consideration of foreign currency swaps, the above 1994 maturities, payable beyond one year, include $6.7 billion in currencies other than the U.S. Dollar, primarily the Canadian Dollar ($1.9 billion) and German Mark ($2.1 billion). At December 31, 1994 and 1993, Notes and Loans Payable include $62.0 billion and $62.8 billion of obligations with fixed rates, and $11.7 billion and $7.6 billion of obligations with variable interest rates (predominantly based on the London Interbank Offering Rate or LIBOR), after considering the impact of interest rate swap agreements. To achieve its desired balance between fixed and variable rate debt, the Corporation has entered into interest rate swap, interest rate cap, interest rate collar, and swaption agreements. The notional amounts of such agreements as of December 31, 1994 were approximately $5,482 million ($4,195 million pay variable and $1,287 million pay fixed), $440 million, $50 million, and $741 million, respectively. The notional amounts of such agreements as of December 31, 1993 were approximately $4,709 million ($3,471 million pay variable and $1,238 million pay fixed), $790 million, zero, and $1,191 million, respectively. The Corporation and certain of its subsidiaries maintain or otherwise have available to them through asset securitization programs various syndicated bank credit facilities which in aggregate provide $25.9 billion of committed bank credit availability. The terms of the facilities range from one to five years, with a weighted average term of approximately three years. Facility and commitment fees on the syndicated credit facilities average 0.16% per annum over the term of the various agreements based on the Corporation's current credit rating. The facilities contain certain covenants. The Corporation and its subsidiaries were in compliance with these covenants at December 31, 1994. The Corporation and its subsidiaries maintain other bank lines of credit, some of which are supported by bank commitment fees and compensating balances. Compensating balances, which are not subject to withdrawal restrictions, are maintained at a level required to provide the same income that a fee would generate. Total commitment and facilities fees incurred by the Corporation amounted to $49.3 million in 1994, $44.5 million in 1993, and $28.5 million in 1992. Total compensating balances maintained by the Corporation in lieu of commitment fees averaged $23.5 million in 1994 and $87.2 million in 1993. At December 31, 1994, unused short-term credit facilities totaled approximately $18.5 billion and unused long-term credit facilities totaled approximately $19.2 billion. Total interest cost incurred in 1994, 1993, and 1992 amounted to $5,465.8 million, $5,717.8 million, and $7,140.4 million, respectively, of which $33.9 million, $44.1 million, and $43.6 million, related to certain real estate, plants, and equipment acquired in those years, was capitalized. II-29 44 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE 16. OTHER LIABILITIES AND DEFERRED CREDITS
1994 1993 --------- --------- (DOLLARS IN MILLIONS) Employee benefits...................................................... $ 4,630.8 $ 2,597.7 Warranties, dealer and customer allowances, claims, discounts, etc..... 13,290.2 12,552.1 Taxes, other than income taxes......................................... 1,569.8 1,433.4 Payrolls............................................................... 1,844.4 1,976.7 Unpaid insurance losses, loss adjustment expenses, and unearned insurance premiums................................................... 2,985.6 2,906.8 Plant closings and other restructurings reserve (excludes environmental)....................................................... 3,103.6 4,151.7 Interest............................................................... 3,023.2 2,699.4 Deferred credits....................................................... 1,666.3 1,228.5 Governmental and other contract related................................ 777.8 802.6 Environmental cleanup.................................................. 693.7 659.3 Industrial Development Bonds........................................... 632.9 619.7 Other.................................................................. 8,649.0 6,846.9 --------- --------- Total............................................................. $42,867.3 $38,474.8 ========= =========
Certain amounts for 1993 have been reclassified to conform with 1994 classifications. NOTE 17. STOCKHOLDERS' EQUITY In June 1994, General Motors converted all 17,825,000 outstanding shares of its Series A Conversion Preference Stock (Preference Equity Redemption Cumulative Stock or PERCS) into shares of GM $1 2/3 par value common stock. GM originally issued this stock in June 1991 at a price of $41.375 per share. Holders of the Preference Stock received 0.992435 shares of GM $1 2/3 par value common stock for each share of Preference Stock called for conversion, plus $0.1655 in cash in payment of the accrued and unpaid dividend (covering the June 1 to June 18 period). Fractional shares of GM $1 2/3 par value common stock were paid in cash. A total of 17.7 million shares of GM $1 2/3 par value common stock was issued in this conversion. Holders of Series C Depositary Shares are entitled to receive cumulative preferential dividends from the date of issue at the quarterly rate of $0.8125 per share. The Series C Depositary Shares are convertible at any time at the option of the holder into shares of Class E common stock. Commencing in February 1996, GM may, at its option, call any or all of the outstanding Series C Depositary Shares, at specified prices declining to $50 per share in 2002 and thereafter, payable in cash, in shares of $1 2/3 par value common stock, or in a specified combination thereof. Holders of $1 2/3 par value, Class E, and Class H common stocks are entitled to one, one-eighth, and one-half vote per share, respectively, on all matters submitted to the stockholders for a vote. The liquidation rights of common stockholders are based on per-share liquidation units of the various classes and are subject to certain adjustments if outstanding common stock is subdivided, by stock split or otherwise, or if shares of one class of common stock are issued as a dividend to holders of another class of common stock. At December 31, 1994, each share of $1 2/3 par value, Class E, and Class H common stocks was entitled to a liquidation unit of the same as the vote per share. Holders of GM Class E and Class H common stock have no direct rights in the equity or assets of EDS or GMHE, but rather have rights in the equity and assets of GM (which includes 100% of the stock of EDS and GMHE). GM's Certificate of Incorporation provides, generally, that if at any time GM should sell, liquidate, or otherwise dispose of substantially all of EDS, Hughes, or the other business of GMHE, shares of the Corporation's $1 2/3 par value common stock will automatically be exchanged for Class E or Class H common stock, respectively. II-30 45 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED After December 31, 1994 or December 31, 1995, the Board of Directors may exchange $1 2/3 par value common stock for Class E or Class H common stock, respectively, if the Board has declared and paid certain minimum cash dividends during each of the last five years preceding the exchange. In the event any of the aforementioned exchanges were to occur, the GM Certificate of Incorporation provides that the Class E or Class H common stockholders would receive $1 2/3 par value common stock having a market value at the time of the exchange equal to 120% of the market value of the Class E or Class H common stock exchanged. At December 31, 1994, the Corporation's capital surplus plus net income retained for use in the business (less accumulated deficit) was $9,013.8 million, $3,752.1 million, and $2,169.3 million on $1 2/3 par value, Class E, and Class H common stocks, respectively, as allocated pursuant to GM's Certificate of Incorporation. However, consistent with Delaware law, which governs the amount legally available for the payment of dividends on the Corporation's common stock, the Board of Directors has determined that such amount is materially higher than the Corporation's capital surplus plus net income retained for use in the business (less accumulated deficit). Stocks subject to repurchase include $450.0 million at December 31, 1994 and 1993, related to Class H common stock subject to put options by the Howard Hughes Medical Institute (the "Institute"). The Institute has put options for its Class H common stock holdings exercisable at $30 per share on March 1, 1995 for 15 million shares. The Corporation holds an option to call the Institute's shares until February 28, 1995 at a call price of $37.50 per share. During 1992, certain redeemable Series H preference stocks totaling $243.9 million were redeemed by the holders of such securities.
1994 1993 1992 --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Capital Stock Preferred Stock, without par value, cumulative dividends (authorized, 6,000,000 shares) $5.00 series, stated value $100 per share, redeemable at Corporation option at $120 per share Outstanding at beginning of the year................. $ -- $ 153.0 $ 153.0 Redeemed by the Corporation during the year.......... -- (153.0) -- --------- --------- --------- Outstanding at end of the year (1,530,194 shares in 1992)............................................. -- -- 153.0 --------- --------- --------- $3.75 series, stated value $100 per share, redeemable at Corporation option at $100 per share Outstanding at beginning of the year................. -- 81.4 81.4 Redeemed by the Corporation during the year.......... -- (81.4) -- --------- --------- --------- Outstanding at end of the year (814,100 shares in 1992)............................................. -- -- 81.4 --------- --------- --------- Preference Stock, $0.10 par value (authorized, 100,000,000 shares) E series, convertible one-for-four at fixed dates into Class E Common Stock Issued at beginning of the year...................... -- 0.3 1.0 Redeemed by the Corporation (301 shares in 1993)..... -- -- -- Converted into shares of Class E Common Stock........ -- (0.3) (0.7) --------- --------- --------- Issued at end of the year (3,250,906 E-I Series shares in 1992)................................... -- -- 0.3 --------- --------- ---------
II-31 46 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1994 1993 1992 --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Series A Conversion, mandatorily convertible one-for-one on July 1, 1994 into $1 2/3 par value common stock Issued at beginning of the year (17,825,000 shares)........................................... $ 1.8 $ 1.8 $ 1.8 Converted into shares of $1 2/3 par value common stock (17,825,000 shares)......................... (1.8) -- -- --------- --------- --------- Issued at end of the year (17,825,000 shares in 1993 and 1992)......................................... -- 1.8 1.8 --------- --------- --------- Series B 9 1/8% Depositary Shares, stated value $25 per share, redeemable at Corporation option on or after January 1, 1999 -- issued at end of the year (44,300,000 shares, equivalent to 11,075,000 shares of nonconvertible Series B 9 1/8% Preference Stock, stated value $100 per share)......................... 1.1 1.1 1.1 --------- --------- --------- Series C Depositary Shares, liquidation preference $50 per share, convertible one for 1.4078 into Class E Common Stock, callable at Corporation option on or after February 19, 1996 -- issued during 1992 and issued at end of the year (31,880,600 shares, equivalent to 3,188,060 shares of Series C Convertible Preference Stock)........................ 0.3 0.3 0.3 --------- --------- --------- Series D 7.92% Depositary Shares, stated value $25 per share, redeemable at Corporation option on or after August 1, 1999 -- issued during 1992 and issued at end of the year (15,700,000 shares, equivalent to 3,925,000 shares of Series D 7.92% Preference Stock)............................................... 0.4 0.4 0.4 --------- --------- --------- Series G 9.12% Depositary Shares, stated value $25 per share, redeemable at Corporation option on or after January 1, 2001 -- issued during 1992 and issued at end of the year (23,000,000 shares, equivalent to 5,750,000 shares of Series G 9.12% Preference Stock)............................................... 0.6 0.6 0.6 --------- --------- --------- Common Stock, $1 2/3 par value (authorized, 2,000,000,000 shares) Issued at beginning of the year (720,105,471 shares in 1994)................................................ 1,200.2 1,178.1 1,034.9 Issued in a public offering (57,000,000 shares)........ -- -- 95.0 Issued during the year (16,568,663 shares in 1994)..... 27.6 22.1 48.2 Series A conversion (17,671,648 shares in 1994)........ 29.4 -- -- --------- --------- --------- Issued at end of the year (754,345,782 shares in 1994, 720,105,471 in 1993, and 706,831,567 in 1992)........ 1,257.2 1,200.2 1,178.1 --------- --------- --------- Class E Common Stock, $0.10 par value (authorized, 1,000,000,000 shares) Issued at beginning of the year (263,089,320 shares in 1994)................................................ 26.3 24.2 10.4 Issued during the year (5,035,935 shares in 1994)...... 0.5 2.1 3.4 Two-for-one stock split in the form of 100% stock dividend (104,509,016 shares)........................ -- -- 10.4 --------- --------- --------- Issued at end of the year (268,125,255 shares in 1994, 263,089,320 in 1993, and 242,168,653 in 1992)........ $ 26.8 $ 26.3 $ 24.2 --------- --------- ---------
II-32 47 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1994 1993 1992 --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Class H Common Stock, $0.10 par value (authorized, 600,000,000 shares) Issued at beginning of the year (75,705,433 shares in 1994)................................................ $ 7.6 $ 7.0 $ 3.8 Issued during the year (3,014,881 shares in 1994)...... 0.3 0.6 3.3 Reclassification of shares subject to repurchase from the Howard Hughes Medical Institute.................. -- -- (0.1) Reacquired on the open market (292 shares in 1994)..... -- -- -- --------- --------- --------- Issued at end of the year (78,720,022 shares in 1994, 75,705,433 in 1993, and 70,240,927 in 1992).......... 7.9 7.6 7.0 --------- --------- --------- Total capital stock at end of the year............... $ 1,294.3 $ 1,238.3 $ 1,448.2 ========= ========= ========= Capital Surplus (principally additional paid-in capital) Balance at beginning of the year.......................... $12,003.4 $10,971.2 $ 4,710.4 Preference stock -- amounts in excess of par value of Depositary shares issued............................... -- -- 2,496.8 Series E shares converted.............................. -- (171.2) (343.6) Series A shares converted.............................. (720.5) -- -- $1 2/3 par value common stock -- amounts in excess of par value of Shares issued.......................................... 870.2 612.6 2,956.5 Series A shares converted.............................. 692.8 -- -- Class E Common Stock Amounts in excess of par value of Series E shares converted............................ -- 170.2 335.6 Shares issued during the year........................ 188.7 257.2 265.8 Amount transferred to Class E Common Stock -- 100% stock dividend....................................... -- -- (10.4) Class H Common Stock Repurchase price in excess of par value Shares reacquired on the open market................. -- (0.6) (7.2) Reclassification of shares subject to repurchase from the Institute..................................... -- -- (15.0) Amounts in excess of par value of shares issued........ 114.8 164.0 582.3 --------- --------- --------- Balance at end of the year........................ $13,149.4 $12,003.4 $10,971.2 ========= ========= ========= Net Income Retained for Use in the Business (Accumulated Deficit) Balance at beginning of the year.......................... $(2,002.9) $(3,354.2) $21,525.2 --------- --------- --------- Income (Loss) before cumulative effect of accounting changes................................................ 5,658.7 2,465.8 (2,660.6) Cumulative effect of adopting SFAS Nos. 112 and 106, respectively........................................... (758.1) -- (20,837.7) --------- --------- --------- Net income (loss)......................................... 4,900.6 2,465.8 (23,498.3) --------- --------- --------- Total................................................ $ 2,897.7 $ (888.4) $(1,973.1) --------- --------- ---------
II-33 48 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1994 1993 1992 --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Cash dividends Preferred Stock, $5.00 series, $1.68 per share in 1993 and $5.00 in 1992.................................... $ -- $ 2.6 $ 7.7 Preferred Stock, $3.75 series, $1.26 per share in 1993 and $3.75 in 1992.................................... -- 1.0 3.0 Preference Stock, E-I series, $1.42 per share in 1993 and $2.86 in 1992.................................... -- 4.6 9.3 Preference Stock, E-II series, $2.15 per share in 1992................................................. -- -- 7.0 Preference Stock, E-III series, $1.08 per share in 1992................................................. -- -- 3.5 Preference Stock, H series, $1.08 per share in 1992.... -- -- 3.5 Preference Stock, Series A Conversion, $1.66 per share in 1994 and $3.31 in 1993 and 1992................... 32.5 59.0 59.0 Depositary Shares, Series B, $2.28 per share in 1994 and 1993 and $2.38 in 1992........................... 101.1 101.1 105.3 Depositary Shares, Series C, $3.25 per share in 1994 and 1993 and $2.82 in 1992........................... 103.6 103.6 89.8 Depositary Shares, Series D, $1.98 per share in 1994 and 1993 and $0.89 in 1992........................... 31.1 31.1 13.9 Depositary Shares, Series G, $2.28 per share in 1994 and $2.34 per share in 1993.......................... 52.4 53.8 -- $1 2/3 par value common stock, $0.80 per share in 1994 and 1993 and $1.40 in 1992........................... 592.6 565.8 945.4 Class E Common Stock, $0.48 per share in 1994, $0.40 in 1993, and $0.36 in 1992.............................. 124.8 97.2 76.1 Class H Common Stock, $0.80 per share in 1994 and $0.72 in 1993 and 1992..................................... 73.8 64.1 53.3 --------- --------- --------- Total cash dividends................................. 1,111.9 1,083.9 1,376.8 --------- --------- --------- Less accumulation of redemption value of Series H preference stock....................................... -- -- 4.3 --------- --------- --------- Less redemption price of preferred stock in excess of stated value........................................... -- 30.6 -- --------- --------- --------- Balance at end of the year........................ $ 1,785.8 $(2,002.9) $(3,354.2) ========= ========= ========= Minimum Pension Liability Adjustment (Note 4) Balance at beginning of the year.......................... $(5,311.2) $(2,925.3) $ (936.8) Change during the year.................................... 1,762.8 (2,385.9) (1,988.5) --------- --------- --------- Balance at end of the year........................ $(3,548.4) $(5,311.2) $(2,925.3) ========= ========= ========= Accumulated Foreign Currency Translation Adjustments Balance at beginning of the year.......................... $ (494.4) $ (155.9) $ 467.4 Changes during the year................................... 394.0 (338.5) (623.3) --------- --------- --------- Balance at end of the year........................ $ (100.4) $ (494.4) $ (155.9) ========= ========= ========= Net Unrealized Gains (Losses) on Investments in Certain Debt and Equity Securities Balance at beginning of the year.... $ 164.3 $ 241.6 $ 274.0 Cumulative effect of adopting SFAS No. 115................ 241.0 -- -- Changes during the year................................... (162.2) (77.3) (32.4) --------- --------- --------- Balance at end of the year........................ $ 243.1 $ 164.3 $ 241.6 ========= ========= ========= Total Stockholders' Equity.................................. $12,823.8 $ 5,597.5 $ 6,225.6 ========= ========= =========
II-34 49 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED
1994 1993 1992 --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Memo: Retained earnings (accumulated deficit) attributable to: $1 2/3 par value Common Stock........................... $ (778.8) $(4,080.1) $(5,021.0) Class E Common Stock.................................... 1,663.9 1,344.3 1,074.3 Class H Common Stock.................................... 900.7 732.9 592.5 --------- --------- --------- Total.............................................. $ 1,785.8 $(2,002.9) $(3,354.2) ========== ========== ==========
NOTE 18. SEGMENT REPORTING INDUSTRY SEGMENTS While the major portion of the Corporation's operations is derived from the automotive products industry segment, GM also has financing and insurance operations and produces products and provides services in other industry segments. The automotive products segment consists of the design, manufacture, assembly, and sale of automobiles, trucks, and related parts and accessories. The financing and insurance operations assist in the merchandising of General Motors' products as well as other products. GMAC and its subsidiaries offer financial services and certain types of insurance to dealers and customers. In addition, GMAC and its subsidiaries are engaged in mortgage banking and investment services. The other products segment consists of military vehicles, radar and weapon control systems, guided missile systems, and defense and commercial satellites; the design, installation, and operation of business information and telecommunication systems; as well as the design, development, and manufacture of locomotives. Because of the high degree of integration, substantial interdivisional and intersegment transfers of materials and services are made. Intersegment sales and revenues are made at negotiated selling prices. Substantially all of the products in the automotive segment are marketed through retail dealers and through distributors and jobbers in the United States, other North America (Canada and Mexico), and through distributors and dealers overseas. Information concerning operations by industry segment follows:
FINANCING & AUTOMOTIVE INSURANCE OTHER PRODUCTS OPERATIONS PRODUCTS TOTAL ---------- ------------- --------- ---------- (DOLLARS IN MILLIONS) 1994 Net Sales and Revenues Outside............................................ $123,253.4 $ 9,418.8 $17,919.3 $150,591.5 Intersegment....................................... 416.9 -- 3,547.2 -- ---------- ------------- --------- ---------- Total............................................ $123,670.3 $ 9,418.8 $21,466.5 $150,591.5(1) ---------- ------------- --------- ---------- Operating Profit..................................... $ 6,116.0 N/A(2) $ 2,105.3 $ 8,221.3 ---------- ------------- --------- ---------- Identifiable Assets at Year-End...................... $ 88,064.5 $84,554.6 $23,076.5 $195,695.6 ---------- ------------- --------- ---------- Depreciation and Amortization........................ $ 5,655.2 $ 3,301.5 $ 1,294.6 $ 10,251.3 ---------- ------------- --------- ---------- Capital Expenditures................................. $ 5,545.4 $ 132.8 $ 1,546.9 $ 7,225.1 ========== ============ ========= ========== 1993 Net Sales and Revenues Outside............................................ $107,908.5 $ 8,752.0 $16,961.4 $133,621.9 Intersegment....................................... 118.7 -- 3,323.9 -- ---------- ------------- --------- ---------- Total............................................ $108,027.2 $ 8,752.0 $20,285.3 $133,621.9(1) ---------- ------------- --------- ---------- Operating Profit..................................... $ 1,625.7 N/A(2) $ 904.7 $ 2,530.4 ---------- ------------- --------- ---------- Identifiable Assets at Year-End...................... $ 81,009.0 $79,352.3 $23,753.8 $184,115.1 ---------- ------------- --------- ---------- Depreciation and Amortization........................ $ 5,281.9 $ 2,892.6 $ 1,267.5 $ 9,442.0 ---------- ------------- --------- ---------- Capital Expenditures................................. $ 5,164.8 $ 118.5 $ 1,187.4 $ 6,470.7 ========== ============ ========= ==========
- ------------------------- (1) After elimination of intersegment transactions. (2) Financing and Insurance Operations do not report Operating Profit. II-35 50 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED
FINANCING & AUTOMOTIVE INSURANCE OTHER PRODUCTS OPERATIONS PRODUCTS TOTAL ---------- ------------- --------- ---------- (DOLLARS IN MILLIONS) 1992 Net Sales and Revenues Outside............................................ $102,813.9 $10,402.1 $15,316.7 $128,532.7 Intersegment....................................... 191.0 -- 3,349.4 -- ---------- --------- --------- ---------- Total............................................ $103,004.9 $10,402.1 $18,666.1 $128,532.7(1) ---------- --------- --------- ---------- Operating Profit (Loss).............................. $ (3,360.1) N/A(2) $ 122.7 $ (3,237.4) ---------- --------- --------- ---------- Identifiable Assets at Year-End...................... $ 83,504.6 $81,422.0 $23,948.1 $188,874.7 ---------- --------- --------- ---------- Depreciation and Amortization........................ $ 5,209.1 $ 2,595.5 $ 1,154.4 $ 8,959.0 ---------- --------- --------- ---------- Capital Expenditures................................. $ 5,349.1 $ 149.7 $ 1,090.8 $ 6,589.6 ========== ========= ========= ==========
- ------------------------- (1) After elimination of intersegment transactions. (2) Financing and Insurance Operations do not report Operating Profit. A reconciliation of outside net sales and revenues to Total Net Sales and Revenues and of operating profit (loss) to Income (Loss) before Income Taxes detailed in the Statement of Consolidated Operations and a reconciliation of identifiable assets to Total Assets displayed in the Consolidated Balance Sheet follow:
1994 1993 1992 ---------- ---------- ---------- (DOLLARS IN MILLIONS) Outside Net Sales and Revenues reported on the prior page and above.............................................. $150,591.5 $133,621.9 $128,532.7 Other Income............................................. 4,359.7 4,597.6 3,709.5 ---------- ---------- ---------- Total Net Sales and Revenues...................... $154,951.2 $138,219.5 $132,242.2 ========== ========== ========== Total Operating Profit (Loss) reported on the prior page and above.............................................. $ 8,221.3 $ 2,530.4 $ (3,237.4) Financing and Insurance Operations....................... 1,439.8 1,572.8 2,101.0 Other Corporate Income and Expenses Less Intersegment Transactions........................................... (1,307.8) (1,527.9) (2,196.7) ---------- ---------- ---------- Income (Loss) before Income Taxes................. $ 8,353.3 $ 2,575.3 $ (3,333.1) ========== ========== ========== Identifiable Assets reported on the prior page and above.................................................. $195,695.6 $184,115.1 $188,874.7 Corporate Assets......................................... 5,648.2 7,207.9 4,588.6 Eliminations............................................. (2,745.1) (3,122.1) (3,267.3) ---------- ---------- ---------- Total Assets...................................... $198,598.7 $188,200.9 $190,196.0 ========== ========== ==========
GEOGRAPHIC SEGMENTS Net sales and revenues, net income (loss) before cumulative effect of accounting changes, net income (loss), total and net assets, and average number of employees in the U.S., Other North America (Canada and Mexico), and in locations outside North America are summarized on the next page. Net income (loss) before cumulative effect of accounting changes and net income (loss) are after provisions for deferred income taxes applicable to that portion of the undistributed earnings deemed to be not permanently invested, less available tax credits and deductions, and appropriate consolidating adjustments. Interarea sales and revenues are made at negotiated selling prices. Average number of employees for 1992 does not include NCRS employees. II-36 51 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED
OTHER UNITED NORTH LATIN ALL STATES AMERICA EUROPE AMERICA OTHER TOTAL* ---------- --------- --------- -------- -------- ---------- (DOLLARS IN MILLIONS) 1994 Net Sales and Revenues Outside (excluding GMAC)................ $101,185.6 $ 8,376.7 $24,849.5 $5,304.6 $1,456.4 $141,172.8 GMAC and related operations............. 6,531.2 781.0 1,894.2 57.2 155.2 9,418.8 Other income............................ 3,193.5 177.7 483.5 354.8 150.1 4,359.6 ---------- --------- --------- -------- -------- ---------- Subtotal outside.................... 110,910.3 9,335.4 27,227.2 5,716.6 1,761.7 154,951.2 Interarea............................... 11,476.9 13,607.4 753.7 90.2 59.2 -- ---------- --------- --------- -------- -------- ---------- Total............................... $122,387.2 $22,942.8 $27,980.9 $5,806.8 $1,820.9 $154,951.2 ========== ========= ========= ======== ======== ========== Income Before Cumulative Effect of Accounting Change....................... $ 2,075.5 $ 1,177.3 $ 1,337.1 $ 828.5 $ 256.9 $ 5,658.7 ---------- --------- --------- -------- -------- ---------- Net Income................................ $ 1,361.9 $ 1,132.8 $ 1,337.1 $ 828.5 $ 256.9 $ 4,900.6 ---------- --------- --------- -------- -------- ---------- Total Assets.............................. $154,175.7 $13,765.9 $29,523.6 $4,023.6 $3,463.4 $198,598.7 ---------- --------- --------- -------- -------- ---------- Net Assets................................ $ (1,178.2) $ 4,724.0 $ 6,719.3 $2,178.2 $1,065.3 $ 12,823.8 ---------- --------- --------- -------- -------- ---------- Average Number of Employees (in thousands).......................... 433 101 126 27 6 693 ========== ========= ========= ======== ======== ========== 1993 Net Sales and Revenues Outside (excluding GMAC)................ $ 89,868.0 $ 7,311.5 $21,847.3 $4,595.0 $1,248.1 $124,869.9 GMAC and related operations............. 5,921.7 682.0 1,947.6 52.5 148.2 8,752.0 Other income............................ 3,783.5 210.0 345.2 191.3 67.6 4,597.6 ---------- --------- --------- -------- -------- ---------- Subtotal outside.................... 99,573.2 8,203.5 24,140.1 4,838.8 1,463.9 138,219.5 Interarea............................... 10,094.7 13,416.4 433.9 166.9 30.8 -- ---------- --------- --------- -------- -------- ---------- Total............................... $109,667.9 $21,619.9 $24,574.0 $5,005.7 $1,494.7 $138,219.5 ========== ========= ========= ======== ======== ========== Net Income................................ $ 190.1 $ 680.8 $ 604.7 $ 798.0 $ 160.4 $ 2,465.8 ---------- --------- --------- -------- -------- ---------- Total Assets.............................. $151,343.5 $10,963.7 $23,395.0 $3,113.4 $2,672.8 $188,200.9 ---------- --------- --------- -------- -------- ---------- Net Assets................................ $ (7,315.6) $ 4,516.3 $ 5,967.3 $2,054.9 $1,001.2 $ 5,597.5 ---------- --------- --------- -------- -------- ---------- Average Number of Employees (in thousands).......................... 448 99 131 27 6 711 ========== ========= ========= ======== ======== ========== 1992 Net Sales and Revenues Outside (excluding GMAC)................ $ 79,783.4 $ 7,509.0 $26,291.9 $3,310.5 $1,235.8 $118,130.6 GMAC and related operations............. 7,306.2 852.4 2,021.0 43.5 179.0 10,402.1 Other income............................ 3,153.9 188.8 124.3 107.9 134.6 3,709.5 ---------- --------- --------- -------- -------- ---------- Subtotal outside.................... 90,243.5 8,550.2 28,437.2 3,461.9 1,549.4 132,242.2 Interarea............................... 9,925.1 11,699.6 400.0 146.3 122.4 -- ---------- --------- --------- -------- -------- ---------- Total............................... $100,168.6 $20,249.8 $28,837.2 $3,608.2 $1,671.8 $132,242.2 ========== ========= ========= ======== ======== ========== Income (Loss) Before Cumulative Effect of Accounting Changes...................... $ (4,885.7) $ 547.4 $ 1,340.2 $ 209.5 $ 193.3 $ (2,620.6) ---------- --------- --------- -------- -------- ---------- Net Income (Loss)......................... $(25,377.5) $ 168.8 $ 1,332.9 $ 209.5 $ 193.3 $(23,498.3) ---------- --------- --------- -------- -------- ---------- Total Assets.............................. $148,378.0 $12,851.0 $26,097.8 $2,939.3 $2,584.1 $190,196.0 ---------- --------- --------- -------- -------- ---------- Net Assets................................ $ (5,686.9) $ 3,890.9 $ 5,529.7 $1,721.6 $ 917.0 $ 6,225.6 ---------- --------- --------- -------- -------- ---------- Average Number of Employees (in thousands).......................... 478 98 141 26 7 750 ========== ========= ========= ======== ======== ==========
- ------------------------- * After elimination of interarea transactions. II-37 52 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED NOTE 19. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The Corporation (or GM, which for purposes of this note shall be deemed to include its consolidated subsidiaries) is a party to financial instruments with off-balance-sheet risk which it uses in the normal course of business to reduce its exposure to fluctuations in interest rates, and foreign exchange rates, and to meet the financing needs of its customers. The primary classes of derivatives used by the Corporation are foreign exchange-forward contracts and options, interest rate forward contracts and options, and forward contracts to purchase or sell mortgages or mortgage-backed securities. Those instruments involve, to varying degrees, elements of credit risk in the event a counter-party should default and market risk as the instruments are subject to rate and price fluctuations. Credit risk is managed through the approval of and periodic monitoring of financially sound counterparties. Since virtually all derivative transactions are entered into to hedge underlying business exposures, market risk in these instruments is largely offset by equal and opposite movements in the underlying exposure. Cash receipts or payments on these contracts normally occur at maturity, or for interest rate swap agreements, at periodic contractually defined intervals. FOREIGN EXCHANGE-FORWARD CONTRACTS AND OPTIONS Foreign exchange-forward contracts are legal agreements between two parties to purchase and sell a foreign currency, for a price specified at the contract date, with delivery and settlement in the future. GM is an international corporation with operations in over 50 countries. GM has foreign currency exposures at these operations related to buying, selling, and financing in currencies other than the local currency. GM's most significant foreign currency exposures relate to major North American countries (Canada and Mexico), Western European countries (primarily Germany, United Kingdom, Spain, Belgium, and France), Japan, and Brazil. The magnitude of these exposures significantly varies over time depending upon the strength of local automotive markets and sourcing decisions. GM enters into agreements to manage certain foreign exchange exposures in accordance with established policy guidelines. These agreements primarily hedge debt, firm commitments and anticipated transactions involving vehicles, components and fixed assets and subsidiary dividends. As a general practice, GM has not hedged the foreign exchange exposure related either to the translation of overseas earnings into U.S. dollars or the translation of overseas equity positions back to U.S. dollars. GM uses foreign exchange-forward contracts, purchases foreign exchange options, and may from time to time write options. Cross currency swaps are included in this category and relate to interest rate swaps in which the underlying notional principal amounts are in different currencies. At December 31, 1994 and 1993, the Corporation held foreign exchange-forward contracts of approximately $9,030 million and $12,407 million (including cross-currency swaps of $1,161 million and $1,951 million), respectively. At December 31, 1994 and 1993, the Corporation had entered into foreign exchange options of approximately $1,537 million and $2,144 million, respectively. Deferred hedging gains on outstanding contracts hedging firm commitments to purchase inventory or fixed assets totaled $12 million at December 31, 1994. Such amounts are deferred and will be included in the cost of such assets when purchased, to be recognized in operations as part of the basis of these assets. All other foreign exchange-forward contracts and options are marked to market, and recognized with other gains or losses on foreign exchange transactions in the Statement of Consolidated Operations. The Corporation's firm commitments typically extend for periods of up to 12 months but can extend for periods up to 36 months. II-38 53 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED INTEREST RATE FORWARD CONTRACTS AND OPTIONS The Corporation's financing and cash management activities subject it to market risk from exposure to changes in interest rates. To manage these exposures, the Corporation has entered into various financial instrument transactions. The Corporation's objective of entering into these transactions is to maintain the desired level of exposure to the risk of interest rate fluctuations and minimize interest expense. To achieve this objective, the Corporation will at times use written options. In a limited number of cases, GMAC swaps, matched to specific portfolios of wholesale assets or debt, are executed on a portfolio basis to achieve specific interest rate management objectives. The differential paid or received on such swaps is recorded as an adjustment to interest expense or income over the term of the underlying debt agreement or matched portfolio. Interest rate forward contracts are contractual agreements between the Corporation and another party to exchange fixed and floating interest rate payments periodically over the life of the agreements without the exchange of underlying principal amounts. Interest rate options such as interest rate caps, floors, or swaptions generally permit but do not require the purchaser of the option to exchange interest payments in the future. At December 31, 1994 and 1993, the total notional amount of such agreements with off-balance-sheet risk was approximately $14,080 million and $10,984 million, respectively. Interest rate forward contracts used to hedge an underlying debt obligation are not marked to market, but are used to adjust interest expense recognized over the life of the underlying debt agreement. Written options including those embedded in interest rate forward agreements, written interest rate caps, written swaptions, and interest rate forward contracts that do not meet settlement accounting criteria are marked to market with related gains and losses recognized in income on a current basis. Gains (losses) on terminated swap contracts are deferred and recognized as a yield adjustment on the underlying debt; such unamortized gains (losses) totaled approximately ($24) million and $8 million at December 31, 1994 and 1993, respectively. MORTGAGE CONTRACTS The Corporation has also entered contracts to purchase and sell mortgages at specific future dates and has entered certain exchange traded futures contracts in order to reduce exposure to interest rate risk. At December 31, 1994 and 1993, mandatory delivery contracts with investors totaled $694 million and $2,139 million, respectively, and commitments to purchase/fund first mortgage loans at fixed prices and/or mortgage-backed securities totaled $690 million and $1,796 million, respectively. The Corporation's exchange traded futures contracts, which are used to hedge the funding of adjustable rate mortgage loans and mortgage backed securities inventory, mature in the first three quarters of 1995 in notional amounts of approximately $1.2 billion, $2.1 billion, and $1.1 billion, respectively. Gains and losses on derivatives, including exchange traded futures, used to hedge interest rate risk associated with rate locked funding commitments and mortgages held for resale are deferred, and considered in the reporting of the underlying mortgages on a lower of cost or market basis. Deferred gains amounted to $2.7 million as of December 31, 1994. Gains and losses on contracts used to reduce interest rate exposure on mortgage backed securities are recognized in the current period. Derivatives used to hedge purchased mortgage servicing rights and loans held for investment have notional values of $482 million and $461 million at December 31, 1994 and 1993, respectively; gains and losses on such contracts are deferred against the basis of the underlying assets. UNUSED LINES OF CREDIT The Corporation grants revolving lines of credit to dealers; unused amounts under these lines were $400 million at December 31, 1994 and $301 million at December 31, 1993. Commitments supported by collateral, II-39 54 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED generally dealer inventories and real estate, were approximately 52% and 44%, respectively, of the total commitments at December 31, 1994 and 1993. Since many of the commitments are expected to expire without use, total committed amounts do not necessarily represent the Corporation's future liquidity requirements. CREDIT RISK The forward contracts, options, and lines of credit previously discussed contain an element of risk that the counterparties may be unable to meet the terms of the agreements. However, the Corporation minimizes such risk exposure for forward contracts and options by limiting the counterparties to major international banks and financial institutions. Management also reduces its credit risk for unused lines of credit by applying the same credit policies in making commitments as it does for extending loans. Management does not expect to record any losses as a result of counterparty default. The Corporation does not require or place collateral for these financial instruments, except for the lines of credit. General Motors has business activities with customers, dealers, and associates around the world, and its receivables from and guarantees to such parties are well diversified and, in many cases, secured by collateral. Consequently, in management's opinion, no significant concentration of credit risk exists for the Corporation. NOTE 20. FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with the requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments and SFAS No. 119, Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments, the Corporation has provided the following fair value estimates and information about valuation methodologies. The estimated fair value amounts have been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value, so the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions and/or estimation methodologies may be material to the estimated fair value amounts. Fair value information presented herein is based on information available at December 31, 1994 and 1993. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been updated since those dates and, therefore, the current estimates of fair value at dates subsequent to December 31, 1994 and 1993 may differ significantly from these amounts. The II-40 55 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED estimated fair value of financial instruments held by the Corporation and its subsidiaries, for which is it practicable to estimate that value, were as follows:
DECEMBER 31, 1994 DECEMBER 31, 1993 ------------------------ ------------------------ BOOK FAIR BOOK FAIR VALUE VALUE VALUE VALUE ---------- ---------- ---------- ---------- (DOLLARS IN MILLIONS) Assets Cash and Marketable Securities.............. $ 16,075.6 $ 16,075.6 $ 17,962.7 $ 18,169.4 Finance Receivables -- net.................. 54,048.4 53,869.8 53,848.8 54,620.4 Accounts and Notes Receivable -- net........ 8,742.5 8,742.5 6,340.5 6,340.5 Other Assets................................ 4,341.7 4,551.5 3,368.0 3,847.3 Liabilities Accounts Payable............................ (11,635.0) (11,635.0) (10,276.5) (10,276.5) Notes and Loans Payable Payable within one year.................. (36,108.5) (36,097.4) (36,534.0) (36,732.2) Payable beyond one year.................. (37,621.7) (38,138.9) (33,907.2) (35,853.4) Other Liabilities........................... (632.9) (622.8) (619.7) (627.8) Stocks Subject to Repurchase................ (450.0) (445.4) (450.0) (429.0)
The prior table excludes the book value and fair value of financial instrument derivatives which are as follows:
FAIR VALUE OF OPEN CONTRACTS (1) AT: ---------------------------------------------- DECEMBER 31, 1994 DECEMBER 31, 1993 --------------------- --------------------- ASSET LIABILITY ASSET LIABILITY POSITION POSITION POSITION POSITION -------- --------- -------- --------- (DOLLARS IN MILLIONS) Foreign Exchange-Forward Contracts(2)...................... $241 $ (63) $ 54 $ (52) Foreign Exchange Options................................... 2 (1) 12 (11) Interest Rate Forward Contracts............................ 48 (296) 179 (141) Interest Rate Options...................................... -- (126) -- (69) Mortgage Contracts......................................... -- (7) 10 (8)
- ------------------------- (1) The related asset (liability) recorded on the balance sheet for foreign exchange-forward contracts, foreign exchange options, interest rate forward contracts, and interest rate options totaled ($1) million, $1 million, ($10) million, and ($123) million, respectively, at December 31, 1994. There was no related carrying value recorded for mortgage contracts at December 31, 1994. (2) Foreign exchange contracts include certain derivatives with both foreign exchange and interest rate exposures which had a fair value of $77 million at December 31, 1994 and $6 million at December 31, 1993. The following methods and assumptions were used to estimate the fair value of each class of financial instrument: CASH AND MARKETABLE SECURITIES As a result of GM's January 1, 1994 adoption of SFAS No. 115, certain marketable securities previously recorded at amortized cost are recorded at fair value in 1994. For cash equivalents and marketable securities, fair value is determined principally based on quoted market prices. II-41 56 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONTINUED FINANCE RECEIVABLES The fair value is estimated by discounting the future cash flows using applicable spreads to approximate current rates applicable to each category of finance receivables. The carrying value of wholesale receivables and other receivables whose interest rates adjust on a short-term basis with applicable market indices (generally the prime rate) are assumed to approximate fair value either due to their short maturities or due to the interest rate adjustment feature. ACCOUNTS AND NOTES RECEIVABLE AND ACCOUNTS PAYABLE For receivables and payables with short maturities, the book values approximate market value. OTHER ASSETS AND OTHER LIABILITIES Other assets reported at December 31, 1994 and 1993 include various financial instruments (e.g., long-term receivables and certain investments) having a fair value based on discounted cash flows, market quotations, and other appropriate valuation techniques. The fair values of retained subordinated interests in trusts and excess servicing assets (net of deferred costs) are derived by discounting expected cash flows using current market rates. Estimated values of Industrial Development Bonds, included in Other Liabilities and Deferred Credits, are based on quoted market prices for the same or similar issues. NOTES AND LOANS PAYABLE The fair value of the debt payable within one year is determined by using quoted market prices, if available, or calculating the estimated value of each bank loan, note, or debenture in the portfolio at the applicable rate in effect. Commercial paper, master notes, and demand notes have an original term of less than 90 days and, therefore, the carrying amount of these liabilities is considered fair value. Debt payable beyond one year has an estimated fair value based on quoted market prices for the same or similar issues or based on the current rates offered to the Corporation for debt of similar remaining maturities. STOCKS SUBJECT TO REPURCHASE At December 31, 1994 and 1993, the fair value of the Corporation's stock repurchase obligation is based on discounted cash flows assuming redemption by the Institute at the specified exercise date. At the closing Class H common stock price at December 31, 1994 and 1993, the shares subject to repurchase would be valued at $523 million and $585 million, respectively. FOREIGN EXCHANGE-FORWARD CONTRACTS AND OPTIONS The fair value of foreign exchange-forward contracts is estimated by obtaining quotes for futures contracts with similar terms, adjusted where necessary for maturity differences. The fair value of foreign exchange options is estimated using active exchange quotations for most options, and pricing models for illiquid options. INTEREST RATE FORWARD CONTRACTS AND OPTIONS The fair value of interest rate forward contracts, including contracts with optionality, is estimated using pricing models based upon current market interest rates. Exchange traded futures are valued at quoted market prices. II-42 57 GENERAL MOTORS CORPORATION AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS -- CONCLUDED MORTGAGE CONTRACTS The fair value of such contracts is estimated based upon the amount that would be received or paid to terminate the contracts based on market prices of similar financial instruments and current rates for mortgage loans. UNUSED LINES OF CREDIT Because loans extended under these commitments are at market interest rates, there is no significant fair value position related to the outstanding commitments. NOTE 21. COMMITMENTS AND CONTINGENT LIABILITIES Minimum future commitments under operating leases having noncancellable lease terms in excess of one year, primarily for real property, aggregating $6,296.6 million, are payable $886.1 million in 1995, $702.8 million in 1996, $588.5 million in 1997, $537.5 million in 1998, $504.4 million in 1999, and $3,077.3 million in 2000 and thereafter. Certain of the leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases were $1,340.7 million in 1994, $1,343.1 million in 1993, and $1,338.4 million in 1992. The Corporation and its subsidiaries are subject to potential liability under government regulations and various claims and legal actions which are pending or may be asserted against them. Some of the pending actions purport to be class actions. The aggregate ultimate liability of the Corporation and its subsidiaries under these government regulations, and under these claims and actions, was not determinable at December 31, 1994. In the opinion of management, such liability is not expected to have a material adverse effect on the Corporation's consolidated operations or financial position. * * * II-43 58 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION SELECTED QUARTERLY DATA (UNAUDITED)
1994 QUARTERS ------------------------------------------------------ 1ST 2ND 3RD 4TH --------- --------- --------- --------- (DOLLARS IN MILLIONS) Net sales and revenues..................... $37,495.4 $40,392.2 $34,510.3 $42,553.3 ======== ======== ======== ======== Income before income taxes................. $ 2,452.1 $ 3,086.2 $ 453.6 $ 2,361.4 U.S. foreign, and other income taxes (credit)................................. 840.3 1,163.4 (98.4)(1) 789.3 --------- --------- --------- --------- Income before cumulative effect of accounting change........................ 1,611.8 1,922.8 552.0 1,572.1 Cumulative effect of accounting change..... (758.1)(2) -- -- -- --------- --------- --------- --------- Net income................................. 853.7 1,922.8 552.0 1,572.1 Dividends on preferred and preference stocks................................... 86.8 89.7 72.1 72.1 --------- --------- --------- --------- Income on common stocks.................... $ 766.9 $ 1,833.1 $ 479.9 $ 1,500.0 ======== ======== ======== ======== Earnings attributable to common stocks $1 2/3 par value before cumulative effect of accounting change.................. $ 1,362.1 $ 1,665.3 $ 306.0 $ 1,311.8 Cumulative effect of accounting change... (751.3)(2) -- -- -- --------- --------- --------- --------- Net earnings attributable to $1 2/3 par value................................. $ 610.8 $ 1,665.3 $ 306.0 $ 1,311.8 ======== ======== ======== ======== Net earnings attributable to Class E..... $ 92.1 $ 106.5 $ 117.3 $ 128.5 ======== ======== ======== ======== Class H before cumulative effect of accounting change..................... $ 70.8 $ 61.3 $ 56.6 $ 59.7 Cumulative effect of accounting change... (6.8)(2) -- -- -- --------- --------- --------- --------- Net earnings attributable to Class H..... $ 64.0 $ 61.3 $ 56.6 $ 59.7 ======== ======== ======== ========
- ------------------------- (1) The income tax credit in the third quarter of 1994 is primarily a function of the low level of pre-tax income, a low effective tax rate for foreign operations, and a favorable adjustment related to book tax accruals which had been established in prior years. (2) Effective January 1, 1994, the Corporation adopted SFAS No. 112. The unfavorable cumulative effect of adopting SFAS No. 112 was $758.1 million, or $751.3 million attributable to $1 2/3 par value common stock and $6.8 million attributable to Class H common stock. II-44 59 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION -- CONTINUED
1994 QUARTERS -------------------------------------- 1ST 2ND 3RD 4TH ------ ------ ------ ------ Average number of shares of common stocks outstanding (in millions) $1 2/3 par value........................................ 725.3 733.1 752.7 753.7 Class E................................................. 257.9 260.1 261.2 261.9 Class H................................................. 90.6 91.7 92.7 93.3 Earnings per share attributable to common stocks $1 2/3 par value before cumulative effect of accounting change............................................... $ 1.86 $ 2.23 $ 0.40 $ 1.74 Cumulative effect of accounting change.................. (1.05)(1) -- -- -- ------ ------ ------ ------ Net income attributable to $1 2/3 par value............. $ 0.81 $ 2.23 $ 0.40 $ 1.74 ====== ====== ====== ====== Net earnings attributable to Class E.................... $ 0.36 $ 0.41 $ 0.45 $ 0.49 ====== ====== ====== ====== Class H before cumulative effect of accounting change... $ 0.78 $ 0.67 $ 0.61 $ 0.64 Cumulative effect of accounting change.................. (0.08)(1) -- -- -- ------ ------ ------ ------ Net earnings attributable to Class H.................... $ 0.70 $ 0.67 $ 0.61 $ 0.64 ====== ====== ====== ====== Cash dividends per share of common stocks $1 2/3 par value........................................ $ 0.20 $ 0.20 $ 0.20 $ 0.20 Class E................................................. 0.12 0.12 0.12 0.12 Class H................................................. 0.20 0.20 0.20 0.20 Price range of common stocks $1 2/3 par value (2): High.............................. $65.38 $60.13 $53.38 $48.38 Low................................. 52.00 49.75 46.25 36.13 Class E (2): High....................................... 36.88 38.00 38.50 39.50 Low........................................ 27.50 32.88 33.00 34.75 Class H (2): High....................................... 40.38 38.75 38.00 37.75 Low........................................ 32.63 31.75 34.63 31.00
- ------------------------- (1) Includes unfavorable effect of adoption of SFAS No. 112 of $1.05 per share of $1 2/3 par value and $0.08 per share of Class H common stock. (2) The principal market is the New York Stock Exchange and prices are based on the Composite Tape. $1 2/3 par value common stock is also listed on the Chicago, Pacific, and Philadelphia stock exchanges. As of December 31, 1994, there were 781,909 holders of record of $1 2/3 par value common stock, 354,297 holders of record of Class E, and 394,957 holders of record of Class H common stock. II-45 60 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION -- CONTINUED
1993 QUARTERS -------------------------------------------------- 1ST 2ND 3RD 4TH --------- --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net sales and revenues.......................... $34,564.2 $36,250.1 $30,137.5 $37,267.7 ========= ========= ========= ========= Income (Loss) before income taxes............... $ 930.4 $ 1,532.5 $ (989.7) $ 1,102.1 U.S. foreign, and other income taxes (credit)... 417.2 643.4 (876.8)(1) (74.3)(2) --------- --------- --------- --------- Net income (loss)............................... 513.2 889.1 (112.9)(3) 1,176.4(4) Dividends on preferred and preference stocks.... 94.2 89.0 86.8 86.8 --------- --------- --------- --------- Income (Loss) on common stocks.................. $ 419.0 $ 800.1 $ (199.7) $ 1,089.6 ========= ========= ========= ========= Earnings (Loss) attributable to common stocks Net earnings (loss) attributable to $1 2/3 par value...................................... $ 300.5 $ 662.4 $ (347.0) $ 921.4 Net earnings attributable to Class E.......... $ 74.1 $ 87.7 $ 98.4 $ 107.0 Net earnings attributable to Class H.......... $ 44.4 $ 50.0 $ 48.9 $ 61.2 Average number of shares of common stocks outstanding (in millions) $1 2/3 par value.............................. 707.4 707.9 709.6 715.7 Class E....................................... 234.7 236.7 246.6 253.5 Class H....................................... 93.9 86.0 87.4 88.7 Earnings (Loss) per share attributable to common stocks Net earnings (loss) attributable to $1 2/3 par value...................................... $ 0.42 $ 0.92 ($ 0.49)(5) $ 1.28(5) Net earnings attributable to Class E.......... $ 0.32 $ 0.37 $ 0.40 $ 0.42 Net earnings attributable to Class H.......... $ 0.47 $ 0.58 $ 0.56 $ 0.69 Cash dividends per share of common stocks $1 2/3 par value..................................... $ 0.20 $ 0.20 $ 0.20 $ 0.20 Class E....................................... 0.10 0.10 0.10 0.10 Class H....................................... 0.18 0.18 0.18 0.18 Price range of common stocks $1 2/3 par value: High........................ $ 41.25 $ 44.88 $ 49.75 $ 57.13 Low......................... 32.00 36.38 41.63 42.00 Class E: High................................. 35.88 33.38 32.50 31.13 Low.................................. 27.63 28.25 26.00 26.50 Class H: High................................. 27.50 33.00 38.00 42.38 Low.................................. 22.88 23.38 30.50 34.50
- ------------------------- (1) Includes a deferred tax benefit of $444.3 million related to an increase in the U.S. corporate income tax rate. (2) The effective income tax rate in the fourth quarter of 1993 reflects benefits related to foreign tax credits and taxes on foreign income. (3) Includes a special restructuring charge of $589.0 million. (4) Includes a charge of $189.5 million related to the sale of AGT. (5) Includes favorable (unfavorable) effects on earnings per share of: third quarter 1993 -- 1% U.S. corporate income tax increase of $0.64, increase to the plant-closing reserve of ($0.83), and labor contract-related costs of ($0.20) per share of $1 2/3 par value common stock; and fourth quarter 1993 -- loss on the sale of AGT of ($0.27) per share of $1 2/3 par value common stock. II-46 61 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION -- CONTINUED SELECTED FINANCIAL DATA
1994 1993 1992 ---------- ---------- ---------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net sales and revenues............................... $154,951.2 $138,219.5 $132,242.2 Income (Loss) before income taxes.................... $ 8,353.3 $ 2,575.3 $ (3,333.1) % of sales and revenues.............................. 5.4% 1.9% (2.5)% ========= ========= ========= Net income (loss).................................... $ 4,900.6 $ 2,465.8 $(23,498.3) Income (Loss) on common stocks....................... $ 4,579.9 $ 2,109.0 $(23,804.6) Rate of return on average common stockholders' equity............................................. 79.9%* 104.2%* (169.3)%* ========= ========= ========= $1 2/3 par value common stock Earnings (Loss) attributable to.................... $ 3,893.9 $ 1,537.3 $(23,940.7) Cash dividends..................................... 592.6 565.8 945.4 ---------- ---------- ---------- Net income retained (loss accumulated)............. $ 3,301.3 $ 971.5 $(24,886.1) ========= ========= ========= Earnings (Loss) per share.......................... $ 5.15 $ 2.13 $ (38.28) Cash dividends per share........................... 0.80 0.80 1.40 ---------- ---------- ---------- Net income retained (loss accumulated) per share... $ 4.35 $ 1.33 $ (39.68) ========= ========= ========= Class E common stock Earnings attributable to........................... $ 444.4 $ 367.2 $ 278.4 Cash dividends..................................... 124.8 97.2 76.1 ---------- ---------- ---------- Net income retained................................ $ 319.6 $ 270.0 $ 202.3 ========= ========= ========= Earnings per share................................. $ 1.71 $ 1.51 $ 1.33 Cash dividends per share........................... 0.48 0.40 0.36 ---------- ---------- ---------- Net income retained per share........................ $ 1.23 $ 1.11 $ 0.97 ========= ========= ========= Class H common stock Earnings (Loss) attributable to.................... $ 241.6 $ 204.5 $ (142.3) Cash dividends..................................... 73.8 64.1 53.3 ---------- ---------- ---------- Net income retained (loss accumulated)............. $ 167.8 $ 140.4 $ (195.6) ========= ========= ========= Earnings (Loss) per share.......................... $ 2.62 $ 2.30 $ (2.29) Cash dividends per share........................... 0.80 0.72 0.72 ---------- ---------- ---------- Net income retained (loss accumulated) per share... $ 1.82 $ 1.58 $ (3.01) ========= ========= =========
- ------------------------- * The large negative return in 1992 and the high returns in 1993 and 1994 reflect the adoption of SFAS No. 106 and its impact on lowering average common stockholders' equity. The Corporation adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits, effective January 1, 1994. The unfavorable cumulative effect of adopting SFAS No. 112 was $751.3 million or $1.05 per share of $1 2/3 par value and $6.8 million or $0.08 per share of Class H common stock. The Corporation adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, effective January 1, 1992. The unfavorable cumulative effect of adopting SFAS No. 106 was $20,687.3 million or $33.38 per share of $1 2/3 par value and $150.4 million or $2.08 per share of Class H common stock. Also effective January 1, 1992, Hughes changed its revenue recognition policy for certain commercial businesses. The unfavorable effect of this change on 1992 earnings was $32.8 million or $0.05 per share of $1 2/3 par value and $7.2 million or $0.10 per share of Class H common stock. II-47 62 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION -- CONTINUED
1991 1990 ---------- ---------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net sales and revenues............................................. $123,108.8 $124,705.1 Loss before income taxes........................................... $ (5,892.3) $ (2,217.1) % of sales and revenues............................................ (4.8)% (1.8)% ========= ========= Net loss........................................................... $ (4,452.8) $ (1,985.7) Loss on common stocks.............................................. $ (4,523.2) $ (2,023.9) Rate of return on average common stockholders' equity.............. (15.9)% (6.1)% ========= ========= $1 2/3 par value common stock Loss attributable to............................................. $ (4,851.4) $ (2,378.3) Cash dividends................................................... 983.4 1,804.7 ---------- ---------- Loss accumulated................................................. $ (5,834.8) $ (4,183.0) ========= ========= Loss per share................................................... $ (7.97) $ (4.09) Cash dividends per share......................................... 1.60 3.00 ---------- ---------- Loss accumulated per share....................................... $ (9.57) $ (7.09) ========= ========= Class E common stock Earnings attributable to......................................... $ 223.6 $ 194.4 Cash dividends................................................... 62.5 52.4 ---------- ---------- Net income retained.............................................. $ 161.1 $ 142.0 ========= ========= Earnings per share*.............................................. $ 1.14 $ 1.04 Cash dividends per share*........................................ 0.32 0.28 ---------- ---------- Net income retained per share*................................... $ 0.82 $ 0.76 ========= ========= Class H common stock Earnings attributable to......................................... $ 104.6 $ 160.0 Cash dividends................................................... 54.3 63.4 ---------- ---------- Net income retained.............................................. $ 50.3 $ 96.6 ========= ========= Earnings per share............................................... $ 1.39 $ 1.82 Cash dividends per share......................................... 0.72 0.72 ---------- ---------- Net income retained per share.................................... $ 0.67 $ 1.10 ========= =========
- ------------------------- * Adjusted to reflect the two-for-one stock split in the form of a 100% stock dividend distributed on March 10, 1992. Effective January 1, 1991, accounting procedures were changed to include in inventory general purpose spare parts previously charged directly to expense. The effect of this change on 1991 earnings was a favorable adjustment of $302.7 million or $0.50 per share of $1 2/3 par value and $3.8 million or $0.04 per share of Class H common stock. Also, the Corporation adopted SFAS No. 109, Accounting for Income Taxes, effective January 1, 1991. The favorable (unfavorable) cumulative effect of adopting SFAS No. 109 was $230.5 million or $0.38 per share of $1 2/3 par value, $(6.1) million or $(0.03) per share of Class E and $8.3 million or $0.09 per share of Class H common stock. II-48 63 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION -- CONCLUDED
1994 1993 1992 ---------- ---------- ---------- (DOLLARS IN MILLIONS) Average number of shares of common stocks outstanding (in millions) $1 2/3 par value....................................... 741.3 710.2 670.5 Class E................................................ 260.3 243.0 209.1 Class H................................................ 92.1 88.6 75.3 Cash dividends on capital stocks as a percent of net income................................................. 22.7% 44.0% N/A Expenditures for real estate, plants, and equipment...... $ 4,883.7 $ 3,822.1 $ 4,336.7 Expenditures for special tools........................... $ 2,341.4 $ 2,648.6 $ 2,252.9 Cash and marketable securities........................... $ 16,075.6 $ 17,962.7 $ 15,107.7 Working capital (with GMAC on an equity basis)........... $ 700.9 $ 2,822.2 $ 10,938.6 Current ratio (with GMAC on an equity basis)............. 1.02 1.08 1.32 Total assets............................................. $198,598.7 $188,200.9 $190,196.0 Long-term debt and capitalized leases (with GMAC on an equity basis)......................... $ 6,218.7 $ 6,383.6 $ 7,055.4
1991 1990 ---------- ---------- (DOLLARS IN MILLIONS) Average number of shares of common stocks outstanding (in millions) $1 2/3 par value................................................... 614.6 601.5 Class E *.......................................................... 195.3 187.1 Class H............................................................ 73.7 88.1 Cash dividends on capital stocks as a percent of net income.......... N/A N/A Expenditures for real estate, plants, and equipment.................. $ 4,255.1 $ 4,249.9 Expenditures for special tools....................................... $ 2,956.8 $ 3,155.5 Cash and marketable securities....................................... $ 10,192.4 $ 7,821.4 Working capital (with GMAC on an equity basis)....................... $ 10,807.1 $ 10,915.1 Current ratio (with GMAC on an equity basis)......................... 1.36 1.37 Total assets......................................................... $184,074.6 $180,236.5 Long-term debt and capitalized leases (with GMAC on an equity basis)..................................... $ 6,699.1 $ 4,923.8
- ------------------------- * Adjusted to reflect the two-for-one stock split in the form of 100% stock dividends distributed on March 10, 1992. II-49 64 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The following management's discussion and analysis should be read in conjunction with the competitive position and environmental matters discussions included in Part I, Item 1, which are specifically incorporated by reference herein. General Motors Corporation reported record consolidated net income for 1994 of $4,900.6 million, or $5.15 per share of GM $1 2/3 par value common stock, including the unfavorable effect of a postemployment benefits accounting change. The record was reached as a result of positive contributions from all five major business sectors, including solid profitability in GM's North American Automotive Operations (NAO). This compares to consolidated net income in 1993 of $2,465.8 million, or $2.13 per share of $1 2/3 par value common stock, and a net loss in 1992 of $23,498.3 million, or $38.28 per share of $1 2/3 par value common stock.
1994 O/(U) BUSINESS SECTOR RESULTS 1994 1993* 1993 ------------------------------------------------------ ------ ------ ------ (DOLLARS IN MILLIONS) NAO................................................... $ 690 $ (872) $1,562 IO.................................................... 1,582 1,115 467 GMAC.................................................. 920 981 (61) EDS................................................... 822 724 98 GMHE.................................................. 1,049 922 127 Other................................................. (162) (404) 242 ------ ------ ------ Total............................................ $4,901 $2,466 $2,435 ====== ====== ======
- ------------------------- * Reflects 1994 classifications GM sales and revenues increased 12.1% to $155.0 billion in 1994 and 4.5% to $138.2 billion in 1993. Dollar sales and revenues include price adjustments of $2.5 billion in 1994, $3.6 billion in 1993, and $2.5 billion in 1992. Profit (loss) margin -- income (loss) as a percent of sales and revenues -- with GMAC on an equity basis -- has improved 5.7 percentage points since 1992, when GM reported a net loss margin of 2.2% (excluding the SFAS No. 106 accounting change). However, the 1994 net profit margin of 3.5% is short of GM's goal of an average annual net margin of at least 5% over the auto industry business cycle. Cost of sales and other operating charges as a percent of net sales and revenues -- with GMAC on an equity basis -- was 82.8% in 1994, 85.0% in 1993, and 88.9% in 1992. The improvement in 1994 versus 1993 is primarily attributable to NAO where reduced material costs as a result of global sourcing, improved manufacturing performance and a reduction in hourly employment despite increased vehicle production. These favorable items were partially offset by higher corporate-wide engineering costs to support new model development, as reflected by the $1.0 billion increase in research and development expenses, and increased costs of emissions and safety equipment. The improvement in 1993 versus 1992 primarily reflects cost improvements at NAO due to consolidation efforts, purchasing savings, cost cutting in the automotive components group, a 13% reduction in vehicle assembly hours, and reductions in both salaried and hourly headcount. Special Items All three years contained certain nonrecurring special items. Results in 1994 included the unfavorable effect of the adoption of Statement of Financial Accounting Standards (SFAS) No. 112, Employers' Accounting for Postemployment Benefits, amounting to $758.1 million after-tax, or $1.05 per $1 2/3 par value share and $0.08 per share of Class H common stock. The 1993 results included an after-tax increase of $589.0 million in the Corporation's previously announced plant closing reserve, labor contract-related costs of $143.8 million after-tax, primarily reflecting II-50 65 the recognition of lump-sum payments to retirees to be made in 1995 and 1996, and an after-tax loss of $189.5 million on the sale of the Allison Gas Turbine Division (AGT). These unfavorable special items were partially offset by the $444.3 million favorable impact of the increase in the U.S. corporate income tax rate. The higher tax rate resulted in a benefit due to the Corporation's deferred tax asset position. The results in 1992 were severely affected by the adoption of SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. The total unfavorable cumulative effect of this accounting change was $20,837.7 million, or $33.38 per $1 2/3 par value share and $2.08 per share of Class H common stock. Additionally, several other nonrecurring charges to earnings were recorded during 1992. GM reduced the basis of its investment in National Car Rental System Inc. (NCRS) resulting in a charge to earnings of $744.1 million after taxes, or $1.11 per share of $1 2/3 par value common stock. GM also recognized a $165.1 million after-tax gain on the sale of its equity investment in Daewoo Motor Co., or $0.25 per share of $1 2/3 par value common stock. The 1992 loss included a one-time special restructuring charge of $749.4 million after taxes, or $0.97 per share of $1 2/3 par value common stock and $1.87 per share of Class H common stock, primarily attributable to redundant facilities and related employment costs at Hughes Aircraft Company (Hughes). Also effective January 1, 1992, Hughes changed its revenue recognition policy for certain commercial businesses from the percentage-of-completion (cost-to-cost) method to the units-of-delivery method resulting in an unfavorable effect of $40.0 million, or $0.05 per share of $1 2/3 par value and $0.10 per share of Class H common stock. Excluding special items in these years, GM had income of $5,658.7 million in 1994 and $2,943.8 million in 1993, compared to a loss of $1,292.2 million in 1992. After considering preferred and preference stock dividend payments and the apportionment of earnings attributable to GM Class E and Class H common stocks, this represents income per share of $6.20 and $2.79 on $1 2/3 par value common stock in 1994 and 1993 and a loss per share of $3.02 in 1992. The following table summarizes these data:
1994 1993 1992 -------- -------- ---------- (DOLLARS IN MILLIONS) Consolidated Net Income (Loss) as reported................... $4,900.6 $2,465.8 $(23,498.3) -------- -------- ---------- Add (deduct) net of tax cumulative effect of accounting changes and special items Unfavorable cumulative effect of accounting changes Postemployment benefits............................... 758.1 -- -- Postretirement benefits other than pensions........... -- -- 20,837.7 Hughes revenue recognition policy..................... -- -- 40.0 Special nonrecurring items Increase in plant closing reserve (GMHE restructuring in 1992)................................................. -- 589.0 749.4 Labor contract-related costs............................ -- 143.8 -- Loss on sale of AGT..................................... -- 189.5 -- Increase in U.S. corporate income tax rate.............. -- (444.3) -- Write-down of investment in NCRS........................ -- -- 744.1 Gain on the sale of Daewoo Motor Co. ................... -- -- (165.1) -------- -------- ---------- Total cumulative effect of accounting changes and special items.................................... 758.1 478.0 22,206.1 -------- -------- ---------- Income (Loss) on a comparable basis.......................... $5,658.7 $2,943.8 $ (1,292.2) ======= ======= =========
Worldwide Wholesale Sales Worldwide wholesale vehicle sales totaled 8,328,000 units in 1994, up 7.0% from 1993, reflecting higher sales in all regions. GM unit sales rose 6.1% in the United States, 9.2% in other North American countries, and 8.2% overseas. GM's worldwide wholesale sales of cars in 1994 were 5,480,000 units, up 6.0% from 1993. Truck sales were 2,848,000 units, an 8.9% increase. II-51 66 GM reported worldwide wholesale sales of vehicles of 7,785,000 units in 1993, up 1.3% from 1992. GM unit sales rose 7.9% in the United States but declined 5.2% in other North American countries and 7.9% overseas. GM's worldwide wholesale sales of cars in 1993 were 5,169,000 units, down 1.1% from 1992. Truck sales were 2,616,000 units, a 6.4% increase.
CARS TRUCKS TOTAL ----------------------- ----------------------- ----------------------- WORLDWIDE WHOLESALE SALES 1994 1993 1992 1994 1993 1992 1994 1993 1992 - ------------------------------ ----- ----- ----- ----- ----- ----- ----- ----- ----- (UNITS IN THOUSANDS) United States................. 3,049 2,953 2,809 1,967 1,776 1,572 5,016 4,729 4,381 Other North America........... 304 285 296 217 192 207 521 477 503 ----- ----- ----- ----- ----- ----- ----- ----- ----- Total North America........... 3,353 3,238 3,105 2,184 1,968 1,779 5,537 5,206 4,884 Overseas...................... 2,127 1,931 2,122 664 648 679 2,791 2,579 2,801 ----- ----- ----- ----- ----- ----- ----- ----- ----- Total.................... 5,480 5,169 5,227 2,848 2,616 2,458 8,328 7,785 7,685 ===== ===== ===== ===== ===== ===== ===== ===== =====
Vehicle Unit Deliveries of Cars and Trucks Worldwide
1994 1993 1992 ------------------------- ------------------------- ------------------------- GM AS GM AS GM AS A % A % A % OF OF OF INDUSTRY GM INDUS. INDUSTRY GM INDUS. INDUSTRY GM INDUS. -------- ----- ----- -------- ----- ----- -------- ----- ----- (UNITS IN THOUSANDS) United States Cars...................... 8,991 3,079 34.3 % 8,519 2,927 34.4 % 8,215 2,870 34.9 % Trucks.................... 6,422 1,984 30.9 % 5,682 1,786 31.4 % 4,905 1,580 32.2 % -------- ----- -------- ----- -------- ----- Total United States.... 15,413* 5,063 32.9 % 14,201* 4,713 33.2 % 13,120* 4,450 33.9 % Other North America Canada.................... 1,257 410 32.6 % 1,190 378 31.8 % 1,225 404 33.0 % Mexico.................... 619 114 18.4 % 607 107 17.6 % 679 121 17.8 % -------- ----- -------- ----- -------- ----- Total North America.... 17,289 5,587 32.3 % 15,998 5,198 32.5 % 15,024 4,975 33.1 % -------- ----- -------- ----- -------- ----- International Europe Germany................ 3,468 553 15.9 % 3,455 547 15.8 % 4,267 692 16.2 % United Kingdom......... 2,129 348 16.3 % 1,975 340 17.2 % 1,795 306 17.0 % Other West Europe...... 7,701 754 9.8 % 7,196 671 9.3 % 9,123 774 8.5 % -------- ----- -------- ----- -------- ----- Total West Europe.... 13,298 1,655 12.4 % 12,626 1,558 12.3 % 15,185 1,772 11.7 % Central/East Europe.... 2,274 52 2.3 % 2,949 64 2.2 % 2,345 34 1.4 % -------- ----- -------- ----- -------- ----- Total Europe......... 15,572 1,707 11.0 % 15,575 1,622 10.4 % 17,530 1,806 10.3 % -------- ----- -------- ----- -------- ----- Latin America Brazil................. 1,398 269 19.2 % 1,135 255 22.5 % 772 176 22.8 % Venezuela.............. 75 22 29.3 % 125 31 24.8 % 131 31 23.7 % Other Latin American... 1,149 120 10.4 % 1,015 121 11.9 % 844 107 12.7 % -------- ----- -------- ----- -------- ----- Total Latin America........... 2,622 411 15.7 % 2,275 407 17.9 % 1,747 314 18.0 % -------- ----- -------- ----- -------- ----- All Other Asia/Pacific Australia............ 616 122 19.8 % 556 102 18.3 % 543 100 18.4 % Other Asia/Pacific... 11,844 424 3.6 % 11,152 393 3.5 % 10,154 498 4.9 % -------- ----- -------- ----- -------- ----- Total Asia/Pacific.... 12,460 546 4.4 % 11,708 495 4.2 % 10,697 598 5.6 % Africa................. 487 62 12.7 % 518 57 11.0 % 503 54 10.7 % Middle East............ 661 69 10.4 % 730 72 9.9 % 811 80 9.9 % -------- ----- -------- ----- -------- ----- Total All Other...... 13,608 677 5.0 % 12,956 624 4.8 % 12,011 732 6.1 % -------- ----- -------- ----- -------- ----- Total International... 31,802 2,795 8.8 % 30,806 2,653 8.6 % 31,288 2,852 9.1 % -------- ----- -------- ----- -------- ----- Total Worldwide............. 49,091 8,382 17.1 % 46,804 7,851 16.8 % 46,312 7,827 16.9 % ====== ===== ====== ===== ====== =====
- ------------------------- * Includes foreign brands of 4,151,000 units, or 26.9%, in 1994, 3,723,000 units, or 26.2%, in 1993, and 3,633,000 units, or 27.7%, in 1992. II-52 67
EMPLOYMENT AND PAYROLLS 1994 1993 1992 --------- --------- --------- Average worldwide employment GM (excluding units listed below)......................... 516,300 531,700 571,000 GMAC...................................................... 18,000 18,300 19,200 EDS....................................................... 75,400 71,500 70,500 GMHE...................................................... 77,100 83,400 89,300 NCRS...................................................... 6,000 5,900 -- --------- --------- --------- Average number of employees............................... 692,800 710,800 750,000 ========= ========= ========= Worldwide payrolls (in millions)............................ $31,737.3 $29,805.8 $30,340.5 Average U.S. hourly employment(1)(2)........................ 226,800 235,240 256,250 U.S. hourly payrolls(1) (in millions)....................... $13,582.3 $12,438.9 $12,408.2 Average labor cost per active hour worked -- U.S. hourly(1)................................................. $ 44.23 $ 42.72 $ 42.21 U.S. and Canadian employment at December 31 (including outside contract personnel, excluding saleable engineers)(3) Salaried............................................... 72,800 71,400 79,600 Hourly(4).............................................. 274,400 290,400 316,400 --------- --------- --------- Total................................................ 347,200 361,800 396,000 ========= ========= =========
- ------------------------- (1) Excludes EDS, Hughes, Saturn, and NCRS. (2) Includes employees "at work" (excludes laid-off employees receiving benefits). (3) Excluding GMAC, EDS, GMHE, and NCRS. (4) Includes employees "on roll" (includes laid-off employees receiving benefits). NAO 1994 was a pivotal year in the financial turnaround of NAO. NAO returned to profitability in 1994 after having incurred four consecutive years of losses. During 1994, NAO continued its ongoing efforts to improve performance in the four key areas: profitability, product quality, organizational consolidation, and cost reduction. In terms of profitability, NAO reported net income of $690.0 million, an improvement of $1,562.3 million over 1993. 1994 net income included a one-time $707.7 million after-tax charge resulting from the adoption of SFAS No. 112. Excluding this one-time charge, NAO's net income of $1,397.7 million was a $2,270.0 million improvement over 1993. Profit improvement was the result of higher vehicle volumes and outside component sales as well as reduced sales allowance expense, improved manufacturing performance, and reduced material costs from global sourcing. These improvements were offset by higher engineering costs to support new model development, and increased costs of emissions and safety equipment. NAO's 1993 loss of $872.3 million represented a $4.7 billion improvement over 1992. This improvement was realized despite a $589.0 million after-tax increase to the plant closing reserve and labor contract-related costs of $143.8 million after tax. Due to the strong vehicle market, U.S. 1994 truck deliveries were at an all-time record high of nearly 2 million units despite capacity constraints which prevented GM from fully satisfying market demand. Truck deliveries in 1994 increased 198,000 units from 1993. GM's share of U.S. truck deliveries was 30.9% in 1994, 31.4% in 1993, and 32.2% in 1992. GM's U.S. passenger car deliveries exceeded the 3 million mark for the first time in four years, and were up 152,000 units from 1993. The Corporation's share of U.S. car deliveries was 34.3% in 1994, 34.4% in 1993, and 34.9% in 1992. GM's share of total U.S. vehicle unit deliveries was 32.9% in 1994, compared to 33.2% in 1993 and 33.9% in 1992. II-53 68 Market share for 1994 was adversely affected by disruptions in vehicle supply due to labor strikes, significant model changes, and capacity constraints as well as a continuation of the planned reduction in low profit fleet sales. This planned reduction in low profit fleet sales also reduced 1993 market share. As a result of GM's reduction in fleet sales and the strong acceptance of GM product in the marketplace, incentives decreased $1,039 million in 1994 from 1993, and $1,336 million in 1993 from 1992. During 1994, Delphi Automotive Systems (formerly Automotive Components Group Worldwide -- renamed in February 1995), while fully participating in higher NAO vehicle volumes, continued to focus on aggressively growing non-NAO business worldwide. Delphi non-NAO sales grew by $800 million. In addition, Delphi obtained several major contracts for new non-NAO business and completed 12 ventures/acquisitions, adding manufacturing capability in such places as China, Mexico, and Italy. In terms of product quality, GM continued to stress quality over quantity. From a quality perspective, internal measures showed that the 1995 model year start-up was the best ever. In addition, during 1994 GM continued to show an improvement in customer surveys of overall customer satisfaction with the purchase experience as well as with overall product satisfaction. Proceeding with its ongoing organizational consolidation objectives, NAO combined its three car passenger car platforms and Saturn under two groups: the Small Car Group comprised of Saturn Corporation and the Lansing Automotive Division, and the Midsize and Luxury Car Group comprised of the Midsize Car Division and Cadillac Luxury Car Division. This organizational change enabled the newly-formed groups to have a clear market-driven focus, retain the uniqueness of its products and take advantage of NAO-wide economies of scale facilitated by the use of common parts, processes, and systems throughout the operations. NAO continued to consolidate and close selected plants during 1994. These plant closings were executed as part of NAO's previously announced plan to reduce its annual capacity to 5.4 million U.S. and Canada passenger cars and light-duty trucks, while introducing new products which appeal to the growing trucks market segment. Several steps were taken by Delphi during 1994 so as to "right-size" the organization and significantly improve cost competitiveness. Delphi completed the sale of its axle, forge, and propshaft business, motors and actuators business, light and heavy duty starter motor business, and heavy duty generator business. These divestitures allowed Delphi to focus resources on core businesses. Cost reduction remained a key strategy. NAO continued to achieve significant savings from its global sourcing and advanced purchasing strategies during 1994 as well as lean manufacturing and organizational consolidations. Lean manufacturing is a long-term strategy and is continually modified to meet changing events and consumer demands. During 1994, NAO achieved progress in its lean manufacturing target areas while increasing U.S. vehicle production. Delphi increased its utilization of three shifts and 24 hour manufacturing operations, and implemented second and third tier wage agreements with some of its unions. Balancing plant capacity and plant labor will be an ongoing challenge for NAO during 1995 and future years. Management intends to continually review its manufacturing processes and where appropriate realign capacity and selectively add labor. Salaried employment in the United States and Canada was 72,800 at the end of 1994, up from 71,400 at the end of 1993 and down from 79,600 at the end of 1992. Hourly employment in the U.S. and Canada declined to 274,400 at the end of 1994, down from 290,400 at the end of 1993 and 316,400 at the end of 1992. During 1994, several facilities were divested to Delco Remy America, ITT Automotive -- Electrical Systems N.A., and American Axle, representing approximately 12,500 jobs. In December 1992, GM and the United Auto Workers reached agreement to offer an early retirement incentive plan aimed at reducing hourly employment. This plan was offered in the first quarter of 1993 and accepted by 16,500 hourly employees. Although 1994 was a breakthrough year for NAO, there remains a significant amount of work to be done in order to achieve the goals set out in the NAO turnaround plan, and to enable NAO to reach its full potential. In this regard, NAO Management intends to maintain the momentum in implementing continued operational and financial improvements in the ensuing years. The turnaround strategies developed by the II-54 69 NAO Management Team aggressively address both short-term and long-term challenges facing the North American automotive industry. Through implementation of these strategies, NAO Management and its employees intend to continue the turnaround of GM's North American Operations and build a successful, dynamic organization poised to enter the 21st century as a strong competitor in the automotive market. International Automotive Operations GM's International Automotive Operations (IO) recorded a substantial improvement in profitability in 1994. IO reported income of $1,582.4 million in 1994 versus $1,115.3 million in 1993 and $1,435.5 million in 1992. The 1994 results reflected significant improvements in GM Europe's earnings versus 1993 when vehicle deliveries totaled only 1,622,000 units and the continuation of strong financial results in GM's Latin American Operations (LAO). IO results in 1993 reflected record sales and profits in LAO and Europe remained profitable despite an extremely difficult economic climate and low industry vehicle unit deliveries. In 1994, the West European car and truck market increased to 13.3 million units with GM achieving a share of 12.4% compared with 12.3% in 1993 and 11.7% in 1992. With an overall 13.2% share of the passenger car market in 1994, GM maintained its second place among all manufacturers of passenger cars in Western Europe. However, the technically identical Opel/Vauxhall model series again was 'number one' in the Western European car market for the third consecutive year with a market share of 12.6%. This marginal fall in the passenger car market share from the 1993 share of 12.7% reflected a number of factors including restricted availability of the successful new Omega and its predecessor model in the first half of the year, total international demand for the Corsa exceeding capacity, and much of the market growth coming in France where GM has a less than average share. During 1993, GM's Western European vehicle unit deliveries declined by 12.1%, although GM increased its car and truck market share to 12.3% from 11.7% in 1992. Overall passenger car market share increased from 12.7% in 1992 to 13.4% in 1993. Market share increased for Opel/Vauxhall for the fifth straight year. Significant further progress was made in a number of markets. In the Netherlands, Opel was market leader for the 26th consecutive year with a share of 14.9%, up from 14.1% in 1993. Opel became market leader in Finland and Hungary, and in Ireland moved up to second place in the market with a best ever share of 14.9%, compared with 13.9% in 1993. Market leadership was maintained in Switzerland and Portugal, and in Germany, GM increased its share from 15.8% last year to 15.9%. In Sweden, Saab increased its market share from 10.1% in 1993 to 11.5%, continuing the process of recovery and contributing to the return to a profit-making position. Worldwide retail sales of the Saab lineup increased 20.5% in 1994 compared with 1993 levels. GM Europe's profit for the 1994 calendar year showed a significant improvement over 1993. The improvement was primarily due to strong volume gains, lower employment-separation program costs, and continued manufacturing- and material-cost reductions. LAO's performance once again exceeded all previous vehicle sales. By capitalizing on industry expansions throughout the region, GM posted all-time record deliveries of over 411,000 units (up 1.2% vs. 1993). GM's market share (15.7%), however, was adversely impacted by continued capacity constraints in Brazil and the timing of GM's start-up in Argentina (not until the third quarter) -- two of the fastest growing markets. GM do Brasil's sales increased 5.5% from the 1993 level. Sales and earnings records were established in Colombia, while GM Chile also achieved its second best year in history. Recently approved capital expenditures, targeted at capacity expansion, will keep LAO poised for the future and allow it to take advantage of market growth. All this was accomplished amidst political uncertainty and continued competitive pressures from Eastern European and Asian entries. While attaining a 29.6% increase in unit deliveries in 1993 (versus 1992) to 407,000 units, GM continued to strengthen its financial position in Latin America by posting record operating profit as well. The region also benefited from a relatively low effective tax rate in 1993. II-55 70 Record 1994 sales in Brazil, Colombia, and Ecuador, combined with year-to-year increases in Argentina, Bolivia, Chile, and Peru, all contributed to GM's 15.7% regional market share -- its highest overseas. The region also experienced a trend toward expanded growth in intra-regional exports brought on by expanded regional trade pacts. Intra-regional exports were up 15% in 1994 versus 1993. In the Asia-Pacific region, financial performance continued on a favorable course. Strong results at GM Holden's Automotive (GMHA) and improved earnings at Isuzu Motor Limited (Isuzu) more than balanced the substantial business development costs of expanding GM operations in the region's fast growing economies. GMHA reported record profits, sparked by the success of its popular Holden Commodore model. Meanwhile, Isuzu continued with a major financial turnaround and posted higher profits in 1994. GM's expansion efforts in the region were bolstered by market share and sales volume increases, especially in Australia, Taiwan and Thailand. New initiatives included the start of Opel passenger car assembly in Indonesia and the launch of several new Opel models in the region. The Opel Corsa continued its trendsetting pattern of worldwide acceptance with successful launches throughout the Asia-Pacific region, including Australia where it was introduced as the Holden Barina. GMAC General Motors Acceptance Corporation (GMAC) serves the financing and insurance needs of GM customers. Reference should be made to the condensed GMAC financial statements included in Note 11 to the Financial Statements. The Corporation hereby encourages reference to the GMAC 1994 Annual Report on Form 10-K to the Securities and Exchange Commission. Consolidated net income for GMAC and its subsidiaries totaled $919.7 million in 1994, or $61.4 million and $16.4 million below income reported in 1993 and 1992, respectively. In this regard, 1994 income reflects an unfavorable first quarter after-tax charge of $7.4 million related to the cumulative effect on income resulting from the implementation of SFAS No. 112. Also, 1992 income reflects a cumulative unfavorable adjustment of $282.6 million related to implementation of SFAS No. 106. Net income from financing operations, including GMAC Mortgage Group (GMACMG) results, totaled $809.0 million in 1994 (excluding the $6.8 million unfavorable impact due to the adoption of SFAS No. 112). 1994 results were favorable $18.4 million relative to the $790.6 million earned in 1993 and unfavorable $202.6 million relative to the $1,011.6 million earned in 1992 (excluding the $232.8 million unfavorable impact due to the adoption of SFAS No. 106). The $18.4 million increase from 1993 earnings reflects record earnings from international operations as well as continued positive credit loss experience, and a more favorable funding mix in the U.S., resulting from greater investor confidence in GM and GMAC. The $221.0 million decrease in earnings from 1992 to 1993 is primarily attributable to lower asset levels and tighter net interest rate margins in North America, partially offset by higher earnings outside North America. Consolidated financing revenue totaled $9,418.8 million in 1994, up $666.8 million from 1993 but down $983.3 million from 1992. The increase from 1993 to 1994 is primarily attributable to increases in leasing revenues, resulting from continued growth in operating lease activity and greater wholesale revenue due to GMAC's resumption of dealer wholesale inventory financing formerly transacted by GM. This increase was partially offset by reduced lease financing revenues due to GM's reduction in fleet sales. Retail and lease financing revenue, at $2,955.0 million for 1994, was $718.4 million and $2,552.0 million lower than 1993 and 1992, respectively. Contributing to these declines were lower asset levels, primarily due to net asset liquidations through the sale of retail finance receivables since December 1990. Leasing revenue reached $4,855.7 million in 1994, compared to $3,870.9 million in 1993 and $3,527.9 million in 1992, as leasing continues to gain consumer acceptance. In 1994, wholesale and term loan financing revenue amounted to $1,608.1 million, compared with $1,207.7 million in 1993 and $1,367.2 million in 1992, with the increase primarily attributed to the resumption of wholesale inventory financing as well as greater dealer inventory, partially offset by sales of wholesale receivables. Net insurance premiums earned by Motors Insurance Corporation in 1994 were relatively stable and amounted to $1,127.6 million, compared with $1,107.2 million in 1993 and $1,159.7 million in 1992. Net II-56 71 income from insurance operations totaled $118.1 million in 1994 (excluding the $0.6 million unfavorable impact due to the adoption of SFAS No. 112). These results compare with $190.5 million in 1993 and $207.1 million in 1992 (excluding the $49.8 million unfavorable impact due to the 1992 adoption of SFAS No. 106). Income earned in 1994, in comparison to 1993, reflects non-recurring capital gains recognized in 1993, partially offset by improved underwriting results in 1994. Insurance operations in 1993 compared unfavorably to 1992, due to unfavorable underwriting results, which were partially offset by higher capital gains. Interest and discount expense decreased to $4,230.9 million in 1994 from $4,721.2 million reported in 1993 and $5,828.6 million in 1992. The $490.3 million decrease from 1993 is primarily due to a more favorable medium- and long-term funding mix resulting from increasingly positive perception of GMAC's financial position by the capital markets. The $1,107.4 million decrease from 1992 to 1993 is due to the more favorable funding mix, a general decrease in U.S. interest rates, and a lower level of total borrowings. Total consolidated assets of GMAC at December 31, 1994 were $85,537.4 million, $4,786.6 million above the previous year. Consolidated earning assets, which comprised $82,074.6 million of the total consolidated assets, increased $7,290.8 million from 1993 year-end levels. The year-to-year increase can be largely attributed to an increase in operating lease assets due to the continued popularity of the SmartLease program. As shown in the following table, GMAC financed or leased worldwide 1.9 million new passenger cars and trucks during 1994, up 2.0% from 1993 and down 12.4% from 2.2 million units in 1992.
UNITS FINANCED OR LEASED BY GMAC WORLDWIDE 1994 1993 1992 - ----------------------------------------------------------------------- ----- ----- ----- (UNITS IN THOUSANDS) U. S. ................................................................. 1,323 1,371 1,648 Outside the U.S........................................................ 613 527 561 ----- ----- ----- Total GMAC...................................................... 1,936 1,898 2,209 ===== ===== =====
GMAC financed or leased 25% of new General Motors products delivered in the U.S. during 1994, a 3 percentage point decrease from 1993 and an 8 percentage point decrease from 1992. The decline in penetration of retail delivery financing reflects continued intense competitive pressures within a robust sales environment. Total earning assets of GMAC at December 31, 1993 were down 14.2% from year-end 1992. The reduced level of earning assets reflects lower financing levels of new GM cars and trucks in the U.S. in 1993, as well as the sales of receivables. In the U.S., GMAC financed 28% of new GM vehicles delivered by GM dealers during 1993, down 5 percentage points from 1992. As of December 31, 1994, GMAC's total borrowings were $66.7 billion compared with $62.8 billion at December 31, 1993. Approximately 78.7% represented funding for operations in the United States. GMAC's total borrowings at December 31, 1993 decreased 15.8% from the prior year-end. Approximately 80.0% of 1993 borrowing supported United States operations. GMAC's provisions for loan losses reflect continued favorable loss experience related to its finance receivables. Based on these continued improvements, GMAC adjusted its allowances accordingly during 1994, which resulted in a provision for losses on financing receivables of $177.3 million, including sold receivables, $123.5 million and $193.7 million lower than 1993 and 1992, respectively. The provision for financing losses amounted to $300.8 million in 1993, a decrease of $70.2 million from 1992, reflecting a lower level of finance receivables outstanding, and improved year-to-year loss performance. Electronic Data Systems Corporation Reference should be made to EDS' Management's Discussion and Analysis in Exhibit 99(a) which is incorporated herein by reference. II-57 72 EDS achieved record earnings for the ninth consecutive year, reflecting continued strong performance in its existing businesses as well as growth in new markets. Separate consolidated net income increased 13.5% to $821.9 million in 1994 and 13.9% to $724.0 million in 1993 over $635.5 million in 1992. Earnings per share attributable to Class E common stock were $1.71 in 1994, up from $1.51 in 1993 and $1.33 in 1992, and are based on the Available Separate Consolidated Net Income of EDS (described in Note 9 to the Financial Statements). EDS is a world leader in systems integration and communications services. Revenues from sources outside GM and its affiliates rose 24.0% in 1994 to $6,505.2 million and 7.5% in 1993 to $5,238.1 million and comprised 64.7% and 61.2%, respectively, of total EDS revenues. In addition, EDS continued to assist GM in a variety of re-engineering processes being implemented in the Corporation's factories and offices. EDS financial statements do not include the amortization of the $2,179.5 million initial cost to GM of EDS customer contracts, computer software programs, and other intangible assets, including goodwill, arising from the acquisition of EDS by GM in 1984. This cost, plus the $343.2 million cost of contingent notes purchased in 1986, less certain income tax benefits, was assigned principally to intangible assets, including goodwill, and is being amortized by GM over the estimated useful lives of the assets acquired. Such amortization, charged against Other Sector income, was $29.1 million in 1994 and $34.9 million in 1993 and 1992.
YEARS ENDED DECEMBER 31, --------------------------------- SUMMARY FINANCIAL DATA -- EDS 1994 1993 1992 - -------------------------------------------------------------- --------- -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Revenues Systems and other contracts GM and affiliates........................................... $ 3,547.2 $3,323.7 $3,348.5 Outside customers........................................... 6,412.9 5,183.6 4,806.7 Interest and other income..................................... 92.3 54.5 63.7 --------- -------- -------- Total Revenues................................................ 10,052.4 8,561.8 8,218.9 Costs and Expenses............................................ 8,768.2 7,430.5 7,218.1 Income Taxes.................................................. 462.3 407.3 365.3 --------- -------- -------- Separate Consolidated Net Income.............................. $ 821.9 $ 724.0 $ 635.5 ======== ======= ======= Available Separate Consolidated Net Income* Average number of shares of Class E common stock outstanding (in millions) (Numerator)................................... 260.3 243.0 209.1 Class E dividend base (in millions) (Denominator)............................................... 481.7 480.6 479.3 Available Separate Consolidated Net Income.................... $ 444.4 $ 367.2 $ 278.4 ======== ======= ======= Earnings Attributable to Class E Common Stock on a Per Share Basis....................................................... $ 1.71 $ 1.51 $ 1.33 Cash dividends per share of Class E common stock.............. $ 0.48 $ 0.40 $ 0.36 ======== ======= =======
- ------------------------- * Available Separate Consolidated Net Income is determined quarterly. GM Hughes Electronics Corporation Reference should be made to GMHE's Management's Discussion and Analysis in Exhibit 99(b) which is incorporated herein by reference. For the second consecutive year, GMHE reported record earnings and revenues. Earnings increased 13.8% to $1,049.2 million in 1994 from $921.6 million in 1993. This compares with a loss in 1992 of $921.6 million. Earnings in 1994 include the unfavorable effect of an accounting change for postemployment benefits while 1992 included the restructuring charge and accounting changes for postretirement benefits and II-58 73 revenue recognition described previously. Excluding these special items, GMHE earnings in 1994 and 1992 would have been $1,079.6 million and $699.9 million, respectively. Revenues increased 4.3% to $14,099.4 million in 1994 and 9.9% to $13,517.5 million in 1993. Revenue increases in both years were due to continued strength in the domestic automotive market and increased demand for telecommunications products and services. The 1992 acquisition of General Dynamics' missile business also contributed to the 1993 revenue growth, however, lower production rates and planned terminations on several defense programs resulted in a decline in defense revenues in 1994. The improvements in earnings were due primarily to the aforementioned revenue increases, improved operating margins, and a lower income tax rate in 1994 resulting from the recognition of a capital loss carryforward tax benefit. The improved operating margins were primarily the result of an aggressive cost reduction program at Delco Electronics, ongoing efforts to reduce costs across GMHE's defense businesses, and continued benefits from the consolidation of the missile business acquired in August 1992. These factors were partially offset in 1994 by operating losses in the in-flight entertainment systems and air traffic control businesses and increased operating expenses associated with the commencement of nationwide service in 1994 by DIRECTV(R), GMHE's new direct-to-home television service. Results for 1994 include a $35.0 million pre-tax charge for the expected disposition of a subsidiary. In December 1994, GMHE announced that it had reached an agreement with CAE Inc. of Toronto, Canada to acquire substantially all of the assets of its U.S. subsidiary, CAE-Link Corporation, for $155 million in cash. CAE-Link is an established supplier of simulation, training, and technical services, primarily to the U.S. military and NASA. The transaction closed on February 24, 1995. In July 1993, GMHE sold its 30% ownership interest in the Japan Communications Satellite Company which resulted in a $89.7 million pre-tax gain. In December 1993, GMHE sold Hughes Rediffusion Simulation Limited and related entities which resulted in a pre-tax loss of $55.0 million. Amounts for 1992 include a $28.0 million pre-tax gain on the sale of assets to Hughes-JVC Technology Corporation and $35.0 million of pre-tax income from a patent infringement settlement. In August 1992, GMHE acquired the missile business of General Dynamics Corporation (GD) for 21.5 million shares of Class H common stock and cash of $62.8 million. Subsequently, GD sold those shares as part of a 29.1 million share public offering of Class H common stock. The remaining 7.6 million shares were issued by GM, and the proceeds were used for general corporate purposes. Earnings (Loss) per share attributable to Class H common stock were $2.62 in 1994, $2.30 in 1993, and ($2.29) in 1992, and are based on the Available Separate Consolidated Net Income (Loss) of GMHE (described in Note 9 to the Financial Statements).
YEARS ENDED DECEMBER 31, ------------------------------------- SUMMARY FINANCIAL DATA -- GMHE 1994 1993 1992 - ------------------------------------------------------------------- --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Revenues Net sales Outside customers................................................ $ 9,108.7 $ 9,062.8 $ 8,267.6 GM and affiliates................................................ 4,953.6 4,387.4 3,901.4 Other income -- net................................................ 37.1 67.3 128.1 --------- --------- --------- Total Revenues..................................................... 14,099.4 13,517.5 12,297.1 Costs and Expenses................................................. 12,570.8 12,147.1 12,547.6(1) Income Taxes (Credit).............................................. 572.8 572.6 (77.2) --------- --------- --------- Income (Loss) before cumulative effect of accounting changes....... 955.8 797.8 (173.3) Cumulative effect of accounting changes(2)......................... (30.4) -- (872.1) --------- --------- --------- Net Income (Loss).................................................. 925.4 797.8 (1,045.4) Adjustments to exclude the effect of GM purchase accounting adjustments related to Hughes(3)................................. 123.8 123.8 123.8 --------- --------- --------- Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss)................................... $ 1,049.2 $ 921.6 $ (921.6) ========= ========= =========
- ------------------------- (1) Includes one-time $1,237.0 million (after-tax $749.4 million or $1.87 per share of Class H common stock) restructuring charge primarily attributable to redundant facilities and related employment costs at Hughes. (2) Effective January 1, 1994, GMHE adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits. Effective January 1, 1992, GMHE adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and Hughes changed its revenue recognition policy for certain commercial businesses from the cost-to-cost method to the units-of-delivery method. (3) Amortization of intangible assets arising from GM's acquisition of Hughes. II-59 74
YEARS ENDED DECEMBER 31, ------------------------------------- SUMMARY FINANCIAL DATA -- GMHE 1994 1993 1992 - ------------------------------- --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Available Separate Consolidated Net Income (Loss)(4) Average number of shares of Class H common stock outstanding (in millions) (Numerator)............................................ 92.1 88.6 75.3 Class H dividend base (in millions) (Denominator).................. 399.9 399.9 399.9 Available Separate Consolidated Net Income (Loss).................. $ 241.6 $ 204.5 $ (142.3) ========= ========= ========= Earnings (Loss) Attributable to Class H Common Stock on a Per Share Basis Before cumulative effect of accounting changes................... $ 2.70 $ 2.30 $ (0.11) Cumulative effect of accounting changes(2)....................... (0.08) -- (2.18) --------- --------- --------- Net earnings (loss) attributable to Class H common stock......... $ 2.62 $ 2.30 $ (2.29) ========= ========= ========= Cash dividends per share of Class H common stock................... $ 0.80 $ 0.72 $ 0.72
- ------------------------- (2) Effective January 1, 1994, GMHE adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits. Effective January 1, 1992, GMHE adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions, and Hughes changed its revenue recognition policy for certain commercial businesses from the cost-to-cost method to the units-of-delivery method. (4) Available Separate Consolidated Net Income (Loss) is determined quarterly. LIQUIDITY AND CAPITAL RESOURCES The return to overall profitability in 1994 and 1993 resulted in much stronger cash flow from operations compared with 1992. The Corporation's net loss in 1992 had adverse effects on cash flows and balance sheet strength during that period. Despite negative business conditions during that period, GM was able to meet its funding needs through outside borrowings, sale of finance receivables, equity issuances, sale of assets, sale and leasebacks, and other means. In 1992, GM's earnings were inadequate to cover its fixed charges (principally interest and related charges on debt), primarily as a result of losses incurred by NAO. The Corporation is implementing fundamental changes which it believes are restoring the profitability of those operations and will enable the Corporation to continue to have earnings sufficient to cover its fixed charges, as was the case in 1994 and 1993. Cash Flows Cash and cash equivalents, including GMAC, were $10,939.0 million at December 31, 1994, down from $13,790.5 million a year earlier due to net cash used in investing activities exceeding net cash provided by operating and financing activities. Cash and cash equivalents at December 31, 1994 with GMAC on an equity basis were $9,731.4 million, about the same as $9,762.5 million a year earlier. Net cash provided by operating activities, including GMAC, was $11,948.7 million in 1994, $14,746.4 million in 1993, and $9,766.2 million in 1992. The decrease in 1994 reflected pension contributions in excess of pension expense, increases in accounts receivable, inventories, and other investments and miscellaneous assets, partially offset by higher net income before the accounting change, higher income taxes payable, and higher other liabilities. Net cash provided by operating activities with GMAC on an equity basis was $8,436.8 million in 1994, $11,406.3 million in 1993, and $6,699.6 million in 1992. In 1993, the Corporation increased by $950.0 million its existing reserve for scheduled plant closings, which was established as a result of NAO's adoption of a plan to realign its annual two-shift capacity to 5.4 million U.S. and Canadian passenger car and light-duty truck vehicles. The increase in the reserve resulted from changes in assumptions, primarily regarding the amount and duration of job security and supplemental unemployment benefits expected to be paid to employees, given the terms of the Corporation's 1993 collective bargaining agreements. In 1992, GMHE provided a special restructuring charge of $1,237.0 million, which comprehended a reduction of Hughes' worldwide employment, a major facilities consolidation, and the disposition of certain business lines that no longer met GMHE's strategic objectives. II-60 75 At December 31, 1994, the balance in the Corporation's plant closing and restructuring reserve (excluding environmental) was $3,103.6 million, which included $2,760.4 million for the NAO plant closings and $343.2 million for the GMHE restructuring. Approximately $2,435.3 million of the plant closing reserve is comprised of employee job security and facility costs which, together with $401.9 million of interest to accrete in the future, will require cash outflows (see Note 6 to the Financial Statements). Asset writedowns of $325.1 million, which comprise the remainder of the total, will not require future cash flows. The future employee job security costs (approximately two-thirds of the future cash expenditures) will be expended during the period between the closing of the plants and the time the affected employees are redeployed, retire, or otherwise terminate their employment. Such spending will primarily occur over the next six years, generally in a slightly declining pattern. Most of the facility costs will be expended in varying amounts over the next five years. Cash outflows are influenced by, among other items, the Corporation's ability to manage its work force efficiently and effectively and changes in the timing of plant closings. Approximately $288.2 million of the GMHE restructuring reserve balance, primarily relating to facilities consolidation, will require future cash outflows, the predominant portion of which will occur over the next three years. The balance of the GMHE reserve represents non-cash items. During 1994, 1993 and 1992, $498.8 million, $599.6 million, and $723.4 million, consisting primarily of job security costs, were charged against the NAO plant closing reserve. Charges against GMHE's restructuring reserve were $228.3 million in 1994, predominantly facilities costs, $527.6 million in 1993, approximately equally split among facilities costs, severance, business disposition costs, and other, and $250.9 million in 1992, predominantly facilities costs. In addition, in 1994 and 1993 the GMHE restructuring reserve was increased by $35 million and $78 million, respectively, primarily due to changes in the estimated loss on disposition of two subsidiaries. The Corporation has made substantial progress toward achieving its plan of realigning NAO's plant capacity and the improved operating results and cash flow are partly a result of these actions. Further incremental benefits are anticipated as execution of the plan is completed. GMHE's operating results and cash flows were favorably affected by cost reductions resulting from the restructuring but significant further incremental benefits are not anticipated. Net cash provided by (used in) investing activities, including GMAC, was ($17,499.8)million in 1994, $366.8 million in 1993, and $1,767.5 million in 1992. Net cash used in investing activities in 1994 consisted primarily of capital expenditures and the net increase in equipment on operating leases, reflecting the continued acceptance and popularity of the GMAC SmartLease program. Net cash provided by investing activities in 1993 was primarily due to the net reduction in finance receivables (resulting from sales of finance receivables) exceeding capital expenditures and the net increase in equipment on operating leases. GMAC received $18,800.0 million in 1994, $13,072.2 million in 1993, and $11,201.8 million in 1992 from proceeds from sales of finance receivables. Such sales, which are an integral element in GMAC's strategy to minimize liquidity concerns, accelerate the conversion of receivables to cash. With GMAC on an equity basis, net cash used in investing activities amounted to $7,720.8 million in 1994 and $4,162.6 million in 1993, compared to net cash provided by investing activities of $2,465.0 million in 1992. Net cash provided by financing activities, including GMAC, was $2,688.2 million in 1994 versus net cash used of $12,477.5 million in 1993 and $6,904.9 million in 1992. Net cash provided by financing activities in 1994 primarily reflected the net increase in short-term loans payable and proceeds from issuing common stocks, primarily for employee benefit plans, partially offset by a net decrease in long-term debt and cash dividends paid to stockholders. Net cash used in financing activities in 1993 primarily reflected the net decrease in short-term loans payable and a net decrease in long-term debt. Net cash used in financing activities with GMAC on an equity basis was $757.0 million in 1994 and $11,397.6 million in 1993, compared to net cash provided by financing activities of $628.2 million in 1992. General Motors converted all 17,825,000 outstanding shares of its Series A Conversion Preference Stock (Preference Equity Redemption Cumulative Stock or PERCS) into shares of GM $1 2/3 par value common stock on June 18, 1994. A total of 17.7 million shares of GM $1 2/3 par value common stock was issued in this conversion. II-61 76 In 1993, cash flows from investing and financing activities, with GMAC on an equity basis, were significantly affected by the discontinuation of GM financing of certain dealer wholesale receivables and the use of the related proceeds to retire certain intercompany financing arrangements with GMAC. In May 1993, GM redeemed all of the $5.00 Series and $3.75 Series of Preferred Stock for $265.0 million. In authorizing the redemption, the Board of Directors determined that the action would provide additional financial flexibility to the Corporation by eliminating certain covenants contained in the terms of the Preferred Stock. To help meet its funding needs, GM issued several different series of preference stock providing aggregate net proceeds of $2,498.1 million in 1992. In addition, GM raised $2,165.4 million in May 1992 through the issuance in a public offering of 57.0 million shares of $1 2/3 par value common stock and $129.4 million in October 1992 from the issuance of 7.6 million Class H shares. The 7.6 million Class H shares were in addition to the 21.5 million Class H shares issued to finance the acquisition of GD's missile business. Health Care Expense and Other Postretirement Benefits The adoption of SFAS No. 106 had no effect on cash flow since the Corporation continues its practice of paying postretirement benefits (other than pensions) when incurred. Nonetheless, General Motors is committed to reducing the burden of continuing health care cost increases. As described in Note 5 to the Financial Statements, SFAS No. 106 requires the cost of postretirement medical, dental, vision, and life insurance to retirees and eligible dependents to be recognized in the financial statements during the period employees provide services to the Corporation. Costs for medical, dental, vision, and life insurance claims provided to employees during active service are expensed as incurred (pay-as-you-go) and are not covered by this Standard. The following table sets forth the components of GM's 1994 SFAS No. 106 expense and GM's 1994 U.S. health care cost and cash expenditures (excluding EDS and Hughes, but including GMAC and Delco Electronics):
SFAS NO. 106 HEALTH PAY-AS-YOU-GO EXPENSE CARE COST COST* ------------ --------- ------------- (DOLLARS IN MILLIONS) GM U.S. Operations Health Care -- SFAS No. 106 Expense.................................. $3,564 $ 3,564 $ -- Retired Employees Pay-As-You-Go...................................... -- -- 1,616 Active Employees Pay-As-You-Go...................................... -- 1,845 1,845 ------ ------- ------- Total Health Care....................................... 3,564 $ 5,409 $ 3,461 ======= ======= SFAS No. 106 Ongoing Expense Life Insurance........................................ 402 Other Subsidiaries -- Health Care and Life Insurance.......................................... 156 ------ Total SFAS No. 106...................................... $4,122 ======
- ------------------------- * Pay-as-you-go amounts for 1993 were $1,578 million for retirees, $1,885 million for active employees and $3,463 million in total. The Corporation has disclosed in the financial statements certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "accumulated postretirement benefit obligations," "liabilities," or "obligations." Notwithstanding the recording of such amounts and the use of these terms, the Corporation does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of the Corporation (other than pensions) represent legally enforceable liabilities of the Corporation. II-62 77 GM Card GM is the sponsor of a credit card program, entitled the GM Card program, introduced in the U.S. in September 1992 and subsequently in Canada and the United Kingdom. A cardholder's use of the card generates entitlements to rebates which can be used solely in connection with the cardholder's purchase or lease of a new GM vehicle. As the sponsor of the GM Card program, neither GM nor GMAC provide consumer credit. GM is using the program as a marketing strategy to strengthen brand loyalty and to ultimately increase product sales. Independent banks issue the GM Card and are responsible for evaluating, extending, and funding credit to the cardholders, and are fully responsible for any credit card losses with no recourse against GM. GM Card rebates accumulate at a rate equal to 5% of all spending for goods or services charged to the GM Card up to a maximum rebate amount of $500 per year on the Blue Card and $1,000 per year on the Gold Card. Additional rebates may be earned when the GM Card is used to make purchases from non-bank marketing partners. The rebates, which expire in 7 years, may be applied over and above all sales allowances in the market at the time of vehicle purchase or lease. GM is solely responsible to cardholders for rebates. Provisions for GM Card rebates are recorded as reductions in revenue at the time of vehicle sale. GM has the right to prospectively modify the plan. Rebates redeemed during 1994, 1993, and 1992 were $149.8 million, $33.6 million, and $0.4 million, respectively. Cardholder rebates available for future redemption when the cardholder purchases or leases a new GM vehicle amounted to $1.6 billion (net of deferred program income) at December 31, 1994. At the time the rebate is redeemed, income on the vehicle sale is recognized, and the Corporation anticipates that profits from incremental sales resulting from the GM Card program along with deferred program income will more than offset future rebate costs associated with the GM Card. Debt Changes GM and certain of its subsidiaries maintain or otherwise have available to them through asset securitization programs various syndicated bank credit facilities which in aggregate provide $25.9 billion of committed credit availability. Of this amount, $3.0 billion is directly available to the Corporation and the remainder is available to GMAC and its subsidiaries and other GM subsidiaries worldwide. At year-end 1994, unused short-term credit facilities totaled approximately $18.5 billion and unused long-term credit facilities totaled approximately $19.2 billion, compared with $14.7 billion and $18.2 billion, respectively, at the end of 1993. During 1994, notes and loans payable of GM and its subsidiaries including GMAC (as detailed in Note 15 to the Financial Statements) increased 4.7% to $73,730.2 million at year-end from $70,441.2 million at December 31, 1993. During 1993, notes and loans payable decreased 14.7%. GM's fully consolidated ratio of debt to stockholders' equity (excluding stocks subject to repurchase) was 5.75 to 1 at December 31, 1994 and 12.58 to 1 a year earlier. Long-term debt of GM and its subsidiaries with GMAC on an equity basis was $6,082.3 million at the end of 1994, a decrease of $136.1 million during the year. The ratio of long-term debt to the total of long-term debt and stockholders' equity (with GMAC on an equity basis and excluding stocks subject to repurchase) was 32.2% at December 31, 1994 and 52.6% at December 31, 1993. The ratio of long-term debt and short-term loans payable to the total of this debt and stockholders' equity (with GMAC on an equity basis and excluding stocks subject to repurchase) was 35.6% at the end of 1994 and 57.8% at the end of 1993. Derivative Financial Instruments GM is an international corporation with operations in over 50 countries in the world which naturally exposes the Corporation to a variety of financial risks. These financial risks are principally the effects of movements in foreign exchange rates on transactions not denominated in U.S. dollars, and, to a lesser extent, changes in interest rates on its net cost of borrowings. In addition, the Corporation is hedging its use of metals in the physical and financial commodities markets. The impact of such financial exposures on the II-63 78 Corporation's annual income is relatively small compared with the impact of changes in vehicle sales volumes and operating margins. These financial exposures are monitored and managed in accordance with Corporate policies and procedures. With respect to foreign exchange, GM has foreign exchange exposures at many of its domestic and foreign operations related to buying, selling, and financing in currencies other than the local currency. GM's most significant foreign currency exposures relate to major North American countries (Canada and Mexico), Western European countries (primarily Germany, United Kingdom, Spain, Belgium, and France), Japan, and Brazil. The magnitude of these exposures varies significantly over time depending upon the strength of local automotive markets and sourcing decisions. GM and its subsidiaries enter into agreements to manage certain foreign exchange exposures primarily to hedge transaction risks. As a general practice, GM has not hedged the foreign exchange exposure related to either the translation of overseas earnings into U.S. dollars or the translation of overseas equity positions back to U.S. dollars. The Corporation manages its market risk from exposure to changes in interest rates through various interest rate forward contracts and options both on its financing assets and debt. At December 31, 1994 and 1993, the total notional amount of such financial instruments was approximately $14 billion and $11 billion, respectively. The $3 billion increase in notional amount relates to GMAC, and its use of such instruments in the normal course of business to offset a companion asset or funding position as well as to adjust the fixed/floating nature of its funding position. The increase does not reflect any change in underlying approach or philosophy by the Corporation. With respect to interest rates, in 1994 interest rates rose worldwide with U.S. interest rates essentially leading the trend. The Corporation raises most of its financing in the U.S. However, 1994 borrowing costs declined, reflecting a more favorable funding mix at GMAC resulting from reduced medium- and long-term cost of funds as well as an increasingly positive perception by the capital markets. Additional information regarding GM's accounting policies for and use of derivative financial instruments is contained in Notes 1, 15, 19 and 20 to the Financial Statements. Security Ratings Debt ratings by the various rating agencies reflect each agency's opinion of the ability of issuers to repay debt obligations punctually. Lower ratings generally result in higher borrowing costs. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating.
CURRENT SECURITY RATINGS GENERAL MOTORS, GMAC, AND GMHE: ------------------------------------- LONG-TERM COMMERCIAL PREFERENCE DEBT PAPER* STOCK --------- ---------- ---------- Standard & Poor's.............................. BBB+ A-2 BBB Moody's........................................ Baa1 Prime-2 baa3 Fitch Investors................................ A- F-1 BBB+ Duff & Phelps.................................. A- D-1 BBB+
- ------------------------- * EDS commercial paper is rated Prime-1 by Moody's. In February 1993, Standard & Poor's Corporation (S&P) revised the long-term debt, commercial paper and preference stock ratings of GM, GMAC, GMHE, and EDS. GM's, GMAC's, and GMHE's S&P ratings were lowered from A- to BBB+ for senior debt, eighth highest within the 10 investment grade ratings available from S&P for long-term debt, based on a determination of adequate capacity to pay interest and repay principal. S&P lowered GMAC's, EDS', and GMHE's ratings from A-1 to A-2 for commercial paper, third highest within the four investment grade ratings available from S&P for commercial paper, indicating strong capacity for timely payment determined by significant safety characteristics. The rating on GM's preference stock was lowered from BBB+ to BBB (the ninth highest within the 10 S&P investment grade ratings). II-64 79 In October 1993, at the time of GM's labor contract settlement, S&P revised its ratings outlook from stable to negative. In April 1994, S&P revised its ratings outlook from negative to positive. In November 1992, Moody's Investors Service, Inc. lowered its rating of senior debt of GM, GMAC, and GMHE to Baa1 from A2, eighth highest within the 10 investment grade ratings available from Moody's for long-term debt, reflecting adequate protection of present interest payments and principal. Concurrently, Moody's lowered its rating of GMAC and GMHE commercial paper from Prime-1, the highest of three investment grade ratings available from Moody's for commercial paper, to Prime-2, indicating a strong ability for repayment based on sound earnings trends and coverage ratios, appropriate capitalization characteristics, and adequate maintenance of alternative liquidity. Moody's affirmed the Prime-1 rating of EDS commercial paper. In addition, the rating of GM preference stock was lowered to baa3 (the 10th highest of 10 investment grade ratings) from a3. Moody's cited GM's continued net losses in North America as the basis for its action. In addition, substantially all of the short-, medium-, and long-term debt issued by GMAC and the senior debt of GM is rated by Fitch Investors Service, Inc. (Fitch) and Duff & Phelps Credit Rating Co. (D&P). The senior debt of GM and GMAC is rated A- by both agencies, seventh highest within the 10 investment grade ratings available. Fitch's A- rating is assigned to bonds considered to be of high credit quality, with the obligor's ability to pay interest and repay principal considered to be strong. D&P's A- rating indicates adequate likelihood of timely payment of principal and interest. GMAC commercial paper has received ratings of F-1 by Fitch, the second highest of four investment grade ratings available which is assigned to short-term issues which possess a very strong credit quality based primarily on the existence of liquidity necessary to meet the obligation in a timely manner. GMAC's commercial paper is rated D-1 by D&P, the second highest of five investment grade ratings available which signifies a very high certainty of timely payment based on excellent liquidity factors and good fundamental protection factors. GM's preference shares are rated BBB+ by Fitch and D&P, the eighth highest of 10 investment grade ratings available. Preference issues assigned this rating by Fitch are considered reasonably safe but lack the projections of the "A" to "AAA" categories. This rating signifies that current results should be watched for possible signs of deterioration. Preference stock assigned this rating by D&P has below average projection factors but is still considered sufficient for prudent investment. Despite the current ratings by Moody's and S&P, GM management believes that GM and GMAC remain highly liquid, retain good access to the capital markets, and maintain extensive bank credit facilities. GM management believes that NAO's return to profitability should favorably impact the Corporation's credit ratings over time. Capital Spending Worldwide capital expenditures, excluding GMAC, were $7.1 billion in 1994 and $6.4 billion in 1993 and 1992. Expenditures in 1994 were devoted primarily to product development in continued support of the Corporation's programs to improve vehicle quality, performance, and styling. GMAC's capital expenditures were approximately $133.0 million in 1994, $118.5 million in 1993, and $149.7 million in 1992. Of the 1994 worldwide expenditures for real estate, plants, and equipment, approximately 70% were in the United States (71% in 1993 and 56% in 1992), 10% in other North America (5% in 1993 and 3% in 1992), and 20% overseas (24% in 1993 and 41% in 1992). Commitments for capital spending, including special tools, were $4.2 billion at December 31, 1994. Capital expenditures for 1995 are estimated to be approximately $8.5 billion. Dividend Policy GM's policy is to distribute dividends on its $1 2/3 par value common stock based on the outlook and indicated capital needs of the business. At the November 1992 meeting of the General Motors Board of II-65 80 Directors, the quarterly dividend on the $1 2/3 par value common stock was reduced from $0.40 per share to $0.20 per share to conserve cash and strengthen GM's competitive position. With respect to Class E and Class H common stocks, the Corporation's current policy is to pay aggregate annual cash dividends approximately equal to 30% and 35% of the Available Separate Consolidated Net Income of EDS and GMHE, respectively, for the prior year. In February 1995, the Board of Directors increased the quarterly dividends on Class E common stock from $0.12 per share to $0.13 per share and on Class H common stock from $0.20 per share to $0.23 per share. Notwithstanding the current dividend policy, the dividends paid on the Class H common stock for each of the quarters of 1994, 1993, and 1992 exceeded 35% of the Available Separate Consolidated Net Income of GMHE for the preceding year (excluding the effect of the $749.4 million after-tax special restructuring charge at Hughes in 1992). At December 31, 1994, the Corporation's capital surplus plus net income retained for use in the business was $9,013.8 million, $3,752.1 million, and $2,169.3 million on $1 2/3 par value, Class E, and Class H common stocks, respectively, as allocated pursuant to GM's Certificate of Incorporation. However, consistent with Delaware law, which governs the amount legally available for the payment of dividends on the Corporation's common stock, the Board of Directors has determined that such amount is materially higher than the Corporation's capital surplus plus net income retained for use in the business. Book Value Book value per share of $1 2/3 par value common stock was $11.18 at the end of 1994, versus $1.65 a year earlier and $1.98 at the end of 1992. Book value per share of Class E common stock increased to $1.43 from $0.21 and $0.25 at the end of 1993 and 1992, respectively. Book value per share of Class H common stock increased to $5.59 from $0.83 and $0.99 at the end of 1993 and 1992, respectively. Deferred Taxes The Corporation's Consolidated Balance Sheet at December 31, 1994 includes a deferred tax asset of approximately $18.2 billion related to net future deductible temporary differences (see Note 8 to the Financial Statements) in the U.S. of which approximately $14.9 billion relates to the obligation for postretirement benefits other than pensions. The Corporation believes it is likely that such benefits will be realized through the reduction of future taxable income. Management has carefully considered various factors in assessing the probability of realizing these deferred tax benefits including: - Recent operating results of GMAC, EDS, and GMHE, which collectively generated U.S. pre-tax income of approximately $3.3 billion, $3.4 billion, and $2.3 billion in 1994, 1993, and 1992, respectively. - Substantial improvement in the operating results of U.S. automotive operations over the most recent three year period and overall financial forecasts of book and taxable income for the 1995-1999 period. Improvements are expected by balancing plant capacity per the plant closing plan, reducing material costs through global sourcing, increasing efficiency through lean manufacturing, and reducing low profit fleet sales. - The ability to utilize tax planning, such as capitalization of research and experimentation costs for tax purposes, so that the Corporation does not have, and does not expect to generate in the near future, any significant U.S. Federal tax net operating loss carryforwards. - The extended period of time over which the tax benefits can be utilized. Postretirement benefits become tax deductions over periods up to 50 years. - The fact that the Corporation has never lost deferred Federal tax benefits due to the expiration of a U.S. net operating loss carryforward. II-66 81 For illustrative purposes, the Corporation estimates that it will require approximately $19.5 billion in U.S. taxable income over the next five years to realize the recorded deferred tax benefit from temporary differences between book and taxable income that are expected to impact taxable income over the five-year period. The Corporation expects to realize the related deferred tax benefit of $6.8 billion. This expectation is based on improved operating results in the U.S., available tax planning, and the recurring nature of many temporary differences between book and taxable income. (Examples of temporary differences expected to recur in future periods are product warranty and sales incentive expenses which will generate additional deferred tax assets, thereby offsetting the realization of previously recorded deferred tax assets related to these items.) As shown in the table below which provides a reconciliation of the Corporation's pre-tax book U.S. income (loss) and taxable U.S. income (loss), U.S. taxable income is estimated at $1.7 billion for 1994. Foreign income taxable in the U.S. includes dividends from foreign operations which totaled approximately $1.1 billion, $6.2 billion and $0.6 billion in 1994, 1993, and 1992, respectively. The increase in dividends in 1993 was effected as part of GM's tax planning and global cash management initiatives. The estimated decrease in 1994 taxable income from temporary differences compared to prior years is driven by the significant pension contributions during 1994.
RECONCILIATION OF BOOK INCOME TO TAXABLE INCOME 1994 1993 1992 - ----------------------------------------------------------- --------- -------- --------- (DOLLARS IN MILLIONS) Pre-tax U.S. income (loss) from all sources................ $ 3,152.1 $ (512.7) $(6,767.3) Foreign income taxable in the U.S.......................... 1,779.0* 6,438.0 584.0 Temporary differences...................................... (3,342.2)* 1,332.7 3,759.9 Other -- including goodwill and other non-deductible expenses................................................. 80.1* 465.8 581.5 --------- -------- --------- U.S. taxable income (loss)............................... $ 1,669.0* $7,723.8 $(1,841.9) ======== ======= ========
- ------------------------- *Estimated amounts The effect of U.S. taxable income in 1993 was substantially offset by the use of foreign tax credits and a similar result is expected for 1994. The taxable loss in 1992 was carried back to prior years. Pensions At year-end 1994, GM's total unfunded pension position decreased to $12.6 billion ($9.4 billion U.S. and $3.2 billion non-U.S.) from $22.3 billion a year ago. Major factors contributing to this decrease were greater than legally required contributions and the increase in interest rates which resulted in higher discount rates used to compute the projected benefit obligation of the plans. Under current pension accounting standards, each year end the Corporation is required to change its discount rate to the then long-term bond rate to determine the annual funded status. Total worldwide pension contributions for the 1994 calendar year totaled $8.2 billion. GM's Board of Directors has approved a plan with the long-term goal that its principal U.S. plans be fully funded on an ongoing economic basis by year end 1996. In measuring its pension obligations for the purpose of developing this long-term pension funding plan, the Corporation uses a stable long-term rate of return (i.e., 10%) that it expects to achieve over time on the investment of plan assets. To meet this goal, the Corporation contributed $7.7 billion in cash to its U.S. pension plans in the 1994 calendar year, $5.8 billion more than was required by law. After satisfying its 1994 Employee Retirement Income Security Act (ERISA) minimum funding obligation with a cash contribution of $1.9 billion to its U.S. hourly pension plan in the first quarter of 1994, the Corporation made cash contributions of $3.3 billion and $2.5 billion to its U.S. pension plans in the third and fourth quarters of 1994, respectively. The Corporation has made further cash contributions of $1.8 billion to its U.S. pension plans in the first quarter of 1995 and expects to make additional contributions as it seeks to meet the long-term funding plan described above. II-67 82 On May 11, 1994, the Corporation reached an agreement with the Pension Benefit Guaranty Corporation (PBGC) which could lead to incremental stock contributions to its U.S. hourly pension plan in the near term. The funding proposal includes $4 billion in cash (already contributed) plus a contribution of approximately 177 million shares of Class E common stock. Based on the $38.75 per share closing price of Class E common stock on the New York Stock Exchange on March 1, 1995, a 177 million share contribution of such stock would have a face market value of approximately $6.8 billion. If and when such stock is contributed by GM to its U.S. hourly pension plan, the value to be recorded by GM and the U.S. hourly pension plan will be somewhat less than that reflected by the per share market price at which it is then trading, as it will be a value attributed to the entire block of stock by an independent valuation expert (to be retained by the independent trustee) who will consider, among other things, the relative size of the block. Given that improvement in the funded status of GM's U.S. pension plans is a prerequisite to improve the Corporation's credit rating, increase its financial flexibility, and strengthen its long-term financial soundness, the Corporation's proposed contribution of its Class E stock holdings is considered a good use of the Corporation's assets without impacting EDS' business and customer relationships. GM's ability to make the contribution as planned is contingent upon receiving the exemption requested from the U.S. Department of Labor (DOL), and other conditions. GM filed its application with the DOL. The notice containing a description of the proposed prohibited transaction exemption and soliciting comment thereon was published in the Federal Register on November 14, 1994 and mailed to all participants in the hourly plan. No assurance can be given at this time that the approvals will be obtained. Under the terms of the agreement with the PBGC, GM will defer the use of funding credits that would result from the incremental cash and stock contributions. Consequently, GM will continue to make regular cash contributions to its pension plans over the next several years. The PBGC agreement also provides flexibility to GM by granting a release of EDS from liability, if any, under Title IV of ERISA for GM's U.S. pension plans in the event EDS were to leave the GM controlled group under certain circumstances. Environmental Matters The Corporation is subject to various laws relating to the protection of the environment, and is in various stages of investigation or remediation for sites where contamination has been alleged. As disclosed in Note 16 to the Financial Statements, Other Liabilities and Deferred Credits, the accrued liability for worldwide environmental cleanup was $693.7 million at December 31, 1994, $659.3 million at December 31, 1993, and $519.1 million at December 31, 1992. Such amounts are currently believed to be sufficient. In future periods, new laws or regulations, advances in technologies, and additional information about the ultimate remedy selected at new and existing sites, and the Corporation's share of the cost of such remedies, could significantly change the Corporation's estimates. Note 1 to the Financial Statements, Significant Accounting Policies, describes the Corporation's methodology for estimating environmental liabilities. The process of estimating such liabilities is complex and is dependent primarily on the existence and quality of historical information and physical data relating to a contaminated site, the complexity of the site, uncertainty as to what remedy and technology will be required, the outcome of discussions with regulatory agencies and other potentially responsible parties (PRPs) at multi-party sites, the number and financial viability of other PRPs, and the timing of expenditures. In 1994, 1993, and 1992, the Corporation expensed $105.7 million, $104.7 million, and $114.0 million, respectively, for environmental cleanup. In addition, worldwide capital expenditures, as discussed previously, include $130.5 million, $211.5 million, and $246.9 million in 1994, 1993, and 1992, respectively, for various environmental matters. Stocks Subject to Repurchase On February 15, 1995, GM and the Howard Hughes Medical Institute entered into an agreement under which GM will assist the Institute in a registered public offering of approximately 15 million shares of Class H common stock. The put and call rights described in Note 17 to the Financial Statements expired unexercised. The Institute will have a new put right with an exercise date on the earlier of the conclusion of the offering or June 30, 1995. GM will receive any net proceeds of the offering in excess of $37.50 per share. II-68 83 GENERAL MOTORS OPERATIONS WITH GMAC ON AN EQUITY BASIS In order to facilitate analysis, the following financial statements present financial data for the Corporation's manufacturing, wholesale marketing, defense, electronics, and computer service operations with the financing and insurance operations reflected on an equity basis. This is the same basis and format used in years prior to GM's adoption of SFAS No. 94, Consolidation of All Majority-owned Subsidiaries: STATEMENT OF CONSOLIDATED OPERATIONS WITH GMAC ON AN EQUITY BASIS
YEARS ENDED DECEMBER 31, -------------------------------------- 1994 1993 1992 ---------- ---------- ---------- (DOLLARS IN MILLIONS) Net Sales and Revenues(1) Manufactured products.................................... $134,888.1 $119,803.2 $113,489.0 Computer systems services................................ 6,687.9 5,449.5 5,082.6 ---------- ---------- ---------- Total Net Sales and Revenues............................. 141,576.0 125,252.7 118,571.6 ---------- ---------- ---------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below..................................... 117,290.8 106,497.1 105,423.0 Selling, general, and administrative expenses............ 10,574.7 9,765.7 9,633.6 Depreciation of real estate, plants, and equipment....... 3,868.4 3,824.7 3,670.3 Amortization of special tools............................ 2,900.7 2,535.3 2,504.0 Amortization of intangible assets........................ 180.7 189.3 189.1 Special provision for scheduled plant closings and other restructurings......................................... -- 950.0 1,237.0 ---------- ---------- ---------- Total Costs and Expenses................................. 134,815.3 123,762.1 122,657.0 ---------- ---------- ---------- Operating Income (Loss).................................. 6,760.7 1,490.6 (4,085.4) Other income less income deductions -- net(2)............ 1,251.8 1,195.3 1,046.3 Interest expense......................................... (1,304.5) (1,510.9) (1,886.8) ---------- ---------- ---------- Income (Loss) before Income Taxes........................ 6,708.0 1,175.0 (4,925.9) Income taxes (credit).................................... 2,181.9 (482.1) (1,594.9) ---------- ---------- ---------- Income (Loss) after Income Taxes......................... 4,526.1 1,657.1 (3,331.0) Earnings of nonconsolidated affiliates................... 1,125.2 808.7 427.8 ---------- ---------- ---------- Income (Loss) before cumulative effect of accounting changes................................................ 5,651.3 2,465.8 (2,903.2) Cumulative effect of accounting changes(3)............... (750.7) -- (20,595.1) ---------- ---------- ---------- Net Income (Loss)........................................ $ 4,900.6 $ 2,465.8 $(23,498.3) ========== ========== ==========
- ------------------------- (1) Includes sales to nonconsolidated affiliates of $1,134.1 million in 1994, $1,059.2 million in 1993, and $984.8 million in 1992, including $275.0 million in computer systems services revenues for 1994, $265.9 million for 1993, and $275.9 million for 1992. (2) Includes loss on the sale of AGT of $305.6 million in 1993, and the NCRS charge of $813.2 million and gain on the sale of Daewoo Motor Co. of $162.8 million in 1992. (3) Effective January 1, 1994, the Corporation adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits. Not included is the unfavorable cumulative effect on GMAC earnings of $7.4 million of adopting SFAS No. 112 because the cumulative effect is included in earnings of nonconsolidated affiliates. Effective January 1, 1992, the Corporation adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. Not included is the unfavorable cumulative effect on GMAC earnings of $282.6 million of adopting SFAS No. 106 because the cumulative effect is included in earnings of nonconsolidated affiliates. Also effective January 1, 1992, Hughes changed its revenue recognition policy as discussed previously. II-69 84 CONSOLIDATED BALANCE SHEET WITH GMC ON AN EQUITY BASIS
DECEMBER 31, ------------------------- 1994 1993 ---------- ---------- (DOLLARS IN MILLIONS) ASSETS Current Assets Cash and cash equivalents........................................... $ 9,731.4 $ 9,762.5 Other marketable securities......................................... 1,245.0 722.5 ---------- ---------- Total cash and marketable securities........................... 10,976.4 10,485.0 Accounts and notes receivable Trade............................................................. 7,873.1 5,563.1 Nonconsolidated affiliates........................................ 2,080.4 2,955.2 Inventories......................................................... 10,127.8 8,615.1 Contracts in process................................................ 2,265.4 2,376.8 Prepaid expenses and deferred income taxes.......................... 6,455.6 8,036.3 ---------- ---------- Total Current Assets........................................... 39,778.7 38,031.5 Equity in Net Assets of Nonconsolidated Affiliates.................. 9,204.3 8,638.5 Deferred Income Taxes............................................... 16,318.6 14,874.1 Other Investments and Miscellaneous Assets.......................... 14,835.5 12,586.4 Property -- Net..................................................... 34,661.4 34,103.9 Intangible Assets................................................... 11,536.4 12,746.1 ---------- ---------- Total Assets................................................... $126,334.9 $120,980.5 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable.................................................... $ 10,905.0 $ 9,546.5 Loans payable....................................................... 993.7 1,449.6 Income taxes payable................................................ 144.7 389.9 Accrued liabilities and deferred income taxes (including current portion of postretirement benefits other than pensions)........... 26,584.4 23,823.3 Stocks subject to repurchase........................................ 450.0 -- ---------- ---------- Total Current Liabilities...................................... 39,077.8 35,209.3 Long-Term Debt...................................................... 6,082.3 6,218.4 Payable to GMAC..................................................... 1,212.5 1,355.5 Capitalized Leases.................................................. 136.4 165.2 Postretirement Benefits Other Than Pensions......................... 37,348.0 35,423.6 Pensions............................................................ 11,223.1 20,583.3 Other Liabilities and Deferred Income Taxes......................... 16,752.2 14,739.7 Deferred Credits.................................................... 1,678.8 1,238.0 Stocks Subject to Repurchase........................................ -- 450.0 Stockholders' Equity................................................ 12,823.8 5,597.5 ---------- ---------- Total Liabilities and Stockholders' Equity..................... $126,334.9 $120,980.5 ========== ==========
II-70 85 STATEMENT OF CONSOLIDATED CASH FLOWS WITH GMAC ON AN EQUITY BASIS
YEARS ENDED DECEMBER 31, ------------------------------------- 1994 1993 1992 --------- --------- --------- (DOLLARS IN MILLIONS) Cash Flows from Operating Activities Income (Loss) before cumulative effect of accounting changes.................. $ 5,651.3(1) $ 2,465.8 $(2,903.2)(2) Adjustments to reconcile income (loss) before cumulative effect of accounting changes to net cash provided by operating activities Depreciation and amortization......................... 6,949.8 6,549.3 6,363.4 Special provision for scheduled plant closings and other restructurings................................ -- 950.0 1,237.0 Provision for inventory allowances.................... 53.1 44.1 28.5 Pension expense, net of cash contributions............ (5,096.1) (1,548.2) 273.4 Pre-tax (gain) loss on sales of various assets........ (17.6) 305.6 (162.8) Write-down of investment in National Car Rental System Inc................................................. -- -- 813.2 Provision for ongoing postretirement benefits other than pensions, net of cash payments................. 2,204.6 2,355.7 2,170.1 Change in deferred income taxes (3)................... 584.5 (1,345.8) (2,833.5) Undistributed earnings of nonconsolidated affiliates.......................................... (204.4) 448.1 724.5 Change in other operating assets and liabilities Accounts receivable................................. (1,428.7) (106.0) (741.8) Inventories (3)..................................... (1,750.3) 240.3 886.4 Accounts payable (3)................................ 1,224.0 552.2 (478.8) Income taxes payable................................ (243.3) (353.1) 245.6 Other liabilities (3)............................... 990.0 (455.9) (754.4) Other (3)........................................... (480.1) 1,304.2 1,832.0 --------- --------- --------- Net Cash Provided by Operating Activities.................. $ 8,436.8 $11,406.3 $ 6,699.6 ========= ========= =========
- ------------------------- (1) Includes the unfavorable cumulative effect on GMAC earnings of $7.4 million from adopting SFAS No. 112. (2) Includes the unfavorable cumulative effect on GMAC earnings of $282.6 million from adopting SFAS No. 106. (3) Excluding effect of accounting changes. II-71 86 STATEMENT OF CONSOLIDATED CASH FLOWS WITH GMAC ON AN EQUITY BASIS -- CONCLUDED
YEARS ENDED DECEMBER 31, ------------------------------------ 1994 1993 1992 --------- ---------- --------- (DOLLARS IN MILLIONS) Cash Flows from Investing Activities Investment in companies, net of cash acquired............ $ (246.6) $ (232.4) $ (134.7) Expenditures for real estate, plants, and equipment...... (4,750.9) (3,703.6) (4,187.0) Expenditures for special tools........................... (2,341.4) (2,648.6) (2,252.9) Proceeds from disposals of real estate, plants, and equipment............................................. 240.9 447.1 120.3 Proceeds from sale and leaseback of capital assets....... -- -- 654.9 Proceeds from the sale of various assets................. 518.4 231.5 162.8 Change in other investing assets Investments in other marketable securities -- acquisitions........................................ (2,757.0) (2,554.9) (4,676.0) Investments in other marketable securities -- liquidations........................................ 2,237.0 2,585.6 4,363.0 Notes and finance receivables......................... 101.9 8,811.0 1,718.4 Operating leases -- net............................... (723.1) (470.7) 68.6 --------- ---------- --------- Net Cash Provided by (Used in) Investing Activities........ (7,720.8) 2,465.0 (4,162.6) --------- ---------- --------- Cash Flows from Financing Activities Net increase (decrease) in loans payable................. (550.9) 252.5 (1,013.4) Increase in long-term debt............................... 798.7 989.6 3,951.6 Decrease in long-term debt............................... (934.8) (1,627.7) (3,634.8) Net decrease in payable to GMAC.......................... (143.0) (10,207.7) (2,303.0) Redemption of Series H preference stocks................. -- -- (243.9) Redemption of Howard Hughes Medical Institute put options............................................... -- (315.0) (300.0) Repurchases of common and preferred stocks............... -- (265.6) (7.2) Proceeds from issuing common and preference stocks....... 1,184.9 860.2 5,555.7 Cash dividends paid to stockholders...................... (1,111.9) (1,083.9) (1,376.8) --------- ---------- --------- Net Cash Provided by (Used in) Financing Activities........ (757.0) (11,397.6) 628.2 --------- ---------- --------- Effect of Exchange Rate Changes on Cash and Cash Equivalents.............................................. 9.9 81.2 63.2 --------- ---------- --------- Net increase (decrease) in cash and cash equivalents....... (31.1) 2,554.9 3,228.4 Cash and cash equivalents at beginning of the year......... 9,762.5 7,207.6 3,979.2 --------- ---------- --------- Cash and cash equivalents at end of the year............... $ 9,731.4 $ 9,762.5 $ 7,207.6 ========= ========== =========
* * * * II-72 87 PART III ITEMS 10 THROUGH 13 Certain information required by Part III (Items 10 through 13) of this form, other than the information set forth below, has been omitted because the Registrant intends to file a definitive proxy statement pursuant to Regulation 14A not later than 120 days after the end of its fiscal year. EXECUTIVE OFFICERS OF THE REGISTRANT The names and ages of all executive officers of the Registrant at January 31, 1995 and their positions and offices with the Registrant on that date are as follows:
NAME AND (AGE) POSITIONS AND OFFICES - ------------------------------------------------ ----------------------------------------------- John F. Smith, Jr. (56)......................... Chief Executive Officer; President; Director; Member, Finance Committee and Chairman, The President's Council J. Michael Losh (48)............................ Executive Vice President; Chief Financial Officer; Member, The President's Council G. Richard Wagoner, Jr. (42).................... Executive Vice President; Member, The President's Council Louis R. Hughes (46)............................ Executive Vice President; Member, The President's Council Harry J. Pearce (52)............................ Executive Vice President; Member, The President's Council
There are no family relationships, as defined, between any of the above executive officers, and there is no arrangement or understanding between any of the above executive officers and any other person pursuant to which he was selected as an officer. Each of the above executive officers was elected by the Board of Directors to hold office until the next annual election of officers and until his successor is elected and qualified or until his earlier resignation or removal. The Board of Directors elects the officers in conjunction with each annual meeting of the stockholders. Mr. John F. Smith, Jr. has been associated with General Motors since 1961. He was elected Executive Vice President in charge of International Operations in 1988. Effective August 1990, he was elected Vice Chairman of the Board of Directors. On April 6, 1992, Mr. Smith was elected President and Chief Operating Officer. Effective November 1992, he was elected Chief Executive Officer and President. Mr. Losh has been associated with General Motors since 1970. In July 1984, he was elected Vice President of General Motors and General Manager of Pontiac Division. He was named General Manager of Oldsmobile Division in June 1989. Effective May 1992, he was elected Group Executive in charge of North American Vehicle Sales, Service, and Marketing. In July 1994, he was elected Executive Vice President and Chief Financial Officer of General Motors. Mr. Wagoner has been associated with General Motors since 1977. He was elected Vice President in charge of finance for General Motors Europe in June 1989. In July 1991, he was elected President and Managing Director of General Motors do Brasil. Effective November 1992, he was elected Executive Vice President and Chief Financial Officer of General Motors. In July 1994, he was named President of North American Operations. III-1 88 Mr. Hughes has been associated with General Motors since 1966. In March 1989, he was elected Chairman and Managing Director of Adam Opel AG. He was elected President of General Motors Europe and Vice President and Group Executive of General Motors in April 1992. Effective November 1992, he was elected Executive Vice President, International Operations of General Motors. In September 1994, he was named President of International Operations. Mr. Pearce has been associated with General Motors since 1985. In May 1987, he was elected Vice President and General Counsel of General Motors. Effective November 1992, he was elected Executive Vice President of General Motors with responsibility for the Industry-Government Relations Staff, Environmental Activities Staff, Electronic Data Systems Corporation and GM Hughes Electronics Corporation. In July 1994, he assumed responsibility for GM's Strategic Decision Center, Corporate Communications, Allison Transmission Division, Electro-Motive Division, Urban and Community Affairs, Executive Compensation and Corporate Governance, and the Corporate Services Staff. He remained General Counsel through August 1, 1994. III-2 89 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
PAGE NO. --------------- (a) 1. All Financial Statements See Part II 2. Financial Statement Schedule....................................... General Motors Corporation and Subsidiaries Schedule II-Allowances for the Years Ended December 31, 1994, 1993, and 1992.............................................................. IV-3 3. Exhibits (Including Those Incorporated by Reference).
EXHIBIT NO. PAGE NO. - --------- --------------- (3)(a) Restated Certificate of Incorporation as amended to May 26, 1994, incorporated by reference to Exhibit 3(i) to the Current Report on Form 8-K of General Motors Corporation dated May 26, 1994, and Amendment to Article Fourth of the Certificate of Incorporation -- Division III -- Preference Stock, by reason of the Certificates of Designations filed with the Secretary of State of the State of Delaware on September 14, 1987 and the Certificate of Decrease filed with the Secretary of State of the State of Delaware on September 29, 1987 (pertaining to the six series of Preference Stock contributed to the General Motors pension trusts), incorporated by reference to Exhibit 19 to the Quarterly Report on Form 10-Q of General Motors Corporation for the quarter ended June 30, 1990 in the Form SE of General Motors Corporation dated August 6, 1990; as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on June 28, 1991 (pertaining to Series A Conversion Preference Stock), incorporated by reference to Exhibit 4(a) to Form S-8 Registration Statement No. 33-43744 in the Form SE of General Motors Corporation dated November 1, 1991; as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on December 9, 1991 (pertaining to Series B 9 1/8% Preference Stock), incorporated by reference to Exhibit 4(a) to Form S-3 Registration Statement No. 33-45216 in the Form SE of General Motors Corporation dated January 27, 1992; as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on February 14, 1992 (pertaining to Series C Convertible Preference Stock), incorporated by reference to Exhibit (3)(a) to the Annual Report on Form 10-K of General Motors Corporation for the year ended December 31, 1991 in the Form SE of General Motors Corporation dated March 20, 1992; as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on July 15, 1992 (pertaining to Series D 7.92% Preference Stock), incorporated by reference to Exhibit 3(a)(2) to the Quarterly Report on Form 10-Q of General Motors Corporation for the quarter ended June 30, 1992 in the Form SE of General Motors Corporation dated August 10, 1992; and as further amended by the Certificate of Designations filed with the Secretary of State of the State of Delaware on December 15, 1992 (pertaining to Series G 9.12% Preference Stock), incorporated by reference to Exhibit (a) to Form S-3 Registration Statement No. 33-49309 in the Form SE of General Motors Corporation dated January 25, 1993................................................. N/A (b) By-Laws as amended to December 5, 1994, incorporated by reference to Exhibit 3(ii) to the Current Report on Form 8-K of General Motors Corporation dated December 5, 1994........................ N/A
IV-1 90
EXHIBIT NO. PAGE NO. - --------- --------------- (4)(a) Form of Indenture relating to the $500,000,000 8 1/8% Debentures Due April 15, 2016 dated as of April 1, 1986 between General Motors Corporation and Citibank, N.A., Trustee, incorporated by reference to Exhibit 4 to Amendment No. 1 to Form S-3 Registration Statement No. 33-4452 and resolutions adopted by the Special Committee on April 15, 1986, incorporated by reference to Exhibit 4(a) to the Current Report on Form 8-K of General Motors Corporation dated April 24, 1986................................. N/A (b) Form of Indenture relating to the $700,000,000 9 5/8% Notes Due December 1, 2000 and the $1,400,000,000 Medium-Term Note Program dated as of November 15, 1990 between General Motors Corporation and Citibank, N.A., Trustee, incorporated by reference to Exhibit 4(a) to Form S-3 Registration Statement No. 33-37737............. N/A (c) Instruments defining the rights of holders of nonregistered debt of the Registrant have been omitted from this exhibit index because the amount of debt authorized under any such instrument does not exceed 10% of the total assets of the Registrant and its subsidiaries. The Registrant agrees to furnish a copy of any such instrument to the Commission upon request........................ N/A (10)(a) The General Motors Hourly-Rate Employees Pension Plan............ N/A (b) General Motors Retirement Program for Salaried Employees......... N/A (c)* General Motors Amended 1987 Stock Incentive Plan, incorporated by reference to Exhibit A to the Proxy Statement of General Motors Corporation dated April 13, 1992................................. N/A (d)* General Motors Performance Achievement Plan, incorporated by reference to Exhibit A to the Proxy Statement of General Motors Corporation dated April 16, 1982................................. N/A (e)* General Motors 1987 Performance Achievement Plan, incorporated by reference to Exhibit A to the Proxy Statement of General Motors Corporation dated April 17, 1987................................. N/A (f)* General Motors 1992 Performance Achievement Plan, incorporated by reference to Exhibit A to the Proxy Statement of General Motors Corporation dated April 13, 1992................................. N/A (11) Computation of Earnings (Loss) Per Share Attributable to Common Stocks for the Three Years Ended December 31, 1994............... IV-6 (12) Computation of Ratios of Earnings to Fixed Charges for the Three Years Ended December 31, 1994.................................... IV-9 (18) Letter from Registrant's Independent Auditors dated January 30, 1995 regarding change in accounting principle.................... IV-10 (21) Subsidiaries of the Registrant as of December 31, 1994........... IV-11 (23) Consents of Independent Auditors................................. IV-20 and IV-22 (99)(a) Electronic Data Systems Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis.... IV-21 (b) GM Hughes Electronics Corporation and Subsidiaries Consolidated Financial Statements and Management's Discussion and Analysis.... IV-47 (27) Financial Data Schedule (for SEC information only)............... N/A
(b) Reports on Form 8-K One report on Form 8-K, dated December 5, 1994, was filed during the quarter ended December 31, 1994 reporting amendments to the By-Laws under Item 7, Financial Statements, Pro Forma Financial Information and Exhibits. * Required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K. IV-2 91 GENERAL MOTORS CORPORATION AND SUBSIDIARIES SCHEDULE II -- ALLOWANCES
ADDITIONS ADDITIONS BALANCE AT CHARGED TO CHARGED TO BEGINNING COSTS TO OTHER BALANCE AT DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS END OF YEAR - ----------------------------------------------- ----------- ----------- ----------- ---------- ------------ (DOLLARS IN MILLIONS) FOR THE YEAR ENDED DECEMBER 31, 1994 Allowances Deducted from Assets(a) Finance receivables (unearned income)........ $ 3,195.1 $ -- $ 2,324.6 $2,209.8 $3,309.9 Accounts and notes receivable (for doubtful receivables)............................... 222.0 98.8 0.8 77.0(b) 244.6 Inventories (principally for obsolescence of service parts)............................. 149.3 53.0 -- 24.5(c) 177.8 Other investments and miscellaneous assets (receivables and other).................... 34.1 -- -- 1.7 32.4 Miscellaneous allowances (insurance and mortgage).................................. 24.4 28.0 -- 16.7 35.7 ----------- ----------- ----------- ---------- ------------ Total Allowances Deducted from Assets.... $ 3,624.9 $ 179.8 $ 2,325.4 $2,329.7 $3,800.4 ========== ========== ========== ========== ========== FOR THE YEAR ENDED DECEMBER 31, 1993 Allowances Deducted from Assets(a) Finance receivables (unearned income)........ $ 4,215.5 $ -- $ 3,260.4 $4,280.8 $3,195.1 Accounts and notes receivable (for doubtful receivables)............................... 215.6 106.2 3.1 102.9(b) 222.0 Inventories (principally for obsolescence of service parts)............................. 141.7 44.1 0.3 36.8(c) 149.3 Other investments and miscellaneous assets (receivables and other).................... 31.6 4.3 -- 1.8 34.1 Miscellaneous allowances (insurance and mortgage).................................. 17.8 9.5 -- 2.9 24.4 ----------- ----------- ----------- ---------- ------------ Total Allowances Deducted from Assets.... $ 4,622.2 $ 164.1 $ 3,263.8 $4,425.2 $3,624.9 ========== ========== ========== ========== ========== FOR THE YEAR ENDED DECEMBER 31, 1992 Allowances Deducted from Assets(a) Finance receivables (unearned income)........ $ 6,723.0 $ -- $ 4,189.7 $6,697.2 $4,215.5 Accounts and notes receivable (for doubtful receivables)............................... 190.6 74.2 2.4 51.6(b) 215.6 Inventories (principally for obsolescence of service parts)............................. 153.7 28.4 1.5 41.9(c) 141.7 Other investments and miscellaneous assets (receivables and other).................... 37.8 1.9 -- 8.1 31.6 Miscellaneous allowances (insurance and mortgage).................................. 6.8 11.6 -- 0.6 17.8 ----------- ----------- ----------- ---------- ------------ Total Allowances Deducted from Assets.... $ 7,111.9 $ 116.1 $ 4,193.6 $6,799.4 $4,622.2 ========== ========== ========== ========== ==========
- ------------------------- Notes: (a) See analysis of allowance for financing losses in Note 10 to the Financial Statements. (b) Accounts written off. (c) Obsolete parts written off, etc. Reference should be made to the Notes to Financial Statements. IV-3 92 SIGNATURES Pursuant to the requirements of Section 13 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: March 6, 1995 By: /s/ John F. Smith, Jr. -------------------------------------- (John F. Smith, Jr. Chief Executive Officer, President and Director) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 6th day of March 1995 by the following persons on behalf of the Registrant and in the capacities indicated.
SIGNATURE TITLE - ----------------------------------- ----------------------------------- /s/ John G. Smale Chairman of the Board of Directors - ----------------------------------- (John G. Smale) /s/ John F. Smith, Jr. Chief Executive Officer, President - ----------------------------------- and Director (John F. Smith, Jr.) /s/ J. Michael Losh Executive Vice President and Chief - ----------------------------------- Financial Officer (J. Michael Losh) Principal /s/ Leon J. Krain Vice President and Group Executive - ----------------------------------- Financial (Leon J. Krain) Officers /s/ Heidi Kunz Vice President and Treasurer - ----------------------------------- (Heidi Kunz) /s/ Wallace W. Creek Comptroller - ----------------------------------- Principal (Wallace W. Creek) Accounting /s/ James H. Humphrey Chief Accounting Officer Officers - ----------------------------------- (James H. Humphrey)
IV-4 93 SIGNATURES -- CONCLUDED
SIGNATURE TITLE - ----------------------------------- ----------------------------------- /s/ Anne L. Armstrong Director - ----------------------------------- (Anne L. Armstrong) /s/ John H. Bryan Director - ----------------------------------- (John H. Bryan) /s/ Thomas E. Everhart Director - ----------------------------------- (Thomas E. Everhart) /s/ Charles T. Fisher, III Director - ----------------------------------- (Charles T. Fisher, III) /s/ J. Willard Marriott, Jr. Director - ----------------------------------- (J. Willard Marriott, Jr.) /s/ Ann D. McLaughlin Director - ----------------------------------- (Ann D. McLaughlin) /s/ Paul H. O'Neill Director - ----------------------------------- (Paul H. O'Neill) /s/ Edmund T. Pratt, Jr. Director - ----------------------------------- (Edmund T. Pratt, Jr.) /s/ Louis W. Sullivan Director - ----------------------------------- (Louis W. Sullivan) /s/ Dennis Weatherstone Director - ----------------------------------- (Dennis Weatherstone) /s/Thomas H. Wyman Director - ----------------------------------- (Thomas H. Wyman)
IV-5 EX-10.(A) 2 EXHIBIT 10(A) 1 EXHIBIT 10(a) Supplemental Agreement Covering PENSION PLAN EXHIBIT A TO AGREEMENT BETWEEN GENERAL MOTORS CORPORATION AND UAW DATED OCTOBER 24, 1993 2 TABLE OF CONTENTS
PAGE NO. Index to Exhibit A and Exhibit A-1 (ii) Exhibit A -- Supplemental Agreement Between General Motors Corporation and the UAW (Pension Plan) (1) Exhibit A-1 -- The General Motors Hourly-Rate Employees Pension Plan 1
(i) 3 INDEX TO EXHIBIT A -- SUPPLEMENTAL AGREEMENT BETWEEN GENERAL MOTORS CORPORATION AND THE UAW (PENSION PLAN) EXHIBIT A-1 -- THE GENERAL MOTORS HOURLY-RATE EMPLOYEES PENSION PLAN
PAGE NO. Actuary: Appointment of (3) Certification by (3) Administration, General (11), 50-51 Amendment, Provision for (2), 60-61 Appendix A -- Benefit Class Codes 69-70 Appendix B -- Foundry Jobs 71-76 Appendix C -- Asbestos Jobs 77 Approval of Plan (See "Plan, Approval of") Asbestos Jobs: Definition of 77 Asbestos Service, Credited Service for 46 Base Hourly Rate 66-67 Basic Benefit 67 Basic Benefit Applicable to: Benefits Commencing Prior to October 1, 1993 19-22, 26-28 Deferred Pensions 54-57 Early Retirement 6-9 ERISA Minimum 8 Normal Retirement 6 Total and Permanent Disability Retirement 6 Benefit Class Code 69-70 Board of Administration: Applicability of 3(c) Agreement (10)-(11) Appointment of Members (5)
(ii) 4 INDEX--CONT'D.
PAGE NO. Functions (9)-(11) Information Furnished by Corporation (6)-(9) Liability Members (11) Pay and Expenses of Members (6) Retroactive Adjustments (9) Time of Meeting (6) Voting (6) Chairperson, Impartial: Appointment of (9)-(10) Compensation of (10) Term of Office (10) Voting (10) Contributions: General Provisions (3)-(5), 48-49 Service, Current (3) Service, Prior (4) Time of Payment (3)-(5) Credited Service, Subsequent to Effective Date of Plan: Computation 34-40 During Layoff or Disability Leave 35-36, 38-39 Limitation of 39-40 Military Service 37 Occupational Disability Absences 36-37 Prior Service as Salaried Employee 37 Reinstatement of 40 Credited Service, Asbestos 46 Credited Service, Credit Union (12) Credited Service, Equal to Seniority 40 Credited Service, Foreign Subsidiary 41 Credited Service, Foundry (14), 41-43 Credited Service, Loss of 40 Credited Service, Reinstatement of 40 Credited Service, Union Leaves of Absence (12)
(iii) 5 INDEX--CONT'D.
PAGE NO. Deduction For: Benefit Plan(s) Overpayments 59 Dependent Life Insurance 58 Income Tax 58 Medical Expense Coverage 58 Optional Life Insurance 58 Union Dues (13)-(14) Deferred Pension: Benefits, Determination of 54-57 Eligibility 54 If Reemployed 56-57 Minimum Vesting Standards-ERISA 43-46 Definitions 64-68 Dependent Life Insurance 58 Discharged Employee 9, 13 Disciplinary Action (See "Employment Rights") Duration of Agreement (15) Employee, Definition of 64-65 Employment Rights (12)-(13), 59 Establishment of Fund (3) Establishment of Plan (See "Plan, Establishment of") Federal Social Security Benefit: Definition of 66 Fiduciary, Named-ERISA 60 Financing (3)-(5), 48-49 Foundry Jobs: Designation of 71-76 Foundry Service, Credited Service for 41-43 Guaranteed Income Stream Benefits 53 Grievance Procedure: Non-Applicability of (11)-(12)
(iv) 6 INDEX--CONT'D.
PAGE NO. Income Tax (See "Plan, Approval of: Internal Revenue Service") Insurance Company or Trustee: Definition of 65 Designation of (3) Insured Fund, Definition of 66 Layoff or Disability Absence: Credited Service During 35-36, 38-39 Leaves of Absence: Union (12) Military Service 37 Letter Agreements 87-95 Liability of Corporation (5), 48-50 Limitation of Benefits 60 Lump-Sum Payment 90-91 Medical Expense Benefit Coverages 58 Merger or Consolidation-ERISA 64 Military Service, Credited Service for 37 Modification, Provision for (1)-(2), 60-61 Optional Life Insurance 58 Pension Fund, Definition of 66 Pension Payments: General Provisions 51-54 Non-Alienation of 57-59 To Persons Other Than Pensioners 53 Plan, Approval of: Board of Directors (1)-(3), 60 Internal Revenue Service (1)-(2), 59 Plan, Duration of (15) Plan, Establishment of (1)-(3), 3-4 Plan, Termination of 61-64
(v) 7 INDEX--CONT'D.
PAGE NO. Pre-Retirement Survivor Coverage-REA: Duration 32-33 Effective Date 32-33 Eligibility 32-34 Payment 32-33 Qualified Domestic Relations Order-REA 9, 27, 33, 57 Reemployment (13), 40, 52-53, 66 Retirement, Early: Benefit Options 4 Benefits, Determination of 6-9 Benefits, Payment of 51-54 Benefits, Redetermination of 7 Eligibility 4 Mutual Retirement Standards 78-79 Reduction for Age 7 Retirement, General (12)-(13) Retirement, Normal: Benefits, Determination of 6 Benefits, Payment of 51-54 Eligibility 4 Retirement, Total and Permanent Disability: Benefits, Determination of 6 Benefits, Payment of 51-54 Disability, Determination of 5 Eligibility 5, 51, 57 Recovery From (12)-(13), 5, 17, 52-53 Seniority (See "Credited Service") Seniority, Definition of 66 Seniority, Equal to Credited Service 40 Social Security Benefits: Redeterminations for 47 Special Benefit 18-19 Standards for Application of Provisions for Mutually Satisfactory Retirement 78-79 Statement of Intent-Representation 80-85
(vi) 8 INDEX--CONT'D.
PAGE NO. Supplement, Early Retirement: Benefits, Determination 13-14, 16-17 Earnings Limitation 17 Eligibility (13), 13-14 Limitation of 70% of Final Pay 18 Payment of 14, 51-54 Penalty Against 16-17 Recovery if Overpaid 17 Redetermination if Commenced Prior to October 1, 1993 25 Waiver of Earnings Limitation, Mutual Retirement 17 Supplement, Interim: Benefits, Determination of 14-15 Earnings Limitation 17 Eligibility (13), 13-14 Limitation of 70% of Final Pay 18 Payment of 15, 51-54 Penalty Against 16-17 Recovery if Overpaid 17 Redetermination if Commenced Prior to October 1, 1993 25 Supplemental Pension Agreement: Conflicts With Plan (1) Date of (1) Duration of (15) Parties to (16)-(17) Surviving Spouse Benefits: After Employee's Retirement 9-13 Before Employee's Retirement 12-13 Cancellation Because of Death or Divorce 9-10, 26 Effective Date 10-11 Election to Receive Full Amount of Future Increases 26-27 Joint and Survivor-ERISA 28-31 Reduction of Basic Benefit 11-12 Rejection of Coverage 10-11, 29 Special Survivor Option 26
(vii) 9 INDEX--CONT'D.
PAGE NO. Spouse Consent 10-11, 29 Upon Marriage or Remarriage After Retirement 27-28 Temporary Benefit Applicable to: Benefits Commencing Prior to October 1, 1993 22-24 Early Retirement 8-9 Total and Permanent Disability Retirement 8 Termination of Plan (See "Plan, Termination of") Trust Fund: Definition of 66 Establishment of (3), 48-49 Irrevocability of 50 Trustee, Duties of (3) Trustee or Insurance Company: Definition of 65 Designation of (3) Union Dues, Deduction of (13)-(14) Vesting (See "Deterred Pension") Wage Inequity Adjustments 21 Widow's Benefits (See "Surviving Spouse Benefits") Workers Compensation: Deductions for Receipt of 47-48, 89
(viii) 10 EXHIBIT A SUPPLEMENTAL AGREEMENT (PENSION PLAN) 11 A, Sect.1 SUPPLEMENTAL AGREEMENT (PENSION PLAN) On this 24th day of October, 1993, General Motors Corporation, hereinafter referred to as the Corporation, and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, hereinafter referred to as the Union, on behalf of the employees covered by the collective bargaining agreement of which this Supplemental Agreement becomes a part, agree as follows: SECTION 1. ESTABLISHMENT OF PLAN Subject to the approval of its Board of Directors, the Corporation will establish an amended pension plan, hereinafter referred to as the Plan, a copy of which is attached hereto as Exhibit A-1 and made a part of this agreement to the extent applicable to the employees represented by the Union and covered by this agreement as if fully set out herein, modified and supplemented, however, by the provisions hereinafter. In the event of any conflict between the provisions of the Plan and the provisions of this agreement, the provisions of this agreement will supersede the provisions of the Plan to the extent necessary to eliminate such conflict. The Plan, as set forth in Exhibit A-1, and the Plan as it may be modified and supplemented by superseding provisions of this agreement, as above provided, are both contingent upon and subject to obtaining and retaining such approval of the Commissioner of Internal Revenue as the Corporation may find necessary to establish the deductibility under Section 404 of the Internal Revenue Code for income tax purposes of any and all contributions made by the Corporation to both plans and to establish the plans and related trust as being qualified and tax exempt under Sections 401 and 501(a) or other applicable provisions of the Internal (1) 12 A, Sect. 1 Revenue Code. Any modification or amendment of either the Plan, or the Plan as modified and supplemented by this agreement, may be made retroactively by the Corporation with the consent of the Union, if necessary or appropriate, to qualify or maintain the Plan as a plan and trust meeting the requirements of Sections 401 and 501(a) of the Internal Revenue Code, as now in effect or hereafter amended, or any other applicable provisions of the federal tax laws, as now in effect or hereafter amended or adopted, and the regulations issued thereunder, provided that pension benefits under the Plan are not diminished. Until the Plan is approved by the Corporation's Board of Directors and by the Commissioner of Internal Revenue, all as hereinbefore provided, the benefits payable shall be only those determined under the Plan as constituted prior to October 1, 1993; provided, however, that following approval by its Board of Directors and its receipt of the favorable ruling from the Commissioner of Internal Revenue as set forth above, the Corporation or the trustee will pay to retired employees and surviving spouses any excess amounts equal to the difference between the monthly pension calculated in accordance with the terms of the Plan, attached hereto as Exhibit A-1, and the monthly pension paid or payable in accordance with the terms of the Pension Plan which was attached as Exhibit A-1 to the Supplemental Agreement (Pension Plan) between the Parties dated September 17, 1990. Any such excess amounts payable for months prior to the receipt of the aforementioned Board of Directors and the Commissioner of Internal Revenue approvals, shall be payable the first of the month following the date upon which the last of these two approvals is received by the Corporation, and any such amounts payable thereafter shall be paid on the first of the month at the same time as the related pension is paid. In the event that the Plan is disapproved by the Board (2) 13 A, Sect. 1 of Directors of the Corporation, the Corporation within thirty days after any such disapproval will give written notice thereof to the Union and this agreement shall thereupon have no force or effect. In that event the matters covered by this agreement shall be the subject of further negotiation between the Corporation and the Union. SECTION 2. FINANCING (a) A trustee or an insurance company, or both, shall be designated by the Corporation, and a trust agreement or contract, or both, executed between the Corporation and such trustee or insurance company, or both, under the terms of which a pension fund or insured fund, shall be established to receive and hold contributions payable by the Corporation, interest, and other income, and to pay the pensions and supplements provided by the Plan. (b) The Corporation agrees to pay over irrevocably to the trustee or insurance company during the period of this agreement, contributions or payments for the Plan equal to the sum of (i) and (ii) below as determined and certified as of each anniversary of the effective date of the Plan by one or more actuaries chosen by, but independent of, the Corporation, and qualified through Fellowship in the Society of Actuaries and enrollment with the Joint Board for Enrollment of Actuaries (hereinafter referred to as the Actuary). Such contributions or payments for any year may be made not later than the date on which such contributions are required by law to be made for the purpose of crediting such contributions to such year under the minimum funding standards of the Employee Retirement Income Security Act of 1974: (i) the annual "current service" or "normal cost" contribution attributable to a year's cost accruals in respect of assumed continuous service after each such anniversary date, and (3) 14 A, Sect. 2 (b)(ii) (ii) the "prior service contribution" computed as that part of the present value, at each such anniversary date, of the prospective pensions payable under the Plan for employees, pensioners and former employees who are entitled to a deferred pension then covered by the Plan which is in excess of: (aa) the value of the trust fund, as then comprised of any contracts and total other assets, invested and uninvested, such total assets being valued on a basis at least equal to the total cost thereof, plus (bb) the then present value of the prospective "current service" or "normal cost" contributions determined by the Actuary in accordance with (i) above, such excess part being amortized according to the following schedule: (1) in respect of the portion of such excess part attributable to the level of benefits in effect prior to October 1, 1979 - the fifty-ninth anniversary of the Corporation's pension plan (October 1, 2009), and (2) in respect of the portion of such excess part attributable to the increase in the level of benefits established by amendments to the Corporation's pension plan effective on or after October 1, 1979 - the thirtieth anniversary of the date on which such increase in the level of benefits becomes effective. (c) The Corporation may contribute or pay additional amounts to the trustee or insurance company, or both, under (b) above in any year without such additional amounts being construed to reduce any thirty-year period for the completion of the "prior service contributions" of subsection (b)(ii) above. If the Corporation has contributed any such additional amounts prior to any anniversary date of the Corporation's pension plan or shall contribute any (4) 15 A, Sect. 2 (c) such additional amounts prior to any anniversary date of the Plan falling within the duration of this agreement, the Corporation may as of such anniversary, contribute a lesser amount than otherwise determined by (b) above for such anniversary, provided that the value of any contracts and total other assets as valued in accordance with (b)(ii)(aa) above at such anniversary shall not be less than the amount estimated by the Actuary to be the value as if contributions and payments up to and including such anniversary date had been made as provided in (b) above and no additional amounts had been contributed or paid prior to such anniversary. (d) The Corporation by payment of the contributions or amounts as hereinbefore provided in this section shall be relieved of any further liability, and pensions and supplements shall be payable only from the trust fund or the insured fund or both. SECTION 3. ADMINISTRATION (a) Board of Administration (1) There shall be established a central Board of Administration hereinafter referred to as the Board, composed of six members, three appointed by the Corporation and three by the Union. Each member of the Board shall have an alternate. In the event a member is absent from a meeting of the Board, the alternate may attend and when in attendance shall exercise the duties of the member. Either the Corporation or the Union at any time may remove a member or alternate appointed by it and may appoint a member or alternate to fill any vacancy among members or alternates appointed by it. No person shall act as a member of the Board of Administration or as an alternate for such member unless notice of the appointment has been given in writing by the party making the appointment to the other party. (5) 16 A, Sect. 3 (a)(2) (2) The Board shall meet at such times and for such periods for the transaction of necessary business as may be mutually agreed upon by its members. (3) To constitute a quorum for the transaction of business, the presence of four members of the Board shall be required. At all meetings of the Board, the member or members present appointed by the Corporation shall have in the aggregate a total of one vote to be cast on behalf of the Corporation, and the member or members present appointed by the Union shall have in the aggregate a total of one vote to be cast on behalf of the Union. (4) The compensation and expenses of the Corporation members will be paid by the Corporation and the compensation and expenses of the Union members will be paid by the Union and no part of such compensation or expenses will be paid from the trust fund. (5) The Corporation shall cause to be furnished to the Board of Administration annually: (i) A statement as of each anniversary date of the Plan showing in summary form the value of the assets which comprise such fund by general categories of investment, such value being determined on a basis at least equal to the total cost thereof for each such category. (ii) Such information as to age, sex and service of hourly-rate employees of the Corporation as a whole in the United States and as to the number of pensioners and amount of pensions and supplements by age groups, as the Board may reasonably require, but in no event shall the Corporation be required to furnish the Board with any data not furnished by the Corporation to the Actuary. (6) 17 A, Sect. 3 (a)(5)(iii) (iii) A report, prepared by the Actuary, in respect of each year's actuarial valuation of the Plan, setting out the following: (a) the amount of the normal cost contribution and the amount of the payment toward amortization of the actuarial deficiency required in accordance with Section 2(b) hereof. (b) a statement of the method and the assumptions, such as the interest rate, mortality rates, withdrawal rates, retirement rates, average benefit unit and assumptions used with respect to the survivor benefit, adopted for the valuation for the purposes of Section 2(b) hereof. (c) the amount, as of each anniversary date, of the gross actuarial deficiency, determined in accordance with Section 2(b) hereof as the present value of the prospective pensions payable under the Plan less the then present value of the prospective normal cost contributions, if any, for (1) retired employees, (2) employees who have separated with retention of deferred pensions, (3) non-retired and non-separated employees, and (4) total. (d) the amount of assets used in the actuarial valuation, together with a reconciliation of the amount of such assets with the amount used in the preceding valuation. (e) the amount of the net (unfunded) actuarial deficiency. (f) the amount by which the value of the trust fund exceeded the amount then required by Section 2(b) hereof to be in such fund. (g) the extent to which the trust fund assets as of the valuation date would be sufficient to cover the pension liabilities, as determined in accordance with SFAS 87. (7) 18 A, Sect. 3 (a)(5)(iv) (iv) A statement, certified by the Actuary, that the amount of the trust fund is or is not less than the amount then required by Section 2(b) hereof to be in such fund. (v) A statement setting forth: (aa) The value of the trust fund computed on the basis of market value as of the previous anniversary date of the Plan. (bb) Additions during Plan year: (i) payments by General Motors into the fund (ii) interest and dividends received by the fund (iii) net investment gains, and (iv) total additions. (cc) Pension payments and supplements to retired employees and surviving spouses during Plan year. (dd) The value of the trust fund computed on the basis of market value as of the anniversary date of the Plan for the year for which the statement is being submitted. (vi) A schedule setting forth as of March 31 of each year: (aa) the amount of investment of the pension fund in residential real estate mortgages, by type, in communities with General Motors plants and in other communities, (bb) the amount invested in such residential real estate mortgages during the preceding year in comparison with total new money investments during that year, and (8) 19 A, Sect. 3 (a)(5)(vi)(cc) (cc) a description of such residential mortgages in which funds were invested during the preceding year, by type, separately by plant city areas and in total for other areas. (vii) A copy of Form 5500 reports and attendant schedules for the Plan will be furnished as soon as practicable after General Motors has filed such report with the Internal Revenue Service. (6) The Board of Administration shall have no power to add to or subtract from or modify any of the terms of this agreement or the Plan, nor to change or add to any benefit provided by said agreement or Plan, nor to waive or fail to apply any requirement of eligibility for a benefit under said agreement or Plan. (7) Any case referred to the Board of Administration on which it has no power to rule shall be referred back to the parties without ruling. (8) No ruling or decision of the Board of Administration in one case shall create a basis for a retroactive adjustment in any other case prior to the date of written filing of each such specific claim. (9) There shall be no appeal from any ruling by the Board which is within its authority. Each such ruling shall be final and binding on the Union and its members, the employee or employees involved, and on the Corporation, subject only to the arbitrary and capricious standard of judicial review. The Union will discourage any attempt of its members and will not encourage or cooperate with any of its members, in any appeal to any Court or Administrative Board or Agency from a ruling of the Board of Administration. (b) IMPARTIAL CHAIRPERSON (1) The Corporation and the Union shall mutually (9) 20 A, Sect. 3 (b)(1) agree upon and select an Impartial Chairperson, who shall serve until requested in writing to resign by three Board members. (2) The Impartial Chairperson will not be counted for the purpose of a quorum, and will vote only in case of a failure of the Corporation and the Union by vote through their representatives on the Board to agree upon a matter which is properly before the Board and within the Board's authority to determine; provided that the Impartial Chairperson may vote only on matters involving the processing of individual cases, not on the development of procedures. (3) The fees and expenses of the Impartial Chairperson will be paid one-half by the Corporation and one-half by the Union. (c) As soon as possible after the effective date of this agreement, the Union and Corporation members of the Board of Administration shall work out matters such as but not limited to: (1) procedures for establishing Local Pension Committees at the Divisions or plants involved; (2) the authority and duties of such Local Pension Committees; (3) the procedures for reviewing applications for pensions; (4) the handling of complaints regarding the determination of age, service credits, and computation of benefits; (5) procedures for making appeals to the Board; (6) means of verifying service credits to which employees are entitled under the Plan; (7) methods of furnishing information to employees regarding past and future service credits; (8) the amount of time the Union members of the local committees may be permitted to leave their work to attend meetings of the Local Pension Committees; (9) how disputes over total and permanent disability claims will be handled, including disputes, if any, with respect to whether a disabled pensioner engages in gainful employment; (10) the review of pertinent information about the Plan (10) 21 A, Sect. 3 (c) for dissemination to employees; (11) how pension payments will be authorized by the Board. All such matters shall be consistent with all other provisions of the Plan and this agreement. The working out of the procedures outlined in this section shall be the responsibility of the Corporation and Union members of the Board, and the Impartial Chairperson shall have no power to decide any question with respect thereto. The provisions of Agreement Implementing Section 3(c) of the Supplemental Agreement, Pension Plan, dated October 14, 1988 which were established by the Board pursuant to the foregoing are incorporated herein by reference and are a part hereof and effective with respect to the administration of the Plan as fully as if set out herein at length. (d) Except as provided otherwise in this agreement, the general administration of the provisions of the Plan shall be the responsibility of the Corporation. (e) The Board and any member of the Board, or the Local Pension Committees or any member of the Local Pension Committees, shall be entitled to rely upon the correctness of any information furnished by the Union or the Corporation. Neither the Board nor any of its members, nor the Local Pension Committees nor any of its members, nor the Union nor any officer or other representative of the Union, nor the Corporation nor any officer or other representative of the Corporation shall be liable because of any act, or failure to act, on the part of the Board or any of its members, or the Local Pension Committees or any of its members or any person, except that nothing herein shall be deemed to relieve any such individual from any liability for the individual's own fraud or bad faith. (f) No matter respecting the Plan as modified and supplemented by this agreement or any difference arising thereunder shall be subject to the grievance procedure established in the collective bargaining (11) 22 A, Sect. 3 (f) agreement between the Corporation and the Union, except as expressly provided in Paragraph (46) of such collective bargaining agreement. (g) Credited service shall be granted an employee who is absent from work pursuant to Paragraph 24 of the National Agreement, or on a leave of absence under Paragraph 109 of the National Agreement if the leave was granted for the purpose of permitting the employee to engage in the business of or to work for the Local Union, or if the leave was granted under Paragraph 109(a) of the National Agreement for the purpose of permitting the employee to engage in the business of or to work for the International Union while on such leave (an employee on leave under the National Agreement solely to permit the employee to be Manager of the credit union sponsored by the Local Union shall be included hereunder, but only with respect to any period while serving in such capacity while on such leave). An employee eligible for credited service under this section shall be credited with up to 40 hours for each calendar week since October 1, 1950 while on such leave, including compensated hours, provided the employee meets the requirements of the leave; but in no event shall the employee be credited with more than 1700 hours, including compensated hours, in any calendar year. SECTION 4. EFFECT OF RETIREMENT ON EMPLOYMENT STATUS AND SENIORITY (a) An employee who retires or is retired under the terms of the Plan shall cease to be an employee and shall have seniority canceled. (b) An employee who has been retired on a total and permanent disability pension and who thereby has broken seniority in accordance with subsection (a) (12) 23 A, Sect. 4 (b) above, but, who recovers and has such pension discontinued, shall have seniority reinstated as though such employee had been on a sick leave of absence during the period of such disability retirement, provided, however, if the period of disability retirement was for a period longer than the seniority the employee had at the date of retirement, the employee shall, upon the discontinuance of such disability pension, be given seniority equal to the amount of seniority at the date of such retirement. (c) If an employee retired for reasons other than total and permanent disability, who has lost seniority in accordance with subsection (a) above, is rehired, such employee will have the status of a new employee. SECTION 5. SUPPLEMENTS Notwithstanding any other provisions of the Plan, an employee who retires with benefits payable commencing on or after October 1, 1993 while on an approved leave of absence requested by the International Union to permit such employee to engage in the business of or to work for the International Union, shall not be prevented from receiving benefits under Section 6 of Article II of the Plan solely because the last day worked for the Corporation was not within five years of the date the employee's pension benefits commence. SECTION 6. DEDUCTION OF UNION DUES (a) Notwithstanding any other provisions of the Plan, any retired employee entitled to receive a pension or supplement may, pursuant to the retired employee's written authorization and direction acceptable to the Corporation, authorize the deduction of monthly Union dues from any monthly pension or supplement otherwise payable and direct that such dues be remitted to the Union. (13) 24 A, Sect. 6 (b) (b) An authorization to deduct said monthly Union dues shall become effective as of the first of the second month following the month in which the Corporation receives such authorization from the Union, and shall remain in full force and effect until revoked by the retired employee's written notice given to the Corporation, except that during any period when there is not in effect a written collective bargaining agreement or supplement thereto between the Corporation and the Union which permits or provides for the deduction of Union dues from monthly pension benefits payable to a retired employee, such assignment, authorization and direction, if otherwise in effect, shall automatically be suspended for the duration of such period only. (c) The Union shall indemnify and hold harmless the Corporation against any and all liability, including reasonable attorney's fees, that may arise by reason of the Corporation's compliance with this Section 6. (d) This Section 6 shall be of no force or effect during any month for which less than one thousand such authorizations are in effect. SECTION 7. FOUNDRY JOBS Any job classification put into effect after September 14, 1973 at a plant identified in Appendix B of the Plan, shall be designated by written agreement between the parties as a foundry job if such classification (a) supersedes or replaces a job classification previously designated as a foundry job for such plant, and (b) becomes applicable to employees who perform substantially the same work as had been performed by employees while on a job classification previously designated as a foundry job for such plant. (14) 25 A, Sect. 8 SECTION 8. DURATION OF AGREEMENT This agreement and Plan shall continue in effect until the termination of the collective bargaining agreement of which this is a part. In witness hereof, the parties hereto have caused this agreement to be executed the day and year first above written. (15) 26 INTERNATIONAL GENERAL MOTORS UNION, UAW CORPORATION OWEN BIEBER JOHN F. SMITH, JR. STEPHEN P. YOKICH WILLIAM E. HOGLUND RICHARD MONCZKA GERALD A. KNECHTEL CAL RAPSON FREDERICK R. CURD, JR. HENDERSON SLAUGHTER JAMES E. PRYCE RICHARD SHOEMAKER BARBARA J. MAHONE BILL APPLE DEAN W. MUNGER LEON BLACKWELL LARRY E. KNOX L.E. BUNCH RALPH E. HANDLEY MIKE GRACEY THOMAS E. UTTER LARRY STEVENS ARTHUR R. SCHWARTZ KARLA SWIFT EDWARD V. SABISKY TOM WEEKLEY MARTINA HUND-MEJEAN GEORGE BRODEUR RODERICK D. GILLUM BILL CAPSHAW DOUGLAS B. VANBROCKLIN, M.D. BOB FARLEY ROWLAND L. AUSTIN JIM JACKSON JOHN H. BERRY III DICK JONES E. PRESTON BOLDEN RICK LYONS RICHARD L. BREWER JUDY MURPHY THOMAS J. BENNETT HERSCHEL NIX KEVIN M. BUTLER PEGGY PERSON WILLIAM L. COWELL BILL RENO PRESTON M. CRABILL WILLIE WILLIAMS RALPH E. DEEDS, JR. RON BAUG H. STEPHEN DOYLE ESTHER CAMPBELL JOHN J. FLAHARTY ROBERT EVANS DONALD E. FRAZIER DARWYN JONES KENNETH D. GALLINGER MARK HAWKINS THOMAS A. GAWEL DANNY LACK STEVEN L. GEBBIA KEN LAUBERT ALLEN J. GREEN DICK LONG TERRY J. MCDOUGALL BILL SCRASE RONALD E. NEWTON LEON SKUDLAREK DANIEL J. OSBORNE JIM STEVENS ALICE M. OSBURN RAY ALLEN RODNEY O'NEAL PAUL ALLMAND GARY N. PHELEY TOM AMENO BERNARD J. QUICK ROGER ANCLAM MICHAEL A. TAUBITZ JEANNIE ANDERSON RANDY J. THAYER JIM BEARDSLEY JAMES R. RHADIGAN (16) 27 INTERNATIONAL GENERAL MOTORS UNION, UAW CORPORATION CHARLIE BEST PAUL J. SCHNOBRICK RON BIEBER JEFFREY E. SMITH BILLIE BOLLER RICHARD M. STIFTER BOB BREECE ALAN H. STROHMAIER JACK BROWN JAY C. WILBER BENNIE BURGESS DONALD G. WINE REBECCA CABREROS GERALD J. WINTER SCOTT CAMPBELL ELIZABETH M. AZONI BUD CARROLL JAMES F. BALL MIKE CAVANAUGH W. GARY BRYANT JOHN CHILDERS MAGDALENA T. CHAVEZ JOHN G. CLARK LEE M. CRAWFORD JOHN J. CLARK CAROLE G. DAVEY RUFUS COLEMAN KEVIN B. DUFF JERRY COVILLE JEFFREY L. FELTEN HAROLD COX MICHAEL S. FLIGSTEIN SHELLEY CZEIZLER GALE P. FRAZEE DICK DANJIN CHRISTINE A. GASICIEL M.L. DOUGLAS SANDRA E. GERNHART GREG FEDAK JENNIE F. HART JOHN FEDEWA JOHN B. HULETT III MARK FIEDLER KENNETH A. HULIK CHUCK GAYNEY BETTY SUE JONES RAY GIBSON ANTHONY KLEMER DAN GINGERICH JAMES W. LALONDE LARRY GONTKO CHARLES H. MATTHEWS MOSES GREEN MARK R. MCCARTHY MIKE GRIMES DELORES J. MCFARLAND LESLIE HALLIBURTON JEAN L. ROSE TOM HENRY CHARLES E. RUCKER MOHAMMED ISA LARRY D. SHACK SAM ISAAC MICHAEL W. TAYLOR LARRY JOLLY BERNARD G. WEBER DAVID KOEPCKE JANICE M. WHITEHOUSE CHRIS MANNING JOSEPH D. WINGER FAYE MCAFEE RICK MCKIDDY STEVE MCLIMANS PAUL MITCHELL CLAYTON MOLL CARLENA MURDY (17) 28 INTERNATIONAL GENERAL MOTORS UNION, UAW CORPORATION RON MURRAY WILBERT NEAL DON NEWTON TONY ORTIZ ED PARKER LINDA PATTON CARL PEDERSEN TOM RICHARDSON TOM ROBINSON RICHARD RUPPERT DON SARKESIAN JOEL SAWYER LOU SCHULTZ LEONARD SCHWARTZ HAROLD SHELTON JIM SHROAT DARRELL SMITH LAWRENCE SMITH JOE SPRING RICHARD STALINSKI CINDY SUEMNICK LARRY SZUMAL KEN TERRY JIM TITSWORTH LIBBY TOMASKO LULA TRICE TOM WALSH JIM YAKLIN AL YELLE ED YONAN (18) 29 EXHIBIT A-1 THE GENERAL MOTORS HOURLY-RATE EMPLOYEES PENSION PLAN 1 30 [INTENTIONALLY LEFT BLANK] 2 31 Art. I ARTICLE I ESTABLISHMENT OF THE PLAN General Motors Corporation on behalf of itself and its Divisions and as agent for certain of its directly or indirectly wholly-owned and substantially wholly-owned domestic subsidiaries in accordance with I.R.C. Section 414(b), (c), and (m) will establish, subject to the approval of its Board of Directors, a pension fund either by a trust agreement with a trustee or trustees or by contract with an insurance company or insurance companies, or both, and with respect thereto shall make such payments or contributions as will be sufficient to maintain the fund on a sound actuarial basis as well as to pay expenses incident to the operation and management of the Plan. Except as expressly provided in Sections 6, 7, and 8 of Article II and as provided in Article VII and Article IX, the provisions set forth in this Plan are applicable only to employees with seniority on or after October 1, 1993. Employees retired with benefits commencing prior to such date or separated prior to such date, or eligible surviving spouses of such employees, shall be entitled to the benefits, if any, under the Plan as it existed immediately prior to such date. Notwithstanding the paragraph immediately above, employees who retired with benefits commencing after September 14, 1993 and prior to October 1, 1993 pursuant to the provisions of Article II of the Plan, shall be considered for purposes of Article II herein as having retired with benefits payable commencing on or after October 1, 1993; the surviving spouse of any employee who died after September 14, 1993 and prior to October 1, 1993, who is otherwise eligible for monthly benefits under the Plan, shall be considered entitled to monthly benefits pursuant to Section 5 of Article II herein; and any such employees shall be 3 32 Art. I considered eligible for credited service under Article III herein. ARTICLE II ELIGIBILITY FOR RETIREMENT AND AMOUNT OF PENSIONS SECTION 1. NORMAL RETIREMENT Any employee who shall have attained the age of 65, shall have completed one or more years of credited service as provided in Article III and shall cease active service, shall be entitled to receive a pension. SECTION 2. EARLY RETIREMENT (a) (1) An employee who has attained age 60 but not age 65, and who has 10 or more years of credited service, may retire at the option of the employee. (2) An employee who has attained age 55 but not age 60, and whose combined years of age and years of credited service (to the nearest 1/12 in each case) shall total 85 or more, may retire at the option of the employee. (3) An employee who has 30 or more years of credited service may retire at the option of the employee. (b) an employee who has attained age 55 (age 50 for an employee who is laid off on or after october 1, 1984 as a result of a plant closing where no other general motors plants are in the same geographical area) but not age 65 and who has 10 or more years of credited service may be retired under mutually satisfactory conditions as set forth hereinafter in the standards applicable to such retirement. 4 33 Art. II, 3 SECTION 3. TOTAL AND PERMANENT DISABILITY RETIREMENT (a) An employee who is totally and permanently disabled prior to attaining age 65, and has at least 10 years of credited service, shall be eligible for a disability pension as hereinafter provided. (b) An employee shall be deemed to be totally and permanently disabled only if the employee is not engaged in regular employment or occupation for remuneration or profit and on the basis of medical evidence satisfactory to the Corporation the employee is found to be wholly and permanently prevented from engaging in regular employment or occupation with the Corporation at the plant or plants where the employee has seniority for remuneration or profit as a result of bodily injury or disease, either occupational or nonoccupational in cause, but excluding disabilities resulting from service in the armed forces of any country unless the employee becomes totally and permanently disabled after accumulating at least 5 years of seniority following separation from service in the armed forces. (c) Any disability pensioner may be required to submit to medical examination at any time during retirement prior to age 65, but not more often than semi-annually, to determine whether the pensioner is eligible for continuance of the disability pension. If on the basis of such examination it is found that the pensioner is no longer disabled or if the pensioner engages in gainful employment, except for purposes of rehabilitation as determined by the Corporation, the pensioner will be deemed recovered and such disability pension will cease. In the event the disability pensioner refuses to submit to medical examination the pension will be discontinued until the pensioner is examined. 5 34 Art. II, 4 SECTION 4. AMOUNT OF PENSIONS (a) (1) The monthly pension payable to an employee retired pursuant to the provisions of Sections 1, 2, or 3 of this Article II with benefits payable commencing on or after October 1, 1993 shall be a basic benefit for each year of credited service that the employee had at the date of retirement, determined by the applicable Benefit Class Code and based on the month for which payment is being made as set forth in the table immediately following:
Basic Benefit Rate Per Year of Credited Service For Months Commencing Retirement With Benefit 10-1-93 10-1-94 10-1-95 Benefits Payable Class through through and Commencing Code 9-1-94 9-1-95 After - -------------------------------------------------------------- $ $ $ - - - OCTOBER 1, 1993 A 32.50 33.50 34.70 and After B 32.75 33.75 34.95 C 33.00 34.00 35.20 D 33.25 34.25 35.45
(2) The monthly pension benefit payable to an employee who retires at the employee's option at a date selected by the employee shall be multiplied by a percentage as set forth in the following table: 6 35 Art. II, 4(a)(2)
Age When Pension Commences Percentage* - ----------------------------------------------- 42 21.0% 43 22.6 44 24.3 45 26.1 46 28.2 47 30.4 48 32.8 49 35.4 50 38.3 51 41.5 52 45.0 53 48.9 54 53.2 55 57.9 56 63.5 57 69.4 58 75.2 59 80.8 60 86.7 61 93.3 62 or over 100.0
*Prorated for intermediate ages computed on the basis of the number of complete calendar months by which the employee is under the age attained at the employee's next birthday. If an employee: (i) with 30 or more years of credited service retires at the employee's option, or (ii) whose combined years of age and years of credited service (to the nearest 1/12 in each case) shall total 85 or more retires at the employee's option, the monthly basic benefits otherwise payable to such employee after age 62 and one month shall be redetermined without any such reduction. 7 36 Art. II, 4(a)(3) (3) The basic benefit payable in any month will not be reduced below an amount which results in the early retirement supplement paid to a participant in such month, under Article II, Section 6(a)(1), exceeding the old age insurance benefits, unreduced on account of age, payable under Title II of the Social Security Act, as amended. (b) A temporary benefit for each year of credited service up to 30 shall be payable in addition to the monthly basic pension payable to an employee retired under mutually satisfactory conditions, or totally and permanently disabled pursuant to Section 2(b) or Section 3 above, as set forth in the table immediately following:
Monthly Temporary Benefit Amount Retirees With Per Year of Benefits Payable Credited Commencing Service Maximum - ---------------------------------------------------------- October 1, 1993 $ $ Through September 1, 1994 31.00 930.00 October 1, 1994 through 31.95 958.50 September 1, 1995 October 1, 1995 and After 33.10 993.00
8 37 Art. II, 4(c) (c) The monthly temporary benefit determined in (b) above shall be payable until age 62 and one month, or until the age at which the employee becomes or could have become eligible for a Federal Social Security benefit for disability or an unreduced Federal Social Security benefit for age. At such age the temporary benefit shall cease to be payable. (d) An employee who is discharged for cause after such employee is eligible to retire at the employee's option under Section 2(a) of this Article II shall be entitled to the benefits provided under Section 4(a) of this Article II. (e) The amount of any monthly pension benefit otherwise payable to the employee at retirement, or earlier commencement, will be reduced by the value of any past and future benefits paid or payable to any alternate payee(s) under a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p). The actuarial value will be used to determine any amount to be paid to any such payee(s), if applicable, and the remaining benefit entitlement of the employee. SECTION 5. PENSION BENEFITS TO EMPLOYEE'S SURVIVING SPOUSE (a) In lieu of the monthly basic benefit otherwise payable, an employee who retires or is retired pursuant to the normal, early or total and permanent disability retirement provisions of this Article II, or who breaks seniority and is eligible for a deferred pension pursuant to the provisions of Section 2 of Article VII hereof, shall be deemed to have elected automatically a reduced amount of monthly basic benefit to provide that, if the designated spouse shall be living at the employee's death after such election shall have become effective, a survivor benefit shall immediately be payable to such spouse commencing on the first of the month following the employee's death and such survivor 9 38 Art. II, 5(a) benefit shall be payable during the spouse's further lifetime. In the event such spouse predeceases such employee, or they are divorced by court decree and a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) does not provide to the contrary, such employee may cancel the survivor benefit election and have the monthly basic pension benefit restored to the amount payable without such election, effective the first day of the third month (for cancellations on and after January 1, 1994, due to the death of the designated spouse, restoration of the monthly basic pension benefit will be effective the first day of the month) following the month in which the Corporation receives (i) evidence satisfactory to the Corporation of the spouse's death, or (ii) such employee's written revocation of the election because of divorce, on a form approved by the Corporation and accompanied by evidence satisfactory to the Corporation of a final decree of divorce. The automatic election provided in this subsection (a) shall become effective on the later of (i) the commencement date of the employee's monthly pension benefit, (ii) the first day of the month following the month in which the employee attains age 55 (except that this item (ii) shall not apply to an employee with 30 or more years of credited service or to an employee who retires with benefits payable prior to age 55 pursuant to Section 2(b) of this Article II), or (iii) the first day of the month following the month in which the employee has been married one year if married when the election would otherwise become effective but such marriage has been in effect less than one year at that date. An employee may prevent the automatic election provided in this subsection (a) during the 90-day period prior to the effective date of such automatic election by executing a specific written rejection of such election, which includes the written consent of the 10 39 Art. II, 5(a) employee's spouse witnessed by the plan representative or a notary public, on a form approved by the Corporation and filing it with the Corporation. Information regarding this coverage is included in the summary plan description, which will be provided to each employee. Within a reasonable period prior to the annuity starting date, each participant shall be provided a written explanation of: (i) the terms and conditions of the surviving spouse coverage; (ii) the participant's right to make and the effect of an election to waive the surviving spouse coverage; (iii) the rights of the participant's spouse; and (iv) the right to make and the effect of revocation of a previous selection to waive the surviving spouse coverage. (b) The beneficiary of a survivor benefit election shall be only the person who is the employee's spouse at such time and who has been such spouse for at least one year immediately prior to the effective date of such election. (c) A survivor benefit election shall be revoked automatically upon the death of the employee or the designated spouse, or both, prior to the effective date of the election. (d) A survivor benefit election shall be irrevocable at and after its effective date if the employee and the designated spouse shall be living at such date, except as otherwise provided in Section 5(a) of this Article II. (e) For an employee who makes a survivor benefit election or who is deemed to have made such election under this Section 5, the reduced amount of the monthly basic benefit referred to in (a) above shall be equal to an amount determined by multiplying the monthly basic benefit otherwise payable to the employee by 95% if the employee's age and the eligible spouse's age are the same; except that, in the case of an employee whose basic benefits are subject to 11 40 Art. II, 5(e) redetermination at age 62 and one month the amount of reduction in the monthly basic benefit before such age for the survivor benefit election shall be based on the monthly basic benefit payable to such employee after age 62 and one month. Such percentage shall be increased by one-half of one percent (1/2%) (up to a maximum of 100%) for each 12 months in excess of five (5) years that the spouse's age exceeds the employee's age and shall be decreased by one-half of one percent (1/2%) for each 12 months in excess of five (5) years that the spouse's age is less than the employee's age. (f) The survivor benefit payable to the surviving spouse of a retired employee who has completed an election or who is deemed to have made an election under this Section 5, and who dies after such election becomes effective, shall be a monthly benefit for the further lifetime of such surviving spouse equal to 60% of the reduced amount of such employee's monthly basic benefit as determined in (e) above; except that the survivor benefit payable to the surviving spouse of an employee whose basic benefits are subject to redetermination at age 62 and one month pursuant to Section 4(a) of this Article II, shall be based on the monthly basic benefit payable to such employee after age 62 and one month. (g) The surviving spouse of an employee (i) who dies on or after attaining age 65, or on or after attaining age 55 and after the employee is eligible to retire at the employee's option under Section 2(a)(1) or 2(a)(2) of this Article II, or at any age with 30 or more years of credited service, but before the first day of the month following the date on which the employee retires or before the commencement date of the employee's monthly pension in the case of an employee who retires and defers the receipt of the monthly pension, and 12 41 Art. II, 5(g)(ii) (ii) who, if the employee had retired at the date of death, would have been eligible for the election under subsection (a) of this Section 5, shall immediately be entitled to a monthly benefit during the spouse's lifetime, terminating with the last monthly payment before the spouse's death. The monthly benefit payable to the surviving spouse shall be the amount such spouse would have been entitled to receive under subsection (f) of this Section 5, if the employee had retired on the date of death under Sections 1, 2(a)(1), 2(a)(2) or 2(a)(3), whichever is applicable, of this Article II with benefits commencing the first of the following month and had effectively made the election under subsection (a) of this Section 5. (h) The death of an otherwise eligible employee who has retired under Section 3 of this Article II, occurring on or after attaining age 55, but before the first day of the month following the date of death, shall not disqualify an otherwise eligible surviving spouse from receiving a benefit hereunder. SECTION 6. SUPPLEMENTS (a) An employee who retires under Section 2 (other than an employee referred to in Section 4(d) of this Article II, unless the Corporation or an Impartial Umpire under an applicable collective bargaining agreement determines the discharge should not result in the employee being ineligible for benefits under this Section 6), or Section 3 of this Article II, and who files an application for a pension within five years of the last day worked for the Corporation and who agrees to restrict participation in the work force before age 62 and one month as provided in (e) below will receive, in addition to the pension, certain supplements as set forth below: (1) If the employee retires under Section 2 or Section 3 of this Article II with 30 or more years of 13 42 Art. II, 6(a)(1) credited service at the date of retirement, such employee shall be entitled to a monthly early retirement supplement until age 62 and one month in an amount which when added to the monthly pension under this Plan will equal the amount of total monthly benefit provided in the table set forth below, subject to subsequent provisions of this Section 6:
Total Monthly Benefit Rate For Determining Monthly Early Retirement Supplement Prior to Age 62 and One Month For Retirements With 30 or More Years of Credited Service Retirement 10-1-93 10-1-94 10-1-95 With Benefits through through and Payable 9-1-94 9-1-95 After Commencing - ------------------------------------------------------------------ October 1, $ $ $ 1993 and After 1,900 1,960 2,030
(2) If the employee retires at the employee's option after attaining age 55 with benefits payable commencing on or after October 1, 1993 with less than 30 years of credited service, such employee shall be entitled to a monthly interim supplement until the attainment of age 62 and one month equal to the amount provided immediately below for each year of credited service that such employee had at the date of retirement, subject to the provisions of (b), (e) and (g) of this Section 6: 14 43 Art. II, 6(a)(2)
Monthly Amount* and Effective Date of Interim Supplement Payable Prior to Age 62 and One Month for Each Year of Credited Service Retired With Benefits Payable Commencing on or After October 1, 1993 Age at 10-1-93 10-1-94 10-1-95 Retirement through through and 9-1-94 9-1-95 After - ------------------------------------------------------------------- $ $ $ 55 13.65 14.05 14.55 56 16.05 16.55 17.15 57 19.45 20.05 20.80 58 22.80 23.50 24.35 59 25.50 26.25 27.20 60 29.45 30.35 31.45 61 29.45 30.35 31.45
*Prorated for intermediate ages computed on the basis of the number of complete calendar months by which the employee is under the age attained at the employee's next birthday. (b) The early retirement supplement under provision (a)(1) of this Section 6 for an employee who retires at the employee's option shall be calculated assuming that the basic pension commences immediately after retirement, and such early retirement supplement and the interim supplement under provision (a)(2) of this Section 6 shall be reduced for any month prior to age 62 and one month, for which the employee becomes or could have become eligible for a Federal Social Security benefit, by an amount equal to the amount of the temporary benefit to which the employee would have been entitled if retired under Section 2(b) of this Article II. 15 44 Art. II, 6(c) (c) The early retirement supplement under provision (a)(1) of this Section 6 for an employee who retires under Section 2(b) or Section 3 of this Article II shall be calculated on the assumption that the employee will receive a temporary benefit until age 62 and one month, even if such temporary benefit is not received by the employee until such age because of entitlement to Social Security Benefits. (d) The early retirement supplement under provision (a)(1) of this Section 6 for an employee who does not prevent the automatic election of the surviving spouse coverage provided under Section 5 of this Article II shall be calculated on the basis of the monthly pension the employee would have received if the employee had prevented such automatic election. (e) Any of the supplements to which an employee is entitled shall commence on the first day of the month following the date on which the employee retires and shall be payable monthly thereafter until and including the first day of the month in which the employee (1) dies, (2) has the pension cease for any other reason, (3) is reemployed by the Corporation, or (4) attains age 62 and one month, whichever occurs first. However, if an employee entitled to receive a supplement has earnings after retirement in excess of the following annual earnings limitation in any calendar year before the attainment of age 62 and one month, such earnings being defined for this purpose as the type counted for the earnings test under the Federal Social Security Act or the corresponding type in any future Federal legislation amending, superseding, supplementing or incorporating the Federal Social Security Act, a penalty equal to double the amount by which such earnings exceed the amount permitted shall be charged against each succeeding monthly supplement which the employee would otherwise be entitled to receive until the full amount of such penalty 16 45 Art. II, 6(e) is satisfied, it being understood that penalties and charges herein shall be cumulative if appropriate:
Annual Earnings Limitation Calendar Year Amount - ------------- -------------------------- $ 1993 15,000 1994 15,500 1995 15,500 1996 15,500
An employee receiving a monthly early retirement supplement or interim supplement may be required to certify whether such employee's annual earnings have been in excess of the permitted amount and to furnish verification of the amount of such earnings. Unless repaid by the employee in a lump sum, any overpayments of a supplement made after an employee incurred a penalty because of excess earnings in accordance with the preceding paragraph shall be deducted from future monthly benefits payable to the employee under this Pension Plan. The annual earnings limitation provisions of this subsection (e) shall not be applicable to any mutually satisfactory retirement with benefits payable commencing on or after October 1, 1993 and prior to September 14, 1996. (f) If a retired employee has been receiving a pension under Section 3 of this Article II and has been receiving a supplement and, on the basis of medical evidence satisfactory to the Corporation, it is found that such employee is no longer totally and permanently disabled and seniority is restored, or if such employee is reemployed by the Corporation, such employee shall not thereby forfeit any right thereafter to receive a supplement if such employee thereafter retires under this Pension Plan. 17 46 Art. II, 6(g) (g) If the total of the employee's monthly pension under this Pension Plan and the monthly early retirement supplement or interim supplement receivable as computed above would exceed 70% of the employee's final base pay, such monthly supplement (but not the monthly pension) shall be reduced to the extent required so that such monthly pension plus the supplement will equal 70% of the employee's final base pay. For this purpose, an employee's final base pay shall mean 173 1/3 times the employee's Base Hourly Rate as defined in Article X. SECTION 7. SPECIAL BENEFIT (a) A retired employee, or a surviving spouse, (i) age 65 or older, or (ii) under age 65 and enrolled in the voluntary "Medicare" coverage that is available under the Federal Social Security Act by making contributions (in either case excluding the spouse of a former employee who received a deferred vested pension benefit under Article VII of the Plan), who is receiving a monthly benefit under Article II of the Plan which commenced prior to October 1, 1979, subject to (d) below, shall receive a monthly special benefit equal to the lesser of the generally applicable "Medicare" Part B premium in effect as of the dates below, or: (i) $38.50 for months commencing on or after January 1, 1993, (ii) $41.10 for months commencing on or after January 1, 1994, (iii) $46.10 for months commencing on or after January 1, 1995, (iv) $51.60 for months commencing on or after January 1, 1996. (b) In no event shall such payment commence prior to the first day of the month following the earlier of (i) the month during which age 65 is attained, or (ii) for 18 47 Art. II, 7(b) enrollments effective prior to October 1, 1993 receipt by the Corporation of application on a form provided for this purpose from an otherwise eligible individual under age 65; except that, with respect to an otherwise eligible individual under age 65, payment shall commence with the first month of such enrollment, but in no event prior to October 1, 1979. (c) Not more than one such payment shall be made to any individual for any one month. No such payment shall be made to any individual under age 65 for any month such individual is not enrolled for such voluntary "Medicare" coverage. No such payment shall be made under this Plan to any individual who retires with benefits payable commencing on or after October 1, 1979. (d) The special benefit payable to an individual who is not enrolled in "Medicare" Part B as of October 1, 1990, but who was receiving a special benefit, is limited to $28.00 per month. Such an individual will become entitled to the schedule of payments in subsection (a) above, upon proof of enrollment in "Medicare" Part B. Thereafter, continued receipt of a special benefit will be contingent on maintenance of "Medicare" Part B enrollment. (e) For an individual enrolled in "Medicare" Part B as of October 1, 1990, or who first becomes eligible for "Medicare" Part B on or after October 1, 1990, receipt of a special benefit on and after January 1, 1991 is contingent upon continued enrollment in "Medicare" Part B. SECTION 8. BENEFITS FOR EMPLOYEES WHO RETIRED WITH BENEFITS PAYABLE COMMENCING PRIOR TO OCTOBER 1, 1993 An employee who retired under Article II of the Plan with benefits payable commencing prior to October 1, 1993, or the eligible surviving spouse of such an employee, shall be entitled to the benefits, if any, 19 48 Art. II, 8 under the Plan as it existed immediately prior to such date, except that (a) (1) Benefits payable to such retired employees or surviving spouses shall be increased to the extent necessary to provide monthly benefits equal to the benefits which would have been payable had the basic pension benefits payable to the employee after age 65 been based on the following table:
Basic Benefit Rate Per Year of Credited Service Retirement For Months With Benefits Benefit Commencing Payable Class October 1, 1993 Commencing Code and After ------------- -------- --------------- Prior to $ October 1, 1979 N/A 21.00* October 1, 1979 A 22.25 through B 22.50 September 1, 1980 C 22.75 D 23.00 October 1, 1980 A 22.35 through B 22.60 September 1, 1981 C 22.85 D 23.10 October 1, 1981 A 22.45 through B 22.70 September 1, 1984 C 22.95 D 23.20 October 1, 1984 A 25.10 through B 25.35 September 1, 1985 C 25.60 D 25.85 October 1, 1985 A 25.20 through B 25.45 September 1, 1986 C 25.70 D 25.95 October 1, 1986 A 25.30 through B 25.55 September 1, 1987 C 25.80 D 26.05
*Including, if applicable, $1.00 waived for election of a special survivor option. (Continued On Next Page) 20 49 Art. II, 8(a)(1) (Continued From Preceding Page)
Basic Benefit Rate Per Year of Credited Service Retirement For Months With Benefits Benefit Commencing Payable Class October 1, 1993 Commencing Code and After ------------- -------- --------------- $ October 1, 1987 A 28.30 through B 28.55 September 1, 1988 C 28.80 D 29.05 October 1, 1988 A 28.40 through B 28.65 September 1, 1989 C 28.90 D 29.15 October 1, 1989 A 28.50 through B 28.75 September 1, 1990 C 29.00 D 29.25 October 1, 1990 A 31.70 and prior to B 31.95 October 1, 1993 C 32.20 D 32.45
(2) Benefits payable to employees retired on and after October 1, 1973, shall be based on the Benefit Class Code applicable to the employee, determined as though the maximum base hourly rate of the employee's job classification had included the amount of any wage inequity adjustment made applicable to such job classification on or after September 14, 1973, and prior to the employee's loss of seniority. 21 50 (3) If an employee whose monthly basic benefit otherwise would have been redetermined at age 62 attains age 62 on or after March 1, 1982, such redetermination shall be effective at age 62 and one month. (b) Any temporary benefits payable to such retired employees until age 65 if retired with benefits payable commencing before March 1, 1974, or age 62 if retired with benefits payable commencing on or after March 1, 1974 or age 62 and one month for a retired employee who attains age 62 on or after March 1, 1982, or in any case, if earlier, until the age at which the employee becomes or could have become eligible for a Federal Social Security benefit for disability or an unreduced Federal Social Security benefit for age shall be increased to the extent necessary to provide monthly temporary benefits equal to the temporary benefits which would have been payable had the temporary benefits payable to the employee prior to such age 65 (or age 62 or age 62 and one month) or earlier age been based on the following: 22 51 Art. II, 8(b)
Retires With Monthly Temporary Benefit Amount* Benefits Payable Per Year of Commencing Credited Service Maximum - ---------------- ---------------- ------- $ $ Prior to September 1, 1964 12.50 325.00 Setember 1, 1964 and prior to October 1, 1967 13.00 325.00 October 1, 1967 and prior to October 1, 1970 13.25 331.25 October 1, 1970 and prior to March 1, 1974 13.75 343.75 March 1, 1974 and prior to October 1, 1976 14.75 368.75 October 1, 1976 and prior to October 1, 1978 15.25 381.25 October 1, 1978 and prior to October 1, 1979 16.25 406.25 October 1, 1979 and prior to October 1, 1980 17.25 431.25 October 1, 1980 and prior to October 1, 1981 18.25 456.25 October 1, 1981 and prior to January 1, 1983 19.25 481.25
* Benefit payable for months commencing October 1, 1993. (Continued On Next Page) 23 52 Art. II, 8(b) (Continued From Preceding Page)
Retires With Monthly Temporary Benefit Amount* Benefits Payable Per Year of Commencing Credited Service Maximum ---------------- ---------------- ------- January 1, 1983 $ $ and prior to October 1, 1985 19.25 577.50 October 1, 1985 and prior to October 1, 1986 20.25 607.50 October 1, 1986 and prior to October 1, 1987 21.25 637.50 October 1, 1987 and prior to October 1, 1988 21.45 643.50 October 1, 1988 and prior to October 1, 1989 22.55 676.50 October 1, 1989 and prior to October 1, 1990 23.65 709.50 October 1, 1990 and prior to October 1, 1991 26.00 780.00 October 1, 1991 and prior to October 1, 1992 28.20 846.00 October 1, 1992 and prior to October 1, 1993 30.30 909.00
* Benefit payable for months commencing October 1, 1993. 24 53 Art. II, 8(c)(1) (c) (1) An employee who retired under Article II of this Plan with 30 or more years of credited service who is receiving a monthly supplement which commenced prior to October 1, 1993 shall receive an increase to such monthly supplement as follows:
Amount of Increase* Payable to Payable Between Effective Date Age 62 Ages 62 and of Increase and One Month One Month-64 - -------------- ------------- ---------------- $ $ October 1, 1993 60.00 30.00
The amount of any monthly supplement payable to an employee who retired under Article II of the Plan with benefits commencing prior to October 1, 1993 shall be redetermined to the amount of supplement which would have been payable had the applicable benefit rates set forth in this Section 8 been in effect when such employee's benefits commenced. If such retired employee is entitled as of October 1, 1993 to receive Social Security benefits, and became so entitled before October 1, 1993, any increase in the rate of temporary pension provided in provision (b) of this Section 8 shall not be considered in redetermining the supplement until the retired employee ceases to be so entitled. (2) An employee who retired under Article II of this Plan at the employee's option after attaining age 55 with less than 30 years of credited service who is receiving an interim supplement which commenced prior to October 1, 1993 shall receive, for months commencing on and after October 1, 1993, an increase to such interim supplement, as follows: 25 54 Art. II, 8(c)(2)
Age at Monthly Increase Per Year Retirement of Credited Service - ---------- ------------------------- $ 55 0.45 56 0.50 57 0.65 58 0.75 59 0.80 60 0.95 61 0.95
(d) The survivor benefit payable to the surviving spouse of a retired employee who has completed an election of a special survivor option and who dies after such election becomes effective, shall be a monthly benefit for the further lifetime of such surviving spouse equal to $9.55 for each year of credited service that such retired employee had at the date of retirement, with respect to benefits payable for any month commencing on or after October 1, 1993. (e) An employee who retired under Article II of the Plan, or who is eligible for a deferred pension pursuant to the provisions of Section 2 of Article VII of the Plan, and who has surviving spouse coverage in effect but whose designated spouse predeceases the employee, may have the monthly basic pension benefit restored to the amount payable without such coverage, effective the first day of the third month (for restorations on and after January 1, 1994, restoration of the monthly basic pension benefit will be effective the first day of the month) following the month in which the Corporation receives evidence satisfactory to the Corporation of the spouse's death. (f) In lieu of receiving a reduced amount of any increase in benefits otherwise payable under this 26 55 Art. II, 8(f) Section 8 on or after April 1, 1971 in order to provide an increase in the amount of survivor benefit otherwise payable, an employee who retired under Article II of the Plan with benefits payable commencing prior to November 23, 1970, who is divorced by court decree, and for whom the terms of a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) do not expressly prohibit cancellation of the survivor annuity, from the employee's designated spouse for whom survivor benefit coverage is in effect, may elect to receive the full amount of such increase. To make such election the employee must complete a form approved by the Corporation and file it with the Corporation, accompanied by evidence satisfactory to the Corporation of a final decree of divorce, in which case such election shall become effective with respect to benefits falling due for months commencing on the first day of the third month following the month in which the Corporation receives such completed election form and final decree of divorce. (g) An employee who retired or retires under Article II of the Plan with benefits payable commencing on or after January 1, 1962, who marries, or remarries, subsequent to the earliest date survivor benefit coverage was in effect, or was not in effect on such date solely because the retired employee was not then married, may elect, or re-elect, survivor benefit coverage. Any such coverage, and the benefits thereunder, shall be provided under the terms and conditions of the Plan in effect at the time of the employee's retirement. Such coverage shall become effective on the first day of the third month following the month in which the Corporation receives a completed election form, but in no event before the first day of the month following the month in which the retired employee has been married one year. No election provided hereunder shall become effective under any circumstance for any retired 27 56 Art. II, 8(g) employee whose completed election form is received by the Corporation after the first day of the month in which the retired employee has been married one year. This subsection (g) also shall be applicable to an employee retired with benefits payable commencing on or after October 1, 1993. (h) Monthly benefits payable under this Section 8 on and after October 1, 1993 shall not be limited by the 70% benefit limitation in Section 6(g) of this Article II. (i) The monthly amount of any lifetime supplement payable to an employee retired with benefits payable commencing on or after March 1, 1974 with 30 or more years of credited service shall be $35.00. (j) The monthly amount of any age-service supplement payable to an employee retired with benefits payable commencing on or after March 1, 1974 with less than 30 years of credited service but after attaining age 62 and one month shall be $1 for each year of credited service reduced by 1/36th for each complete calendar month that the employee is under age 65 at the date of retirement. SECTION 9. EMPLOYEES NOT ACTIVELY AT WORK The absence of an employee from active work at the time such employee would be eligible to retire under the Plan shall not preclude the employee's retirement without return to active work. SECTION 10. JOINT AND SURVIVOR COVERAGE (a) In lieu of the monthly basic benefit otherwise payable, an employee who retires pursuant to the provisions of Section 3 of this Article II who is under age 55 and has less than 30 years of credited service shall be deemed to have elected automatically a reduced 28 57 Art. II, 10(a) amount of monthly basic benefit, up to and including the month in which the retired employee dies or attains age 55, whichever occurs first, and a monthly survivor's benefit, beginning on the first day of the month after the retired employee would have reached age 55 shall be payable to the designated spouse during the further lifetime of the spouse. (b) This automatic election shall be deemed to have been made at the time the employee shall apply or shall have applied for a disability pension benefit (with the election being effective the first day of the month for which the first benefit under the Plan is payable). (c) The automatic election provided in this Section 10 shall be applicable only with respect to a spouse to whom the employee is married on the date of such election and only if the retired employee and the spouse shall have been married throughout the one-year period ending on the date of the retired employee's death. (d) An employee may prevent the automatic election provided in this Section 10 during the 90-day period prior to the effective date as set forth in subsection (b) of this Section 10, by specific written rejection which includes the written consent of the spouse witnessed by the plan representative or a notary public on a form approved by the Corporation. (e) In any event, the election shall automatically be canceled: (i) if the employee's disability retirement status terminates other than by death prior to the first day of the month after the retired employee attains age 55, or (ii) if the retired employee survives on a disability retirement status until the first day of the month after the attainment of age 55, at which time the coverage described in Section 5 of this Article II becomes applicable. 29 58 Art. II, 10(f) (f) The amount of the monthly basic benefit payable to an employee deemed to have made the election provided hereunder shall be determined by reducing actuarially the amount of such benefit for the cost of the survivor benefit payable in the event of the retired employee's death before the first of the month following the attainment of age 55. The actuarial reduction shall be based on the age of the retired employee and the spouse (the age of each being determined as their age at the birthday nearer the date on which the benefits commence) and shall reflect the higher mortality associated with being disabled. Reduction factors at selected ages for disability survivor coverage before age 55 are set forth in the following table:
Age Difference Between Disabled Employee and Spouse Age of Spouse Is: Employee When 10 5 5 10 Benefits Years Years Same Years Years Commence Younger Younger Age Older Older - ------------------------------------------------------ % % % % % 30 8.6 8.1 7.5 6.7 5.9 35 10.4 9.9 9.2 8.3 7.2 40 12.5 11.8 11.0 10.0 8.8 45 14.3 13.5 12.7 11.6 10.3 50 13.9 13.2 12.4 11.4 10.2 51 13.1 12.5 11.7 10.8 9.7 52 10.4 9.9 9.3 8.6 7.7 53 3.4 3.2 3.0 2.8 2.5 54 3.4 3.3 3.1 2.8 2.5
NOTE: Actuarial reduction factors for ages not shown will be calculated on the same basis as the factors shown. 30 59 Art. II, 10(g) (g) The amount of the monthly benefit payable to the surviving spouse of a retired employee deemed to have made the election specified hereunder shall be 50% of the amount of the monthly basic benefit payable to the retired employee after the reduction provided in subsection (f) of this Section 10. (h) Anything in the Plan to the contrary notwithstanding, if the designated spouse of a retired employee deemed to have made the election provided hereunder shall predecease such retired employee, or they are divorced by court decree and a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) does not provide to the contrary, the monthly basic benefit of such retired employee shall be restored to the amount payable without such election, effective the first day of the third month (for restorations on and after January 1, 1994, due to the death of the designated spouse, restoration of the monthly basic pension benefit will be effective the first day of the month) following the month in which the Corporation receives evidence satisfactory to the Corporation of the spouse's death or divorce. (i) No benefit shall be payable under this Section 10 for any month for which benefits are payable under Article II, Section 5(h) or Section 11 of this Plan. (j) Information regarding this coverage is included in the summary plan description, which will be provided to each employee. Within a reasonable period prior to the annuity starting date, each participant shall be provided a written explanation of: (i) the terms and conditions of the surviving spouse coverage; (ii) the participant's right to make and the effect of an election to waive the surviving spouse coverage; (iii) the rights of the participant's spouse; and (iv) the right to make and the effect of a revocation of a previous selection to waive the surviving spouse coverage. 31 60 Art. II, 11 SECTION 11. PRE-RETIREMENT SURVIVOR COVERAGE TO COMPLY WITH THE RETIREMENT EQUITY ACT OF 1984 (a) An employee who: (i) has either 5 or more years of credited service, or 5 years of "service" as provided under Article III, Section 6, or (ii) breaks seniority on or after October 1, 1993 and who is eligible for a deferred pension under Article VII, Section 2, and in either case is not eligible for the survivor benefit coverage provided under Section 5 of this Article II, shall have the pre-retirement survivor coverage described herein. Such coverage shall remain in full force and effect until the date on which the employee or former employee becomes eligible for the survivor benefit coverage provided under Article II, Section 5, at which time the pre-retirement survivor coverage described herein shall cease to be effective. In the event the employee or former employee predeceases the designated spouse while the pre-retirement survivor coverage provided hereunder is in effect, the designated spouse shall be eligible, during the further lifetime of such spouse, for a monthly benefit commencing on the first of the month following the month in which the employee or former employee would have become eligible to retire at the option of the employee. The amount of any such monthly survivor benefit shall be determined by the basic benefit rate in effect for the employee on the date of death of such employee, or the date seniority broke for a former employee. (b) The survivor coverage provided hereunder for an employee or former employee shall be effective on 32 61 Art. II, 11(b) the date the employee or former employee attains 5 years of credited service or "service" as provided under Article III, Section 6. (c) The survivor coverage provided hereunder shall be effective with respect to a spouse to whom the employee or former employee is married, but only if the couple shall have been married throughout the one-year period ending on the date of the employee's or former employee's death. (d) Subsections (b) and (c) notwithstanding, if an employee or former employee marries or remarries, such coverage shall be in effect in favor of the spouse upon such marriage or remarriage, unless, in the case of remarriage, a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) requires such coverage to remain in effect for the former spouse. The effective date of any such coverage shall be in accordance with subsection (c) of this Section 11. (e) In the event of divorce, the employee or former employee can revoke the coverage provided hereunder without spousal consent, unless a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) provides to the contrary. (f) The coverage provided hereunder shall be canceled automatically on the date when any employee or former employee becomes eligible for the survivor coverage provided under the provisions of Article II, Section 5 of the Plan. (g) The monthly benefit amount payable hereunder to any eligible surviving spouse shall be 50% of the monthly amount of the basic benefit as determined in Article VII, Section 2(b) otherwise payable at the (i) date of death to the employee, or (ii) date seniority broke for a former employee, after any reduction provided in Section 2(c) of Article VII. 33 62 Art. II, 11(h) (h) No benefit shall be payable under this Section 11 for any month for which benefits are payable under Article II, Section 5 or Section 10 of this Plan. (i) Information regarding the coverage provided hereunder is included in the summary plan description, which will be provided to each employee covered by the Pension Plan, in accordance with The Employee Retirement Income Security Act (ERISA). (j) The pre-retirement survivor coverage provided hereunder will apply to eligible employees and former employees separated from service: (1) whose last day worked for the Corporation was on or after October 1, 1976, and (2) who have entitlement to but have not commenced receipt of deferred vested benefits, and (3) who were alive as of August 23, 1984. ARTICLE III CREDITED SERVICE SECTION 1. CREDITED SERVICE SUBSEQUENT TO OCTOBER 1, 1950 (a) (1) Credited service shall be computed for each calendar year for each employee on the basis of total hours compensated by any plant or Division of the Corporation during such calendar year while the employee has unbroken seniority. Employment while covered under The GM Special Pension Plan shall not be credited hereunder, except for an employee with seniority on March 1, 1988, who has not received a cash payment representing such employee's accrued benefit under The GM Special Pension Plan. Any calendar year in which the employee has 1700 or more compensated hours shall be counted a full 34 63 Art. III, 1(a)(1) calendar year. Where the employee's total hours compensated during a calendar year are less than 1700 hours, a proportionate credit shall be given to the nearest 1/10 of a year. (2) For the purpose of computing credited service, hours of pay at premium rate shall be computed as straight time hours. (b) For the purpose of computing compensated hours under subsection (a) of this Section 1: (1) An employee with seniority on or after January 1, 1968 who is absent from work during any calendar year thereafter because of layoff or while on a Corporation approved sick leave, shall be credited with 40 hours for each complete calendar week of such absence during such year in addition to any other hours credited, provided that such employee shall have received pay from the Corporation during that year for at least 170 hours, and provided further that if such absence commences in calendar year 1970 or later, and such layoff or sick leave continues into the following year, the employee shall be credited with 40 hours for each complete calendar week of absence in the following year, not to exceed 1530 hours of credit for all such absence related to receipt of such pay from the Corporation in the first year. An employee who is recalled from permanent layoff and returns to work on or after October 1, 1993 shall become eligible for the 1530 hours of credit hereunder, applicable during a sick leave or layoff, on the later of: (1) receipt of pay from the Corporation for at least 170 hours, or (2) the day next following the 12th week of pay from one or more GM plants within a calendar year. If the employee receives pay from the Corporation for 170 or more hours prior to the 12th week in (2) immediately above, the employee shall become eligible for "bank" hours equal to the 35 64 Art. III, 1(b)(1) number of hours worked since recall, plus any "bank" hours to which the employee was entitled immediately before such return to work, but in no case to exceed 1530 hours. An employee who returns to work on or after October 1, 1979 and receives pay for a period of less than 170 hours and who thereafter returns to such layoff or sick leave, shall not be disqualified, solely because of the receipt of such pay, from receiving any such credit for which the employee otherwise would be eligible hereunder. For the purposes of this subsection only, an employee who is laid off subsequent to October 1, 1979 and whose first day of absence due to such layoff is the first regularly scheduled work day in the January next following the last day worked shall be deemed to have been laid off on December 31 of the year in which the employee last worked. A part-time employee shall be credited for any week of such absence in the same percentage relationship as such employee's regular part-time schedule is to 40 hours. An employee who (i) is at work on or after October 1, 1993; (ii) has 10 or more years of seniority at time of layoff commencing on or after October 1, 1993; (iii) while on such layoff has received the maximum of 1530 hours of credit for periods of absence due to layoff or Corporation approved sick leave in accordance with the preceding paragraph of this Section 1(b)(1); and (iv) continues thereafter to be absent due to such layoff shall be credited with 40 hours for each complete calendar week of absence due to such layoff up to a maximum of 1700 hours of credit. (2) An employee who is absent from work because of occupational injury or disease incurred in the course of such employee's employment with the Corporation, and on account of such absence receives 36 65 Art. III, 1(b)(2) Workers Compensation while on Corporation approved leave of absence shall be credited with 40 hours for each complete calendar week of such absence after September 1, 1961. (c) Any salaried employee transferred to an hourly-rate job who thereby becomes an employee covered by the Plan shall have credited to the nearest 1/10 year any credited service the employee had as of the date of such transfer under any Corporation retirement plan for salaried employees. (d) If an employee who retired is rehired, such employee may accumulate additional credited service by reason of such reemployment. (e) For the purpose of computing compensated hours under subsection (a) of this Section 1: (1) An employee who after October 1, 1950 and prior to June 1, 1955 was absent from work because such employee entered into active service in the armed forces of the United States and who was given a Corporation approved leave of absence for such period shall be credited with the number of hours that the employee would have been scheduled to work during such absence. (2) An employee, who on or after June 1, 1955 was or is absent from work to enter into (or remain in) active service in the armed forces of the United States and for that reason was or is given a Corporation approved leave of absence, shall be credited with 40 hours for each complete calendar week while on such leave; provided, however, that credited service based on such hours shall not exceed four years (including credited service, if any, granted under subsection (e)(1) of this Section 1), or such longer period during which the employee has reemployment rights pursuant to any Federal law, and provided, further, that the employee is reemployed in accordance 37 66 Art. III 1(e)(2) with the terms of such leave of absence or, if reemployed by the Corporation at a location other than the location from which the leave was granted, within 90 days from the date of discharge from the armed forces. (f) Any employee hired on an hourly-rate job by a plant or Division of the Corporation, who has credited service under any Corporation retirement plan for salaried employees or who has lost credited service under any such plan, shall, upon making proper application, have such service credited to the nearest 1/10 year; provided that the employee acquires or acquired seniority following the loss of such credited service. (g) If a former salaried employee who is entitled to a deferred retirement benefit under Part A of the General Motors Retirement Program for Salaried Employees is reemployed by the Corporation and acquires seniority prior to the commencement of such deferred retirement benefit, such employee shall, upon making proper application, have reinstated, in lieu of the deferred retirement benefit, the credited service lost at the time the employee became entitled to such deferred retirement benefit. (h) An employee with at least five years of seniority: (1) on January 1, 1968 who was absent from work because of layoff during any calendar year after December 31, 1955 and before January 1, 1963, or (2) on December 10, 1973 who was absent from work because of layoff during any calendar year after December 31, 1950 and before January 1, 1956, or (3) on October 1, 1979 who was absent from work because of layoff during any calendar year after December 31, 1962 and before January 1, 1968, or 38 67 Art. III, 1(h)(4) (4) on October 1, 1984 who was absent from work because of layoff during any calendar year after December 31, 1978 and before January 1, 1984, or (5) on October 1, 1993 who was absent from work because of layoff during any calendar year after December 31, 1973 and before January 1, 1977 shall be credited with 40 hours for each complete calendar week of such absence, not previously credited under this Section 1, during which the employee had seniority multiplied by a percentage as set forth in the following table:
Employee's Seniority on January 1, 1968 in the Case of (1) Above or December 10, 1973 in the Case of (2) Above or October 1, 1979 in the Case of (3) Above or October 1, 1984 in the Case of (4) Above or October 1, 1993 in the Case of (5) Above % --------------------------------------------- 20 years or more 100 15 years but less than 20 years 75 10 years but less than 15 years 50 5 years but less than 10 years 25
provided that the employee makes proper application. (i) In no event shall any employee be credited with more than 1700 hours, including compensated hours, in any calendar year. No employee shall be credited with any service after retirement. There shall be no duplication of credited service under the Plan. Not 39 68 Art. III, 1(i) more than one year of credited service shall be credited to any employee in any calendar year, except as otherwise provided in Section 5 of this Article III with respect to foundry service. (j) Notwithstanding any other Section of this Article III, in the case of an employee who shall retire on or after October 1, 1990, the employee's credited service for the period before January 1, 1966 shall not be less than the employee's seniority as of December 31, 1965 as determined under the Collective Bargaining Agreement. SECTION 2. LOSS OF CREDITED SERVICE An employee will lose all credited service for purposes of this Plan: (a) if the employee quits, (b) if the employee is discharged or released, (c) if the employee's seniority is broken for any other reason. SECTION 3. REINSTATEMENT OF CREDITED SERVICE (a) Any employee with seniority on or after October 1, 1993 who breaks seniority and thereby loses or has lost credited service under Section 2 of this Article III and then is or was later reemployed by any plant or Division of the Corporation shall, upon making proper application, have such credited service reinstated provided the employee subsequently acquires or acquired seniority. (b) Any employee retired under the provisions of this plan who subsequently has seniority reinstated, will have credited service at the time of retirement reinstated. 40 69 Art. III, 4 SECTION 4. SERVICE WITH A FOREIGN SUBSIDIARY An employee with seniority on or after October 1, 1993 whose employment as an hourly or salaried employee with a directly or indirectly wholly-owned or substantially wholly-owned foreign subsidiary of General Motors Corporation has been terminated other than by retirement, shall be granted credited service under this Plan for any periods of active service with such foreign subsidiary or, if greater, the amount of service credited to such employee under any pension or retirement plan of the foreign subsidiary at the time of termination, provided such service was prior to the most recent period of active service credited under this Plan. Any monthly benefits payable under this Plan to a retired employee who has received credited service under this Section 4 will be reduced by an amount equivalent to the total of any monthly benefits that could be payable to such employee under any retirement plan to which the foreign subsidiary has contributed, excluding, however, any such plan or any portion of any such plan providing retirement benefits purchased solely by voluntary employee contributions. Any survivor's benefits payable under this Plan to a survivor of such an employee shall be subject to similar reduction by monthly survivor's benefits payable under any plan to which the foreign subsidiary has contributed. SECTION 5. FOUNDRY SERVICE An employee with seniority on or after October 1, 1993 who at retirement has over 10 years of credited service which such employee accrued while employed on certain foundry job classifications as set forth in Appendix B, shall receive additional credited service related thereto. Total credited service for any such employee who retires with benefits payable 41 70 Art. III, 5 commencing on or after October 1, 1975 shall be the sum of (i) credited service otherwise credited to the employee, and (ii) any such additional credited service which shall be credited to the employee in accordance with the following table:
Years of Credited Service Additional Credited on Credited Foundry Jobs Service ------------------------- ---------- For years 1 through 10 0 For years 10.1 through 25 33-1/3% For years over 25 20%
If any such employee is continuously employed exclusively on such foundry jobs in a calendar year, such additional credited service shall apply to any credited service otherwise credited to the employee for such year. If any such employee (i) is not continuously employed in a calendar year, or (ii) is employed on other than such foundry jobs in such year, such additional credited service shall apply to any credited service otherwise credited to the employee for such year in accordance with the following table:
If Credited Service Additional Credited Service Otherwise Applies to Such Year Only if Employee Credited to Spent Following Minimum Number of Employee For Complete Calendar Weeks on Calendar Year is Foundry Jobs During Such Year ------------------- ------------------------------------- 1.0 (year) 26 .9 23 .8 21 .7 18 .6 16 .5 13 .4 10 .3 8 .2 5 .1 3
42 71 Art. III, 5 No additional credited service shall be granted for any calendar year in which any such employee spends less than the minimum required number of complete calendar weeks on such foundry jobs, as indicated above. If any such employee is on such foundry job at the commencement of a layoff or approved leave of absence, such additional credited service shall apply to any credited service otherwise credited to the employee while on such layoff or approved leave of absence. SECTION 6. HOURS, YEARS AND BREAKS IN SERVICE TO COMPLY WITH THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (a) An employee who breaks seniority on or after October 1, 1976 who would be eligible for a deferred pension under Article VII, Section 2, except solely for the fact that the employee does not have at least 5 years of credited service under the foregoing Sections of this Article III, shall be eligible for a deferred pension under the provisions of Article VII, Section 2 if, at the time the employee breaks seniority, such employee has 5 years of service solely as determined under this Section 6. (b) The monthly amount of any such deferred pension shall be based solely on the credited service that the employee had under the foregoing Sections of this Article III when the employee broke seniority. (c) No employee shall be eligible to be covered under this Section 6 until such employee (i) attains age 21, or (ii) completes 1 year of service under this Section 6, whichever is later. Rehired employees shall participate immediately. (d) An employee shall complete 1 year of service when such employee completes 750 hours of service 43 72 Art. III, 6(d) in the 12 consecutive month period beginning with the employment commencement date. If an employee fails to complete 750 hours of service in such period, such employee shall complete 1 year of service in the first 12 consecutive month period thereafter in which the employee completes 750 hours of service, measured from each succeeding anniversary of the employment commencement date. Thereafter, an employee shall complete 1 year of service during each 12 consecutive month period in which such employee completes 750 hours of service, measured from the anniversary of the employment commencement date. A year of service under this Section 6 shall include service (i) with affiliated group members accrued subsequent to acquisition, (ii) rendered to the Corporation as a former leased employee (but only upon employee application, supported by substantiation satisfactory to the Corporation of such service), and (iii) rendered to the Corporation as a salaried employee in accordance with I.R.C. Section 414(b), (c), (m), (n), and (o). (e) An employee who satisfies the eligibility requirements of this Section 6, and who is otherwise entitled to participate in the Plan, shall commence participation under this Section 6 if the employee satisfies such requirements (i) between April 1 and September 30; on the first day of the plan year beginning after the date on which such requirements are satisfied, or (ii) between October 1 and March 31; on the first day of the plan year that includes the date such requirements are satisfied, but in no event shall any employee participate hereunder if such employee breaks seniority prior to such commencement date. (f) An employee shall complete an hour of service under this Section 6 for each hour paid by the Corporation for working or for having been entitled to work. Any hours for which an employee receives pay for having been entitled to work, irrespective of 44 73 Art. III, 6(f) mitigation of damages, shall be credited to the period or periods so entitled, rather than to the period in which such pay is received. There shall be no duplication of any hours of service under this Section 6. (g) Solely for purposes of determining years of service for vesting under this Section 6, all of the employee's years of service shall be taken into account except the following: (i) years of service before age 18 (age 22 prior to October 1, 1985); (ii) years of service before January 1, 1971, unless the employee has at least 3 years of service after December 31, 1970; (iii) years of service prior to any 1-year break in service as defined herein, until the employee completes a year of service after such break; (iv) for non-vested participants under this section, years of service prior to any 1-year break in service if the number of such consecutive breaks equals or exceeds the aggregate number of years of service prior to such break, for a non-vested participant at work on or after October 1, 1985, years of service prior to any 1-year break in service if the number of such consecutive breaks equals or exceeds the greater of 5, or the aggregate number of years of service prior to such break (such aggregate number of years of service before such break shall not include any years of service not required to be taken into account under this Section 6 by reason of any prior break in service); (v) years of service before October 1, 1976, if such service would have been disregarded under rules of the Plan as in effect on October 1, 1976, regarding breaks in service; and (vi) any year in which the employee completes less than 750 hours of service. (h) An employee shall incur a 1-year break in service under this Section 6 in any 12 consecutive month period during which the employee does not complete more than 375 hours of service, measured from the anniversary of the employment commencement date. Solely for purposes of 45 74 Art. III, 6(h) determining whether an employee has incurred such 1-year break in service, in addition to hours worked which are paid by the Corporation, any hours which an employee does not work but for which such employee is paid by the Corporation for vacation, sickness or disability, or is entitled to be so paid, directly or indirectly, shall be taken into consideration. For any absence from work commencing on and after October 1, 1985 by reason of pregnancy of the individual, childbirth, placement of a child related to an adoption, or for child care purposes immediately following such birth or placement or for any absence from work commencing on and after October 1, 1993 for any reason that qualifies an employee for a leave under the Family and Medical Leave Act of 1993, the employee shall be credited with the hours of work for which such employee otherwise would have been scheduled, or, if unable to determine such scheduled hours, 8 hours for each work day of such absence, not to exceed a total of 501 hours for any such absence. Such hours shall be credited in the year in which the absence commences if necessary to prevent incurring a 1-year break in service, otherwise such hours shall be credited in the immediately following year. SECTION 7. ASBESTOS SERVICE An employee with seniority on or after October 1, 1993 who at retirement has over 10 years of credited service which was accrued while employed on certain asbestos job classifications as set forth in Appendix C, shall receive additional credited service related thereto in the same manner as set forth in Section 5 of this Article III. 46 75 Art. IV ARTICLE IV REDETERMINATIONS ON ACCOUNT OF SOCIAL LEGISLATION SECTION 1. REDETERMINATIONS FOR FEDERAL SOCIAL SECURITY BENEFITS FOR AGE OR DISABILITY (a) The benefits payable for age or disability under the Federal Social Security Act, as amended, as now in effect, or as hereafter amended, which are referred to in the determination of pensions under Article II shall be included in such determination even though the employee either does not apply for, or loses part or all of such payments through delay in applying for them, by entering into covered employment, or otherwise. (b) Old age benefit payments or disability benefit payments, other than those payable on a basis of "need" or because of military service, under any future federal legislation, amending, superseding, supplementing, or incorporating the Federal Social Security Act, as amended, or benefits provided therein, shall be considered as benefits for age or disability under the Federal Social Security Act for the purposes of the Plan. (c) If an employee is eligible for a Federal Social Security benefit for disability or an unreduced Federal Social Security benefit for age at the time of retirement or thereafter, such employee shall provide the Corporation with evidence of the effective date of entitlement to such benefit. SECTION 2. DEDUCTIONS FOR WORKERS COMPENSATION In determining the monthly benefits payable under this Plan, a deduction shall be made unless prohibited by law, equivalent to all or any part of Workers 47 76 Art. IV, 2 Compensation (including compromise or redemption settlements) payable to such employee by reason of any law of the United States, or any political subdivision thereof, which has been or shall be enacted, provided that such deductions shall be to the extent that such Workers Compensation has been provided by premiums, taxes or other payments paid by or at the expense of the Corporation, except that no deduction shall be made for the following: (a) Workers Compensation payments specifically allocated for hospitalization or medical expense, fixed statutory payments for the loss of any bodily member, or 100% loss of use of any bodily member, or payments for loss of industrial vision. (b) Compromise or redemption settlements payable prior to the date monthly pension benefits first become payable. (c) Workers Compensation payments paid under a claim filed not later than two years after the breaking of seniority. ARTICLE V FINANCING SECTION 1. TRUST FUND The Corporation shall execute a trust agreement with a trustee or trustees selected by the Corporation to manage and operate the pension fund and to receive, hold and disburse such contributions, interest and other income as may be necessary to pay such of the pensions and supplements or portions thereof under this Plan as are not provided for by an insured fund. The Corporation may establish an insured fund with such 48 77 Art. V, 1 insurance company or companies as it may select for the payment of such of the pension and supplements or portions thereof under this Plan as are not provided for in a trusteed fund. The Corporation will determine the form and terms of any such trust agreement which may authorize the inclusion of obligations and stock (common and preferred) of the Corporation and its wholly-owned subsidiaries among the investments of the pension fund provided for by such trust agreement; may utilize any investment manager as defined under the Employee Retirement Income Security Act of 1974 or regulations thereunder; may modify any such trust agreement from time to time to accomplish the purposes of this Plan; may remove any trustee, and select any successor trustee; and select and change insurance companies. SECTION 2. CONTRIBUTIONS (a) The Corporation, subject to Article IX, Section 1, shall make such contributions to the trustee or pay such premiums under any insured contract for the purposes of providing pensions and supplements under the Plan as shall be required under accepted actuarial principles and Title I of the Employee Retirement Income Security Act of 1974 to maintain the Plan and pension or insured fund in a sound condition and shall pay for expenses incident to the operation and management of the Plan. (b) The Corporation may charge to the fund expenses necessary for the proper administration of the Plan and investment of the funds, including the direct cost of benefit administration performed by, or on behalf of, the Corporation for the Plan, and Pension Benefit Guaranty Corporation premiums for participants. (c) No employee shall be required to make any contributions to the Plan. 49 78 Art. V, 3 SECTION 3. IRREVOCABILITY (a) The Corporation shall have no right, title or interest in the contributions made by it to the trustee and no part of the pension or insured fund shall revert to the Corporation, except that after satisfaction of all liabilities of the Plan as set forth in Article IX, such contributions as may have been made by the Corporation as the result of overpayments may revert to the Corporation. (b) The pension benefits and supplements of the Plan shall be only such as can be provided by the assets of the pension fund or by any insured fund and there shall be no liability or obligation on the part of the Corporation to make any further contributions to the trustee or insurance company in event of termination of the Plan. No liability for the payment of pension benefits or supplements under the Plan shall be imposed upon the Corporation, the Officers, Directors or Stockholders of the Corporation, except as otherwise may be required by the Employee Retirement Income Security Act of 1974. ARTICLE VI ADMINISTRATION SECTION 1. The Corporation shall be responsible for the general administration of the Plan and for carrying out the provisions thereof. SECTION 2. (a) The Corporation shall have all such powers as may be necessary to carry out the provisions of the Plan except as the powers and duties of the Corporation may be modified by any collective bargaining agreement. 50 79 Art. VI 2(b) (b) Subject to the limitations of (a) above, the Corporation may from time to time establish rules for the administration of the Plan and the transaction of the Plan's business. (c) In making any such determination or rule, the Corporation shall pursue uniform policies and shall not discriminate in favor of, or against any employee or group of employees. ARTICLE VII PENSION BENEFITS AND SUPPLEMENTS SECTION 1. PENSION AND SUPPLEMENT PAYMENTS (a) (1) Pensions and supplements shall be paid monthly. (2) The first monthly payment of an employee's pension other than for total and permanent disability shall become payable with the employee's consent on the first day of the month following the month in which the employee actually retires, and the pension shall be payable monthly thereafter. (3) Total and permanent disability pension shall be payable monthly during the continuance of total and permanent disability and while the pensioner otherwise remains eligible for such benefits. Such payments shall begin the later of: (i) the first day of the month which includes the date the required proof of disability is received by the Corporation, or (ii) the first day of the month which includes the date the employee has been continuously and totally disabled for a period of 5 months. Successive periods of absence due to the same disability as that upon which claim for total and 51 80 Art. VII, 1(a)(3)(ii) permanent disability pension is based and aggregating at least five months will be considered the same as one continuous absence provided that the aggregate will not include any such absence which precedes the last day at work by more than one year, or (iii) the first day of the third month following the date the required proof of disability is received by the Corporation, or (iv) the first day of the third month following determination by the impartial clinic that the employee is totally and permanently disabled. These subsections (iii) and (iv) shall not be applicable (a) if the employee dies prior to such date, or (b) where Extended Disability Benefits are less than the benefits payable under this Plan. (4) A supplement for an employee shall be payable in the manner provided in Section 6 of Article II. (5) Pension and supplement payments shall not be payable with respect to any period for which weekly sickness and accident benefits are payable to the employee under any plan to which the Corporation has contributed. If such sickness and accident benefits during any month are payable for a period of less than 4-1/3 weeks, the sum of the monthly pension benefit (excluding any special benefit) and supplement payable for that month shall be reduced by the percentage which such period of sickness and accident benefits is of 4-1/3 weeks. (b) A pensioner who is reemployed by the Corporation shall cease to receive, during such reemployment, any monthly pension benefits to which the pensioner might otherwise be entitled. Any such reemployed pensioner will have credited service at the time of retirement reinstated. A reemployed 52 81 Art. VII, 1(b) pensioner shall accrue additional credited service as a result of such employment and the monthly pension benefits of such pensioner shall be adjusted with regard to such employment upon subsequent cessation of active service. (c) In the event that it shall be found that any pensioner or surviving spouse to whom a pension or survivor benefit is payable is unable to care for the affairs of such pensioner or surviving spouse because of illness or accident, any monthly pension payment and supplement or survivor benefit due (unless prior claim therefor shall have been made by a duly qualified guardian or other legal representative) may be paid to the spouse, parent, brother, sister or other person or party (including private or public institutions) deemed by the Corporation to have incurred expense for such pensioner otherwise entitled to payment. Any such payment shall be a payment for the account of the pensioner and shall be a complete discharge of any liability of the Plan therefor. (d) In order to retire under the Plan, an employee must have unbroken seniority at the time of retirement except that a person who is eligible for benefits under the Guaranteed Income Stream Benefit Program and is not receiving deferred pension benefits under this Plan shall not be precluded from retiring without return to employment even though such person shall have incurred a break in seniority while on continuous layoff from the Corporation. A person who, while eligible to retire, receives (i) a benefit payment pursuant to Attachment A of Appendix K of the Collective Bargaining Agreement or Article IV of the Supplemental Unemployment Benefit Plan, or (ii) a GIS Redemption Payment under the Guaranteed Income Stream Benefit Program, shall not be eligible to retire under any of the provisions of this Plan for the period described in such agreements, plans 53 82 Art. VII, 1(d) or programs, commencing with the date such person terminates employment or breaks seniority pursuant to the terms of such agreements, plans or programs. (e) Notwithstanding any other provision of this Section 1, an employee attaining age 70-1/2 on and after October 1, 1993, will commence monthly receipt of accrued benefits under this Plan, beginning April 1 of the calendar year immediately following the year the employee attains or attained age 70-1/2. An employee attaining age 70-1/2 shall have the monthly payment based on such employee's pension benefit accrual as of December 31 of the year in which age 70-1/2 is attained. The actuarial value of the sum of all cash distributions received by any otherwise eligible employee prior to such employee's actual retirement under this Plan will be used as an offset from any additional benefit accrual that might otherwise have been payable to such employee as a result of working for the Corporation. SECTION 2. RETENTION OF DEFERRED PENSION IF SEPARATED (a) Any employee who loses accumulated credited service under the provisions of Article III, Section 2 shall be eligible for a deferred pension if such employee is not retired and eligible for pension benefits pursuant to Article II, and provided the credited service of such employee at separation is at least 5 years, or such employee satisfies the "service" requirements of Article III, Section 6. (b) The monthly amount of such deferred pension for an employee breaking seniority on or after October 1, 1993 shall be a basic benefit for each year of credited service that such employee had when such employee broke seniority, determined by such employee's Benefit Class Code when such employee broke seniority as set forth in the table immediately following: 54 83 Art. VII, 2(b)
Benefit Basic Date Class Benefit Seniority Broke Code Rate $ --------------- ------- ------- On October 1, 1993 A 32.50 through B 32.75 September 30, 1994 C 33.00 D 33.25 On October 1, 1994 A 33.50 through B 33.75 September 30, 1995 C 34.00 D 34.25 October 1, 1995 A 34.70 and After B 34.95 C 35.20 D 35.45
(c) A former employee who is eligible for a deferred pension may at the election of such former employee receive (1) a monthly pension commencing at or after age 65 determined in accordance with subsection (b) of this Section 2, or (2) a monthly pension commencing after age 60 and prior to age 65 determined in accordance with subsection (b) of this Section 2, such pension being reduced by 6/10 of 1 percent for each complete calendar month by which such former employee is under the age of 65 at the date the deferred pension commences, or (3) a monthly pension commencing after age 55 and prior to age 60 for a former employee who breaks seniority on or after October 1, 1976, determined in accordance with subsection (b) of this Section 2. Such pension shall be multiplied by a percentage as set forth in the following table: 55 84 Art. VII, 2(c)(3)
Age When Pension Commences Percentage* % 55 42.8 56 46.8 57 51.2 58 55.5 59 59.6 60 64.0
*Prorated for intermediate ages computed on the basis of the number of complete calendar months by which the employee is under the age attained at the employee's next birthday. (d) The deferred pension shall be payable commencing the later of the first day of the month following the month (i) in which such employee attains the applicable age set forth in Section 2(c) of this Article VII, or (ii) during which the Corporation receives a written request from such former employee; provided that such written request shall be valid and effective only if it is filed with the Corporation not earlier than 60 days prior to the date such former employee first becomes eligible for such benefit, and, for such employee who broke seniority prior to October 1, 1976, not later than the 70th birthday, otherwise no deferred vested pension benefit shall be payable at any time. (e) If, prior to the commencement of deferred pension benefits, an employee is reemployed by the Corporation and: (1) acquires seniority, or (2) is reemployed by, and works for, the Corporation at the plant where such employee worked immediately prior to the loss of credited service, or (3) dies after having qualified for a deferred pension in accordance with this Section 2, such employee shall, in lieu thereof, have reinstated the credited service in effect when 56 85 Art. VII, 2(e) such deferred pension was granted; provided that if an employee with 10 or more years of credited service (1) is reemployed by, and works for, the Corporation within 36 months of the date credited service was lost under Article III, Section 2, and (2) becomes disabled while employed by the Corporation prior to acquiring 5 months of seniority, and such disability is continuous for a period of 5 months during which the employee makes proper application and submits medical evidence satisfactory to the Corporation that such employee is totally and permanently disabled as set forth in Section 3 of Article II, such employee will be deemed eligible for a disability pension under Section 3 of Article II, and such pension will be payable pursuant to Section 1 of Article VII, as though such employee had been an employee with seniority throughout such disability period. (f) The amount of any monthly pension benefit otherwise payable to a former employee eligible for a deferred pension will be reduced by the value of any past and future benefits paid or payable to any alternate payee(s) under a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p). The actuarial value will be used to determine any amount to be paid to any such payee(s), if applicable, and the remaining benefit entitlement of the employee. SECTION 3. NON-ALIENATION OF BENEFITS The pension fund shall not in any manner be liable for or subject to the debts or liability of any employee, separated employee, retired employee, pensioner or surviving spouse. No right, benefit, pension or supplement at any time under the Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge or encumbrances of any kind except in accord 57 86 Art. VII, 3 with provisions of a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p). If any person shall attempt to, or shall, alienate, sell, transfer, assign, pledge or otherwise encumber accrued rights, benefits, pensions or supplements under the Plan or any part thereof, or if by reason of bankruptcy or other event happening at any time such benefits would otherwise be received or enjoyed by anyone else, the Corporation may terminate the interest of such employee, pensioner or surviving spouse in any such benefit and instruct the trustee to hold or apply it to or for the benefit of such employee, pensioner or surviving spouse, spouse, children or other dependents, or any of them as the Corporation may instruct; provided, however, that any pensioner, or surviving spouse, entitled to a monthly benefit under the Plan: (a) who elects Blue Cross, Blue Shield, or equivalent coverage, made available under the General Motors Health Care Program for Hourly Employees may, insofar as it is consistent with the regulations governing the plans providing such coverage, participate in such coverage and have deducted from the monthly pension, pursuant to authorization and direction acceptable to the Corporation, the required contribution for such coverage. (b) will have Federal and state income tax withheld pursuant to Federal and state statutes or regulations unless, only with respect to Federal income tax, elected otherwise by submitting to the Corporation authorization and direction acceptable to the Corporation. (c) who elects optional or dependent life insurance coverage(s) made available under the General Motors Life and Disability Benefits Program for Hourly Employees may have deducted from the monthly pension, pursuant to authorization and direction, acceptable to the Corporation, the required contribution(s) for such coverage(s). 58 87 Art. VII, 3(d) (d) may have amounts of not less than $40.00, but in no event more than 10% of the retired employee's monthly pension, withheld to repay any outstanding overpayment owing to any benefit plan of the Corporation, pursuant to written authorization and direction acceptable to the Corporation. ARTICLE VIII MISCELLANEOUS PROVISIONS SECTION 1. NO ENLARGEMENT OF EMPLOYMENT RIGHTS The Corporation's rights to discipline or discharge employees shall not be affected by reason of any of the provisions of the Plan. SECTION 2. INTERNAL REVENUE SERVICE APPROVAL This Plan as amended is contingent upon and subject to obtaining and retaining such approval of the Commissioner of Internal Revenue as may be necessary to establish the deductibility under Section 404 of the Internal Revenue Code for income tax purposes of any and all contributions made by the Corporation to this Plan and to establish this Plan and related trust as being qualified and tax exempt under Sections 401 and 501(a) or other applicable provisions of the Internal Revenue Code. Any modification or amendment of the Plan may be made retroactively, if necessary or appropriate, to qualify or maintain the Plan as a plan and trust meeting the requirements of Sections 401 and 501(a) of the Internal Revenue Code, as now in effect or hereafter amended, or any other applicable provisions of the federal tax laws, as now in effect or hereafter amended or adopted, and the regulations issued thereunder. 59 88 Art. VIII, 3 SECTION 3. CORPORATION BOARD OF DIRECTORS APPROVAL Continuation of the Plan as amended in 1993 is contingent upon obtaining the approval of the Corporation's Board of Directors not later than June 1, 1994. SECTION 4. NAMED FIDUCIARY The Finance Committee of the Corporation's Board of Directors shall be the Named Fiduciary with respect to the Plan. The Finance Committee may delegate to various officers, employees and committees of the Corporation authority to carry out such of its responsibilities as it deems proper to the extent permitted by the Employee Retirement Income Security Act of 1974. SECTION 5. LIMITATION OF BENEFITS No benefits paid from this Plan will exceed the limits of Section 415 of the Internal Revenue Code. ARTICLE IX AMENDMENT AND TERMINATION SECTION 1. AMENDMENT The Corporation reserves the right to amend, modify, suspend or terminate the Plan by action of its Board of Directors, provided, however, that no such action shall alter the Plan or its operation, except as may be required by the Internal Revenue Service for the purpose of meeting the conditions for qualification and tax deduction under Sections 401, 404, and 501(a) of the Internal Revenue Code, in respect of employees who are represented under a collective bargaining agreement in contravention of the provisions of any such agreement pertaining to pension benefits and 60 89 Art. IX, 1 supplements as long as any such agreement is in effect. Except as provided in Article V, Section 3, no such action shall operate to recapture for the Corporation any contributions previously made to the trustee or insurance company under the Plan, nor, except to the extent necessary to meet the requirements of the Internal Revenue Service or any other governmental authority, to affect adversely the pensions or supplements of employees already retired or the trust fund or insured fund then securing such pensions and supplements. SECTION 2. TERMINATION OF PLAN (a) If the Corporation, in accordance with Section 1 of this Article IX, or the Pension Benefit Guaranty Corporation terminates the Plan, the amount of the assets, which are available to provide benefits, and which are held by the trustee as of the termination date, shall be allocated, after deducting expenses for administration or liquidation, in the following manner and order to the extent of the sufficiency of such assets: (1) First, in the case of benefits payable as an annuity: (i) In the case of the benefit of a participant or beneficiary which was in pay status as of the beginning of the 3-year period ending on the termination date of the Plan, to each such benefit, based on the provisions of the Plan (as in effect during the 5-year period ending on such date) under which such benefit would be the least; (ii) In the case of a participant's or beneficiary's benefit (other than a benefit described in subsection (a)(1)(i)) which would have been in pay status as of the beginning of such 3-year period if the participant had retired prior to the beginning of the 3-year period and if benefits had commenced (in the 61 90 Art. IX, 2(a)(1)(ii) normal form of annuity under the Plan) as of the beginning of such period, to each such benefit based on the provisions of the Plan (as in effect during the 5-year period ending on such date) under which such benefit would be the least. For purposes of subsection (a)(1)(i), the lowest benefit in pay status during a 3-year period shall be considered the benefit in pay status for such period. (2) Second, to all other benefits (if any) of individuals under the Plan which are guaranteed under the plan termination insurance provisions of the Employee Retirement Income Security Act of 1974 determined without regard to Section 4022B(a) of said Act. (3) Third, to all other nonforfeitable benefits under the Plan. (4) Fourth, to all other benefits under the Plan. (b) (1) The amount allocated under any of the preceding subsections of this Section 2 with respect to any benefit shall be properly adjusted for any allocation of assets with respect to that benefit under a prior subsection of this Section 2. (2) If the assets available for allocation under subsections (a)(1) and (a)(2) are insufficient to satisfy in full the benefits of all individuals which are described in such subsections, the assets shall be allocated pro rata among such individuals on the basis of the present value (as of the termination date) of their respective benefits described in such subsections. (3) If the assets available for allocation under subsection (a)(3) are not sufficient to satisfy in full the benefits of individuals described therein: (i) Except as provided in subsection (b)(3)(ii), the assets shall be allocated to the benefits of 62 91 Art. IX, 2(b)(3)(i) individuals described in subsection (a)(3) on the basis of the benefits of individuals which would have been described in subsection (a)(3) under the Plan as in effect at the beginning of the 5-year period ending on the date of the Plan's termination. (ii) If the assets available for allocation under subsection (b)(3)(i) are sufficient to satisfy in full the benefits described therein (without regard to this subsection (b)(3)(ii)), then for purposes of subsection (b)(3)(i), benefits of individuals described therein shall be determined on the basis of the Plan as amended by the most recent Plan amendment effective during such 5-year period under which the assets available for allocation are sufficient to satisfy in full the benefits of individuals described in subsection (b)(3)(i) and any assets remaining to be allocated under such subsection shall be allocated under subsection (b)(3)(i) on the basis of the Plan as amended by the next succeeding Plan amendment effective during such period. (c) If the Secretary of the Treasury determines that the allocation made pursuant to this Section 2 results in discrimination prohibited by Section 401(a)(4) of the Internal Revenue Code of 1986, or as may be subsequently amended, then, if required to prevent the disqualification of the plan (or any trust under the plan) under Section 401(a) or 403(a) of such Code the assets allocated shall be reallocated to the extent necessary to avoid such discrimination. (d) In the event of termination or partial termination of the Plan, the right of all affected employees to benefits accrued to the date of such termination, partial termination or discontinuance, to the extent funded as of such date, are nonforfeitable. (e) Anything in the Plan to the contrary notwithstanding, it shall not be possible at any time prior to the satisfaction of all liabilities with respect to 63 92 Art. IX, 2(e) employees under the plan for any part of the corpus or income of the Pension Fund to be used for, or diverted to purposes other than the exclusive benefit of employees. After satisfaction of all liabilities to participants and beneficiaries under the Plan, any residual assets of the Pension Fund will be distributed to the Corporation if the distribution does not contravene any applicable provision of law. SECTION 3. MERGER OR CONSOLIDATION In the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan after September 2, 1974, each participant in the Plan would, if the Plan then terminated, receive a benefit immediately after the merger, consolidation, or transfer which is equal to or greater than the benefit the participant would have been entitled to receive immediately before the merger, consolidation, or transfer, if the Plan had then terminated. ARTICLE X DEFINITIONS 1. EMPLOYEE (a) Any person regularly employed in the United States by the Corporation or by a wholly-owned or substantially wholly-owned domestic subsidiary in accordance with I.R.C. Section 414(b), (c), and (m) thereof, including: (1) hourly-rate persons employed on a full time basis; (2) hourly-rate persons on incentive pay plans; (3) students from educational institutions who are enrolled in cooperative training courses on hourly rate; 64 93 Art. X, 1(a)(4) (4) part-time hourly-rate employees who, on a regular and continuing basis, perform jobs having definitely established working hours, but the complete performance of which requires fewer hours of work than the regular work week, provided such employees work one-half or more of the employing unit's regular work week; (5) hourly-rate employees of Delco Electronics Corporation (DEC); (6) represented employees of the Saturn Corporation who have made a positive election to participate in the GM Plan pursuant to the Memorandum of Agreement dated October 16, 1993. (b) The term "employee" shall not include: (1) temporary employees; (2) part-time employees, who work less than one-half of the employing unit's work week; (3) employees represented by a labor organization which has not signed an agreement making this Plan applicable to such employees; (4) employees of any directly or indirectly wholly-owned or substantially wholly-owned subsidiary of the Corporation acquired or formed by the Corporation on or after January 1, 1984, except as provided under (a)(6) above; (5) leased employees as defined under Section 414(n) of the Internal Revenue Code. 2. TRUSTEE OR INSURANCE COMPANY The bank or banks, trust or insurance company or companies or any combination thereof designated by a trust agreement or contract as the medium for financing the Plan. 65 94 Art. X, 3 3. SENIORITY Seniority means the period following the most recent date of hire by the Corporation and subsequent to which there has been no loss of credited service (as loss of credited service is defined in the Plan), or if the employee is represented under a collective bargaining agreement seniority will be as defined in such agreement. An employee who is rehired on or after October 1, 1984, and thereby has the pension discontinued, but does not have seniority reinstated, shall be deemed, solely to satisfy purposes of The General Motors Hourly-Rate Employees Pension Plan, to have seniority while so employed. 4. FEDERAL SOCIAL SECURITY BENEFIT A Federal Social Security benefit for disability or an unreduced Federal Social Security benefit for age means a benefit determined and payable under Title II of the Federal Social Security Act, as now in effect or as hereafter amended, without any reduction being made therefrom based on the age of the recipient. 5. TRUST FUND; PENSION FUND; INSURED FUND The General Motors Hourly-Rate Employees Pension Plan fund established by payments made by the Corporation in accordance with Article V herein. Such fund therein called the trust fund shall be comprised of either a pension fund or insured fund, or a combination thereof. 6. BASE HOURLY RATE For the purpose referred to in Section 6(g) of Article II of this Plan only, Base Hourly Rate shall be the higher of: (a) the employee's highest straight-time hourly rate, or 66 95 Art. X, 6(b) (b) for an employee who worked on incentive or piece work in at least 4 pay periods, the employee's average earned straight-time hourly rate for the first 4 pay periods (or, if higher, for the last 4 pay periods) for which such employee had any incentive earnings (provided, however, that if the employee worked in less than 4 pay periods but during each such pay period worked, such employee worked on incentive or piece work, the employee's average earned straight-time hourly rate for such pay periods worked shall be used) during the last 13 consecutive pay periods ending with the pay period which includes the last day worked, plus any cost-of-living allowance in effect with respect to the employee's last day worked for the Corporation. 7. BASIC BENEFIT The monthly benefit payable under the Plan for the lifetime of a retired or separated employee, including a benefit reduced by a percentage because of early retirement. The term "basic benefit" shall not include any temporary benefit, special benefit, or supplement payable under the Plan. 8. AGE 62 AND ONE MONTH "Age 62 and one month" means age 62 and one month except that for purposes of determining the month for which the temporary benefit provided in Article II, Section 4 and the early retirement and interim supplements provided in Article II, Section 6 shall cease and the month for which the basic benefit is redetermined in accordance with Article II, Section 4, it shall mean age 62 if both a temporary benefit, early retirement supplement, or interim supplement under the Plan and a benefit under the Federal Social Security Act could otherwise be payable. 67 96 Art. X, 9 9. ACTUARIAL VALUE The actuarial value as of any determination date shall be calculated on the basis of the UP-84 mortality table and the applicable interest rate used by the Pension Benefit Guaranty Corporation (PBGC) as of the first day of the plan year preceding the determination date. 68 97 Appendix A APPENDIX A (HOURLY-RATE EMPLOYEES PENSION PLAN) A Benefit Class Code for the sole purpose of this Plan is hereby established for each job classification in effect on September 14, 1993 on the basis of the maximum base hourly rate (which term as used herein shall include incentive earnings unless otherwise noted) applicable to the job classification on that date, as follows:
For Job Classifications Benefit Having a Maximum Class Base Hourly Rate of Code On or after Less than $16.16 A September 14, 1993 $16.16 but less than $16.38 B but prior to $16.38 but less than $17.31 C October 24, 1993 $17.31 and over D On or after Less than $17.98 A October 24, 1993 $17.98 but less than $18.21 B $18.21 but less than $19.17 C $19.17 and over D
(1) The Benefit Class Code applicable to an employee is the Benefit Class Code for the job classification held by the employee for the greatest number of calendar days during the 24 consecutive months immediately preceding the last day worked. (2) The Benefit Class Code to be established for any new job classification put into effect after September 14, 1993 shall be whichever Benefit Class Code is applicable to other job classifications having the same maximum base hourly rate on the date that such new job classification is put into effect. With respect to a job classification that was obsolete as of September 14, 1993 a hypothetical maximum base hourly rate applicable thereto shall be determined by increasing the maximum base hourly rate for that job 69 98 Appendix A(2) classification at the time of its discontinuance to the extent necessary so as to give effect to general wage increases (including cost-of-living allowance transfers) that have occurred since such discontinuance, and the Benefit Class Code for such classification so derived shall be whichever Benefit Class Code herein is applicable to other job classifications having the same maximum base hourly rate on that date. (3) For purposes hereof, the maximum base hourly rate of a job classification paid on a day-work basis at any plant or facility shall be the maximum straight-time hourly rate for that job classification at such plant or facility (excluding any cost-of-living allowance and premiums). (4) The maximum base hourly rate of a job classification in effect on September 6, 1967 and paid under an incentive method of pay at any plant or facility shall be the average straight-time hourly earned rate (including incentive earnings and any wage increases and cost-of-living allowance transfers which, as of September 6, 1967, were not factored in the base rate of the job classification but excluding any cost-of-living allowance and premiums) for all hours worked by all employees in that job classification at such plant or facility for the period beginning September 5, 1966, and ending September 3, 1967, plus any wage increases and cost-of-living allowance transfers effective for that job classification subsequent to September 6, 1967. In the event an employee is transferred to a job which results in a lower basic benefit rate, such employee's vested pension benefit, if any, shall not be less than the amount of such employee's accrued pension benefit on the date of such transfer to such job. 70 99 Appendix B For the sole purpose of Article III, Section 5 of the Plan, all approved job classifications set forth in the Local Wage Agreements as of September 14, 1973 of the Central Foundry Plants (currently GM Powertrain) - Danville, Illinois, Defiance, Ohio, Malleable Iron and Grey Iron, Saginaw, Michigan, are designated foundry jobs at the respective plant locations except for those job classifications listed herein for each such respective plant location. No other job classifications shall be designated foundry jobs. GM POWERTRAIN, DANVILLE, ILLINOIS Bulldozer, Operator Bus Person Cashier Cook Crane Operator, Locomotive Crane Operator-Yard & Bridge Driver - Licensed Trucks - Tractor & Trailer End Loader Operator Kardex Clerk Kitchen Help Pattern & Maintenance Clerk Pattern Storage and Transport Salvage Reclaimer Scrap Cutter - Torch Shipping Clerk Sprue Crane Hook Up Stock Room Clerk Stock Room and Receiving Warehouse Attendant Window Washer Yard Labor Yard Switchperson Garage Mechanic Machinist Pattern Maker, Wood & Metal Power House Operator 71 100 Appendix B GM POWERTRAIN, DEFIANCE, OHIO Bus Person Cashier Clerk - Pattern and/or Maintenance Cook Crane Operator - Locomotive Dispatcher - Materials Driver - Licensed Trucks - Tractor and Trailer - Semi Heavy Equipment Operator Inspection Department - Inspection (Special Assignment) Kitchen Help Locomotive Operator Safety Equipment Repair Salvage Reclaimer (2) Shipping Clerk Yard Labor Blacksmith Casting Layout (3) Garage Mechanic (1) Machinist Pattern Maker - Leader Pattern Maker - Wood & Metal Shift Operating Engineer Tool Grinder (1) Designated as a foundry job only for those employees so classified who work in Plant 2, 816 Department. (2) Designated as a foundry job only for those employees so classified who work in Plant #1, 539 Department. (3) Designated as a foundry job only for those employees so classified who work in Plant #2 816 Department, Battery Charge Area. 72 101 Appendix B GM POWERTRAIN MALLEABLE IRON PLANT, SAGINAW, MICHIGAN Bull Dozer Operator Bus Person Cashier Clerk - Pattern and Maintenance Cook Crane Operators - Locomotive Driver-Licensed Trucks, Tractor, and Trailer Kitchen Help Salvage Reclaimer Stock Room and Receiving Yard Labor Blacksmith Core and/or Mold Maker - Experimental - Bench & Floor Garage Mechanic Inspector - Layout Machinist - Maintenance Machinist - Miscellaneous (1) Machinist - Pattern Pattern Maker - Leader Pattern Maker - Wood and Metal Power House Operator (1) Designated as a foundry job only for those employees so classified who work in Department 16. 73 102 Appendix B GM POWERTRAIN GREY IRON PLANT, SAGINAW, MICHIGAN (1) Attendant - Pattern Storage Attendant - Pattern Storage - Leader Clerks - Receiving - (Includes Inspectors) Crane Hooker or Signal Person Crane Operator - Locomotive Crib Attendant - Maintenance Crib Attendant - Pattern Shop Drill Press Operator Driver - Licensed Passenger Cars Drivers - Licensed Trucks - Receiving & Yard (1) Equipment Operator - Special (Including Bay City Shovel, Bull Dozer, Pay Loader Shovel Operator) Field Sand Gasoline Locomotive Operator Flask Repair - Metal Flask Flask Repair - Metal Flask - Leader Gardener Laborer - Yard - Maintenance - Leader Labor - Yard - Maintenance - Railroad Track Repair Locker Room Attendant Milling Machine Operator - Driers (2) Oiler - Machinery, Equipment and Motors Power House Attendant Receiving Department - Leader Salvage - Flash Cutter Crane Repair - (Also Operates Crane) Crane Repair - Leader Die Repair Flask Welder Grinder - Cutter Grinder Operator - Blanchard Inspector - Layout 74 103 Appendix B GM POWERTRAIN GREY IRON PLANT, SAGINAW, MICHIGAN (CONT'D.) Machine Repair - Machinist - Maintenance- Leader Machine Repair - Machinist - Maintenance Machine Repair - Machinist - Pattern Shop Power House - Engineer - Class "B" Power House - Fireperson Power House - Repair Power House - Repair - Leader Truck Repair - Gas Truck Repair - Gas - Leader Truck Repair - Gas and Electric (3) Welder - Maintenance - Gas & Arc Welder - Tool and Die (1) Designated a foundry job only for credited service accrued on and after July 27, 1987. (2) Not designated as a foundry job for those employees so classified who work in Department 32. (3) Not designated as a foundry job for those employees so classified who work in Department 30. 75 104 Appendix B APPENDIX B Any job classification in effect at a plant specified in Appendix B that was discontinued at such plant prior to September 14, 1973 shall be designated a foundry job if the work that was performed by employees on such discontinued job classification shall conform substantially to work performed at the same plant by employees on a job classification designated as a foundry job for such plant. 76 105 Appendix C APPENDIX C For the sole purpose of Article III, Section 7 of the Plan, only those job classifications specifically listed herein, which are set forth in the Local Wage Agreement in effect as of October 1, 1979 at Delco Moraine Division, Dayton, Ohio, may be designated asbestos jobs. Such designation as an asbestos job will apply only to these classifications at the above-specified plant location under the conditions specifically set forth herein. No other job classifications shall be designated asbestos jobs. DELCO MORAINE DIVISION, DAYTON, OHIO The following job classifications involved in the blending and processing of raw asbestos are designated asbestos jobs for employees so classified who are assigned to Departments 73M, 515, 523, and 530. Experimental Lining Extruding Machine Operator Janitors Job Setter Lining-Grinder Machine Cleaners Preform of Disc Brake Linings Production Heat Treat Linings Protective Coating Operator Sensor Riveters Stock Handler Weigh and Mix Materials 77 106 Standards STANDARDS FOR APPLICATION OF PROVISIONS REGARDING RETIREMENT UNDER MUTUALLY SATISFACTORY CONDITIONS GENERAL MOTORS HOURLY-RATE EMPLOYEES PENSION PLAN Article II, Section 2(b) of the General Motors Hourly-Rate Employees Pension Plan provides that an employee may be retired early under mutually satisfactory conditions providing such employee is otherwise eligible. The following standards have been adopted by the Corporation as a guide in the application of this provision. STANDARDS A. An employee who is unable to work efficiently by reason of permanent disability: The retirement must be in the best interest of the Corporation. It is also intended to benefit employees who are unable to work efficiently by reason of permanent disability. It contemplates that the efficiency of operation will be improved by reason of the retirement which may be the case in any of the following situations: (1) The employee is no longer physically or mentally capable of performing such employee's work in an efficient and satisfactory manner. (2) The employee, though still capable of performing such employee's work satisfactorily, is prevented by chronic physical illness or physical disability (less than total) from working regularly to the extent that efficiency of operation is interfered with. (3) The employee's condition, based on medical evidence satisfactory to the Corporation, is such that, 78 107 Standards although able to perform the duties of such employee's job efficiently and satisfactorily, such employee would thereby be jeopardizing personal health or that of fellow employees. (4) The employee is on disability leave or is laid off because such employee is unable to do the work offered by the Corporation efficiently and satisfactorily although able to perform efficiently and satisfactorily other work in the plant to which the employee would have been entitled if such employee had sufficient seniority, and the employee's condition, based on medical evidence satisfactory to the Corporation, is expected to be continuous until normal retirement age. B. An employee who is laid off: Retirement under mutually satisfactory conditions will be available to an employee who is laid off (i) as a result of a plant closing or discontinuance of operations, or (ii) whose layoff appears to be permanent, and in either case has not been offered suitable work by the Corporation in the same labor market area. 79 108 Statement STATEMENT OF INTENT Notwithstanding the provisions of Exhibit A, Section 3(c) of The General Motors Hourly-Rate Employees Pension Plan; Exhibit D, Articles V and VI of the Supplemental Unemployment Benefit Plan, and the Items Agreed to by GM-UAW SUB Board of Administration; and Exhibit E, Section 6(a) of the Guaranteed Income Stream Benefit Program, which deal with local union representatives for each of these benefit plan areas, the Corporation and the Union agree as follows: 1. APPOINTMENT OF BENEFIT REPRESENTATIVES (a) Local union benefit representative(s) and alternate(s) shall be appointed or removed by the GM Department of the International Union. Management benefit representative(s) shall be appointed or removed by management. (b) Temporary replacement appointments may be made by the local union President for a minimum of one week and a maximum of four weeks. Replacement appointments for any absence in excess of four weeks also shall be made by the GM Department of the International Union. Replacement appointments in situations when the benefit representative(s) and alternate(s) are both absent but for less than one week and are on a leave of absence pursuant to the provisions of Paragraph 109 of the GM-UAW National Agreement may be made by the local union President. Any problems that may arise under this procedure may be discussed by the Corporation with the GM Department of the International Union. (c) A local union benefit representative shall be an employee of the Corporation having at least one year of seniority, and working at the plant where, and at the time when, such employee is to serve as such 80 109 Statement representative or alternate. No such representative or alternate shall function until written notice has been given by the GM Department of the International Union to the Corporation. In the case of temporary appointments, the notice should be given to local Management with additional copies forwarded to the GM Department of the International Union and the Corporation. 2. NUMBER OF LOCAL UNION BENEFIT REPRESENTATIVES (a) In plants having a total of less than 600 employees, there may be one local union benefit representative and one alternate. (b) In plants having a total of 600 but less than 1,200 employees, there may be two local union benefit representatives and two alternates. (c) In plants having a total of 1,200 but less than 2,000 employees, there may be three local union benefit representatives and three alternates. (d) In plants having a total of 2,000 but less than 5,000 employees, there may be four local union benefit representatives and three alternates. If such plants have a total of 1,400 or more employees on the second and third shifts combined, there may be five local union benefit representatives and two alternates. (e) In plants having a total of 5,000 but less than 8,000 employees, there may be five local union benefit representatives and two alternates. (f) In plants having a total of 8,000 but less than 10,000 employees, there may be six local union benefit representatives and two alternates. (g) In plants having a total of 10,000 or more employees, there may be seven local union benefit representatives and two alternates. 81 110 Statement The number of employees as used herein shall include active employees, employees on sick leave of absence, and employees on temporary layoff. 3. Of the total number of local union benefit representatives and alternates otherwise available, one or more representatives and alternates may be assigned to the second shift or third shift so long as the total number of representatives and alternates set forth in Paragraph 2. above is not exceeded. 4. When plant population changes occur which would increase or decrease the number of local benefit plan representatives, such population changes must be in effect for a period of six consecutive months before such adjustment is made in the number of representatives, unless such population change results from the discontinuance or addition of a shift or the opening or closing of a plant. In the event of a cessation of operations, the Corporation, at the request of the UAW General Motors Department of the International Union, will provide for the continuance of Benefit Representation. Other situations involving a sudden significant change in the number of employees at a location may be discussed by the Corporation and the GM Department of the International Union. 5. Benefit Plan districts will be established by local mutual agreement. Only one local union benefit representative will function in a benefit district and will handle specified benefit plan problems raised by employees within that district pertaining to the Pension Plan, Life and Disability Benefits Program, Health Care Program, Supplemental Unemployment Benefit Plan, and Guaranteed Income Stream Benefit Program agreements. An alternate will be permitted to function in the absence of a local benefit plan representative on the benefit plan representative's shift. 6. Any local union benefit representative may function as the member of the local Pension 82 111 Statement Committee, as the member of the local Supplemental Unemployment Benefit Committee, as a member of the Guaranteed Income Stream Benefit Committee or handle benefit problems under the Life and Disability Benefits Program and the Health Care Program with respect to employees in such representative's Benefit Plan district. An alternate may function in the absence of a local union benefit representative. 7. The time available to a local union benefit representative and alternate with respect to a Benefit Plan district may not exceed eight (8) regular working hours of available time in a day. (a) On a local union benefit representative's regular shift and without loss of pay, a local union benefit representative(s) may accompany the management benefit representative for a mutually agreeable joint off-site visit to a local hospital, an impartial medical opinion clinic or a health maintenance organization, or other similar type joint ventures, with respect to benefit plan matters. (b) A local union benefit representative attending a scheduled Management-Union Benefit Plan meeting on a shift other than the representative's regular shift will be paid for time spent in such meeting. (c) One local union benefit representative attending the local union retiree chapter meeting will be paid for time spent in such meeting. (d) The time spent in such local union retiree chapter meetings, off-site visits or Management-Union Benefit Plan meetings will not result in additional hours which exceed regularly scheduled shift hours, overtime premiums or an increase in representation time being furnished as a result of the representative(s) not working a full shift on the representative's regular shift. 83 112 Statement 8. The local union benefit representative shall be retained on the shift to which the representative was assigned when appointed as such representative regardless of seniority, provided there is a job that is operating on the representative's assigned shift which the representative is able to perform. 9. The Benefit Plans - Health and Safety office may be used by local union benefit representatives during their regular working hours: (a) To confer with retirees, beneficiaries, and surviving spouses who ask to see a local union benefit representative with respect to legitimate benefit problems under the Pension Plan, Life and Disability Benefits Program and Health Care Program Agreements. (b) If the matter cannot be handled appropriately in or near the employee's work area, to confer with employees who, during their regular working hours, ask to see a local union benefit representative with respect to legitimate benefit problems under the Pension, Life and Disability Benefits, Health Care, SUB, and GIS Agreements. (c) To confer with employees who are absent from, or not at work on, their regular shift and who ask to see a local union benefit representative with respect to legitimate benefit problems under the Pension, Life and Disability Benefits, Health Care, SUB, and GIS Agreements. (d) To write position statements and to complete necessary forms with respect to a case being appealed to the Pension, SUB, or GIS Boards by an employee in the local union benefit representative's Benefit Plan district, and to write appeals with respect to denied life, health care, and disability claims involving employees within the representative's Benefit Plan district. 84 113 Statement (e) To file material with respect to the Pension, Life and Disability Benefits, Health Care, SUB and GIS Agreements. (f) To make telephone calls with respect to legitimate benefit problems raised by employees under the Pension, Life and Disability Benefits, Health Care, SUB, and GIS Agreements. 85 114 [INTENTIONALLY LEFT BLANK] 86 115 LETTER AGREEMENTS 87 116 [INTENTIONALLY LEFT BLANK] 88 117 Workers Compensation GENERAL MOTORS CORPORATION October 24, 1993 International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW 8000 East Jefferson Avenue Detroit, Michigan 48214 Attention: Mr. Stephen P. Yokich Vice President and Director General Motors Department Dear Mr. Yokich: This letter of agreement constitutes an amendment to the 1993 GM-UAW Pension Plan and shall be construed and applied as if it were therein incorporated. Pursuant to Subsection 354(14) of the Michigan Workers Compensation Act, as amended, until termination or earlier amendment of the 1993 Collective Bargaining Agreement, workers compensation for employees shall not be reduced by disability retirement benefits payable under the Hourly-Rate Employees Pension Plan. Very truly yours, GENERAL MOTORS CORPORATION Gerald A. Knechtel Vice President Accepted and Approved: INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW By: Stephen P. Yokich 89 118 Lump-Sum Payment GENERAL MOTORS CORPORATION October 24, 1993 International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW 8000 East Jefferson Avenue Detroit, Michigan 48214 Attention: Mr. Stephen P. Yokich Vice President and Director General Motors Department Dear Mr. Yokich: During these negotiations the parties agreed upon certain lump-sum payments to be made to eligible retirees and surviving spouses. Lump-sum payments would be made, on the basis described below, by Corporation check or draft paid directly to retired employees and surviving spouses. 1. The following persons will be eligible for lump-sum payments: (a) employees who retired prior to October 1, 1993 under the terms of Article II, Sections 1, 2 or 3 of the Plan and who are receiving benefits from the Plan as of the first of the month for which a lump-sum payment would be made. (b) eligible surviving spouses of employees who retired under the terms of Article II, Sections 1, 2 or 3 of the Plan prior to October 1, 1993, or surviving spouses eligible for a benefit prior to September 14, 1993 pursuant to Article II, Section 5(g) of the Plan (excluding surviving spouses of former employees who broke seniority and who are eligible for a deferred pension), or surviving spouses eligible for a benefit 90 119 Lump-Sum Payment under Article II, Section 8(d) and who are eligible for a pension benefit from the Plan as of the first of the month for which a lump-sum payment would be made. 2. Amount of Benefit: (a) a maximum payment of $570 will be made to retired employees with thirty or more years of credited service. The payment to pensioners with less than thirty years of credited service will be $19 per year of credited service (with a proportional amount for fractional years) or a minimum payment of $190. (b) eligible surviving spouses will receive 60% of the amount that would have been payable to the retired employee under (a) above. 3. Dates of Payment: December 1994 and December 1995. Please indicate your concurrence in the proposed lump-sum payments arrangement and other provisions of this letter. Very truly yours, GENERAL MOTORS CORPORATION Gerald A. Knechtel Vice President Accepted and Approved: INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW By: Stephen P. Yokich 91 120 Misc. (Benefits Training and Education) GENERAL MOTORS CORPORATION October 24, 1993 International Union, United Automobile Aerospace and Agricultural Implement Workers of America, UAW 8000 East Jefferson Avenue Detroit, MI 48214 Attn: Mr. Stephen P. Yokich Vice President and Director General Motors Department Dear Mr. Yokich: During these negotiations, the parties renewed their commitment to provide on-going training programs for Company and Union Benefit Representatives so as to improve the quality of service provided to hourly employees. The parties also recognized the importance of communications programs aimed at educating employees about their benefits. It was agreed that such training and education programs will be developed jointly and the cost of developing and implementing such programs properly will be paid from the National Joint Skill Development and Training Fund as approved by the Executive Board for Joint Activities. These include, but are not limited to, the following: o The annual joint GM-UAW Benefits Training Conference. o Continuing education program for Union Benefit Representatives provided by the parties. Such program is expected to be implemented beginning in 1994 or as soon thereafter as practicable. o Conduct periodic on-site plant surveys and audits to evaluate training and education needs to improve employee service. 92 121 Misc. (Benefits Training and Education) o Ad hoc training meetings on legal developments or other special needs. Included also are any travel, lodging and living expenses incurred by Company and Union representatives in relation to the above. In addition, the Fund will pay for lost time (eight hours per day base rate plus COLA) of Union Benefit Representatives attending such programs away from their locations. The Company will pay for the time (eight hours per day base rate plus COLA) of alternate Union Benefit Representatives who replace those attending such programs. Very truly yours, GENERAL MOTORS CORPORATION Gerald A. Knechtel Vice President Accepted and Approved: INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW By: Stephen P. Yokich 93 122 Misc. (Improving Benefits Service Through Technology) GENERAL MOTORS CORPORATION October 24, 1993 International Union, United Automobile Aerospace and Agricultural Implement Workers of America, UAW 8000 East Jefferson Avenue Detroit, MI 48214 Attn: Mr. Stephen P. Yokich Vice President and Director General Motors Department Dear Mr. Yokich: During these negotiations, the parties recognized the need to move ahead with the development of technological applications to improve the quality of service provided to hourly employees. 1. The parties recognize the need to provide the necessary tools to Local Union Benefit Representatives so that they may improve the service they are providing to hourly employees. Local Union Benefit Representatives require basic information that can be accessed quickly in order to confidently and accurately answer many of the questions they receive. In addition, the removal of benefit administrators from the plants, has removed a traditional source of specific benefit information regarding their members which previously had been available to the Local Union Benefit Representatives. The information required, as identified by the Union, currently resides in several data systems which would have to be adapted for use by the Local Union Benefit Representatives. It would be necessary to incorporate systems modifications to assure security and to limit access to information for UAW hourly employees at their particular location. 2. The GM Department of the International UAW and the GM Employee Benefits activity jointly will develop a proposal covering the hardware and software requirements associated with this effort. Upon approval by the Executive Board of 94 123 Misc. (Improving Benefits Service through Technology) Joint Activities, the cost of development, installation and training, will be charged to the National Joint Skill Development and Training Fund. It is contemplated the required system modifications will be implemented during 1994 or as soon as practicable. 3. The parties recognize the opportunity for a significant improvement in service to hourly employees contemplating retirement. Therefore, the parties agreed to investigate enhancing the current automated pension estimating application for hourly employees. The cost of these enhancements will be considered as costs of administration chargeable to the Pension Plan. 4. The parties also agreed to explore the implementation of a telephone based annual open enrollment in health care with emphasis on a paperless system. 5. The parties further agreed to continue to provide hourly employees with the use of a Voice Response System for inquiry and transactions in the Personal Savings Plan. In conclusion, during the term of the new Agreement, the GM Employee Benefits activity and the GM Department of the International UAW pledge to carefully consider every opportunity to improve the quality and efficiency in benefits delivery. Very truly yours, GENERAL MOTORS CORPORATION Gerald A. Knechtel Vice President Accepted and Approved: INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW By: Stephen P. Yokich 95 EX-10.(B) 3 EXHIBIT 10(B) 1 EXHIBIT 10(b) GENERAL MOTORS CORPORATION GENERAL MOTORS RETIREMENT PROGRAM FOR SALARIED EMPLOYES (AS AMENDED EFFECTIVE OCTOBER 1, 1990 WITH MODIFICATIONS THROUGH APRIL 1, 1991) 2 TABLE OF CONTENTS
PAGE NO. Index to Program (ii) Eligibility for Retirement 2 Part A -- Non-Contributory Benefits 5 Article I - Benefit Amounts 5 Article II - Credited Service (Applicable to Benefits Under Part A and Supplementary Benefits Under Part B) 41 Article III - Retention of Deferred Retirement Benefit if Separated 56 Part B -- Contributory Benefits 59 Article I - Provisions Relating to Primary Benefits and Supplementary Benefits 59 Article II - Provisions Relating Specifically to Primary Benefits 77 Article III - Provisions Relating Specifically to Supplementary Benefits 83 General Provisions 85 Appendix A - Designated Foundry Jobs 147 Appendix B - Designated Asbestos Jobs 151 Appendix C - Benefit Rates and Formula for GM Salaried Employes in Puerto Rico 152
(i) 3 INDEX TO GENERAL MOTORS RETIREMENT PROGRAM FOR SALARIED EMPLOYES
PAGE NO. Eligibility for Retirement 2-4 PART A -- NON-CONTRIBUTORY BENEFITS Basic Benefit, Applicable to: Benefits Commencing Prior to October 1, 1990 33-40 Deferred Retirement 56-58 Early Retirement 7-10 Normal Retirement 5, 6 Total and Permanent Disability Retirement 10 Basic Benefit Amounts 5 Benefit Class Codes 6 Credited Service: Asbestos Service 55, 151 Compensable Disability Leave 51 Duplication 51 ERISA Service 52-55 Flexible Service 46, 86 Foreign Service 50, 51 Foundry Service 52, 147-150 General 41, 42 Hourly Service 50 Layoff 44, 45 Length of Service 46 Loss of 47, 48 Military Leave 43 Noncompensable Disability Leave 44 Prior to October 1, 1950 42 Reinstatement 48, 49 Subsequent to October 1, 1950 43-46 Temporary Employment 51, 86 Deferred Retirement: Benefits, Determination of 56-57 Effective Date 58 Eligibility 56 Minimum Vesting Standards -- ERISA 52-55 Pre-Retirement Survivor Coverage -- REA: Benefits, Determination of 20-22 Duration 20 Effective Date 21 Eligibility 20, 22 Spousal Consent 21
(ii) 4 INDEX - CONT'D.
PAGE NO. Qualified Domestic Relations Order 6, 12, 14, 19, 21, 24, 58, 100 Reemployment 48, 65, 94, 95 Retirement, Automatic for Bona Fide Executive: Benefits, Determination of 5, 10 Benefits, Payment of 93-98 Eligibility 2 Retirement, Early: Benefits, Determination of 7-10 Benefits, Payment of 93-98 Benefits, Redetermination of Basic 8 Discharge For Cause 10, 26 Eligibility 3 Reductions for Age 7-9 Retirement, Normal: Benefits, Determination of 5 Benefits, Payment of 93-98 Eligibility 3 Retirement, Total and Permanent Disability: Benefits, Determination of 10, 11 Benefits, Payment of 93-98 Disability, Determination of 11 Eligibility 4 Recovery From 12, 48 Special Benefit 31, 32 Supplement, Age-Service 40 Supplement, Early Retirement: Benefits, Determination of 26-30 Earnings Limitation 29, 30 Eligibility 26 Limitation of 70% of Final Pay 30 Payment of 93-98 Penalty Against 29 Recovery if Overpaid 30 Redetermined if Commenced Prior to October 1, 1990 37
(iii) 5 INDEX - CONT'D.
PAGE NO. Supplement, Interim: Benefits, Determination of 28-33 Earnings Limitation 29, 30 Eligibility 27, 28 Employes Retired Prior to October 1, 1990 38 Limitation of 70% of Final Pay 30 Payment of 93-98 Penalty Against 29 Recovery if Overpaid 30 Supplement, Lifetime 40 Surviving Spouse Benefits (Post-Retirement): After Employe's Retirement 12-19 Automatic Election 12, 13 Cancellation Because of Death or Divorce 12, 13 Effective Date 13 Election to Receive Full Amount of Future Increases 39 Joint and Survivor for Disability -- ERISA 16-19 Joint and Survivor Option 23-26 Reduction of Basic Benefit 14 Special Survivor Option 38, 39 Spousal Consent 17 Upon Marriage or Remarriage 39, 40 Surviving Spouse Benefits (Pre-Retirement): Before Employe's Retirement 15, 20-22 Cancellation Because of Divorce 21 Effective Date 14, 21 Reduction of Basic Benefit 14, 22 Spousal Consent 21 Temporary Benefits Applicable to: Benefits Commencing Prior to October 1, 1990 35, 36 Benefits Commencing On or After October 1, 1990 10, 11 Treatment of Certain Employes Under Limited Early Retirement and Prior Program Provisions 112-114 Vesting (See "Deferred Retirement") Widow's Benefits (See "Surviving Spouse Benefits")
(iv) 6 INDEX - CONT'D. PART B -- CONTRIBUTORY BENEFITS
PAGE NO. Contributions: Amount of Employe Contributions 66 Annuities 103, 105 Corporation Contributions 101, 102 During Temporary Absence 79, 80 Employes in Puerto Rico 109 Interest Credits 81 Limitation on Years of Employe Contributions 66 Retirement Under Hourly-Rate Pension Plan 82 Separation From Service Prior to Age 60 77, 78 While on Layoff 79, 80 Withdrawal of Contributions 66, 67 Credited Service 59, 60 Death Benefits: Death of Employe At or After Retirement 73, 74 Death of Employe Prior to Retirement 73 Deferred Retirement: Eligibility 56, 83 If Reemployed 49 Minimum Vesting Standards -- ERISA 52-55 Retention of Primary Benefits if Separated 77 Retention of Supplementary Benefits if Separated 83 Optional Forms of Retirement Benefits: Joint and Survivor Option 68 Surviving Spouse Coverage 68-72 Primary Benefits: Benefits Commencing Prior to October 1, 1990 74-76 Benefits, Determination of 61 Benefits, Payment of 93-98 Continuous Service 90, 91 Contributions 66, 67 Eligibility 59 Retirement Under Electronic Data Systems (EDS) Pension Plan 83, 126-129 Retirement Under Hourly-Rate Pension Plan 82 Separation From Service Prior to Age 60 77, 78 Qualified Domestic Relations Order 71, 73 74, 100
(v) 7 INDEX - CONT'D.
PAGE NO. Retirement, Automatic for Bona Fide Executive: Benefits, Determination of 61 Benefits, Payment of 93-98 Eligibility 2 Retirement, Early: Benefits, Determination of 62-64 Benefits, Payment of 93-98 Eligibility 3 Reductions for Age 62-64 Retirement, Normal: Benefits, Determination of 61 Benefits, Payment of 93-98 Eligibility 3 Retirement, Total and Permanent Disability: Benefits, Determination of 64 Benefits, Payment of 93-98 Disability, Determination of 11 Eligibility 4 Supplementary Benefits: Benefits Commencing Prior to October 1, 1990 74-76 Benefits, Determination of 62 Benefits, Payment of 93-98 Eligibility 59-61 Retirement Under Electronic Data Systems (EDS) Pension Plan 84, 126-129 Retirement Under Hourly-Rate Pension Plan 84 Surviving Spouse Benefits: Before Employe's Retirement 69-72 Benefits, Determination of 69 Cancellation Because of Death or Divorce 70, 71 Duration of Option 71, 72 Effective Date 71 General Provisions 70 Optional Forms of Benefits 67, 68 Treatment of Certain Employes Under Limited Early Retirement and Prior Program Provisions 112-114 Vesting (See "Deferred Retirement") Widow's Benefits (See "Surviving Spouse Benefits")
(vi) 8 INDEX - CONT'D. GENERAL PROVISIONS (APPLICABLE TO PART A AND PART B)
PAGE NO. AC Rochester Products Division, Treatment of Certain Employes of 123, 124 Actuarial Value, Definition of 92 Amendment, Provision for 104 Annual Earnings Base 111 Annual Limitation (Internal Revenue Code 415) 134-139 Appeal Procedure for Denied Claims 133 Assignments and Loans 99, 100 Average Monthly Base Salary, Definition of 88, 89 Base Salary, Definition of 88 Commission Employes 85, 110, 111 Continuous Service, Definition of 90, 91 Corporation Contributions 101, 102 Definitions, Program 85-92 Delco Electronics Division, Treatment of Certain Employes of 117 Detroit Diesel Allison Division, Treatment of Certain Employes of 122, 123 Electronic Data Systems (EDS), Treatment of Certain Employes of 126-130 Employes, Definition of 85-87 Federal Income Tax Withholding 100 Federal Social Security Benefit, Definition of 91, 92 Foreign Service, U.S. Employes In 85 Funding Requirements -- ERISA 102 Gender, Definition of 92 General Motors Institute, Treatment of Certain Employes of 116, 117 GM Balance Engineering Operation, Treatment of Certain Employes of 118, 119 GM Building Division/New York, Treatment of Certain Employes of 115, 116
(vii) 9 INDEX - CONT'D. PAGE NO. GM Fanuc Robotics Corporation, Treatment of Certain Employes of 118 GM Industrial Cleaning Technology Center, Treatment of Certain Employes of 120 Government Employment, Treatment of Employes Returning From 131, 132 Health Care Coverages 100 Hughes Aircraft, Treatment of Certain Employes of 130 Hydra-Matic Division (Muncie Plant), Treatment of Certain Employes of 125 Income Protection Plan 96 Life Insurance 100 Marketing Educational Services Activity, Treatment of Certain Employes of 121 Named Fiduciary -- ERISA 133 Normal Retirement Age, Definition of 92 Overpayments, Repayment of 100 Plan Administrator 133 President's Executive Interchange Program 131 Program, Termination of 104-107 Retirement Payments: Conversion of Deferred Vested Benefits to Lump Sum 97, 98 Employment Beyond Age 70-1/2 96, 97 Reemployment by Corporation 94, 95 To Persons Other Than Retirees 96, 99 Saginaw Division's Actuator Products Group, Treatment of Certain Employes of 119 Salaried Employes Transferred to Hourly Rolls 132 Separate Plans for Employes Who Are Employed Outside U.S 75 State Income Tax Withholding 100 Terex Division, Treatment of Certain Employes of 115 Top-Heavy Plan (Internal Revenue Code 416) 139-145 Truck & Bus Group, Treatment of Certain Employes of 120, 121 Workers Compensation, Deductions for Receipt of 99
(viii) 10 GENERAL MOTORS RETIREMENT PROGRAM FOR SALARIED EMPLOYES The General Motors Retirement Program for Salaried Employes provides non-contributory benefits, as described in Part A, which are applicable to all salaried employes. The Program also provides benefits, as described in Part B, which are available to employes who contribute under the Program while eligible. Provisions applicable to both Part A and Part B, including certain defined terms used throughout the Program, are included in the General Provisions which immediately follow Part B. Except as expressly provided in Sections 7, 8 and 9 of Article I of Part A, Section 7 of Article I of Part B, and Sections 2 and 7 of General Provisions, the provisions set forth in this Program are applicable only to employes who retire with benefits payable commencing on or after September 18, 1990, or who have credited service on or after October 1, 1990. Employes retired with benefits payable commencing prior to September 18, 1990 or who lost credited service prior to October 1, 1990, or eligible surviving spouses, contingent annuitants and beneficiaries of such employes, shall be entitled to the benefits, if any, under the Program as it existed immediately prior to the amendments which became effective as of September 18, 1990. Notwithstanding the paragraph immediately above, the surviving spouse of any employe who died after September 17, 1990 and prior to October 1, 1990, who is otherwise eligible for monthly benefits under this Program, shall be considered entitled to monthly benefits pursuant to Section 5 of Article I of Part A and, if applicable, Section 5 of Article I of Part B; and any such employe shall be considered eligible for credited service under Article II of Part A. 1 11 Sect. 1 ELIGIBILITY FOR RETIREMENT Any separation from service, other than by death, will be considered, for purposes of this Program, as a retirement if the separation occurs: (a) (1) at or after age 55 and prior to age 60 and the employe has 10 or more years of credited service, or (2) prior to age 55 and the employe has 30 or more years of credited service, and the employe's date of hire is prior to January 1, 1988, except that an employe to whom this subsection (a) applies who is separated in a layoff classification will not be considered a retirement until he loses credited service, (b) at age 60 or over, or (c) prior to age 65 because of total and permanent disability and the employe is eligible to receive total and permanent disability benefits under Part A. SECTION 1. AUTOMATIC RETIREMENT FOR BONA FIDE EXECUTIVE AT AGE 65 An employe shall be retired automatically on the first day of the month coinciding with or next following the employe's attaining age 65 if that employe is, for the 2-year period immediately before retirement, employed in a bona fide executive or high policy-making position and whose annual retirement benefits attributable to Corporation contributions under this Program shall equal or exceed $44,000. Such employe may continue in service beyond automatic retirement age only upon invitation of the Corporation. This invitation requires action by the Committee of the Board of Directors having jurisdiction over the activity by which the employe is employed, or by the Board of Directors if the employe is a member of the Board of Directors. Such invitation to continue work shall not be for a period of more than one year at a time. 2 12 Sect. 2 SECTION 2. NORMAL RETIREMENT AT OR AFTER AGE 65 An employe may retire at or after age 65 with one or more years of credited service. SECTION 3. RETIREMENT BETWEEN AGES 60 AND 65 An employe may retire voluntarily at or after age 60 and prior to age 65. SECTION 4. RETIREMENT PRIOR TO AGE 60 (a) An employe who has 10 or more years of credited service and who is separated from service at or after age 55 and prior to age 60 for any reason other than death or total and permanent disability, shall be entitled to retirement benefits determined under the provisions of this Program which are applicable to an employe who retires voluntarily. (b) An employe who (i) is hired prior to January 1, 1988, (ii) has 30 or more years of credited service, and (iii) is separated from service prior to age 55 for a neason other than death or total and permanent disability, shall be entitled to retirement benefits determined under the provisions of this Program which are applicable to an employee who retires voluntarily. 3 13 Sect. 5 SECTION 5. RETIREMENT PRIOR TO AGE 65 DUE TO TOTAL AND PERMANENT DISABILITY An employe who has 10 or more years of credited service may be retired prior to age 65 for total and permanent disability. An employe shall be deemed to be totally and permanently disabled only if (i) he is not engaged in regular employment or occupation for remuneration or profit, and (ii) on the basis of medical evidence satisfactory to the Corporation the employe is found to be wholly and permanently prevented from engaging in regular employment or occupation with the Corporation at the location where he last worked for remuneration or profit as a result of bodily injury or disease, either occupational or non-occupational in cause, but excluding disabilities resulting from service in the armed forces of any country unless the employe becomes totally and permanently disabled after he has accumulated at least 5 years of credited service following his separation from service in the armed forces. SECTION 6. RETIREMENT UNDER SECTION 11 OF THE GENERAL PROVISIONS An employe who has 10 or more years of credited service may be retired prior to age 62 under provisions set forth in Section 11 of the General Provisions of this Program. SECTION 7. EMPLOYES NOT IN ACTIVE SERVICE The absence of an employe (or former employe) from active service at the time such employe would be (or would have been) eligible to retire under the Program shall not preclude such employe's retirement without return to active service, provided that there has been no loss of credited service. 4 14 A, Art. I PART A -- NON-CONTRIBUTORY BENEFITS ARTICLE I BENEFIT AMOUNTS SECTION 1. RETIREMENT AT OR AFTER AGE 65 (a) Any employe who shall have attained the age of 65, shall have completed one or more years of credited service as provided in Article II of this Part A, and shall cease active service shall be entitled to receive a retirement benefit under this Part A. (b) The monthly benefit payable to an employe retired pursuant to the provisions of Section 1(a) of this Article I with benefits payable commencing on or after October 1, 1990 shall be a basic benefit for each year of credited service that the employe had at the first of the month coinciding with or next following the employe's retirement, determined by his Benefit Class Code in accordance with (c) below and based on the month for which payment is being made as set forth in the table immediately following:
Basic Benefit Rate Per Year of Credited Service For Months Commencing Retirement With Benefits Benefit 10-1-90 10-1-91 10-1-92 Payable Class through through and Commencing Code 9-1-91 9-1-92 After October 1, 1990 A 28.35 29.50 30.70 and B 28.60 29.75 30.95 After C 28.85 30.00 31.20 D 29.10 30.25 31.45
5 15 A, Art. I, 1(c) (c) As set forth below, a Benefit Class Code is established for the purpose of this Article I for each salaried position on the basis of the following salaried position levels:
Benefit Class Salaried Position Level Code 1 and 2 A 3 B 4 C 5 and Above D
The Benefit Class Code applicable to an employe is the Benefit Class Code for the salaried position level held by the employe for the greatest number of calendar days during the 24 consecutive months immediately preceding his last day worked. In the event an employe is transferred to a lower salaried position level, which results in a lower Benefit Class Code, such employe's vested retirement benefit, if any, shall not be less than the amount of his accrued retirement benefit on the date of such transfer to such lower salaried position level. (d) The amount of any monthly retirement benefit otherwise payable to the employe at retirement, or earlier commencement, will be reduced by the value of any past and future benefits paid or payable to any alternate payee(s) under a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p). The actuarial value will be used to determine any amount to be paid to any such payee(s), if applicable, and the remaining benefit entitlement of the employe. 6 16 A, Art. I, 2 SECTION 2. EARLY RETIREMENT (a) (1) An employe who retires voluntarily after he has attained age 55 but not age 65 and who has 10 or more years of credited service shall be entitled to receive a retirement benefit under this Part A. (2) An employe who (i) was hired prior to January 1, 1988, (ii) retires voluntarily before he has attained age 55, and (iii) has 30 or more years of credited service shall be entitled to receive a retirement benefit under this Part A. (b) (1) The monthly basic benefit payable to an employe who retires voluntarily with benefits payable commencing on or after October 1, 1990 shall be the basic benefit set forth in Section 1(b) of this Article I but adjusted as set forth in (2) below. (2) (i) For an employe retired (1) pursuant to Section 2(a)(1) above after he has attained age 60, or (2) after he has attained age 55 but not age 60 and whose combined years of age and years of credited service (to the nearest 1/12th in each case) at retirement total 85 or more, or (3) pursuant to Section 2(a)(2) above and, in the case of either (2) or (3) of this subparagraph, the employe was hired prior to January 1, 1988, such benefit shall commence on the first day of the month coinciding with or next following his attaining age 62 (or, if later, the first day of the month coinciding with or next following his first day of absence because of retirement) or, in lieu thereof, he may elect to receive the benefit commencing on the first day of any month coinciding with or following his first day of absence because of retirement and prior to age 62 in an amount 7 17 A, Art. I, 2(b)(2)(i) equal to the benefit payable upon attainment of age 62, multiplied by a percentage as set forth in the following table:
Age When Benefit Commences Percentage* 42 21.0% 43 22.6 44 24.3 45 26.1 46 28.2 47 30.4 48 32.8 49 35.4 50 38.3 51 41.5 52 45.0 53 48.9 54 53.2 55 57.9 56 63.5 57 69.4 58 75.2 59 80.8 60 86.7 61 93.3 62 or Over 100.0
* Prorated for intermediate ages computed on the basis of the number of complete calendar months by which the employe is under the age he will attain at his next birthday. If an employe hired prior to January 1, 1988 (i) with 30 or more years of credited service retires voluntarily, or (ii) whose combined years of age and years of credited service (to the nearest 1/12th in each case) at retirement total 85 or more retires voluntarily with benefits payable commencing on or after October 1, 1990, the monthly basic benefits otherwise payable to him after age 62 and one month shall be redetermined without reduction for commencement prior to age 62. 8 18 A, Art. I, 2(b)(2)(ii) (ii) For an employe retired pursuant to Section 2(a)(1) above after he has attained age 55 but not age 60, and whose combined years of age and years of credited service at retirement total less than 85, such benefit shall commence on the first day of the month coinciding with or next following his attaining age 65, or, in lieu thereof, he may elect to receive the benefit commencing on the first day of any month coinciding with or following his first day of absence because of retirement, in which case the benefit, if elected to commence prior to age 65, shall be reduced, as follows:
Age When Benefit Commences Percentage* 55 46.0% 56 49.6 57 53.2 58 56.8 59 60.4 60 64.0 61 71.2 62 78.4 63 85.6 64 92.8 65 100.0
*Prorated for intermediate ages computed on the basis of the number of complete calendar months by which the employe is under the age he will attain at his next birthday. (iii) The basic benefit payable in any month will not be reduced below an amount which results in the early retirement supplement paid to a participant in such month, under Section 7(a)(1) of this Article I, exceeding the old age insurance benefits, unreduced on account of age, payable under Title II of the Social Security Act, as amended. 9 19 A, Art. I, 2(c) (c) An employe discharged for cause after such employe is eligible to retire voluntarily pursuant to Section 2(a) of this Article I shall be entitled to the benefits provided under Sections 2(b)(1) and 2(b)(2) of this Article I. SECTION 3. AUTOMATIC RETIREMENT FOR BONA FIDE EXECUTIVE AT AGE 65 A bona fide executive employe retired on or after his automatic retirement date and who has one or more years of credited service shall be entitled to the benefits provided under Section 1 of this Article I. SECTION 4. TOTAL AND PERMANENT DISABILITY RETIREMENT (a) An employe who is totally and permanently disabled prior to attaining age 65, and has 10 or more years of credited service, and who retires on or after October 1, 1990, shall be eligible for a monthly disability retirement benefit as hereinafter provided: (i) A monthly basic benefit for each year of credited service as set forth in Section 1(b) of this Article I and determined by his Benefit Class Code as set forth in Section 1 (c) of this Article I, and (ii) A temporary benefit for each year of credited service, up to 30, as set forth in the table immediately following: 10 20 A, Art. I, 4(a)(ii)
Monthly Temporary Benefit Amount Retirement With Per Year of Benefits Payable Credited Commencing Service Maximum $ $ October 1, 1990 through September 1, 1991 25.00 750.00 October 1, 1991 through September 1, 1992 27.20 816.00 October 1, 1992 and After 29.30 879.00
The monthly temporary benefit shall be payable until the earlier of (1) age 62 and one month, or (2) the age at which the employe becomes, or could have become, eligible for a Federal Social Security benefit for disability or an unreduced Federal Social Security benefit for age. At such age the temporary benefit shall cease to be payable. (iii) Such benefits shall be payable in accordance with Section 2 of the General Provisions to the disability retiree during the continuance of total and permanent disability. 11 21 A, Art. I, 4(b) (b) Any disability retiree may be required to submit to medical examination at any time during retirement prior to age 65, but not more often than semi-annually, to determine whether the retiree is eligible for continuance of the disability retirement benefit. If on the basis of such examination it is found that the retiree is no longer disabled or if the retiree engages in gainful employment, except for purposes of rehabilitation as determined by the Corporation, the retiree will be deemed recovered and his disability retirement benefit will cease. In the event the disability retiree refuses to submit to medical examination, the retirement benefit will be discontinued until the retiree is examined. (c) Notwithstanding the provisions of Section 13(a) of the General Provisions, the provisions of this Section 4 shall not be applicable to employes of any wholly-owned or substantially wholly-owned subsidiary of the Corporation acquired or formed by the Corporation on or after March 1, 1984 unless specifically approved by the General Motors Corporation Board of Directors. SECTION 5. SURVIVING SPOUSE COVERAGE (a) In lieu of the monthly basic benefit otherwise payable, an employe who retires or is retired, or who loses credited service and is eligible for a deferred retirement benefit pursuant to the provisions of Article III of this Part A, shall be deemed to have elected automatically a reduced amount of monthly basic benefit to provide that, if his designated spouse shall be living at his death after such election shall have become effective, a survivor benefit shall be payable to such spouse during the spouse's further lifetime. In the event that such spouse predeceases such employe, and a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) does not provide to the contrary, such employe may cancel the survivor benefit election only with respect to his monthly basic retirement benefit and have such benefit restored to the amount payable without such election, effective the first day of the third month following the month in which the Corporation receives evidence satisfactory to the Corporation of the spouse's death. 12 22 A, Art. I, 5(a) The automatic election provided in this subsection (a) shall become effective on the latest of (i) the commencement date of the employe's monthly basic benefit, (ii) the first day of the month coinciding with or next following the employe's attainment of age 55 (except that this item (ii) shall not apply to an employe with 30 or more years of credited service who was hired prior to January 1, 1988), or (iii) the first day of the month coinciding with or next following the date on which the employe has been married one year if he is married when the election would otherwise become effective except for the fact that such marriage has been in effect less than one year at that date; except that, in the case of a bona fide executive employe who has reached automatic retirement date but whose basic benefit has not commenced, the effective date of any such coverage shall be the later of such automatic retirement date or the date determined in (iii) of this paragraph and the basic benefit payable to such employe after the effective date shall be reduced in accordance with the coverage. An employe may prevent the automatic election provided in this subsection (a) during the month prior to the effective date by executing a specific written rejection of such election, which includes the written consent of his spouse witnessed by the program representative or a notary public, on a form approved by the Corporation and filing it with the Corporation. An employe may revoke a written rejection of this automatic election, without the consent of the spouse, at any time prior to commencement of benefits. Information regarding this coverage is included in the summary plan description, which will be provided to each employe. Within a reasonable period prior to the annuity starting date, each participant shall be provided a written explanation of: (i) the terms and conditions of the surviving spouse coverage; (ii) the participant's right to make and the effect of an election to waive the surviving spouse coverage; (iii) the rights of the participant's spouse; and (iv) the right to make and the effect of revocation of a previous selection to waive the surviving spouse coverage. 13 23 A, Art. I, 5(b) (b) The beneficiary of a survivor benefit election under subsection (a) of this Section 5 shall be only the person who is the employe's spouse at such time and who has been his spouse for at least one year immediately prior to the effective date of such election. (c) Except as provided in subsections (g) and (h) below, a survivor benefit election shall be revoked automatically upon the death of the employe or his designated spouse, or both, prior to the effective date of the election. (d) Once the election has become effective it cannot be rescinded, except as otherwise provided under subsection (a) of this Section 5, without the written consent of the Corporation, but subject to such consent, the employe's right to rescind the election is contingent on the written consent of the designated spouse. In the event the employe becomes divorced from such designated spouse, the employe may cancel such coverage without consent of the spouse unless a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) provides to the contrary. (e) For an employe who does not prevent the automatic election provided in this Section 5, the reduced amount of his monthly basic benefit shall be equal to an amount determined by multiplying the monthly basic benefit payable to the employe by 95%; except that, in the case of an employe whose monthly basic benefit is subject to redetermination at age 62 and one month, the amount of reduction in his monthly basic benefit for the survivor benefit election before he attains the age at which his monthly benefit is redetermined shall be based on the monthly benefit payable to such employe after his monthly benefit is redetermined. Such percentage shall be (i) increased by one-half of one percent (1/2%) (up to a maximum of 100%) for each 12 months in excess of five (5) years that the spouse's age exceeds the employe's age, and (ii) decreased by one-half of one percent (1/2%) for each 12 months in excess of five (5) years that the spouse's age is less than the employe's age. 14 24 A, Art. I, 5(f) (f) The survivor benefit payable to the surviving spouse of a retired employe who has the automatic election provided in this Section 5, and who dies after such election becomes effective, shall be a monthly benefit for the further lifetime of such surviving spouse equal to 60% of the reduced amount of such employe's monthly basic benefit; except that the survivor benefit payable to the surviving spouse of an employe whose monthly basic benefit is subject to redetermination at age 62 and one month shall be based on the monthly basic benefit payable to such employe after his monthly basic benefit is redetermined. (g) The death of an otherwise eligible employe who has retired under Section 4 of this Article 1, occurring on or after his attaining age 55, but before the first day of the month following the date on which he dies, shall not disqualify an otherwise eligible surviving spouse from receiving a benefit hereunder. (h) The surviving spouse of an employe (1) who dies (i) on or after attaining age 55 with 10 or more years of credited service, or (ii) at any age with 30 or more years of credited service and his date of hire is prior to January 1, 1988, but before the first day of the month coinciding with or next following the first day of absence because of retirement (or, if later, the commencement date of his monthly basic benefit in the case of an employe who defers the receipt of his monthly benefit under Section 2(b)(2) of this Article I), who had not reached his normal retirement date, and (2) who, if he had retired at the date of his death, would have been eligible for the election under subsection (a) of this Section 5, 15 25 A, Art. I, 5(h) shall be entitled to a monthly benefit during such spouse's further lifetime, terminating with the last monthly payment before such spouse's death. The monthly benefit payable to the surviving spouse shall be the amount such spouse would have been entitled to receive under subsection (f) of this Section 5, if the employe had retired on the date of his death with benefits payable under Section 1(a) or 2(a), whichever is applicable, of this Article I commencing the first of the following month and had effectively made the election under subsection (a) of this Section 5; provided, however, that for the sole purpose of this subsection (h), the benefits which would have been payable to the employe by reason of such retirement shall be determined on the basis of the table set forth in Section 2(b)(2)(i) of this Article I. The surviving spouse of an employe who had been separated from service in a layoff classification but who had not lost credited service at the date of his death shall be entitled to the benefit payable under this subsection (h), if otherwise eligible. (i) Joint and survivor coverage for disability retirements (1) In lieu of the monthly basic benefit otherwise payable, an employe who retires pursuant to the provisions of Section 4 of this Article I who is under age 55 and (i) has less than 30 years of credited service, or (ii) has 30 or more years of credited service and was hired on or after January 1, 1988 shall be deemed to have elected automatically a reduced amount of monthly basic benefit, up to and including the month in which he dies or attains age 55, whichever occurs first, and a monthly survivor's benefit, beginning on the first day of the month after the retired employe would have reached age 55 if he dies before the first day of the month after he would have reached age 55, shall be payable to his designated spouse during the further lifetime of the spouse. 16 26 A, Art. I, 5(i)(2) (2) This automatic election shall be deemed to have been made at the time the employe shall apply or shall have applied for a disability retirement benefit (with the election being effective the first day of the month for which his first benefit under the Program is payable). (3) The automatic election provided in this subsection (i) shall be applicable only with respect to a spouse to whom the employe is married on the date of such election and only if the retired employe and his spouse shall have been married throughout the one-year period ending on the date of the retired employe's death. (4) An employe may prevent the automatic election provided in this subsection (i) at the time such election would otherwise be deemed to have been made, as set forth in paragraph (2) of this subsection (i), by specific written rejection which includes the written consent of his spouse witnessed by the program representative, or a notary public, on a form approved by the Corporation. An employe may revoke a written rejection of this automatic election, without the consent of the spouse, at any time prior to commencement of benefits. (5) In any event, the election shall automatically be cancelled: (i) if the employe's disability retirement status terminates other than by death prior to the first day of the month after the retired employe attains age 55, or (ii) if the retired employe survives on a disability retirement status until the first day of the month after he attains age 55, at which time the coverage described in Section 5(a) through (h) of this Article I becomes applicable. 17 27 A, Art. I, 5(i)(6) (6) The amount of the monthly basic benefit payable to an employe deemed to have made the election provided hereunder shall be determined by reducing actuarially the amount of such benefit for the cost of the survivor benefit payable in the event of the retired employe's death before the first of the month following the attainment of age 55. The actuarial reduction shall be based on the age of the retired employe and his spouse (the age of each being determined as the age at his or her birthday nearer the date on which the benefits commence) and shall reflect the higher mortality associated with being disabled. Reduction factors at selected ages for disability survivor coverage before age 55 are set forth in the following table:
Age Difference Between Age of Disabled Employe and Spouse Employe Spouse Is: When 10 5 5 10 Benefits Years Years Same Years Years Commence Younger Younger Age Older Older -------- ------- ------- --- ----- ----- 30 8.6% 8.1% 7.5% 6.7% 5.9% 35 10.4 9.9 9.2 8.3 7.2 40 12.5 11.8 11.0 10.0 8.8 45 14.3 13.5 12.7 11.6 10.3 50 13.9 13.2 12.4 11.4 10.2 51 13.1 12.5 11.7 10.8 9.7 52 10.4 9.9 9.3 8.6 7.7 53 3.4 3.2 3.0 2.8 2.5 54 3.4 3.3 3.1 2.8 2.5
NOTE: Actuarial reduction factors for ages not shown will be calculated on the same basis as the factors shown. 18 28 A, Art. I, 5(i)(7) (7) The amount of the monthly benefit payable to the surviving spouse of a retired employe deemed to have made the election specified hereunder shall be 50% of the amount of the monthly basic benefit payable to the retired employe after the reduction provided in paragraph (6) of this subsection (i). (8) Anything in the Program to the contrary notwithstanding, if the designated spouse of a retired employe deemed to have made the election provided hereunder shall predecease such retired employe, or they are divorced by a court decree and a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) does not provide to the contrary, such retired employe shall have his monthly basic benefit restored to the amount payable without such election, effective the first day of the third month following the month in which the Corporation receives evidence satisfactory to the Corporation of the spouse's death or divorce. (9) No benefit shall be payable under this subsection (i) for any month for which benefits are payable under Section 5(a), (h), or (j) of this Article I. (10) Information regarding this coverage is included in the summary plan description, which will be provided to each employe. Within a reasonable period prior to the annuity starting date, each participant shall be provided a written explanation of: (i) the terms and conditions of the surviving spouse coverage; (ii) the participant's right to make and the effect of an election to waive the surviving spouse coverage; (iii) the rights of the participant's spouse; and (iv) the right to make and the effect of a revocation of a previous selection to waive the surviving spouse coverage. 19 29 A, Art. I, 5(j) (j) Pre-retirement survivor coverage provided under Part A of the Program to comply with the Retirement Equity Act of 1984 (1) An employe who: (i) has either 5 or more years of credited service, or 5 years of "service" as provided under Article II, Section 11, and who is credited with one or more hours of credited service or "services" accrued on or after January 1, 1989, or (ii) loses credited service on or after October 1, 1990 and who is eligible for a deferred retirement benefit under Article III, and in either case is not eligible for the regular surviving spouse coverage provided under subsection (h) of this Section 5, shall have the pre-retirement survivor coverage described herein. Such coverage shall remain in full force and effect until the date on which the employe or former employe becomes eligible for the regular surviving spouse coverage provided under subsection (h) of this Section 5, at which time the pre-retirement survivor coverage described herein shall cease to be effective. In the event the employe or former employe predeceases the designated spouse while the pre-retirement survivor coverage provided hereunder is in effect, the designated spouse shall be eligible, during the further lifetime of such spouse, for a monthly benefit commencing on the first of the month following the month in which the employe or former employe would have become eligible, except for the fact that he died, to retire at the option of the employe. 20 30 A, Art. I, 5(j)(1) The amount of any such monthly survivor benefit shall be determined by the basic benefit rate in effect for the employe on the date of death of such employe, or the date credited service was broken for a former employe. (2) The survivor coverage provided hereunder for an employe or former employe shall be effective on the date the employe or former employe attains 5 years of credited service or "service" as provided under Article II, Section 11, and provided that such employe is credited with one hour or more of credited service or "service" accrued on or after January 1, 1989. (3) The survivor coverage provided hereunder shall be effective with respect to a spouse to whom the employe or former employe is married, but only if the couple shall have been married throughout the one-year period ending on the date of the employe's or former employe's death. (4) Subsections (j)(2) and (j)(3) notwithstanding, if an employe or former employe marries or remarries, such coverage shall be in effect in favor of his spouse upon such marriage or remarriage, unless, in the case of remarriage, a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) requires such coverage to remain in effect for the former spouse. The effective date of any such coverage shall be in accordance with item (3) of this subsection (j). (5) In the event of divorce, the employe or former employe can revoke the coverage provided hereunder without spousal consent, unless a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) provides to the contrary. 21 31 A, Art. I, 5(j)(6) (6) The coverage provided hereunder shall be canceled automatically on the date when any employe or former employe becomes eligible for the regular surviving spouse coverage provided under the provisions of Article I, Section 5(h) of the Program. (7) The monthly benefit amount payable hereunder to any eligible surviving spouse shall be 50% of the monthly amount of the basic benefit as determined in Article III otherwise payable at the (i) date of death to the employe, or (ii) date credited service broke for a former employe, after any reduction provided in Article III. (8) No benefit shall be payable under this subsection (j) for any month for which benefits are payable under Article I, Section 5 or Section 6 of Part A of this Program. (9) Information regarding the coverage provided hereunder is included in the summary plan description, which will be provided to each employe covered by the Salaried Retirement Program, in accordance with The Employee Retirement Income Security Act (ERISA). (10) The pre-retirement survivor coverage provided hereunder will apply to eligible employes and former employes separated from service: (a) whose last day worked for the Corporation was on or after October 1, 1976, and (b) who have entitlement to but have not commenced receipt of deferred retirement benefits, and (c) who are alive as of August 23, 1984. 22 32 A, Art. I, 6 SECTION 6. JOINT AND SURVIVOR OPTION (a) In lieu of the monthly basic benefit otherwise payable, an employe who retires or is retired or who loses credited service and is eligible for a deferred retirement benefit pursuant to the provisions of Article III of this Part A, may elect to receive during his lifetime a reduced amount of monthly basic benefit to provide that, if the contingent annuitant (who may be any person designated by the employe) shall be living at his death after such election shall have become effective, a survivor benefit shall be payable to such contingent annuitant during the further lifetime of such contingent annuitant; provided that the employe completes the election on a form approved by the Corporation and files it with the Corporation prior to the earlier of: (1) the time he makes application for a benefit to commence at or after age 55, or at any age if the employe's date of hire is prior to January 1, 1988 and he retires with 30 or more years of credited service, in which case the election shall become effective on the commencement date of the employe's monthly basic benefit; or (2) the month prior to that in which the employe attains age 55 if he attains age 55 while eligible for and receiving a retirement benefit, in which case the election shall become effective upon the employe's attainment of age 55. If married, and the designated contingent annuitant is not the spouse, the written consent of the spouse on whose behalf the option otherwise would be in effect, witnessed by the program representative, or a notary public, on a form approved for this purpose by the Corporation and filed with the Corporation, will be required. The written consent of the spouse is limited to a benefit for the designated alternate beneficiary only. 23 33 A, Art. I, 6(b) (b) The death of an otherwise eligible employe who has retired under Section 4 of this Article I, occurring on or after his attaining age 55, but before the first day of the month following the date on which he dies, shall not disqualify an otherwise eligible surviving spouse from receiving a benefit hereunder. (c) Except as provided in (b) above, the option shall be revoked automatically upon the death of the employe or his designated contingent annuitant, or both, prior to the effective date of the election. (d) Once the option has become effective it cannot be rescinded or changed without the consent of the Corporation, but subject to such consent, the employe's right is reserved to rescind the election, except that the written consent of the designated contingent annuitant is required only if such annuitant is the employe's spouse. In the event the employe becomes divorced from such designated spouse, the employe may cancel such option without consent of the spouse, unless a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p) provides to the contrary. (e) The amount of monthly benefit payable to such contingent annuitant if such contingent annuitant is living at the death of the employe shall equal any designated percentage, up to a maximum of 100%, of the employe's reduced monthly basic benefit, except that, in the case of an employe whose monthly benefit is subject to redetermination at age 62 and one month, the amount of reduction in his monthly benefit for the survivor benefit election before he attains the age at which his monthly benefit is redetermined shall be based on the monthly benefit payable to such employe after his monthly benefit is redetermined and the benefit payable to the contingent annuitant shall be based on the monthly benefit payable to such employe after his monthly benefit is redetermined. 24 34 A, Art. I, 6(e) The amount of monthly benefit shall be determined so that the actuarial value of the reduced amount of monthly benefit payable to the employe and the actuarial value of the amount of monthly benefit to be continued to the designated contingent annuitant is as follows:
Joint and Survivor Option Rate Table Full Years Contingent Annuitant Factors to Convert Normal Form of Retirement to is Older (+) or Younger(-) Joint and Survivor Option for Indicated Percentage Than Employe Payable to Contingent Annuitant* -------------------------- -------------------------------------------------- 100% 75% 50% ---- --- --- +20 95.50 96.00 100.00 +19 95.00 95.50 99.50 +18 94.50 95.00 99.00 +17 94.00 94.50 98.50 +16 93.50 94.00 98.00 +15 93.00 93.50 97.50 +14 92.50 93.00 97.00 +13 92.00 92.50 96.50 +12 91.50 92.00 96.00 +11 91.00 91.50 95.50 +10 90.50 91.00 95.00 + 9 89.75 90.50 94.50 + 8 89.00 90.00 94.00 + 7 88.25 89.50 93.50 + 6 87.50 89.00 93.00 + 5 86.75 88.50 92.50 + 4 86.00 88.00 92.00 + 3 85.25 87.50 91.50 + 2 84.50 87.00 91.00 + 1 83.75 86.50 90.50 0 83.00 86.00 90.00 - 1 82.25 85.50 89.50 - 2 81.50 85.00 89.00 - 3 80.75 84.50 88.50 - 4 80.00 84.00 88.00 - 5 79.25 83.50 87.50 - 6 78.50 83.00 87.00 - 7 77.75 82.50 86.50 - 8 77.00 82.00 86.00 - 9 76.25 81.50 85.50 -10 75.50 81.00 85.00 -11 75.00 80.50 84.50 -12 74.50 80.00 84.00 -13 74.00 79.50 83.50 -14 73.50 79.00 83.00 -15 73.00 78.50 82.50 -16 72.50 78.00 82.00 -17 72.00 77.50 81.50 -18 71.50 77.00 81.00 -19 71.00 76.50 80.50 -20 70.50 76.00 80.00
*Other whole percentage levels may be elected. 25 35 A, Art. I, 6(e) Notwithstanding any of the above, where the contingent annuitant is other than the employe's spouse, the actuarial value of the benefit payable to the employe as of his actual retirement date must be more than 50% of the actuarial value of the benefit payable to the employe and his contingent annuitant. SECTION 7. SUPPLEMENTS (a) An employe who retires with benefits payable under Section 2 of this Article I (other than an employe (i) discharged for cause, (ii) hired on or after January 1, 1988, or (iii) referred to in Section 2(b)(2)(ii) of this Article I who retires voluntarily after he has attained age 55 but not age 60 and whose combined years of age and years of credited service at retirement total less than 85) or who retires with benefits payable under Section 4 of this Article I, and who files his application for retirement within five years of the last day he worked for the Corporation and who agrees to restrict his participation in the work force as provided in (e) below will receive, in addition to his retirement benefits, certain supplements as set forth below: (1) If the employe retires under Section 2 or 4 of this Article I with 30 or more years of credited service at the date of his retirement and his date of hire was prior to January 1, 1988, he shall be entitled to a monthly early retirement supplement until age 62 and one month in an amount which when added to his monthly retirement benefit under this Part A and any supplementary benefits under Part B, prior to reduction for survivor coverage, will equal the amount of total monthly benefit applicable to him as provided in the table set forth below, subject to subsequent provisions of this Section 7: 26 36 A, Art. I, 7(a)(1)
Total Monthly Benefit Rate For Determining Monthly Early Retirement Supplement For Retirements With 30 or More Years of Credited Service Retirement With Benefits 10-1-90 10-1-91 10-1-92 Payable through through and Commencing 9-1-91 9-1-92 After -------------- ------- ------- ------- $ $ $ October 1, 1990 and After 1,600 1,700 1,800
(2) If the employe retires voluntarily after attaining age 55 with less than 30 years of credited service, he shall be entitled to a monthly interim supplement until he attains age 62 and one month equal to the amount applicable to him as provided immediately below for each year of credited service that he had at the date of his retirement, subject to subsections (b), (e), and (g) of this Section 7:
Monthly Amount* and Effective Date of Interim Supplement Payable Prior to Age 62 and One Month for Each Year of Credited Service Retired With Benefits Payable Commencing On or After October 1, 1990 Age at Retirement 10-1-90 10-1-91 10-1-92 ---------- ------- ------- ------- $ $ $ 55 11.00 12.00 12.90 56 12.95 14.10 15.20 57 15.70 17.05 18.40 58 18.40 20.00 21.55 59 20.55 22.40 24.10 60 23.75 25.85 27.85 61 23.75 25.85 27.85
* Prorated for intermediate ages computed on the basis of the number of complete calendar months by which the employe is under the age he will attain at his next birthday. 27 37 A, Art. I, 7(a)(2) This provision shall not apply to an employe who has attained age 55 but not age 60 and whose combined years of age and years of credited service (to the nearest 1/12th in each case) at retirement total less than 85. (3) Any interim supplement described above shall be reduced by any supplementary benefits payable under Part B of this Program prior to reduction for survivor coverage. (b) The early retirement supplement under subsection (a)(1) of this Section 7 for an employe who retires voluntarily shall be calculated assuming that his basic benefit commences immediately after retirement, and such early retirement supplement and the interim supplement under subsection (a)(2) of this Section 7 shall be reduced for any month prior to age 62 and one month for which he becomes or could have become eligible for a Federal Social Security benefit, by an amount equal to the amount of the temporary benefit to which he would have been entitled if he had retired under Section 4 of this Article I. (c) The early retirement supplement under subsection (a)(1) of this Section 7 for an employe who retires under Section 4 of this Article I shall be calculated on the assumption that he will receive a temporary benefit until age 62 and one month even if such temporary benefit is not received by the employe until such age because of his earlier entitlement to Social Security benefits. (d) The early retirement supplement under subsection (a)(1) of this Section 7 for an employe who does not prevent the automatic election of the surviving spouse coverage provided under Section 5(a) of this Article I shall be calculated on the basis of the monthly retirement benefit he would have received if he had prevented such automatic election. 28 38 A, Art. I, 7(e) (e) Any of the supplements to which an employe is entitled shall commence on the first day of the month coinciding with or next following the employe's first day of absence because of retirement and shall be payable monthly thereafter until and including the first day of the month in which he dies, or his retirement benefit ceases for any other reason, or he is reemployed by the Corporation, or he attains age 62 and one month, whichever occurs first, provided however, that if an employe entitled to receive a supplement has earnings after retirement in excess of the following annual earnings limitation in any calendar year before he attains age 62 and one month, such earnings being defined for this purpose as the type counted for the earnings test under the Federal Social Security Act or the corresponding type in any future Federal legislation amending, superseding, supplementing or incorporating the Federal Social Security Act, a penalty equal to double the amount by which such earnings exceed the amount permitted shall be charged against each succeeding monthly supplement which he would otherwise be entitled to receive until the full amount of such penalty is satisfied, it being understood that penalties and charges herein shall be cumulative if appropriate:
Calendar Annual Earnings Limitation Year Amount -------- -------------------------- $ 1990 10,000 1991 15,000 1992 15,000 1993 15,000
29 39 A, Art. I, 7(e) An employe receiving a monthly early retirement supplement or interim supplement may be required to certify whether his earnings have been in excess of the permitted amount and to furnish verification of the amount of his earnings. Unless repaid by the employe in a lump sum, any overpayments of a supplement made after an employe incurred a penalty because of excess earnings in accordance with the preceding paragraph shall be deducted from future monthly benefits payable to him under this Part A and under the supplementary benefit provisions of Part B. The annual earnings limitation provisions of this subsection (e) shall not be applicable to any retirement, defined in Section 11 of the General Provisions, with benefits payable commencing on or after October 1, 1990 and prior to September 14, 1993. (f) If a retired employe (i) has been receiving disability retirement benefits under this Part A and has been receiving a supplement and on the basis of medical evidence satisfactory to the Corporation it is found that he is no longer totally and permanently disabled and his credited service is reinstated, or (ii) is reemployed by the Corporation, he shall not thereby forfeit any right he may thereafter have to receive a supplement if he thereafter retires under this Program. (g) If the total of the employe's monthly benefits under this Part A and under the supplementary benefit provisions of Part B and his monthly early retirement supplement or interim supplement as computed above would exceed 70% of his final base salary, his monthly supplement shall be reduced to the extent required so that such monthly benefits plus his supplement will equal 70% of his final base salary. For this purpose, an employe's "final base salary" shall mean his highest monthly base salary rate during the last three months preceding his last day of work prior to retirement. 30 40 A, Art. I, 8 SECTION 8. SPECIAL BENEFIT (a) A retired employe or a surviving spouse (i) age 65 or older, or (ii) under age 65 and enrolled in the voluntary "Medicare" coverage that is available under the Federal Social Security Act by making contributions (in either case excluding the spouse of a former employe who received a deferred non-contributory retirement benefit under the Program), who is receiving a monthly benefit under Article I of this Part A which commenced prior to October 1, 1979, subject to (d) below, shall receive a monthly special benefit equal to: (1) the lesser of $28.00 or the generally applicable "Medicare" Part B premium for months commencing on or after January 1, 1990, (2) the lesser of $31.00 or the generally applicable "Medicare" Part B premium for months commencing on or after January 1, 1991, (3) the lesser of $34.00 or the generally applicable "Medicare" Part B premium for months commencing on or after January 1, 1992, and (4) the lesser of $38.50 or the generally applicable "Medicare" Part B premium for months commencing on or after January 1, 1993. (b) In no event shall such payment commence prior to the first day of the month coinciding with or next following the earlier of (i) the month during which age 65 is attained, or (ii) receipt by the Corporation of application on a form provided for this purpose from an otherwise eligible individual under age 65; except that, with respect to an otherwise eligible individual under age 65, payment shall commence with the first month of such enrollment, but in no event prior to October 1, 1979. 31 41 A, Art. I, 8(c) (c) Not more than one such payment shall be made to any individual for any one month. No such payment shall be made to any individual under age 65 for any month such individual is not enrolled for such voluntary "Medicare" coverage. No such payment shall be made under this Program to any individual who retires with benefits payable commencing on or after October 1, 1979. (d) Effective January 1, 1991, the special benefit payable to an individual who is not enrolled in "Medicare" Part B as of October 1, 1990, but who (i) was receiving a special benefit, and (ii) first became entitled to such benefit prior to March 1, 1988, will be limited to $28.00 per month. Such an individual will become entitled to the schedule of payments in subsection (a) above, upon proof of enrollment in "Medicare" Part B. Thereafter, continued receipt of a special benefit will be contingent on maintenance of "Medicare" Part B enrollment. (e) For an individual enrolled in "Medicare" Part B as of March 1, 1988, or who first becomes eligible for "Medicare" Part B on or after March 1, 1988, receipt of a special benefit on and after January 1, 1991 is contingent upon continued enrollment in "Medicare" Part B. 32 42 A, Art. I, 9 SECTION 9. BENEFITS FOR EMPLOYES WHO RETIRED WITH BENEFITS PAYABLE COMMENCING PRIOR TO OCTOBER 1, 1990 An employe who retired with benefits payable commencing prior to October 1, 1990, or the eligible surviving spouse or contingent annuitant of such an employee, shall be entitled to the benefits, if any, under the Program as it existed immediately prior to such date, except that: (a) (1) Basic benefits payable under this Part A to such retired employes, or the benefits payable to surviving spouses or contingent annuitants in lieu of or related to such basic benefits, shall be increased to the extent necessary to provide monthly benefits equal to the benefits which would have been payable had the basic benefits payable to the employe at and after age 65 been based on the following table:
Basic Benefit Rate Per Year of Credited Service For Months Commencing Retirement ---------------------------- With Benefits Benefit 10-1-90 Payable Class and Commencing Code After ---------------------------------------------------------------------------- $ Prior to October 1, 1979 N/A 20.00* October 1, 1979 A 21.25 through B 21.50 September 1, 1980 C 21.75 D 22.00 October 1, 1980 A 21.35 through B 21.60 September 1, 1981 C 21.85 D 22.10 October 1, 1981 A 21.45 through B 21.70 September 1, 1984 C 21.95 D 22.20
* Including, if applicable, $1.00 waived for election of special survivor coverage. (CONTINUED ON NEXT PAGE) 33 43 A, Art. I, 9(a)(1) (CONTINUED FROM PRECEDING PAGE)
Basic Benefit Rate Per Year of Credited Service For Months Commencing Retirement ---------------------------- With Benefits Benefit 10-1-90 Payable Class and Commencing Code After ----------------------------------------------------------- $ October 1, 1984 A 24.10 through B 24.35 September 1, 1985 C 24.60 D 24.85 October 1, 1985 A 24.20 through B 24.45 September 1, 1986 C 24.70 D 24.95 October 1, 1986 A 24.30 through B 24.55 September 1, 1987 C 24.80 D 25.05 October 1, 1987 A 27.30 through B 27.55 September 1, 1988 C 27.80 D 28.05 October 1, 1988 A 27.40 through B 27.65 September 1, 1989 C 27.90 D 28.15 October 1, 1989 A 27.50 and prior to B 27.75 October 1, 1990 C 28.00 D 28.25
(2) If an employee whose monthly basic benefit under this Part A otherwise would have been redetermined at age 62 attains age 62 on or after March 1, 1982, such redetermination shall be effective at age 62 and one month. 34 44 A, Art. I, 9(b) (b) Any temporary benefits payable to such retired employes until age 65 if retired with benefits payable commencing before June 1, 1974, or age 62 if retired with benefits payable commencing on or after June 1, 1974, or age 62 and one month for a retired employe who attains age 62 on or after March 1, 1982, or, in any case, if earlier, until the age at which the employe becomes or could have become eligible for a Federal Social Security benefit for disability or an unreduced Federal Social Security benefit for age shall be increased to the extent necessary to provide monthly temporary benefits equal to the temporary benefits which would have been payable had the temporary benefits payable to the employe prior to such age 65 (or age 62 or age 62 and one month) or earlier age been based on the following:
Monthly Temporary Benefit Amount* Retires With ------------------------------------ Benefits Payable Per Year of Commencing Credited Service Maximum ----------------------------------------------------------------- $ $ Prior to September 1, 1964 11.50 300.00 September 1, 1964 and prior to October 1, 1967 12.00 300.00 October 1, 1967 and prior to October 1, 1970 12.25 306.25 October 1, 1970 and prior to June 1, 1974 12.75 318.75 June 1, 1974 and prior to October 1, 1976 13.75 343.75 October 1, 1976 and prior to October 1, 1978 14.25 356.25
* Benefit payable for months commencing October 1, 1990. (CONTINUED ON NEXT PAGE) 35 45 A, Art. I, 9(b) (CONTINUED FROM PRECEDING PAGE)
Monthly Temporary Benefit Amount* Retires With ---------------------------------- Benefits Payable Per Year of Commencing Credited Service Maximum ------------------------------------------------------------------ $ $ October 1, 1978 and prior to October 1, 1979 15.25 381.25 October 1, 1979 and prior to October 1, 1980 16.25 406.25 October 1, 1980 and prior to October 1, 1981 17.25 431.25 October 1, 1981 and prior to January 1, 1983 18.25 456.25 January 1, 1983 and prior to October 1, 19a5 18.25 547.50 October 1, 1985 and prior to October 1, 1986 19.25 577.50 October 1, 1986 and prior to October 1, 1987 20.25 607.50 October 1, 1987 and prior to October 1, 1988 20.45 613.50 October 1, 1988 and prior to October 1, 1989 21.55 646.50 October 1, 1989 and prior to October 1, 1990 22.65 679.50
* Benefit payable for months commencing October 1, 1990. 36 46 A, Art. I, 9(c)(1) (c) (1) An employe who retired under Article I of this Program with 30 or more years of credited service who is eligible to receive a monthly supplement which commenced prior to October 1, 1990 shall receive an increase to such monthly supplement as follows:
Amount of Increase* -------------------------------- Payable to Payable Between Effective Date Age 62 Ages 62 and of Increase and One Month One Month - 64 --------------------------------------------------- $ $ October 1, 1990 75.00 37.50
* This increase will not result in a total monthly benefit of less than $1,100 for months prior to age 62 and one month, or $550 for months between ages 62 and one month and 64. The amount of any monthly supplement payable to an employe who retired under the Program with benefits commencing prior to October 1, 1990 shall be redetermined to the amount of supplement which would have been payable had the applicable benefit rates set forth in this Section 9 and referred to in Section 7 of Article I of Part B been in effect when such employe's benefits commenced. If such retired employe is entitled as of October 1, 1990 to receive Social Security benefits, and if he became so entitled before October 1, 1990, the increase in the rate of temporary benefit provided in subsection (b) of this Section 9 shall not be considered in redetermining his supplement until he ceases to be so entitled. 37 47 A, Art. I, 9(c)(2) (2) An employe who retired voluntarily under Article I of this Program after attaining age 55 with less than 30 years of credited service who is eligible to receive a monthly interim supplement which commenced prior to October 1, 1990 shall receive, for months commencing on and after October 1, 1990, an increase to such interim supplement, as follows:
Age at Monthly Increase* Retirement Per Year of Credited Service ------------------------------------------------ 55 0.55 56 0.65 57 0.80 58 0.95 59 1.05 60 1.20 61 1.20
* Prorated for intermediate ages computed on the basis of the number of complete calendar months by which the employe is under the age he will attain at his next birthday. (d) The survivor benefit payable to the surviving spouse of a retired employe who has completed an election of a special survivor option and who dies after such election becomes effective, shall be a monthly benefit for the lifetime of such surviving spouse equal to: (1) $7.00 for each year of credited service that such retired employe had at the date of his retirement with respect to benefits payable for any month commencing October 1, 1990 through September 1, 1991, 38 48 A, Art. I, 9(d)(2) (2) $8.00 for each year of credited service that such retired employe had at the date of his retirement with respect to benefits payable for any month commencing October 1, 1991 through September 1, 1992, and (3) $9.00 for each year of credited service that such retired employe had at the date of his retirement with respect to benefits payable for any month commencing on or after October 1, 1992. (e) An employe who retired under the Program or who is eligible for a deferred retirement benefit pursuant to the provisions of Part A of the Program, and who has surviving spouse coverage in effect but whose designated spouse predeceases him, may have his monthly basic benefit restored to the amount payable without such coverage, effective the first day of the third month following the month in which the Corporation receives evidence satisfactory to the Corporation of the spouse's death. (f) An employe who retired under the Program and who has a joint and survivor option, as provided under this Article I, Section 6, in effect with respect to his Part A benefit but whose designated contingent annuitant is deceased shall receive the increase in benefits which otherwise would have been payable to him under this Section 9 as if he had not elected such option. (g) An employe who retired or retires under Article I of the Program with benefits payable commencing on or after January 1, 1962, who marries, or remarries, subsequent to the earliest date survivor benefit coverage was in effect, or was not in effect on such date solely because the retired employe was not then married, may elect, or re-elect, survivor benefit coverage under Part A. Any such coverage, and the benefits thereunder, shall be provided under the terms and conditions of the Program in effect at the time of the employe's 39 49 A, Art. I, 9(g) retirement. Such coverage shall become effective on the first day of the third month following the month in which the Corporation receives a completed election form, but in no event before the first day of the month following the month in which the retired employe has been married one year. No election provided hereunder shall become effective under any circumstance for any retired employe whose completed election form is received by the Corporation after the first day of the month in which the retired employe has been married one year. This subsection (g) also shall be applicable to an employe retired with benefits payable commencing on or after October 1, 1990. (h) Monthly benefits payable under this Section 9 on and after October 1, 1990 shall not be limited by the 70% benefit limitation in Section 7(g) of this Article I. (i) The monthly amount of any lifetime supplement payable to an employe retired with benefits payable commencing on or after March 1, 1974 with 30 or more years of credited service shall not exceed $35.00 when added to the Part B Supplementary benefit payable at retirement without reduction for survivor coverage. (j) The monthly amount of any age-service supplement payable to an employe retired with benefits payable commencing on or after March 1, 1974 with less than 30 years of credited service, but after attaining age 62 and one month, shall be $1.00 per month per year of credited service, reduced by 1/36th for each complete calendar month that the employe was under age 65 at date of retirement and further reduced by any Part B Supplementary benefit payable at retirement without reduction for survivor coverage. 40 50 A, Art. II ARTICLE II CREDITED SERVICE (APPLICABLE TO BENEFITS UNDER PART A AND SUPPLEMENTARY BENEFITS UNDER PART B) SECTION 1. GENERAL (a) For purposes of determining "credited service" as used in this Program, the word "employment" shall include (1) all employment prior to an employe's retirement, or termination of employment, whichever is earlier, whether on salary or hourly-rate, with the Corporation or its directly or indirectly wholly-owned or substantially wholly-owned domestic or foreign subsidiaries in accordance with I.R.C. Section 414(b), (c), (m), (n), and (o), as well as service with any company (including service with any directly or indirectly wholly-owned or substantially wholly-owned subsidiary of such company) of which substantially all the assets have been acquired by the Corporation or its subsidiaries, excluding any directly or indirectly wholly-owned or substantially wholly-owned subsidiary of the Corporation acquired or formed by the Corporation on or after March 1, 1984, provided that no employment prior to date of acquisition with any such directly or indirectly wholly-owned or substantially wholly-owned domestic or foreign subsidiary acquired after October 1, 1950 or with any company (including employment with any directly or indirectly wholly-owned or substantially wholly-owned subsidiary of such company) of which substantially all the assets are acquired by the Corporation or its subsidiaries after October 1, 1950 shall be taken into account for purposes of determining credited service; and 41 51 A, Art. II, 1(a)(2) (2) any period of employment with a company in which General Motors Corporation held, directly or indirectly, at least 25% of the common stock, if such employment was immediately followed by employment commencing prior to October 1, 1950 with General Motors Corporation or its directly or indirectly wholly-owned or substantially wholly-owned domestic or foreign subsidiaries provided the inclusion of such period of employment is authorized under such rules as may be established in conformity with the objectives of the Program by the Named Fiduciary or its delegate. (b) For the purposes of this Program, credited service is generally considered automatically broken by a quit or discharge; provided that if, after a quit or discharge, an employe has been or is rehired, his credited service shall be reinstated as provided in Section 4(a) of this Article II. However, the period during which such employe is absent from service because of such quit or discharge shall not be included in the calculation of the amount of credited service, unless the employe was or is absent from service at the request of, or with the approval of, the Corporation for the purpose of employment with a company affiliated with the Corporation and, upon termination of such employment with such affiliate, returned or returns to the service of the Corporation as his first employment following his employment with the affiliate. (c) Credited service (and years of credited service) as used in this Program shall be computed to the nearest full month and shall be the sum of the number of years (and months thereof) of (i) credited service prior to October 1, 1950, and (ii) credited service on or after October 1, 1950. Provisions regarding credited service prior to October 1, 1950, are set forth in the General Motors Retirement Program for Salaried Employes as amended through October 1, 1984. 42 52 A, Art. II, 2 SECTION 2. CREDITED SERVICE SUBSEQUENT TO OCTOBER 1, 1950 (a) Credited service shall consist of the number of years (to the nearest 1/12 thereof) represented by: (1) All periods of regular employment subsequent to October 1, 1950, for which an employe receives compensation. No credited service shall accrue hereunder for an employe classified as a Flexible Service employe except as otherwise provided in subsection (e) of this Section 2. (2) All periods of absence prior to (i) an employe's retirement, or (ii) termination of employment, whichever is earlier, under a compensable Disability Leave of Absence, as defined in Section 8 of this Article II. (3) All periods of absence prior to (i) an employe's retirement, or (ii) termination of employment, whichever is earlier, under an approved Military Leave of Absence provided the employe is reemployed in accordance with the terms of such leave of absence. However, such credited service shall not exceed four years, or such longer period during which he has reemployment rights pursuant to any Federal law, and provided, further, that the employe is reemployed in accordance with the terms of such leave of absence or, if reemployed by the Corporation at a location other than the location from which the leave was granted, within 90 days from the date of his discharge from the armed forces. 43 53 A, Art. II, 2(a)(4) (4) All periods of absence during any calendar year after December 31, 1967 and prior to an employe's retirement under a layoff or an approved noncompensable Disability Leave of Absence provided the employe receives compensation for periods totaling at least one month during such calendar year, and provided further, that if such layoff or Disability Leave of Absence commences in a calendar year after December 31, 1969 and continues after that year, credited service shall be granted for each calendar month of such absence, not to exceed eleven months of credit for all such absence related to receipt of such compensation from the Corporation in the first year. For the purposes of this subparagraph (a)(4) only, an employe who is laid off and whose first day of absence due to such layoff is the first regularly scheduled work day in January shall be deemed to have been laid off on December 31 of the year in which he last worked. An employe who returns to work on or after October 1, 1979 and receives pay for a period of less than one month and who thereafter returns to such layoff or Disability Leave of Absence, shall not be disqualified, solely because of the receipt of such pay, from receiving any such credit for which he otherwise would be eligible hereunder. (b) An employe who is at work on or after March 1, 1982, and (1) is laid off on or after March 1, 1982, and (2) has 10 or more years of credited service at the time such layoff commences, and (3) while on such layoff receives the maximum eleven months of credited service for absence due to layoff or Disability Leave of Absence in accordance with subparagraph (a)(4) above, and 44 54 A, Art. II, 2(b)(4) (4) thereafter continues to be absent due to such layoff, shall be granted credited service for each additional month of such absence, not to exceed a maximum of twelve months of credit. (c) For an employe who has at least five years of credited service (1) as of December 31, 1967 and who was absent under a layoff during any calendar year after December 31, 1955 and prior to January 1, 1963, or (2) as of December 31, 1973 and who was absent under a layoff during any calendar year after December 31, 1950 and prior to January 1, 1956, or (3) as of October 1, 1979 and who was absent under a layoff during any calendar year after December 31, 1962 and prior to January 1, 1968, or (4) as of October 1, 1984 and who was absent under a layoff during any calendar month after December 31, 1978 and prior to January 1, 1984, credited service shall be granted for each calendar month of such absence, not previously credited under this Section 2 during which such employe remained on layoff status and retained credited service, the amount of credited service to be granted per year being the months of such absence in such year multiplied by a percentage as set forth in the following table:
Employe's Credited Service on December 31, 1967 in the Case of (1) Above or December 31, 1973 in the Case of (2) Above or October 1, 1979 in the Case of (3) Above or October 1, 1984 in the Case of (4) Above % -------------------------------------------------------- 20 years or more 100 15 years but less than 20 years 75 10 years but less than 15 years 50 5 years but less than 10 years 25
provided that the employe makes proper application. 45 55 A, Art. II, 2(d) (d) All periods on an approved leave of absence as provided for in certain collective bargaining agreements pursuant to policy and rules as may be established by the Corporation. (e) All hours worked and compensated while classified as a Flexible Service employe on and after August 7, 1984, except that no credited service will accrue prior to the later of: (1) one year of employment, or (2) attainment of age 21 (age 25 prior to October 1, 1985). Credited service during Flexible Service employment will be based on compensated hours worked and will accumulate only if the employe works 750 or more hours during the calendar year, as follows:
Equivalent Months Compensated Hours of Credited Service --------------------------------------------------- Less than 750 None 750 but less than 895 6 895 but less than 1040 7 1040 but less than 1185 8 1185 but less than 1330 9 1330 but less than 1475 10 1475 but less than 1615 11 1615 or more 12
(f) Notwithstanding any other section of this Article II, in the case of an employe who shall retire on or after October 1, 1990, the employe's credited service for the period before January 1, 1966 shall not be less than the employe's length of service as of December 31, 1965. 46 56 A, Art. II, 3 SECTION 3. LOSS OF CREDITED SERVICE Unless otherwise provided by the Named Fiduciary or its delegate, credited service will be broken, and all prior credited service will be lost, notwithstanding the provisions of Sections 1 and 2 above, if the employe: (a) Quits, (b) Is discharged for cause, (c) Is paid a separation allowance because of his refusal to accept a salaried position or an hourly-rate job in accordance with Corporation policy, (d) Is laid off or is given an approved leave of absence (excluding Military and compensable Disability Leave of Absence) if the period of continuous absence is one year or more and is equal to or in excess of the employe's credited service prior to such layoff or approved leave of absence, (e) Fails to report for work in accordance with the terms of a Military or compensable Disability Leave of Absence, (f) Is given a final release or a mutually satisfactory release, or (g) Is separated under any classification other than those specifically covered above. 47 57 A, Art. II, 3 For the purposes of this Section 3, credited service will not be broken and prior credited service will not be lost as a result of any separation if the period following immediately thereafter is a period during which compensation by the Corporation or its directly or indirectly wholly-owned or substantially wholly-owned domestic or foreign subsidiaries was on a commission basis and such period is followed immediately thereafter by salaried or hourly-rate employment. However, except as provided in Section 10 of General Provisions, any such period during which compensation was on a commission basis shall not be included in the calculation of the amount of credited service. SECTION 4. REINSTATEMENT OF CREDITED SERVICE (a) Any employe who loses credited service under the provisions of Section 3 immediately above and is later reemployed by the Corporation shall have such credited service reinstated upon making proper application. (b) Any employe retired under the total and permanent disability provisions of this Program who subsequently is deemed recovered and whose disability benefit then ceases will then have reinstated the credited service the employe had at the time of disability retirement, provided the employe is reemployed, or is granted a leave of absence or otherwise given the status of an inactive employe, by the Corporation. (c) Any employe retired under the provisions of this Program, except total and permanent disability retirement, who subsequently is reemployed by the Corporation or one of its directly or indirectly wholly-owned or substantially wholly-owned subsidiaries will then have reinstated the credited service the employe had at the time of retirement. 48 58 A, Art. II, 4(d) (d) If a former employe who is entitled to a deferred retirement benefit under Part A and, if applicable, a deferred supplementary retirement benefit under Part B (or a deferred pension under the "General Motors Hourly-Rate Employes Pension Plan") is reemployed by the Corporation prior to the commencement of such deferred retirement benefits, such employe shall, upon making proper application, have reinstated, in lieu of such deferred retirement benefits, the credited service lost at the time the employe became entitled to such deferred retirement benefits; provided that if an employe with 10 or more years of credited service (1) is reemployed by, and works for, the Corporation within 36 months of the date he lost credited service under Section 3 of this Article II, and (2) becomes disabled while employed by the Corporation for less than 5 months, and such disability is continuous for a period of 5 months during which he makes proper application and submits medical evidence satisfactory to the Corporation that he is totally and permanently disabled, he will be deemed eligible for a disability retirement benefit under Section 4 of Article I of this Part A and such benefit will be payable pursuant to Section 2 of the General Provisions of this Program, as though he had been an employe throughout such disability period. 49 59 A, Art. II, 5 SECTION 5. CREDITED SERVICE OF EMPLOYES FORMERLY ON THE HOURLY ROLL Any employe transferred from the hourly roll to the salary roll, or hired as a salaried employe following the loss of credited service as an hourly-rate employe, shall, upon making proper application, receive credit to the nearest 1/10th of a year for his credited service as recognized under the "General Motors Hourly-Rate Employes Pension Plan". Employment while covered under The GM Special Pension Plan shall not be credited hereunder, except for an employe with seniority on March 1, 1988, who has not received a cash payment representing his accrued benefit under The Special Pension Plan. SECTION 6. SERVICE WITH A FOREIGN SUBSIDIARY An employe whose employment as an hourly or salaried employe with a directly or indirectly wholly-owned or substantially wholly-owned foreign subsidiary of General Motors Corporation has been terminated other than by retirement, shall be granted credited service under this Program for any periods of active service with such foreign subsidiary or, if greater, the amount of service credited to such employe under any pension or retirement plan of the foreign subsidiary at the time of his termination, excluding any directly or indirectly wholly-owned or substantially wholly-owned subsidiary of the Corporation acquired or formed by the Corporation on or after March 1, 1984, provided such service was prior to his most recent period of active service credited under this Program. Any monthly Part A benefits or supplementary benefits under Part B payable under this Program to a retired employe who has received credited service under this Section 6 will be reduced by an amount equivalent to the total of any monthly benefits (or lump-sum payment) that could be payable to such employe under any 50 60 A, Art. II, 6 other retirement plan to which the foreign subsidiary has contributed, excluding, however, any retirement benefits or portion thereof purchased by employe contributions. Any survivor benefits payable under this Program to a survivor of such an employe shall be subject to similar reduction by monthly survivor benefits payable under any other plan to which the foreign subsidiary has contributed. SECTION 7. NO DUPLICATION OF CREDITED SERVICE There shall be no duplication of credited service and no more than a year's credit will be given for any calendar year except as otherwise provided in Sections 10 and 12 of this Article II with respect to foundry and asbestos service. SECTION 8. COMPENSABLE DISABILITY LEAVE OF ABSENCE The term "Compensable Disability Leave of Absence" as used herein means an absence from work because of occupational injury or disease incurred in the course of employment, and on account of which absence the employe receives Workers Compensation while on an approved leave of absence. SECTION 9. TEMPORARY EMPLOYMENT A regular employe, with periods of temporary employment prior to the date he last worked as a regular employe, will be granted credited service for actual time paid while working on any temporary employment immediately preceding regular employment. 51 61 A, Art. II, 10 SECTION 10. FOUNDRY SERVICE An employe who has credited service on or after October 1, 1990 and who at retirement has over 10 years of credited service which he accrued while employed in certain salaried positions in specified foundries as set forth in Appendix A shall receive additional credited service related thereto for purposes of this Part A. Total credited service for any such employe shall be the sum of (i) credited service otherwise credited to him, and (ii) any such additional credited service which shall be credited to him in accordance with the following table:
Years of Credited Service Additional Credited on Foundry Jobs Credited Service -------------------------------------------------- For years 1 through 10 0 For 10 years, 1 month through 25 33-1/3% For years over 25 20%
SECTION 11. HOURS, YEARS AND BREAKS IN SERVICE TO COMPLY WITH THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (a) An employe who breaks credited service on or after October 1, 1990 who would be eligible for a deferred benefit under Article III of this Part A, except solely for the fact that he does not have at least 5 years of credited service under the foregoing Sections of this Article II, shall be eligible for a deferred benefit under the provisions of Article III of this Part A, if at the time the employe breaks credited service, he has 5 years of service solely as determined under this Section 11, and provided that such employe is credited with one hour or more of credited service or service accrued on or after January 1, 1989. 52 62 A, Art. II, 11(b) (b) The monthly amount of any such deferred benefit shall be based solely on the credited service that the employe had under the foregoing Sections of this Article II when he broke credited service. (c) No employe shall be eligible to be covered under this Section 11 until he (i) attains age 21, or (ii) completes 1 year of service under this Section 11, whichever is later. Rehired employes shall participate immediately. (d) An employe shall complete 1 year of service when he completes 750 hours of service in the 12 consecutive month period beginning with his employment commencement date. If an employe fails to complete 750 hours of service in such period, he shall complete 1 year of service in the first 12 consecutive month period thereafter in which he completes 750 hours of service, measured from each succeeding anniversary of his employment commencement date. Thereafter, an employe shall complete 1 year of service during each 12 consecutive month period in which he completes 750 hours of service, measured from the anniversary of his employment commencement date. A year of service under this Section 11 shall include service (i) with affiliated group members accrued subsequent to acquisition, (ii) rendered to the Corporation as a former leased employe (but only upon employe application with substantiation of such service satisfactory to the Corporation), and (iii) rendered to the Corporation as an hourly-rate employe in accordance with I.R.C. Section 414(b), (c), (m), (n), and (o). (e) An employe who satisfies the eligibility requirements of this Section 11, and who is otherwise entitled to participate in the Program, shall commence participation under this Section 11 if he satisfies such requirements (i) between April 1 and September 30; on the first day of the plan year beginning after the date on which such requirements are satisfied, or (ii) between October 1 and March 31; on the first day of the plan year that includes the date such requirements are satisfied, but in no event shall any employe participate hereunder if he breaks length of service prior to such commencement date. 53 63 A,Art.II,11(f) (f) An employe shall complete an hour of service under this Section 11 for each hour for which he is paid by the Corporation for working or for which he is paid by the Corporation for having been entitled to work. Any hours for which an employe receives pay for having been entitled to work, irrespective of mitigation of damages, shall be credited to the period or periods he was so entitled, rather than to the period in which he receives such pay. There shall be no duplication of any hours of service under this Section 11. (g) Solely for purposes of determining years of service for vesting under this Section 11, all of the employe's years of service shall be taken into account except the following: (i) years of service before age 18 (age 22 prior to October 1, 1985); (ii) years of service before January 1, 1971, unless the employe has at least 3 years of service after December 31, 1970; (iii) years of service prior to any 1-year break in service as defined herein, until the employe completes a year of service after such break; (iv) for non-vested participants under this Section 11, years of service prior to any 1-year break in service if the number of such consecutive breaks equals or exceeds the aggregate number of years of service prior to such break, for a non-vested participant at work on or after October 1, 1985, years of service prior to any 1-year break in service if the number of such consecutive breaks equals or exceeds the greater of 5, or the aggregate number of years prior to such break (such aggregate number of years of service before such break shall not include any years of service not required to be taken into account under this Section 11 by reason of any prior break in service); (v) years of service before October 1, 1976, if such service would have been disregarded under rules of the Program as in effect on October 1, 1976, regarding breaks of service; and (vi) any year in which the employe completes less than 750 hours of service. 54 64 A,Art.II,11(h) (h) An employe shall incur a 1-year break in service under this Section 11 in any 12 consecutive month period during which he does not complete more than 375 hours of service, measured from the anniversary of his employment commencement date. Solely for purposes of determining whether an employe has incurred such 1-year break in service, in addition to hours worked which are paid by the Corporation, any hours which an employe does not work but for which he is paid by the Corporation for vacation, sickness or disability, or is entitled to be so paid, directly or indirectly, shall be taken into consideration. For any absence from work commencing on and after October 1, 1985 by reason of pregnancy of the individual, childbirth, placement of a child related to an adoption, or for child care purposes immediately following such birth or placement, the employe shall be credited with the hours of work for which he otherwise would have been scheduled, or, if unable to determine such scheduled hours, 8 hours for each work day of such absence, not to exceed a total of 501 hours for any such absence. Such hours shall be credited in the year in which the absence commences if necessary to prevent incurring a 1-year break in service, otherwise such hours shall be credited in the immediately following year. SECTION 12. ASBESTOS SERVICE An employe with credited service on or after October 1, 1990 who at retirement has over 10 years of credited service which was accrued while employed in certain salaried positions in specified asbestos operations as set forth in Appendix B shall receive additional credited service related thereto for purposes of this Part A, in the same manner as set forth in Section 10 of this Article II. 55 65 A, Art. III ARTICLE III RETENTION OF DEFERRED RETIREMENT BENEFIT IF SEPARATED (a) Any employe who, on or after October 1, 1990, loses accumulated credited service under the provisions of Article II of this Part A shall be eligible for a deferred retirement benefit under this Part A if such employe is not retired and eligible for benefits pursuant to Article I of this Part A, and provided the credited service of such employe at separation is at least 5 years, or such employe satisfies the service requirements of Section 11 of Article II of this Part A, and provided that such employe is credited with one hour or more of credited service or "service" accrued on or after January 1, 1989, or such employe has attained the Normal Retirement Age as defined in Section 1(g) of the General Provisions. (b) The monthly amount of any deferred retirement benefit shall be a basic benefit for each year of credited service, determined by his Benefit Class Code as set forth in Section 1 (c) of Article I of this Part A when he lost credited service, as set forth in the table immediately following:
Date of Loss Benefit Basic of Class Benefit Credited Service Code Rate -------------------------------------------------- $ October 1, 1990 A 28.35 through B 28.60 September 30, 1991 C 28.85 D 29.10 October 1, 1991 A 29.50 through B 29.75 September 30, 1992 C 30.00 D 30.25 October 1, 1992 A 30.70 and After B 30.95 C 31.20 D 31.45
56 66 A, Art. III, (c) (c) A former employe who is eligible for a deferred retirement benefit may at the election of such former employe receive either (1) a monthly benefit commencing at or after age 65 determined in accordance with subsection (b) above, or (2) a monthly benefit commencing after age 55 and prior to age 65 determined in accordance with subsection (b) above, reduced as follows:
Age When Benefit Commences Percentage(*) --------------------------------------- 55 42.8% 56 46.8 57 51.2 58 55.5 59 59.6 60 64.0 61 71.2 62 78.4 63 85.6 64 92.8 65 100.0
(*) Prorated for intermediate ages computed on the basis of the number of complete calendar months by which the employe is under the age he will attain at his next birthday. 57 67 A, Art. III, (d) (d) The deferred retirement benefit shall be payable commencing the first day of the month coinciding with or next following the employe's attainment of the applicable age set forth in subsection (c) of this Article III or, if later, the first day of the month following the month in which the Corporation receives a written request from such former employe; provided that such written request shall be valid and effective only if it is filed with the Corporation not earlier than 60 days prior to the date such former employe first became eligible for such benefit, and, for such employe who broke credited service prior to October 1, 1976, not later than his 70th birthday, otherwise no deferred retirement benefit shall be payable at any time. (e) The amount of any monthly retirement benefit otherwise payable to a former employe eligible for a deferred retirement benefit will be reduced by the value of any past and future benefits paid or payable to any alternate payee(s) under a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p). The actuarial value will be used to determine any amount to be paid to any such payee(s), if applicable, and the remaining benefit entitlement of the employe. 58 68 B, Art. I PART B - CONTRIBUTORY BENEFITS ARTICLE I PROVISIONS RELATING TO PRIMARY BENEFITS AND SUPPLEMENTARY BENEFITS SECTION 1. ELIGIBILITY REQUIREMENTS (a) FOR PRIMARY BENEFITS Each salaried employe will be eligible to commence contributing under Part B on the first day of any month provided that at the time he commences to contribute all of the following conditions are met: (1) Such employe has reached age 21; (2) Such employe has at least six months of continuous service; and (3) Such employe's base salary rate is greater than $2000 per month. (b) FOR SUPPLEMENTARY BENEFITS (1) An employe who has 5 or more years of credited service as determined under Article II of Part A, or an employe who satisfies the "service" requirements of Section 11 of Article II of Part A, or an employe retired as a normal retirement on or after October 1, 1990, and in any case is eligible to receive benefits under Part A, shall be entitled to receive supplementary benefits under this Part B, if otherwise eligible based upon his average monthly base salary, for the following periods: 59 69 B, ART. I,1(b)(1)(i) (i) any period of credited service prior to October 1, 1950, provided that on and after October 1, 1950 the employe contributes at all times while eligible and does not withdraw his contributions prior to termination of employment, (ii) the continuous period of credited service during which the employe contributes under Part B at all times while eligible to do so and during which he does not withdraw his contributions prior to termination of employment, and (iii) any period, not credited under (i) or (ii) immediately above, prior to the earliest date on which the employe was eligible to contribute or age 30, if later, provided that such period shall not exceed the number of years and fractions thereof credited under (ii) above. (2) For the purpose of making the computation described in paragraph (1) immediately above, if the employe: (i) failed to contribute (aa) while temporarily absent and receiving salary at a reduced rate, or (bb) for a period of absence during which contributions are permitted under Section 4 of Article II of this Part B, or (cc) while under age 30, he shall not be considered to have broken the continuous period during which he contributed while eligible, (ii) withdrew his contributions while on layoff which did not result in loss of credited service prior to such layoff, he shall not be considered to have withdrawn his contributions prior to termination of employment, and 60 70 B, ART. I, 1(b)(2)(iii) (iii) withdrew his contributions under this Program while employed by any wholly-owned or substantially wholly-owned subsidiary whose employes are excluded from participation under this Program, the employe will forfeit any monthly Part B benefits for which he otherwise would have been eligible at retirement except as provided under Article II, Section 1(a)(2) of this Part B. SECTION 2. RETIREMENT BENEFITS (a) RETIREMENT AT OR AFTER AGE 65 Retirement benefits, if any, under Part B for an employe who retires at or after age 65 will commence on the first day of the month coinciding with or next following the employe's first day of absence because of retirement. (1) PRIMARY BENEFITS The annual rate of primary retirement benefits payable after retirement under Part B at age 65 or after will be equal to the sum of (i) 60% of the total of the employe's own contributions made prior to July 1, 1977, (ii) 75% of the total of such contributions made on and after July 1, 1977 and prior to October 1, 1979, and (iii) 100% of the total of such contributions made on and after October 1, 1979. 61 71 B, ART. I, 2(a)(2) (2) SUPPLEMENTARY BENEFITS The monthly supplementary retirement benefits shall be 1% of the employe's average monthly base salary in excess of the amount indicated below times the number of years and months of the employe's credited service, as determined under Article II of Part A, or as may be adjusted under Section 1 (b) above:
Retirement With Part B Supplementary Benefit Benefits Payable Based on Average Monthly Base Salary Commencing In Excess of: -------------------------------------------------------------- October 1, 1990 $ through September 1, 1991 2,910.00 October 1, 1991 through September 1, 1992 3,025.00 October 1, 1992 and after 3,145.00 (b) RETIREMENT BETWEEN AGES 60 AND 65
(1) If an employe retires voluntarily at or after age 60 prior to age 62, there shall be payable any primary and supplementary benefits to which he may enitled on account of service rendered up to the of his retirement commencing on the first day of the month coinciding with or next following his attaining age 62 or he may elect to receive either his primary benefit or supplementary benefit, or both, on a reduced basis commencing on the first day of any month coinciding with or following his first day of absence because of retirement and prior to age 62. with such reduction being as set forth in the table in Part A, Article I, Section 2(b)(2)(i). 62 72 B, ART. I, 2(b)(2) (2) An employe discharged for cause at or after age 60 and prior to age 65 shall be entitled to the benefits described in Section 2(b)(1) above. (c) RETIREMENT PRIOR TO AGE 60 OTHER THAN FOR TOTAL AND PERMANENT DISABILITY (1) If an employe who has 10 or more years of credited service retires voluntarily (i) at or after age 55 and prior to age 60 and whose combined years of age and years of credited service (to the nearest 1/12th in each case) at retirement total 85 or more, or (ii) prior to age 55 with 30 or more years of credited service, and in either case was hired prior to January 1, 1988, he shall be entitled to primary and supplementary retirement benefits on account of service rendered up to the date of his retirement commencing on the first day of the month coinciding with or next following his attainment of age 62, or he may elect to receive either his primary benefit or supplementary benefit, or both, commencing on the first day of any month coinciding with or following his first day of absence because of retirement and prior to age 62 in which case any benefits shall be reduced from the amount that would otherwise be payable commencing at age 62 multiplied by a percentage as set forth in the table in Part A, Article I, Section 2(b)(2)(i). (2) If an employe who has 10 or more years of credited service retires voluntarily at or after age 55 and prior to age 60 and (i) whose combined years of age and years of credited service (to the nearest 1/12th in each case) at retirement total less than 85, or (ii) who was hired on or after January 1, 1988, he shall be entitled to primary and supplementary retirement benefits on account of service rendered up to the date of his retirement commencing on the first day of the month coinciding with or next following his attainment of age 65, or he may 63 73 B, ART. I, 2(C)(2) elect to receive either his primary benefit or supplementary benefit, or both, commencing on the first day of any month coinciding with or following his first day of absence because of retirement and prior to age 65 in which case any benefits shall be reduced from the amount that otherwise would be payable commencing at age 65 multiplied by a percentage as set forth in the table in Part A, Article I, Section 2(b)(2)(ii). (3) An employe (i) who has 10 or more years of credited service and who is discharged for cause at or after age 55 and prior to age 60, or (ii) who has 30 or more years of credited service, was hired prior to January 1, 1988, and who is discharged for cause prior to age 55, shall be entitled to the benefits described in Sections 2(c)(1) or 2(c)(2) above, whichever is applicable. (d) RETIREMENT PRIOR TO AGE 65 FOR TOTAL AND PERMANENT DISABILITY If an employe is retired prior to age 65 for total and permanent disability and commences to receive total and permanent disability benefits under Part A, any supplementary benefits to which he may be entitled on account of service rendered up to the date of his retirement which are payable at age 65 shall be payable commencing at the same time as benefits payable under Part A without reduction in amount because of such earlier commencement. Any primary benefits to which the employe may be similarly entitled and which are payable at age 65 shall be payable commencing on the first day of the month with respect to which the initial benefit payment is made under Part A without reduction in amount because of such earlier commencement. 64 74 B, ART. I, 2(e) (e) REEMPLOYMENT If a retired employe who is receiving retirement benefits is reemployed by the Corporation or one of its directly or indirectly wholly-owned or substantially wholly-owned domestic or foreign subsidiaries, payment of his Part B benefits shall cease and he shall be treated thereafter for the purposes of this Program as if he had not previously retired, except that: (1) For the purpose of (aa) the death benefit provisions of Section 5(c)(4) and 6(a)(1) of this Article I, and (bb) the provisions of Section 1(a)(2) of Article II of this Part B relating to the return of an employe's contributions, and solely with respect to the employe's contributions made prior to the date his primary benefits commenced because of retirement, no interest will be credited on the employe's contributions for the period during which he received such primary benefits and upon his reemployment his contributions will be deemed to have been reduced by the amount of such primary benefits (but with such reduction not to exceed the amount of his contributions plus interest); and (2) the amount of any death benefit otherwise subsequently payable under Section 6(a)(2) of this Article I shall be reduced by an amount equal to the amount of reduction specified in the preceding item (1). 65 75 B, ART. I, 3 SECTION 3. EMPLOYE CONTRIBUTIONS (a) Each employe participating in Part B for primary benefits will contribute 1.25% of the amount of his monthly base salary in excess of $2,000. (b) An employe may accrue Part B primary benefits for no more than 35 years. In that regard, however, an otherwise eligible employe who remains at work for GM after contributing for 35 years, may continue to contribute, while otherwise eligible to do so, except that his contributions made in his earliest months of Program participation, commencing with the first month of participation and continuing sequentially thereafter, shall be used to reduce, on a dollar-for-dollar basis, the gross amount of each current monthly contribution that otherwise might be made, as determined by the employe's most recent monthly base salary. The full amount of all such prior contributions used in any such reduction will be used to determine the employe's monthly amount of Part B primary benefits, but at the updated Part B benefit accrual rate. The overall effect of the treatment described herein is to limit to 35 years the period in which any employe may accrue Part B primary benefits, but to maximize the monthly Part B primary benefit generated by such contributions. (c) An employe may continue to contribute from the date he first becomes eligible until he (1) ceases to be eligible, or (2) retires, any provisions of the preceding paragraph to the contrary notwithstanding. (d) If an employe at any time or for any reason withdraws his contributions, he shall not be entitled to any primary retirement benefits under Part B with respect to any period of service prior to the date of such withdrawal of contributions, except as otherwise provided in Sections 1(a)(1) abd (2) and 2(c)(2) of Article 11 of this Part B, or in subsections (e) and (g) of this Section 3. 66 76 B, ART. I, 3(e) (e) If an employe with 5 or more years of credited service, as determined under Article II of Part A, at any time or for any reason withdraws his contributions, he shall not forfeit any deferred benefits which are attributable to the Corporation's contributions made up to the time of such withdrawal of contributions. (f) If an employe at any time or for any reason withdraws his contributions, he shall not be entitled to make any additional withdrawal of his contributions for a period of two years from the date of such withdrawal of contributions. (g) In the event an employe withdraws his contributions under this Program, he thereafter shall not have any right to repay in a lump-sum the amount withdrawn. Such employe, if vested, will be entitled to a Corporation provided benefit which will not be less than an amount determined under (i) Article III of Part A, and (ii) this Part B, less an amount attributable to the employe contributions withdrawn, as may be determined in accordance with applicable IRS regulations. SECTION 4. OPTIONAL FORMS OF RETIREMENT BENEFITS (a) SURVIVING SPOUSE COVERAGE In lieu of any primary or supplementary benefits otherwise payable hereunder, an employe who retires or is retired or who loses credited service and is eligible for a deferred retirement benefit pursuant to the provisions of Articles II or III of this Part B, shall be deemed to have elected automatically a reduced amount of primary and/or supplementary benefits to provide surviving spouse coverage in accordance with the provisions of Part A, Article II, Section 5(a) through (g) of this program. An employe may prevent 67 77 B, ART. I, 4(a) This automatic election during the month prior to the effective date by executing a specific written rejection of such election, which includes the written consent of his spouse witnessed by the program representative, or a notary public, on a form approved by the Corporation and filing it with the Corporation. An employe may revoke a written rejection of this automatic election, without the consent of the spouse, at any time prior to commencement of benefits. (b) JOINT AND SURVIVOR OPTION Under this option, any person may be designated by the employe as the contingent annuitant. The amount of monthly benefits payable to such contingent annuitant if such contingent annuitant is living at the death of the employe shall equal any designated percentage, up to a maximum of 100%, of that portion of the employe's reduced monthly benefits (which are in lieu of benefits otherwise payable as primary benefits, supplementary benefits, or both, as the case may be) as to which the coverage is elected. Benefits hereunder shall be provided in accordance with the provisions of Part A, Article I, Section 6 of this Program. (c) THE SURVIVING SPOUSE OF AN EMPLOYE WHO (1) dies on or after attaining age 55 with 10 or more years of credited service, or at any age with 30 or more years of credited service and his date of hire was prior to January 1, 1988, but before the first day of the month coinciding with or next following the first day of absence because of retirement (or, if later, the commencement date of his monthly basic benefit in the case of an employe who defers the receipt of his monthly benefit under Part A, Article I, Section 2(b)(2)), and 68 78 B, ART. I, 4(c)(2) (2) if he had retired at the date of his death, would have been eligible for the coverage under Part A, Article I, Section 5(a) of this Program, and (3) is not covered by the provisions of Section 5 of this Article I shall be entitled to any primary or supplementary benefits otherwise payable in accordance with the provisions of Part A, Article I, Section 5(h) of this Program. SECTION 5. BENEFITS FOR SURVIVING SPOUSE IN EVENT OF AN EMPLOYE'S DEATH PRIOR TO RETIREMENT (a) ELECTION OF COVERAGE An employe who is participating for primary benefits under this Part B shall be deemed to have elected automatically, subject to all the conditions thereof, to provide, in the event of an employe's death prior to retirement, a monthly benefit for the further lifetime of the employe's designated surviving spouse. (b) BENEFITS PAYABLE The monthly benefit payable to such spouse following the employe's death while this coverage is, or is assumed to be, in effect shall be an amount equal to 60% of the employe's accrued primary and supplementary benefits under Part B of this Program applicable on account of service rendered up to his date of death which would otherwise have been payable under this Part B upon retirement of the employe at age 65. The 60% will be increased by one-quarter of one percent (1/4%) for each 12 months in excess of five (5) years that the spouse's age exceeds the employe's age or decreased by one-quarter of one percent (1/4%) for each 12 months in excess of five (5) years that the spouse's age is less than the employe's age. 69 79 B, ART. I, 5(c) (c) GENERAL PROVISIONS (1) Payment of the monthly benefit to the surviving spouse following an employe's death shall be in lieu of any death benefits otherwise payable to such spouse under Part B of this Program. (2) The benefit payable to an eligible surviving spouse under subsection (b) of this Section 5 shall include a benefit related to the employe's accrued supplementary benefit even though the employe's credited service is less than 5 years on his date of death. (3) Payment of the monthly benefit to the surviving spouse following the employe's death while this coverage is in effect shall commence on the first day of the month following the month in which the death of the employe occurs and shall continue during the further lifetime of such surviving spouse. (4) Upon the death of the designated surviving spouse following the employe's death while this coverage was in effect, there shall be paid to the beneficiary designated by the employe (or, if the employe has designated no beneficiary, to the estate of such spouse) an amount equal to the excess, if any, of (i) all of the employe's contributions under this Program as to which this coverage is applicable plus interest to the date of the employe's death over (ii) the total of any amounts paid to such spouse under this coverage. (5) No additional contributions under the Program will be required of an employe by reason of this coverage. 70 80 B, ART. I, 5(d) (d) EFFECTIVE DATE OF COVERAGE The effective date of this coverage shall be the first day of the month coinciding with the employe's commencement of participation in Part B of this program, except that in the case of an employe who marries or remarries subsequent to age 21, the effective date of the coverage with respect to the spouse by such marriage or remarriage shall be the first day of the month coinciding with or next following the first anniversary of such marriage or remarriage. (e) DURATION OF COVERAGE Once the coverage has become effective it will remain in effect (and benefits will become payable thereunder to the designated surviving spouse in the event of the employe's death) up to but excluding the earliest of the following dates: (1) the date of the final dissolution of the employe's marriage other than by the employe's death, unless a Qualified Domestic Relations order within the meaning of I.R.C. Section 414(p) provides to the contrary; (2) the first day of the month coinciding with or next following the employe's first day of absence because of retirement, except that in the case of an employe who retires for total and permanent disability on or after January 1, 1974 with less than 30 years of credited service, the coverage may remain in effect until the first day of the month coinciding with or next following the employe's attainment of age 55; or 71 81 B, ART. I, 5(e)(3) (3) the first day of the month coinciding with or next following 12 successive months from the effective date of layoff, special leave of absence without pay or transfer to the hourly rolls, except that in the case of an employe who has 10 or more years of credited service, the coverage may remain in effect until the first day of the month coinciding with or next following 24 successive months from such effective date. (f) ALTERNATIVE COVERAGE In the event the coverage described in this Section 5 ceases to be effective, and the employe has 5 or more years of credited service, or satisfies the "service" requirements of Section 11 of Article II of Part A, and in either case is credited with one or more hours of credited service or "service" accrued on or after January 1, 1989, survivor coverage as described in, and in accordance with, the provisions of Part A, Article I, Section 5(j) of this Program, is provided with respect to any accrued Part B benefits. SECTION 6. DEATH BENEFITS (a) Upon the death of the employe or, if later, the death of any contingent annuitant designated by the employe if either of the coverages provided under Section 4 of this Article I has become effective with respect to primary benefits otherwise payable under this Part B, there shall be paid to the beneficiary designated by the employe or, if the employe has designated no beneficiary, to the estate of such employe, an amount, if any, determined in accordance with the following items (1) or (2), whichever is applicable: 72 82 B, ART. I, 6(a)(1) (1) DEATH OF THE EMPLOYE PRIOR TO RETIREMENT -- an amount equal to the excess of (i) all of the employe's contributions under this Program plus interest to the date of the employe's death over (ii) the sum of all payments, if any, made to the employe, to any such designated contingent annuitant of benefits under either of such coverages which are in lieu of primary benefits otherwise payable under this Part B, and to any alternate payee subject to a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p). (2) DEATH OF THE EMPLOYE AT OR AFTER RETIREMENT -- an amount equal to the greater of: (i) the total of (aa) 125% of the employe's contributions made prior to July 1, 1971 under Section 3 of Article I of this Part B (or, if greater, 30 times the amount of monthly primary retirement benefits accrued prior to July 1, 1971 that would have been payable under this Part B if neither of such coverages with respect to primary benefits otherwise payable under this Part B had become effective), and (bb) 125% of the employe's contributions made on and after July 1, 1971 under Section 3 of Article I of this Part B (or, if greater, the total of such contributions plus interest to the date of the employe's retirement), or (ii) all of the employe's contributions under Section 3 of Article I of this Part B plus interest to the date of the employe's retirement, 73 83 B, ART. I, 6(a)(2) less the sum of all payments, if any, made to the employe and to any such designated contingent annuitant of primary benefits provided under this Part B, or of benefits under either of such coverages which are in lieu of primary benefits otherwise payable under this Part B, and to any alternate payee subject to a Qualified Domestic Relations Order within the meaning of Section 414(p). In the case of an employe whose death occurs while the coverage set forth in Section 5 above is in effect, the foregoing terms and provisions of this Section 6 are subject to and limited by the conditions of such coverage. (b) Except as provided in Sections 4 and 5 of this Article I, which describe optional benefits that may be related to, or in lieu of, supplementary benefits under this Part B, no benefit related to an employe's accrued supplementary benefit is payable following the death of an employe or retired employe. SECTION 7. BENEFITS FOR EMPLOYES WHO RETIRED WITH BENEFITS PAYABLE COMMENCING PRIOR TO OCTOBER 1, 1990 (a) Except as otherwise provided in this Section 7, an employe who retired with benefits payable commencing prior to October 1, 1990, or the eligible surviving spouse or contingent annuitant of such an employe, or the eligible surviving spouse of an employe who died in active service prior to September 18, 1990, with the coverage to provide benefits for his surviving spouse in effect, shall be entitled to the benefits, if any, under the Program as it existed immediately prior to the amendments which became effective as of October 1, 1990. 74 84 B, Art. I, 7(b) (b) Effective October 1, 1990, the benefits payable under this Part B to such retired employes or the benefits payable to retired employes, surviving spouses, and contingent annuitants in lieu of, or related to, such benefits shall be increased to the extent necessary to provide monthly Part B benefits equal to the benefits which would have been payable had the Part B benefits payable to the employe at or after age 65 been increased by 0.195% for each complete calendar month of retirement between October 1, 1987 and October 1, 1990. (c) In applying the formula described in subsection (b) immediately above, the following rules shall be used: (1) the total annual increase in benefits payable to the employe at or after age 65 as set forth in subsection (b) shall not exceed 7%; (2) in the case of an eligible surviving spouse of an employe who died in active service, the formula shall be based on the number of complete calendar months from the date of the employe's death or October 1, 1987, if later, to October 1, 1990. (d) An employe who retired under the Program with benefits payable commencing prior to September 18, 1990 and who has survivor coverage in effect with respect to all, or any part, of his Part B benefits but whose designated spouse or contingent annuitant is deceased prior to September 18, 1990, shall receive the increase in benefits which otherwise would have been payable to him under this Section 7 on or after September 18, 1990 as if such coverage was not in effect. 75 85 B, Art. I, 7(e) (e) Notwithstanding any of the foregoing provisions of this Section 7, an employe who retired voluntarily between ages 55 and 59 with benefits payable commencing prior to September 18, 1990, and whose combined years of age and years of credited service totaled less than 85, or an employe whose separation from service prior to age 60 was classified by the Corporation as a discharge for cause, shall not be eligible for the increase in benefits provided in this Section 7. (f) Any early retirement supplement or interim supplement payable pursuant to Section 7 of Article I of Part A shall be redetermined taking into account any increase in the supplementary benefit payable under this Section 7. 76 86 B, Art. II ARTICLE II PROVISIONS RELATING SPECIFICALLY TO PRIMARY BENEFITS SECTION 1. SEPARATION FROM SERVICE PRIOR TO AGE 60 (a) Except as otherwise provided under subsections (b) and (c) of this Section 1, an employe upon separating from service prior to age 60 for any reason except death or retirement must either: (1) leave his contributions in Part B and receive, commencing on the first day of the month coinciding with or next following the employe's attainment of age 65 (or, on a reduced basis pursuant to paragraph (c)(2) of Article III of Part A, on the first day of any month coinciding with or following the employe's attainment of age 55 and prior to age 65), the deferred primary retirement benefit which will have accrued under Part B by his own contributions and, if he has contributed for at least five years or has 5 or more years of credited service as determined under Article II of Part A, the Corporation's contributions; or (2) elect to have returned to him all of his own contributions under Section 3 of Article I of this Part B plus interest to the date of such election and, if he has 5 or more years of credited service as determined under Article II of Part A, he will receive a deferred benefit related to the Corporation contributions made up to the time of such withdrawal of contributions, commencing on the first day of the month coinciding with or next following the employe's attainment of age 65 (or, on a reduced basis pursuant to paragraph (c)(2) of Article III of Part A, on the first day of any month coinciding with or following the employe's 77 87 B, Art. II, 1(a)(2) attainment of age 55 and prior to age 65). Any return of contributions must include the written consent of his spouse witnessed by a program representative, or a notary public, on a form approved by the Corporation and filing it with the Corporation. Upon any subsequent reemployment, the employe will be considered as a new employe for purposes of the provisions of this Part B relating to primary benefits except as otherwise provided in Section 2 of this Article II. (b) An employe who is separated from service in a layoff classification (1) at or after age 55 with 10 or more years of credited service, (2) prior to age 55 with 30 or more years of credited service and whose date of hire was prior to January 1, 1988, or (3) prior to age 55 with 10 but less than 30 years of credited service at the time of such separation, provided that his credited service at such time is sufficient so that he will retain credited service until age 55, will not be required to make either election described in (a) immediately above. (c) An employe who is separated from service and who, as a consequence of such separation, elected to receive a deferred primary retirement benefit under Part B as described in subsection (a)(1) of this Section 1, may reinstate the primary retirement benefit accrued at the time he made such election to receive a deferred primary benefit provided that he (1) contributes under Part B from the date of such reemployment, and (2) returns to the Corporation any annuity notice or other certificate of entitlement related to such deferred primary retirement benefit. (d) For purposes of Section 6 of Article I of this Part B, an employe to whom this Section 1 applies (other than such an employe who elects to have contributions returned with interest) shall be considered to have retired on the date the payment of primary benefits commences under this Part B. 78 88 B, Art. II, 2 SECTION 2. TEMPORARY ABSENCE (a) TEMPORARY ABSENCE BUT RECEIVING FULL SALARY If an employe is temporarily absent from active duty but is receiving full salary, his monthly contributions under Part B will be deducted in the usual way and his retirement benefits will be accrued just as if he were at work. (b) TEMPORARY ABSENCE BUT RECEIVING SALARY AT REDUCED RATE OR NO SALARY No contributions will be required from an employe who is temporarily absent and receiving salary at a reduced rate or no salary, and no primary retirement benefits will be accrued under this Part B for the period during which no contributions are made. This will in no way affect retirement benefits previously accrued. Contributions, if made, shall be upon the basis you the reduced salary except that contributions, if made, by an employe on Disability Leave of Absence shall be upon the basis of the employe's full monthly base salary rate. (c) LAYOFFS (1) No contributions will be permitted from an employe who has been laid off, and no primary retirement benefits will be accrued under this Part B during the period of layoff. 79 89 B, Art. II, 2(c)(2) (2) An employe who is laid off may, at his option, leave his contributions in the Program, in which event his primary retirement benefits previously accrued under this Part B will remain to his credit subject to the provisions of subsection (4) of this Section 2(c). If such an employe is thereafter reemployed within a period of twelve months from the date he is laid off (24 months in the case of an employe who is laid off with 10 or more years of credited service), he will resume contributions under Part B. (3) If an employe who is laid off and withdraws his contributions is reemployed within twelve months after the date he is laid off (24 months in the case of an employe who is laid off with 10 or more years of credited service) and elects to contribute under Part B from the date of such reemployment, he may then, at his election, return the amount which he had withdrawn and thereupon become eligible to receive the primary retirement benefits, covered by contributions made prior to the date of his layoff, for which he would have been eligible if he had not withdrawn his contributions. (4) If an employe is not rehired within twelve months of the date he is laid off (24 months in the case of an employe who is laid off with 10 or more years of credited service), he will be treated as a retirement under the Program, or as a separation, with the rights provided in the "Eligibility for Retirement" section of this Program or under Section 1 of this Article II, whichever is applicable. 80 90 B, Art. II, 3 SECTION 3. INTEREST CREDITS Prior to October 1, 1976, in any case in which interest is payable under the terms of this Program, such interest will be determined on the basis of the rates allowed by the Insurance Companies referred to in Section 6 of General Provisions and will be computed on each contribution from the July 1st following the date such contribution was made to the first of the month in which such interest is payable (but in no event beyond the earlier of the death or retirement of the employe), and will be compounded annually. On and after October 1, 1976, contributions shall accrue interest at a rate of 5%. On and after October 1, 1988, contributions shall accrue interest at a rate of 120% of the annual Federal mid-term rate in effect under Section 1274 of the Internal Revenue Code for the first month of the plan year. SECTION 4. TREATMENT OF EMPLOYES RETURNING FROM LEAVE OF ABSENCE OR LAYOFF IN CONNECTION WITH A NATIONAL EMERGENCY (a) An employe who is granted a Military Leave of Absence, or other leave of absence in connection with a national emergency, or who is laid off as a result of declining volume of business related to such emergency, may be permitted to contribute and to accrue primary retirement benefits under Part B in such amounts and for the period for which he would have been eligible if he had remained actively in the employ of the Corporation, or one of its subsidiaries, under such rules as the Named Fiduciary or its delegate may establish, provided: (1) the employe returns to work following the termination of his leave of absence or reenters the employ of the Corporation, or one of its subsidiaries, within such period and in accordance with the rules established by the Named Fiduciary or its delegate; and 81 91 B, Art. II, 4(a)(2) (2) the employe participates for primary benefits under Part B, if eligible, upon his return to work following the termination of his leave of absence or upon his reemployment by the Corporation or one of its subsidiaries. (b) The salary to be used in determining an employe's eligibility for contributions, and the amount of contribution, under this Section 4 shall be the base salary of such employe at the time of his leave of absence or layoff from the Corporation, or one of its subsidiaries. (c) The Named Fiduciary or its delegate shall, from time to time, adopt rules to carry out the provisions of this Section in conformity with the objectives of this Program. (d) Notwithstanding the provisions of Section 1(b) of Article I of this Part B, an employe who may have become eligible to make contributions in accordance with this Section 4 and who does not so elect shall be eligible nevertheless for supplementary retirement benefits under Part B. SECTION 5. TREATMENT OF FORMER SALARIED EMPLOYES WHO RETIRE UNDER THE GENERAL MOTORS HOURLY-RATE EMPLOYES PENSION PLAN An hourly-rate employe who has contributions in Part B of this Program, and who retires under the provisions of the "General Motors Hourly-Rate Employes Pension Plan", shall be eligible to receive primary benefits under this Part B based upon the amount of contributions to his credit. Solely for the purpose of determining the basis upon which such primary benefits are payable, such employe shall be treated as a retirement under this Program on the basis which most closely corresponds to his retirement under the "General Motors Hourly-Rate Employes Pension Plan". 82 92 B, Art. II, 6 SECTION 6. TREATMENT OF FORMER SALARIED EMPLOYES WHO RETIRE UNDER THE ELECTRONIC DATA SYSTEMS (EDS) PENSION PLAN A salaried employe who has contributions in Part B of this Program, and who retires under the provisions of the "EDS Pension Plan", shall be eligible to receive primary benefits under this Part B based upon the contributions to his credit. Solely for the purpose of determining the basis upon which any such primary benefits may be payable, retirements from EDS (i) prior to age 60 will be deemed to be voluntary, and (ii) at or after age 60 will be deemed to be as provided under Section 11(b) of the General Provisions. ARTICLE III PROVISIONS RELATING SPECIFICALLY TO SUPPLEMENTARY BENEFITS SECTION 1. RETENTION OF DEFERRED SUPPLEMENTARY RETIREMENT BENEFITS IF SEPARATED An employe who, on or after October 1, 1990, loses accumulated credited service under the provisions of Article II of Part A, who is not retired and who is eligible for a deferred retirement benefit under Article III of Part A shall, subject to the provisions of Section 1(b) of Article I of this Part B, be entitled to receive deferred supplementary benefits, with the payment of such benefits to commence at the same time and under the same provisions as applicable to his deferred retirement benefit under Part A. 83 93 B, Art. III, 2 SECTION 2. TREATMENT OF FORMER SALARIED EMPLOYES WHO RETIRE UNDER THE GENERAL MOTORS HOURLY-RATE EMPLOYES PENSION PLAN An hourly-rate employe with 5 or more years of credited service who has accrued supplementary benefits under Part B of this Program, and who retires under the provisions of the "General Motors Hourly-Rate Employes Pension Plan", shall be eligible to receive supplementary benefits, if any, as determined in Article I, Section 2(a)(2) of this Part B, based upon the employe's credited service and average monthly base salary in effect immediately prior to his transfer to the hourly payroll. Solely for the purpose of determining the basis upon which any supplementary benefits may be payable, such employe shall be treated as a retirement under this Program on the basis which most closely corresponds to his retirement under the "General Motors Hourly-Rate Employes Pension Plan". SECTION 3. TREATMENT OF FORMER SALARIED EMPLOYES WHO RETIRE UNDER THE EDS PENSION PLAN A salaried employe with 10 or more years of credited service who has contributed while eligible, does not withdraw his contributions while employed by EDS and who retires under the provisions of the "EDS Pension Plan", shall be eligible to receive any supplementary benefits for which he may be eligible under this Part B, using his base salary at EDS and General Motors to determine his "average monthly base salary." Solely for the purpose of determining the basis upon which any such supplementary benefits may be payable, retirements from EDS (i) prior to age 60 will be deemed to be voluntary, and (ii) at or after age 60 will be deemed to be as provided under Section 11(b) of the General Provisions. A salaried employe with less than 10 years of credited service at the date of his transition to EDS shall not be eligible to receive any supplementary benefits hereunder, since all of the assets and liabilities related to any and all supplementary benefits to which any such employe may have been entitled have been transferred from the Program Trust to EDS in connection with the transition of certain General Motors employes to EDS. 84 94 Gen. Pro., 1 GENERAL PROVISIONS SECTION 1. DEFINITION OF CERTAIN TERMS USED IN THIS PROGRAM (a) EMPLOYES (1) Unless the context indicates otherwise, the term "employes" as used in this Program shall mean salaried employes of the Corporation and its directly or indirectly wholly-owned or substantially wholly-owned domestic or foreign subsidiaries in accordance with I.R.C. Section 414(b), (c), (m), (n), and (o) (other than such employes while assigned to operations in Canada after 1970, and employes of any directly or indirectly wholly-owned or substantially wholly-owned subsidiary of the Corporation acquired or formed by the Corporation on or after March 1, 1984, excluding employes of the Saturn Corporation through December 31, 1991, and employes of the General Motors Investment Management Corporation) (i) who are working in the United States, or (ii) who are citizens of or domiciled in the United States and who have been or may hereafter be hired in the United States by the Corporation or its said subsidiaries and who are sent out of the United States by the Corporation or its said subsidiaries to work in foreign operations, and whose services, if discontinued, would be discontinued by recalling said employes to the United States and terminating their services in the United States (herein sometimes referred to as United States Employes in Foreign Service). Employes compensated wholly or in part on a commission basis shall be regarded as "employes" and may participate in the Program to the extent and subject to the conditions set forth in Section 10 of these General Provisions and other applicable sections of the Program. Employes classified by the 85 95 Gen. Pro., 1(a)(1) Corporation as (i) "part-time employes" -- more than "half-time" (employes who work one-half or more of the employing unit's work week), or (ii) "Flexible Service" employes (employes hired on an indefinite basis who are regularly scheduled to work between 50% and 80% of the employing unit's base work week) shall be regarded as "employes", provided, however, that the provisions of Part A, Article II, Section 2(e) of this Program shall apply to "Flexible Service" employes. Effective October 1, 1990, the term "employes" also shall include salaried employes of General Motors who are working at GM operations in Puerto Rico. Certain benefit rates and a benefit formula applicable solely to such employes, which are, with respect to such employes, in lieu of the benefit rates and benefit formula otherwise applicable hereunder, are set forth in Exhibit C of this Program. (2) The term "employes" shall not include employes who are classified as (i) "temporary employes", including per diem employes, or (ii) "part-time employes" -- less than half-time (employes who work less than one-half of the employing unit's work week) -- provided, however, that the provisions of Part A, Article II, Section 11 of this Program shall apply to each of these classifications, as may be applicable. (3) The term "employes" shall not include employes represented by a labor organization who are covered by a collective bargaining agreement which incorporates or makes as a part thereof: (i) this Program as amended by the collective bargaining agreement, or 86 96 Gen. Pro., 1(a)(3)(ii) (ii) a program or plan similar in purpose to this Program, or (iii) some other plan or program acknowledged by the Corporation and the employes' bargaining agent to be a substitute for, or in lieu of, benefits provided by this Program, or (iv) an understanding that this Program shall cease prospectively to be available, applicable, or operative with respect to each salaried employe covered by such agreement. Such employes shall cease to be eligible for participation in this Program as of the effective date of, or at such other time as may be specified in, such collective bargaining agreement. If such collective bargaining agreement expires or is terminated, and the employe remains a represented employe, such employe shall continue to be ineligible for participation in this Program during the period required to conclude a new collective bargaining agreement. (4) The term "employes" shall not include members of the Board of Directors of General Motors Corporation or its directly or indirectly wholly-owned or substantially wholly-owned subsidiaries, or of Committees appointed by any such Board of Directors, who are not officers or regular employes of the Corporation or said subsidiaries. (5) The term "employes" shall not include leased employes as defined under Section 414(n) of the Internal Revenue Code. 87 97 Gen. Pro., 1(b) (b) BASE SALARY The term "base salary" as used in this Program shall mean the salary paid for a work week of not more than 40 hours, exclusive of any other compensation. An employe's annual base salary is limited to $200,000, as may be adjusted under applicable Federal regulations. An employe's base salary for purposes of determining benefits and contributions paid under this Program shall include salary election deferrals pursuant to (i) a cash or deferred arrangement under Section 401(k) of the Internal Revenue Code as provided under the Corporation's Savings-Stock Purchase Program for Salaried Employes in the United States, and (ii) an arrangement under Section 125 of the Internal Revenue Code. (c) AVERAGE MONTHLY BASE SALARY (1) The term "average monthly base salary" as used in this Program shall mean the monthly average of the employe's base salary for the highest 60 of the 120 months immediately preceding his termination of employment (including EDS and Hughes Aircraft employment, where applicable) or his transfer to the hourly rolls. (2) For purposes of determining "average monthly base salary" the following provisions shall apply: 88 98 Gen. Pro., 1(c)(2)(i) (i) Base salary as indicated in the table below shall be used for any month, referred to in subsection (c)(1) above, preceding termination of employment, or transfer to the hourly rolls, for which the employe's full monthly base salary rate was less than the amounts as shown below:
Retirement With Benefits Payable Commencing Base Salary ---------- ----------- $ October 1, 1990 through September 1, 1991 2,910.00 October 1, 1991 through September 1, 1992 3,025.00 October 1, 1992 and After 3,145.00
(ii) For any month referred to in subsection (c)(1) above, preceding termination of employment, or transfer to the hourly rolls, for which the employe received base salary at less than his full monthly base salary rate, his full monthly base salary rate last received preceding such month shall be used for such month. (iii) For any month referred to in subsection (c)(1) above, preceding an employe's termination of employment, or transfer to the hourly rolls, during which the employe was on the hourly payroll and subsequent to which the employe commenced service as a salaried employe, his monthly base salary rate immediately following the commencement of such service as a salaried employe shall be used for such month. 89 99 Gen. Pro., 1(d) (d) CONTINUOUS SERVICE (APPLICABLE TO PRIMARY BENEFITS UNDER PART B) (1) The term "continuous service" as used in this Program shall include all employment, whether on salary or hourly-rate, with the Corporation and its directly or indirectly wholly-owned or substantially wholly-owned domestic or foreign subsidiaries, now owned or hereafter acquired, as well as service with any company (including service with any directly or indirectly wholly-owned or substantially wholly-owned subsidiary of such company) of which substantially all the assets have been or are hereafter acquired by the Corporation or its said subsidiaries. (2) Any period during which an employe has been or is absent from service under an approved leave of absence with pay, as well as any period not in excess of one month during which an employe has been or is absent from service under such leave of absence without pay, will be included in the calculation of the amount of continuous service. In the case of any employe absent from service in excess of one month under an approved leave of absence without pay, the period during which said employe has been or is absent from service under such leave shall be excluded in the calculation of the amount of continuous service, but his continuous service shall not be broken. An employe who leaves or has left the service of the Corporation without a Military leave of absence to enter the Armed Forces of the United States or of Canada or to accept employment with the Government of the United States or with the Government of Canada and who is rehired after he has terminated such military or governmental service within such period and under such rules as the Named Fiduciary or its delegate has heretofore and may hereafter establish, shall be treated in the same manner as an employe who has received an approved leave of absence without pay. 90 100 Gen. Pro., 1(d)(3) (3) For the purposes of this Program if, after a quit or discharge, an employe has been or is rehired, his continuous service shall commence from the date of rehiring. (4) In cases of employes who have been or are released and who have not been or are not returned to work within twelve months from the date of such release, such employes shall have the same status as if they had quit. (5) In cases of employes who have been or are laid off and who have not been or are not returned to work within five years (or, if less, a period equal to the employe's continuous service prior to such layoff) from the date of such layoff, such employes shall have the same status as if they had quit. (e) FEDERAL SOCIAL SECURITY BENEFIT (1) A Federal Social Security benefit for disability or an unreduced Federal Social Security benefit for age means a benefit determined and payable under Title II of the Federal Social Security Act, as now in effect or as hereafter amended, without any reduction being made therein based on the age of the recipient. (2) Old age benefit payments or disability benefit payments, other than those payable on a basis of "need" or because of military service, under any future Federal legislation amending, superseding, supplementing, or incorporating the Federal Social Security Act, as amended, or benefits provided therein, shall be considered as benefits for age or disability under the Federal Social Security Act for purposes of this Program. 91 101 Gen. Pro., 1(e)(3) (3) If an employe is eligible for a Federal Social Security benefit for disability or an unreduced Federal Social Security benefit for age at the time of retirement or thereafter, such employe shall advise the Corporation of the effective date of entitlement to such benefit. (f) GENDER Wherever in this Program a masculine pronoun is used, it shall be deemed in all instances, where appropriate, to include the feminine also. (g) NORMAL RETIREMENT AGE The normal retirement age for any employe shall be the later of age 65 or the fifth anniversary of the date the employe commenced participation in this Program. An employe who shall cease active service after attaining the normal retirement age shall be entitled to receive a nonforfeitable retirement benefit under Article III of Part A, and Section 1 of Articles II and III of Part B, if applicable. (h) ACTUARIAL VALUE The actuarial value as of any determination date shall be calculated on the basis of the UP-84 mortality table and the applicable interest rate used by the Pension Benefit Guaranty Corporation (PBGC) as of the first day of the plan year preceding the determination date. 92 102 Gen. Pro., 2 SECTION 2. PAYMENT OF RETIREMENT BENEFITS AND SUPPLEMENTS (a) (1) Except as otherwise provided in subsection (g) of this Section 2, retirement benefits and supplements shall be paid monthly. (2) Monthly payments of an employe's retirement benefits other than for total and permanent disability shall become payable with the employe's consent commencing on the first day of the month coinciding with or next following the employe's first day of absence because of retirement and the benefits shall be payable monthly thereafter. No such consent shall be required where the present value of such benefits is $3,500 or less, as determined in accordance with I.R.C. Section 411(a)(11). (3) Total and permanent disability retirement benefits shall be payable monthly during the continuance of total and permanent disability and while the retiree otherwise remains eligible for such benefits. Such payments shall begin the latest of: (i) the first day of the month which includes the date the required proof of disability is received by the Corporation, or (ii) the first day of the month which includes the date the employe has been continuously and totally disabled for a period of five months, or (iii) the first day of the third month following the date the required proof of disability is received by the Corporation. This subsection (iii) shall not be applicable (a) if the employe dies prior to such date, or (b) where Extended Disability Benefits are less than the benefits payable under this Program. 93 103 Gen. Pro., 2(a)(3) Successive periods of absence due to the same disability as that upon which claim for total and permanent disability retirement benefits is based and aggregating at least five months will be considered the same as one continuous absence provided that the aggregate will not include any such absence which precedes the last day at work by more than one year. (4) Any supplement shall be payable in the manner provided in Section 7 of Article I of Part A. (5) Part A benefits and supplementary benefits under Part B shall not be payable with respect to any period for which any layoff payments, salary payments, or any sickness and accident benefits are payable to the employe by the Corporation or under any plan to which the Corporation has contributed. For the month in which the last such layoff payment, salary payment, or sickness and accident benefit payment is made, the Part A benefits (excluding any special benefit payable thereunder) and supplementary benefits under Part B shall be payable only with respect to that portion of the month for which no such layoff payments, salary payments, or sickness and accident benefits were payable. Any primary benefits payable under Section 2 of Article I of Part B, and any special benefit payable under Part A, shall be payable commencing the first day of the month with respect to which the initial benefit payment is payable under Part A. (b) If a retired employe who is receiving retirement benefits is reemployed by the Corporation or one of its directly or indirectly wholly-owned or substantially wholly-owned domestic subsidiaries, such employe shall cease to receive such benefits during such reemployment. Such an employe shall accrue 94 104 Gen. Pro., 2(b) additional credited service under this Program or the Program of the subsidiary where he has been reemployed as a result of such employment and, if otherwise eligible, shall be permitted to make contributions. Upon subsequent cessation of active service, the employe's monthly retirement benefits shall be adjusted with regard to such employment. (c) If a retired employe receives a retroactive Social Security Disability Insurance Benefit (DIB) award resulting from a Reconsideration or Hearing before an administrative law judge, the amount of retirement benefits to be repaid will be reduced by an amount equal to any attorney fees, paid by the retired employe, associated with the award, provided the retiree makes such repayment within 30 days of the date, on or after October 1, 1987, he is notified by GM of the amount to be repaid. This reduction applies only to attorney fees associated with a successful appeal of a denial of DIB, and includes only that portion of such fees associated with the period of time the retired employe was entitled to receive retirement benefits. Any such reimbursement for any such fees may not exceed 25 percent of the amount of any overpayment as of the first of the month immediately following the month in which the retiree is notified by Social Security of his DIB award. Attorney fees incurred for services received prior to denial of the initial application for DIB will not reduce the amount of repayment due. The above provision is to be coordinated with a similar provision in the Life and Disability Benefits Program to ensure the retired employe does not receive credit for more than the actual amount of eligible attorney fees incurred in securing the award, and any reduction, as specified above, first will be taken as a reduction to any overpayment due from the employe under the Life and Disability Benefits Program. 95 105 Gen. Pro., 2(d) (d) In order to retire under this Program, an employe must have unbroken credited service at the time of his retirement, except that a person who is eligible for benefits under the Income Protection Plan and is not receiving deferred retirement benefits under this Program or the Hourly-Rate Employes Pension Plan shall not be precluded from retiring without return to employment, even though he shall have incurred a break in credited service while on continuous layoff from the Corporation. (e) In the event that it shall be found that any retiree, surviving spouse or contingent annuitant to whom a benefit is payable is unable to care for his or her affairs because of illness or accident, any monthly benefit payment and supplement or survivor benefit due (unless prior claim therefor shall have been made by a duly qualified guardian or other legal representative) may be paid to the spouse, parent, brother, sister, or other person or party (including private or public institutions) deemed by the Corporation to have incurred expense for such retiree or survivor otherwise entitled to payment. Any such payment shall be a payment for the account of the retiree or survivor and shall be a complete discharge of any liability of the Program therefor. (f) Notwithstanding any other provision of this Section 2, an employe attaining age 70-1/2 on and after January 1, 1988, will commence monthly receipt of his accrued benefits under this Program, beginning April 1 of the calendar year immediately following the year the employe attains or attained age 70-1/2. No employe shall be eligible to receive any such payment for any month prior to April, 1990, however, and the first such monthly payment shall be April 1, 1990. No employe attaining age 70-1/2 prior to January 1, 1988, shall be eligible hereunder. An employe attaining age 70-1/2 after December 31, 1989, shall have his monthly payment based on his retirement benefit accrual as of December 31 of the year in which he attains 96 106 Gen. Pro., 2(f) age 70-1/2. The actuarial value of the sum of all cash distributions received by any otherwise eligible employe prior to his actual retirement under this Program will be used as an offset from any additional benefit accrual that might otherwise have been payable to such employe as a result of his working for the Corporation. (g) Notwithstanding any other provision of this Section 2, where the sum of the present value of a former employe's monthly deferred retirement benefit commencing at age 65 under Part A, when combined with the present value of any employer provided monthly deferred retirement benefit commencing at age 65 under Part B, is $3,500, or less, the total amount of any employer provided monthly benefit otherwise payable to such former employe, or to the surviving spouse of such deceased former employe, will be paid in a single sum. In the case of a former employe who is not vested in the retirement benefits described in the preceding sentence, such former employe will be deemed, upon termination of Program participation, to have constructively received the total amount of such nonvested benefit. Where the present value of such benefit is more than $3,500, an otherwise eligible former employe, or surviving spouse, will have an option to receive a single-sum payment, but only with spousal consent, where applicable. Any such single-sum payment shall be in full and final satisfaction of any and all benefit entitlement under this Program, and is irrevocable when paid. Solely for purposes of this subsection (g), the interest rate to be used in the determination of the present value of any single sum determined hereunder will be the Pension Benefit Guaranty Corporation's applicable interest rates in effect at the beginning of the plan year in which the single sum is paid. The applicable interest rates shall be used where the present value of the benefit is not in excess of $25,000. Where the present value of the benefit based on applicable interest rates exceeds $25,000, 120% of the applicable interest rates shall be used, provided the remaining lump-sum value not be less than $25,000. 97 107 Gen. Pro., 2(g) In the event any such former employe who receives a single-sum payment is subsequently reemployed by the Corporation, he will be treated as a newly-hired employe, with no entitlement to the reinstatement of any previous credited service, in recognition of his earlier receipt of a single-sum payment representing the present value of the lifetime monthly benefit otherwise related to all such prior years of service. Effective October 1, 1989, in lieu of a single-sum payment which has a present value of more than $3,500, as determined hereunder, a former employe or surviving spouse may elect to receive lifetime monthly benefits that are the actuarial equivalent of such former employe's or surviving spouse's monthly deferred retirement benefits under Part A and Part B, if any. In the event a single-sum payment of $3,500, or less, cannot be made because the identity or location of the former employe or surviving spouse cannot be determined after reasonable efforts to do so have been made, and the payment remains undeliverable for a period of one year from the date of mailing of such notification to the last known address of the former employe, all liability for payment thereof shall terminate immediately, and the amount of the payment shall be applied to reduce Corporation contributions to the Program; provided, however, in the event the identity or location of the former employe or surviving spouse is subsequently determined, such payment shall be made in a single sum. 98 108 Gen. Pro., 3 SECTION 3. DEDUCTIONS FOR WORKERS COMPENSATION In determining the monthly benefits payable under Part A and any supplementary benefits payable under Part B of this Program, a deduction shall be made, unless prohibited by law, equivalent to all or any part of Workers Compensation (including compromise or redemption settlements) payable to such employe by reason of any law of the United States, or any political subdivision thereof, which has been or shall be enacted, provided that such deductions shall be to the extent that such Workers Compensation has been provided by premiums, taxes, or other payments paid by or at the expense of the Corporation, except that no deduction shall be made for the following: (a) Workers Compensation payments specifically allocated for hospitalization or medical expense, fixed statutory payments for the loss of any bodily member, or 100% loss of use of any bodily member, or payments for loss of industrial vision. (b) Compromise or redemption settlements payable prior to the date monthly retirement benefits first become payable. SECTION 4. ASSIGNMENTS AND LOANS (a) No right or interest of any participant or of any beneficiary of any participant under the Program shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner, but excluding devolution by death or mental incompetency, and no right or interest of any such participant or beneficiary shall be liable for, or subject to, any obligation or liability of such participant 99 109 Gen. Pro., 4(a) or beneficiary except in accord with provisions of a Qualified Domestic Relations Order within the meaning of I.R.C. Section 414(p); provided, however, that any retired employe or eligible survivor: (1) who elects health care coverages or life insurance made available by General Motors may, insofar as it is consistent with the regulations governing the plans providing such coverages, participate in such coverages and have deducted, pursuant to the retired employe's or survivor's written authorization and direction acceptable to the Corporation, the required contribution for such coverages as it may be established from time to time, (2) will have Federal and state income tax withheld pursuant to Federal and state statutes or regulations unless, only with respect to Federal income tax, elected otherwise by submitting to the Corporation written authorization and direction acceptable to the Corporation, or (3) who submits to the Corporation written authorization and direction acceptable to the Corporation may have amounts of not less than $40.00 per month, but in no event more than 10% of the retired employe's monthly benefit, withheld to repay any outstanding overpayment owing to any benefit plan of the Corporation. (b) An employe may not borrow against his contributions under this Program at any time. 100 110 Gen. Pro., 5 SECTION 5. CORPORATION CONTRIBUTIONS (a) The Corporation intends to pay to the Insurance Companies each year such contributions as are determined to be required for the purpose of meeting the cost of primary benefits accrued prior to January 1, 1985 under Part B, any additional cost of providing for payment of unreduced primary benefits accrued prior to January 1, 1985 under Part B prior to age 65, and the cost of the optional benefits described in Sections 4 and 5 of Article I of Part B to the extent such optional benefits are in lieu of, or related to, primary benefits accrued prior to January 1, 1985 under Part B, to the extent not covered by the contributions made by the employes prior to January 1, 1985. (b) While the Corporation does not guarantee to do so, it hopes and expects to provide, over such period as it may determine, the cost of the benefits described in Part A, the primary benefits accrued after December 31, 1984 described in Part B, to the extent not covered by employe contributions made after December 31, 1984, and the supplementary benefits described in Part B (including the optional benefits described in Sections 5, 6, and 9 of Article I of Part A and in Sections 4 and 5 of Article I of Part B to the extent such optional benefits are in lieu of, or related to, such benefits), either through placing funds in a retirement trust or through a contract with one or more insurance companies, or both. Such funds will include employe contributions made after January 1, 1985. The Named Fiduciary may appoint an investment manager or managers, as defined under the Employee Retirement Income Security Act of 1974 or regulations thereunder, to manage any assets of the Program. 101 111 Gen. Pro., 5(c) (c) Benefits under Part A, primary benefits accrued after December 31, 1984 under Part B and supplementary benefits under Part B (including the aforementioned optional benefits) shall be paid only to the extent that they are provided for by the assets of such retirement trust or under such contract with one or more insurance companies, and there shall be no liability or obligation on the part of the Corporation to make any contributions to the retirement trust or to the insurance company or companies. The amounts by which benefits otherwise payable hereunder are in excess of those provided under the Program as constituted prior to September 15, 1973 shall not be paid hereunder if amounts equal to such excess have been paid directly by the Corporation. No liability for the payment of benefits under Part A, primary benefits accrued after December 31, 1984 under Part B or supplementary benefits under Part B (including the aforementioned optional benefits) shall be imposed upon the Corporation, the officers, directors, or stockholders of the Corporation. (d) The Corporation shall comply with all funding requirements of the Employee Retirement Income Security Act of 1974 as they apply to this Program. (e) The Corporation may charge to the fund expenses necessary for the proper administration of the Retirement Program and investment of the funds, including the direct cost of benefit administration performed by, or on behalf of, the Corporation for the Retirement Program, the cost of consultant and actuarial services, and Pension Benefit Guaranty Corporation premiums for participants. 102 112 Gen. Pro., 6 SECTION 6. PAYMENT OF CONTRIBUTIONS TO PROVIDE ANNUITIES (a) Prior to January 1, 1977, contributions of the employes and of the Corporation for primary benefits (including optional benefits described in Sections 4 and 5 of Article I of Part B which are in lieu of, or related to, such primary benefits) were paid over to the Metropolitan Life Insurance Company, the Aetna Life Insurance Company, and The Prudential Insurance Company of America as the considerations for the Corporation's purchase of benefits under the Group Annuity Contract made with them and effective as of July 1, 1940, and as subsequently amended. Commencing January 1, 1977, the Corporation has made and intends to make contributions from time to time for addition to and accumulation in an account to be held by each of the Insurance Companies under the Group Annuity Contract for providing annuities as described in Section 6(b) below. Such contributions have included contributions made by employes on and after January 1, 1977 and prior to January 1, 1985. (b) The annuities which were purchased under the Group Annuity Contract prior to January 1, 1977 will continue in force on and after that date, subject to the terms and conditions of the Group Annuity Contract. When each employe becomes entitled to receive a primary benefit accrued prior to January 1, 1985 under Part B, it is the intention of the Corporation to provide an additional annuity equal to such primary benefit, less any annuity then in force on the employe's account under the Group Annuity Contract. Payment of such annuities will be assured by establishing the appropriate reserves in the account held by each Insurance Company under the Group Annuity Contract. 103 113 Gen. Pro., 6(c) (c) The primary benefits referred to in Part B are those purchased prior to January 1, 1977 from the Insurance Companies or for which the appropriate reserves have been established by the Insurance Companies and which are payable by the Insurance Companies under the Group Annuity Contract. The Corporation intends to pay to the Insurance Companies the contributions which will be accumulated for the purpose of establishing reserves to provide primary benefits accrued prior to January 1, 1985 when such benefits are to commence. It is the responsibility of the Insurance Companies to pay to the employes and the designated contingent annuitants, surviving spouses, and beneficiaries of such employes all primary benefits accrued prior to January 1, 1985 resulting from the contributions made by both the employes and the Corporation for such benefits (including the optional benefits described in Sections 4 and 5 of Article I of Part B to the extent such optional benefits are in lieu of, or related to, primary benefits accrued prior to January 1, 1985 under Part B) and paid as the considerations for the purchase of such benefits or allocated by the Insurance Companies as reserves to assure payment of such benefits. SECTION 7. AMENDMENT, MODIFICATION, SUSPENSION, OR TERMINATION, MERGER, CONSOLIDATION, OR TRANSFER OF ASSETS OF PROGRAM BY CORPORATION (a) The Corporation reserves the right, by and through its Board of Directors, to amend, modify, suspend, or terminate the Program in the future. Absent a written delegation of authority from the Board of Directors, no one has any authority whatsoever to commit to the provision of any retirement benefit, or benefit provision, not otherwise provided expressly under the written terms of this Program, or to change any eligibility criteria, or any other provision or criteria of this Program as constituted herein. 104 114 Gen. Pro., 7(b)(1) (b) (1) If the Corporation, in accordance with this Section 7, or the Pension Benefit Guaranty Corporation, partially or totally terminates the Program, the amount of the assets, which are available to provide benefits, and which are held by the trustees and insurance companies as of the termination date, shall be allocated, after deducting expenses for administration or liquidation, in the following manner and order to the extent of the sufficiency of such assets, and in accordance with any regulations for such determinations as may be issued by the Pension Benefit Guaranty Corporation: (aa) First, to that portion of each individual's accrued benefit which is derived from the participant's mandatory contributions. (bb) Second, in the case of benefits payable as an annuity -- (i) In the case of the benefit of a participant or beneficiary which was in pay status as of the beginning of the 3-year period ending on the termination date of the Program, to each such benefit, based on the provisions of the Program (as in effect during the 5-year period ending on such date) under which such benefit would be the least. (ii) In the case of a participant's or beneficiary's benefit (other than a benefit described in subparagraph (bb)(i) above) which would have been in pay status as of the beginning of such 3-year period if the participant had retired prior to the beginning of the 3-year period and if his benefits had commenced (in the normal form of annuity under the Program) as of the beginning of such period, to each such benefit based on the provisions of the Program (as in effect during the 5-year period ending on such date) under which such benefit would be the least. 105 115 Gen. Pro., 7(b)(1)(bb) For purposes of subparagraph (bb)(i) above, the lowest benefit in pay status during a 3-year period shall be considered the benefit in pay status for such period. (cc) Third, to all other benefits (if any) of individuals under the Program which are guaranteed under the plan termination insurance provisions of the Employee Retirement Income Security Act of 1974 determined without regard to Section 4022(B)(a) of said Act. (dd) Fourth, to all other nonforfeitable benefits under the Program. (ee) Fifth, to all other benefits under the Program. (2) (aa) The amount allocated under any of the preceding paragraphs with respect to any benefit shall be properly adjusted for any allocation of assets with respect to the benefit under a prior paragraph of this Section 7. (bb) If the assets available for allocation under any of the preceding paragraphs (other than paragraphs (b)(1)(dd) and (b)(1)(ee)) are insufficient to satisfy in full the benefits of all individuals which are described in such paragraphs, the assets shall be allocated pro rata among such individuals on the basis of the present value (as of the termination date) of their respective benefits described in such paragraphs. 106 116 Gen. Pro., 7(b)(2)(cc) (cc) If the assets available for allocation under paragraph (b)(1)(dd) are insufficient to satisfy in full the benefits of individuals described in that paragraph: (i) Except as provided in subparagraph (b)(2)(cc)(ii) below, the assets shall be allocated to the benefits of individuals described in paragraph (b)(1)(dd) on the basis of the benefits of individuals which would have been described in such paragraph (b)(1)(dd) under the Program as in effect at the beginning of the 5-year period ending on the date of the Program's termination. (ii) If the assets available for allocation under subparagraph (b)(2)(cc)(i) above are sufficient to satisfy in full the benefits described in such subparagraph (without regard to this subparagraph), then for purposes of subparagraph (b)(2)(cc)(i), benefits of individuals described in such subparagraph shall be determined on the basis of the Program as amended by the most recent Program amendment effective during such 5-year period under which the assets available for allocation are sufficient to satisfy in full the benefits of individuals described in subparagraph (b)(2)(cc)(i) and any assets remaining to be allocated under such subparagraph shall be allocated under subparagraph (b)(2)(cc)(i) on the basis of the Program as amended by the next succeeding Program amendment effective during such period. 107 117 Gen. Pro., 7(b)(3) (3) In the event of any termination or partial termination of the Program, the right of all affected employes to benefits accrued to the date of such termination or partial termination, to the extent funded as of such date, is nonforfeitable. (4) If any assets of the Program attributable to employe contributions remain after all liabilities of the Program to participants and their beneficiaries have been satisfied, such assets shall be equitably distributed to the employes who made such contributions (or their beneficiaries) in accordance with their rate of contributions. Any residual assets of the Program may be distributed to the Corporation if all liabilities of the Program to participants and their beneficiaries have been satisfied. (5) For purposes of this Section 7(b), the term "mandatory contributions" shall mean amounts contributed to the Program by a participant which are required as a condition of participation in the Program, or as a condition of obtaining benefits under the Program attributable to employer contributions. For this purpose, the total amount of mandatory contributions of a participant is the amount of such contributions reduced (but not below zero) by the sum of the amounts paid or distributed to him under the Program before its termination. (6) If the Secretary of the Treasury determines that the allocation made pursuant to this Section 7 results in discrimination prohibited by Section 401(a)(4) of the Internal Revenue Code of 1986, or as it may be subsequently amended, then, if required to prevent the disqualification of the Program (or any trust under the Program) under Section 401(a) or 403(a) of such Code, the assets allocated shall be reallocated to the extent necessary to avoid such discrimination. 108 118 Gen. Pro., 7(c) (c) In the event of any merger or consolidation with, or transfer of assets or liabilities to, any other plan or program, each participant in the Program would, if the Program then terminated, receive a benefit immediately after the merger, consolidation, or transfer which is at least equal to the benefit such participant would have been entitled to receive immediately before the merger, consolidation, or transfer, if the Program had then terminated. SECTION 8. GENERAL MOTORS SALARIED EMPLOYES IN PUERTO RICO Prior to September 30, 1990, General Motors salaried employes in Puerto Rico were able to contribute and accrue benefits under the General Motors Retirement Program for Salaried Employes in Puerto Rico, subject to the terms and conditions therein prescribed. Effective October 1, 1990, such Program, as well as all funds related to it, was merged with this Program. Any benefits accrued under such Program prior to October 1, 1990, will be paid from this Program. Effective October 1, 1990, salaried employes in Puerto Rico are covered by the terms and conditions of this Program, except as otherwise may be provided with respect to those provisions set forth in Appendix C. SECTION 9. NON-DUPLICATION OF BENEFITS Except as provided in Section 6 of Article II of Part A, no employe of General Motors Corporation or of its said subsidiaries eligible to accrue benefits under this Program will be eligible to accrue benefits under any separate plan, nor will any employe, while accruing benefits under any one plan, be eligible to accrue benefits under any other retirement or pension plan. 109 119 Gen. Pro., 10 SECTION 10. PARTICIPATION IN PROGRAM BY EMPLOYES COMPENSATED WHOLLY OR IN PART ON A COMMISSION BASIS The provisions set forth in this Section 10 shall be applicable, notwithstanding any other provision of this Program, to employes who are compensated wholly on a commission basis and to employes compensated on a salaried basis but who have periods of employment either prior to or subsequent to such employment on a salaried basis when compensated wholly or in part on a commission basis, subject to the reservation and limitation, however, set forth in the immediately following sentence. Such provisions shall not be applicable to employes compensated wholly or in part on a commission basis who are represented by a labor organization unless such provisions are made applicable to such employes through understandings between the Corporation and their collective bargaining representatives. (a) PART A BENEFITS AND SUPPLEMENTARY BENEFITS UNDER PART B For purposes of Part A benefits and supplementary benefits under Part B, credited service of any employe to whom this Section 10 applies shall include periods of employment (and related periods of absence), when compensated wholly or in part on a commission basis, provided such periods would otherwise be included in the determination of credited service under Article II of Part A. For any employe to whom this Section 10 applies, average monthly base salary for purposes of Part A benefits and supplementary benefits under Part B (or base salary for purposes of the computation under Section 7(g) of Article I of Part A) shall be determined on the basis of such employe's Annual Earnings Base, as defined below, in lieu of base salary, for any period included in the computation during which such employe was compensated wholly or in part on a commission basis. 110 120 Gen. Pro., 10(b) (b) PRIMARY BENEFITS UNDER PART B For purposes of primary benefits under Part B, any employe to whom this Section 10 applies shall be eligible to contribute for such benefits on the basis of such employe's Annual Earnings Base, as defined below, in lieu of base salary, provided such employe would otherwise be eligible to so contribute in accordance with the conditions specified in Section 1(a) of Article I of Part B; however, for purposes of meeting the service requirement of such Section 1(a), a period of employment (and related periods of absence) while compensated wholly or in part on a commission basis may be taken into account. (c) ANNUAL EARNINGS BASE The Annual Earnings Base referred to in this Section 10 shall be the annual amount, or a pro rata portion thereof with respect to any period of less than one year, as established for any year for an employe to whom this Section 10 applies under rules to be determined from time to time by the Named Fiduciary or its delegate. (d) BENEFIT CLASS CODE For purposes of determining the basic benefit rate under Part A, the Benefit Class Code applicable to a position held by the employe to whom this Section 10 applies shall be the Benefit Class Code "D". (e) OTHER PROVISIONS The Named Fiduciary or its delegate shall adopt, from time to time, other rules to carry out the provisions of this Section 10 in conformity with the objectives of this Program. 111 121 Gen. Pro., 11 SECTION 11. TREATMENT OF CERTAIN EMPLOYES UNDER LIMITED EARLY RETIREMENT PROVISIONS AND PRIOR PROGRAM PROVISIONS Effective September 30, 1987, solely to comply with applicable Federal law, the following consent-type retirements were eliminated: (i) Corporation option, (ii) special, (iii) mutually satisfactory, and (iv) early mutual. (a) LIMITED EARLY RETIREMENT PROVISIONS Effective October 1, 1987, pursuant to authority granted by the Corporation's Board of Directors to the Corporation's Management Committee, such Committee may, from time-to-time and in its sole discretion, adopt limited early retirement provisions to provide retirements (i) during a specified period of time, (ii) at a specified level of benefits, and (iii) for identified salaried employes. Any such early retirement provisions that may be adopted by the Corporation in compliance with the authority granted earlier by its Board of Directors, are made a part of this Program as though set out fully herein. (b) PROVISIONS OF PAST PROGRAMS TO HONOR PRIOR COMMITMENTS To implement various commitments made, prior to October 1, 1987, by the Corporation to certain otherwise eligible employes with respect to the availability to each of them of unreduced retirement benefits commencing as early as their attainment of age 55, Program provisions in effect at the time such commitments were made shall continue to apply to such employes. The provision immediately above is limited in applicability solely to otherwise eligible employes from the following units, and any special conditions relevant to the Corporation commitment to each such group of employes are shown: 112 122 Gen. Pro., 11(b)(1) (1) Employes who were working at facilities which had been announced, as of August 31, 1987, to be closed or phased-out, as follows:
Division/Unit Facilities ------------- ---------- Buick-Oldsmobile-Cadillac Cadillac Chicago Fleetwood Flint Body Assembly Wentzville* Central Foundry Massena Pontiac Saginaw Nodular Chevrolet-Pontiac-Canada Detroit (Plant #37) Hamilton Norwood Pontiac (G Car) Detroit Diesel Allison Redford Romulus Fisher Guide Elyria Fort Street Harrison Buffalo Inland Livonia Tecumseh New Departure-Hyatt Bristol
*Related to St. Louis Truck & Bus closing. (CONTINUED ON NEXT PAGE) 113 123 Gen. Pro., 11(b)(1) (CONTINUED FROM PRECEDING PAGE)
Division/Unit Facilities ------------- ---------- Service Parts Operations Baltimore Bethpage Buffalo Burton Cleveland Columbus Dallas Dallas AC/Delco Dallas T & C Houston LaMirada Memphis T & C Newark T & C New York North Brunswick AC Pittsburgh Pittsburgh T & C Romulus Truck & Bus Flint Assembly (Line One) Pontiac Central Plants (Heavy & Medium Duty Trucks & Coach) St. Louis
(2) Otherwise eligible employes who are absent at date of retirement from any unit due to layoff which commenced prior to October 1, 1987, whose age plus credited service totaled 55 or more on the date of layoff . (3) Otherwise eligible employes for whom credited service has been continued as a result of such things as (i) the sale of operations, (ii) a joint venture, or (iii) other similar-type transactions, such as acquisitions and mergers, as specifically set forth in Section 12 of General Provisions. 114 124 Gen. Pro., 12 SECTION 12. TREATMENT OF CERTAIN EMPLOYES OF (a) TEREX DIVISION Notwithstanding any other provision of this Program, in connection with the sale of Terex Division of the Corporation to IBH, termination of employment with General Motors Corporation, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program with respect to an employe (i) who on December 31, 1980 was age 40 or over and had 10 or more years of credited service and whose years of age plus credited service totaled 55 or more, and (ii) whose termination of employment with General Motors Corporation occurs after such employe has been employed by IBH through: (1) December 31, 1985, or (2) December 31, 1982, and is terminated by IBH other than as a discharge (for cause). (b) GM BUILDING DIVISION/NEW YORK Notwithstanding any other provision of this Program, in connection with the transfer of operation of the New York General Motors Building to Corporate Property Investors, Inc. (CPI), termination of employment with General Motors Corporation, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program with respect to an employe (i) who on February 28, 1982 had 10 or more years of credited service and whose years of age plus credited service totaled 55 or 115 125 Gen. Pro., 12(b) more, and (ii) whose termination of employment with General Motors Corporation occurs after such employe has been employed by CPI through: (1) February 28, 1987, or (2) February 28, 1984, and is terminated by CPI other than as a discharge (for cause). For any month in which such employe is employed by CPI, or any other employer, an employe to whom this Section 12(b) applies who retires under this Program, shall not be entitled to receive the temporary benefit that otherwise may be payable under Part A of this Program. (c) GENERAL MOTORS INSTITUTE Notwithstanding any other provision of this Program, in connection with the reorganization of General Motors Institute from a subsidiary of General Motors Corporation to an independent educational facility operated by a successor organization, termination of employment with General Motors Institute, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program until credited service otherwise breaks under Article II, Section 3(d) of Part A with respect to an employe (i) who on June 30, 1982 had 10 or more years of credited service, and (ii) whose termination of employment with General Motors Institute occurs after such employe has been employed by the successor organization through: (1) June 30, 1985, or (2) a date prior to June 30, 1985, and is terminated by the successor organization other than as a discharge (for cause). 116 126 Gen. Pro., 12(c) The immediately preceding paragraph notwithstanding, termination of employment with General Motors Institute, other than by death or retirement, by any employe whose credited service otherwise would have broken between ages 55 and 60, in accordance with Article II, Section 3(d) of Part A, shall not be considered a termination of employment for purposes of this Program until (i) age 60, or (ii) if earlier, the commencement of monthly benefits hereunder, at which time credited service shall be broken for all such employes. (d) DELCO ELECTRONICS DIVISION Notwithstanding any other provision of this Program, an employe who at the request of the Corporation terminated employment with Delco Electronics Division to accept employment with Tau Laboratories shall not be considered a termination of employment for purposes of this Program provided such employe (i) on his last day worked for Delco Electronics Division had 10 or more years of credited service and his age plus credited service totaled 55 or more, and (ii) he remained employed by Tau Laboratories through: (1) December 31, 1987, or (2) December 31, 1984, and is terminated by Tau Laboratories other than as a discharge (for cause). For any month in which such employe is employed by Tau Laboratories, or any other employer, an employe to whom this Section 12(d) applies who was under age 54 on his last day worked for Delco Electronics Division and who subsequently retires under this Program shall not be entitled to receive the temporary benefit that otherwise may be payable under Part A of this Program. 117 127 Gen. Pro., 12(e) (e) GM FANUC ROBOTICS CORPORATION Notwithstanding any other provision of this Program, in connection with the formation of GM Fanuc Robotics Corporation (GMF), a joint venture between General Motors Corporation and Fujitsu Fanuc Ltd., termination of employment with General Motors Corporation, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program with respect to an employe (i) who on June 30, 1985, had 10 or more years of credited service and whose years of age plus credited service totaled 55 or more, and (ii) whose termination of employment with General Motors Corporation occurs after such employe has been employed by GMF through: (1) June 30, 1985, or (2) a date prior to June 30, 1985, and is terminated by GMF other than as a discharge (for cause). (f) GENERAL MOTORS BALANCE ENGINEERING OPERATION Notwithstanding any other provision of this Program, in connection with the sale of GM's Balance Engineering Operation to Balance Engineering Company, termination of employment with General Motors Corporation, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program with respect to an employe (i) who on January 31, 1987 had 10 or more years of credited service and whose years of age plus credited service totaled 55 or more, and (ii) whose termination of employment with General Motors Corporation occurs after such employe has been employed by the Balance Engineering Company through: 118 128 Gen. Pro., 12(f)(1) (1) January 31, 1990, or (2) a date prior to January 31, 1990, and is terminated by the Balance Engineering Company other than as a discharge (for cause). (g) SAGINAW DIVISION'S ACTUATOR PRODUCTS GROUP Notwithstanding any other provision of this Program, in connection with the sale of Saginaw Division's Actuator Products Group to Thomson Industries, Inc., termination of employment with General Motors Corporation, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program with respect to an employe (i) who on April 30, 1987 had 10 or more years of credited service and whose years of age plus credited service totaled 55 or more, and (ii) whose termination of employment with General Motors Corporation occurs after such employe has been employed by Thomson Industries, Inc., through: (1) April 30, 1990, or (2) a date prior to April 30, 1990, and is terminated by Thomson Industries, Inc., other than as a discharge (for cause). 119 129 Gen. Pro., 12(h) (h) GENERAL MOTORS INDUSTRIAL CLEANING TECHNOLOGY CENTER Notwithstanding any other provision of this Program, in connection with the joint venture between General Motors Industrial Cleaning Technology Center (ICTC) and ARA Services, Inc., (ARA), termination of employment with General Motors Corporation, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program with respect to an employe (i) who on December 31, 1986, had 10 or more years of credited service and whose years of age plus credited service totaled 55 or more, and (ii) whose termination of employment with General Motors Corporation occurs after such employe has been employed by the GM ICTC-ARA Joint Venture through: (1) December 31, 1989, or (2) a date prior to December 31, 1989, and is terminated by the GM ICTC-ARA Joint Venture other than as a discharge (for cause). (i) TRUCK & BUS GROUP Notwithstanding any other provision of this Program, in connection with the heavy duty truck joint venture between the Corporation's Truck & Bus Group and Volvo-White, termination of employment with General Motors Corporation, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program with respect to an employe (i) who on August 31, 1987, had 10 or more years of credited service and whose years of age plus credited service totaled 55 or more, and (ii) whose termination of employment with General Motors Corporation occurs after such employe has been employed by the heavy duty truck joint 120 130 Gen. Pro., 12(i) venture between the Corporation's Truck & Bus Group and Volvo-White through: (1) August 31, 1990, or (2) a date prior to August 31, 1990, and is terminated by the GMC Truck & Bus Group - Volvo-White Heavy Duty Truck Joint Venture other than as a discharge (for cause). (j) MARKETING EDUCATIONAL SERVICES ACTIVITY OF THE CUSTOMER SALES AND SERVICE STAFF Notwithstanding any other provision of this Program, in connection with the divestiture of GM's Marketing Educational Services Activity of the Customer Sales and Service Staff to Sandy Corporation, termination of employment with General Motors Corporation, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program with respect to an employe (i) who on August 31, 1987, had 10 or more years of credited service and whose years of age plus credited service totaled 55 or more, and (ii) whose termination of employment with General Motors Corporation occurs after such employe has been employed by the Sandy Corporation through: (1) August 31, 1990, or (2) a date prior to August 31, 1990, and is terminated by the Sandy Corporation other than as a discharge (for cause). 121 131 Gen. Pro., 12(k) (k) DETROIT DIESEL ALLISON DIVISION Notwithstanding any other provision of this Program, in connection with the formation of Detroit Diesel Corporation (DDC), a joint venture between the Detroit Diesel Allison Division and the Penske Corporation, Inc., an employe who accepts employment with DDC has been placed on a special leave of absence for up to three years. During the three-year period which commenced January 1, 1988, any such employe will (i) participate in the DDC Pension Plan, (ii) not be eligible to accrue credited service under Part A or continuous service under Part B, and (iii) not be eligible to contribute under Part B. All of the Program assets attributable to any Part A and Part B benefits accrued by any such employe who accepts employment at DDC have been transferred to DDC. As a result of such transfer of assets, all prior benefit entitlement, of whatever nature, ceased hereunder on the date of such transfer, and the total responsibility and liability therefore has been assumed by DDC, which has assumed concurrently the sole responsibility to provide entirely for any retirement benefit entitlement of any such employe. In the event that any such employe (i) is terminated by DDC other than for cause, (ii) retires from the Corporation, or (iii) is reemployed by the Corporation, all within the three year special leave of absence period, the Corporation will be responsible for any Part A and Part B benefits which accrued to any such terminating employe prior to his acceptance of employment at DDC, concurrent with receipt by the Trustee of this Program of the full amount of Program assets attributable to any such rehired employe from DDC. The Sales Agreement executed earlier between the parties provides that DDC will remain liable under its pension plan for any benefits attributable to such a rehired employe's service at DDC during any employment period at DDC. 122 132 Gen. Pro., 12(k) In view of the prior transfer of assets to DDC representing the full and fair value of any accrued benefit entitlement under this Program at date of such transfer, in the event that any such employe who accepts employment at DDC is reemployed by the Corporation after (i) expiration of the three year leave of absence period, or (ii) he voluntarily terminates his employment at DDC within the three year leave of absence period, he will be treated under this Program as a newly-hired employe, with no entitlement to any benefits or credited service related to all such prior participation hereunder. (l) AC ROCHESTER PRODUCTS DIVISION Notwithstanding any other provision of this Program, in connection with the sale of the fuel injection business of the AC Rochester Products Division, Grand Rapids, to Penske Transportation, Inc., and Detroit Diesel Corporation, hereinafter referred to as Diesel Technology Corporation (DTC), an employe who accepts employment with DTC has been placed on a special leave of absence for up to three years. During the three-year period which commenced November 1, 1988, any such employe will (i) participate in the DTC Pension Plan, (ii) not be eligible to accrue credited service under Part A or continuous service under Part B, and (iii) not be eligible to contribute under Part B. All of the Program assets attributable to any Part A and Part B benefits accrued by any such employe who accepts employment at DTC have been transferred to DTC. As a result of such transfer of assets, all prior benefit entitlement, of whatever nature, ceased hereunder on the date of such transfer, and the total responsibility and liability therefore has been assumed by DTC, which has assumed concurrently the sole responsibility to provide entirely for any retirement benefit entitlement of any such employe. In the 123 133 Gen. Pro., 12(l) event that any such employe (i) is terminated by DTC other than for cause, (ii) retires from the Corporation, or (iii) is reemployed by the Corporation, all within the three year special leave of absence period, the Corporation will be responsible for any Part A and Part B benefits which accrued to any such terminating employe prior to his acceptance of employment at DTC, concurrent with receipt by the Trustee of this Program of the full amount of Program assets attributable to any such rehired employe from DTC. The Sales Agreement executed earlier between the parties provides that DTC will remain liable under its pension plan for any benefits attributable to such a rehired employe's service at DTC during any employment period at DTC. In view of the prior transfer of assets to DTC representing the full and fair value of any accrued benefit entitlement under this Program at date of such transfer, in the event that any such employe who accepts employment at DTC is reemployed by the Corporation after (i) expiration of the three year leave of absence period, or (ii) he voluntarily terminates his employment at DTC within the three year leave of absence period, he will be treated under this Program as a newly-hired employe, with no entitlement to any benefits or credited service related to all such prior participation hereunder. 124 134 Gen. Pro., 12(m) (m) HYDRA-MATIC DIVISION (MUNCIE PLANT) Notwithstanding any other provision of this Program, in connection with the joint venture between the Hydra-Matic Division's Muncie Plant and Acustar's New Process Gear operations, termination of employment with General Motors Corporation, other than by death or retirement, shall not be considered a termination of employment for purposes of this Program with respect to an employe (i) who on March 31, 1990, had 10 or more years of credited service and whose years of age plus credited service totaled 55 or more, and (ii) whose termination of employment with General Motors Corporation occurs after such employe has been employed by the Hydra-Matic Acustar Joint Venture through: (1) March 31, 1993, or (2) a date prior to March 31, 1993, and is terminated by the Hydra-Matic Acustar Joint Venture other than as a discharge (for cause). Notwithstanding the above, the benefits payable under this Program to an employe who transfers to such joint venture will be based on the benefits which such employe had accrued under this Program at April 1, 1990, or the date such employe transfers to such joint venture, if later. 125 135 Gen. Pro., 13 SECTION 13. TREATMENT OF CERTAIN EMPLOYES OF (A) ELECTRONIC DATA SYSTEMS (EDS) (1) In connection with the transition of certain General Motors employes to EDS, the provisions of Part A, Article II, Section 3, which otherwise serve to break credited service under such circumstances, will not apply to any such transitioning employe who has 10 or more years of credited service on his last day worked prior to such transition. However, no additional credited service shall accrue under this Program for any such transitioning employe. (2) Each transitioned employe who on the date of transfer to EDS had completed less than 30 years of credited service, or whose years of age and years of credited service totaled less than 85, and who thereafter retires (a) prior to attaining age 62 and one month with 30 or more years of combined service with GM and EDS, or (b) between ages 55 and 61 and the total of whose years of age and years of combined service with GM and EDS equals or exceeds 85, shall be entitled to receive the following described benefits, while otherwise eligible: (a) With respect to any monthly payment falling due prior to attainment of age 62 and one month, at which time any such benefit shall cease to be payable, a monthly Subsidized Early Retirement Benefit, defined as an amount equal to the Part A normal retirement benefit, based upon credited service under this Program as of the earlier of the date of transfer or March 1, 1989, and the basic benefit rate in effect on March 1, 1989, actuarially reduced from age 62, in accordance with Part A, Article I, 126 136 Gen. Pro., 13(a)(2)(a) Section 2(b)(2)(i). Such Subsidized Early Retirement Benefit is reduced by the sum of the following monthly amounts, each of which shall include any post-retirement increases granted on benefits accrued both prior to and subsequent to March 1, 1989: (i) any Part A basic benefit determined without regard to this section, (ii) any Part B benefits accrued after March 1, 1989, and (iii) any benefit payable under the EDS Retirement plan attributable to benefit accruals after March 1, 1989. (b) Upon attainment of age 62 and one month, a monthly Minimum Guaranteed Benefit Amount, determined by multiplying the credited service under this Program as of the earlier of the date of transfer or March 1, 1989 by the Part A basic benefit rate in effect on March 1, 1989, reduced by the sum of the following monthly amounts, each of which shall include any post-retirement increases granted on benefits accrued both prior to and subsequent to March 1, 1989: (i) any Part A basic benefit determined without regard to this section, (ii) any Part B benefits accrued after March 1, 1989, (iii) any benefit payable under the EDS Retirement Plan attributable to benefit accruals after March 1, 1989, and 127 137 Gen. Pro., 13(a)(2)(b)(iv) (iv) the total of retirement offsets described in subsections 2(a)(i), (ii) and (iii) above for any month prior to the attainment of age 62 and one month, to the extent such offsets exceed the amount of the Subsidized Early Retirement Benefit. Any such excess shall be expressed as a life annuity commencing at age 62 and one month. (3) Each transitioned employe who on the date of transfer to EDS had completed less than 30 years of credited service, and who thereafter retires prior to age 62 and one month with 30 or more years of combined service with GM and EDS, shall be entitled to receive, if otherwise eligible, with respect to any monthly payment falling due prior to attainment of age 62 and one month, at which time any such benefit shall cease to be payable, a monthly Incremental Benefit, as defined hereafter. The Incremental Benefit shall be $1,400.00, multiplied by the Service Factor, as defined hereafter, and reduced by the sum of the following monthly amounts, subsections (b) and (c) of which shall include any post-retirement increases: (a) the Subsidized Early Retirement Benefit, (b) the Part B supplementary benefit, and (c) the maximum primary Federal Social Security Benefit payable unreduced because of age. The Service Factor is a fraction, the numerator of which is years of credited service under this Program as of the earlier of the date of transfer to EDS, or March 1, 1989, and the denominator of which is 30. 128 138 Gen. Pro., 13(a)(4) (4) In determining the amount of any benefit payable under the EDS Retirement Plan attributable to benefit accruals after March 1, 1989, as may be necessary under subsections 2(a)(iii) and (2)(b)(iii) above, in the event the EDS Retirement Plan fails to provide such benefit entitlement, any such reduction in benefits will be deemed to reduce benefits accrued after March 1, 1989, before reducing the benefits accrued prior to such date. (5) Payment under this section, if any, shall be made without regard to whether an otherwise eligible transitioned employe retires before, on, or after March 1, 1989. (6) For purposes of determining any benefits payable under subsections 2(a)(iii), 2(b)(iii), 2(b)(iv) and paragraph 3 of subsection (a), the basis for actuarial equivalence shall be the 1984 Unisex Pension Mortality Table and eight percent interest. (7) Notwithstanding the provisions of this Program defining Eligibility For Retirement, any separation from EDS prior to attainment of age 55, on or after February 1, 1990, by a transitioning employe with thirty or more years of combined service with GM and EDS, will be considered a retirement under this Program, with benefits payable commencing the first of the month following the date of such separation. Any benefits that may be payable hereunder to such an employe will be based solely upon GM credited service, and will be calculated in accordance with all of the applicable provisions of this Program. For an eligible transitioned employe separated (i) from EDS prior to February 1, 1990, with thirty or more years of combined service with GM and EDS, and (ii) prior to age 55, benefits will be payable commencing the first of the 129 139 Gen. Pro., 13(a)(7) month following the date of such separation. In any such case, the monthly amount of Subsidized Early Retirement Benefit, the Minimum Guaranteed Benefit Amount, and the Incremental Benefit would be based upon benefit rates in effect at the earlier of (i) the date of separation, or (ii) March 1, 1989. (B) HUGHES AIRCRAFT (1) In connection with the transfer of certain General Motors employes to Hughes Aircraft, the provisions of Part A, Article II, Section 3, which otherwise serve to break credited service under such circumstances, will not apply to any such transferring employe. However, no additional credited service shall accrue under this Program for any such transferring employe for any period while an employe of Hughes Aircraft. (2) Notwithstanding any other provision of this Program, the provisions set forth in subparagraphs (2) through (7) of Section 13(a) of the General Provisions immediately above shall likewise apply to any General Motors employe who transfers to Hughes Aircraft. In any such case, the term Hughes Aircraft will be substituted for EDS wherever applicable. 130 140 Gen. Pro., 14 SECTION 14. TREATMENT OF CERTAIN EMPLOYES (A) WHO PARTICIPATE IN THE PRESIDENT'S EXECUTIVE INTERCHANGE PROGRAM Notwithstanding any other provision of this Program, an employe who is on an approved special leave of absence in order to participate in the President's Executive Interchange Program (or a program comparable in scope and effect as determined by the Corporation) shall be eligible to participate in this Program during the period of such leave of absence. Such employe shall be granted credited service under Part A and continuous service under Part B of this Program for the period of such leave and shall be eligible to contribute under Part B of this Program on the basis of his base salary rate in effect on his last day of work preceding such absence. For purposes of determining "average monthly base salary", the monthly base salary rate in effect immediately preceding such leave of absence shall be used for any month of such leave during the 60 months immediately preceding termination of employment. (B) WHO RETURN TO THE SERVICE OF THE CORPORATION AFTER GOVERNMENT SERVICE Notwithstanding the provisions of the definition of "Continuous Service" in Section 1 of these General Provisions and the credited service provisions of Article II of Part A, the continuous service or the credited service of an employe who left or leaves the service of the Corporation or one of its subsidiaries without an approved leave of absence to accept employment with the Government of the United States or with the Government of Canada, or with a governmental agency of either of said governments, and who returned or returns to the service of the Corporation or one of its subsidiaries 131 141 Gen. Pro., 14(b) as his first employment following such government employment, shall not be broken. In no event, however, shall the period during which such employe is absent from service because of such government employment be included in the calculation of the amount of continuous service or credited service. (C) WHO ARE EMPLOYED BY FOREIGN BUSINESS ENTITIES IN WHICH THE CORPORATION HAS A SUBSTANTIAL OWNERSHIP INTEREST Notwithstanding any other provision of this Program, an employe who at the request of the Corporation accepts an assignment with a foreign business entity in which the Corporation has a substantial ownership interest shall be eligible to participate in this Program during the period of such assignment. Such employe shall be granted credited service under Part A and continuous service under Part B of this Program for the period of such assignment and shall be eligible to contribute under Part B of this Program for the period of such assignment and shall be eligible to contribute under Part B of this Program on the basis of his base salary rate that would otherwise be in effect in the absence of such assignment. Such salary also shall be used for purposes of determining "average monthly base salary" for any month of such assignment during the 60 months immediately preceding termination of employment. SECTION 15. SALARIED EMPLOYES WHO ARE TRANSFERRED TO THE HOURLY ROLLS A salaried employe who is transferred to the hourly rolls, and within 6 months of such transfer breaks credited service, shall be eligible to receive benefits under this Program, but shall not be eligible to receive retirement benefits under the provisions of the "General Motors Hourly-Rate Employes Pension Plan". 132 142 Gen. Pro., 16 SECTION 16. NAMED FIDUCIARY The Finance Committee of the Corporation's Board of Directors shall be the Named Fiduciary with respect to this Program. The Finance Committee may delegate to various officers, employes and committees of the Corporation authority to carry out such of its responsibilities as it deems appropriate in order to carry out the proper and effective administration of this Program. SECTION 17. PLAN ADMINISTRATOR AND APPEAL PROCEDURE General Motors Corporation shall be the Plan Administrator. The Administrator will provide adequate and timely notice in writing to any participant or beneficiary whose claim for benefits under the Program is denied, setting forth the specific reasons for such denial. Any denied claim may be appealed to the Plan Administrator. The request must be made in writing. The participant or beneficiary will be given an opportunity for a full and fair review by the Named Fiduciary or its delegate of the decision of the Plan Administrator denying the claim. If a participant or beneficiary is not satisfied with the decision of the Plan Administrator, an appeal may be filed with the Employe Benefit Plans Committee (EBPC), which has been delegated the authority necessary to construe, interpret, and administer the Program. Such an appeal must be filed in writing within sixty (60) days from the date of the notice from the Plan Administrator denying a claim for benefits under the Program. The decision of the EBPC shall be final and binding upon the Corporation and the participant or beneficiary. 133 143 Gen. Pro., 18 SECTION 18. CERTAIN PROVISIONS REQUIRED TO COMPLY WITH SECTION 415 OF THE INTERNAL REVENUE CODE (a) For purposes of this section, the term "Annual Addition" shall mean the sum, for any Limitation Year, of Corporation contributions and forfeitures allocated to an employe's account under all defined contribution plans or programs plus any employe contributions to such plans or programs and this Program. (b) For purposes of this section, the term "Limitation Year" shall mean the twelve month period beginning on December 31 and ending the following December 30. (c) For purposes of this section, all defined benefit plans or programs of the Corporation will be treated as one defined benefit plan or program and all defined contributions plans or programs will be treated as one defined contribution plan or program. (d) For purposes of this section, the term "Compensation" shall mean an employe's compensation as defined under Section 415(c)(3) of the Internal Revenue Code and regulations thereunder. (e) DEFINED CONTRIBUTION PLAN LIMITATION In no event shall the sum of an employe's Annual Additions exceed the lesser of $30,000 (or such other amount prescribed by the Secretary of the Treasury applicable to the Limitation Year) or 25% of such employe's Compensation for any Limitation Year. 134 144 Gen. Pro., 18(f) (F) DEFINED BENEFIT PLAN LIMITATIONS (1) An employe's annual benefit under the Program (excluding any benefits attributable to employe contributions) during any Limitation Year shall not exceed the lesser of (i) 100% of the employe's average Compensation during his three consecutive highest paid years of service with the Corporation, or (ii) the employe's accrued benefit (prior to the application of the overall limitation of subsection (g)) (aa) for Limitation Years beginning prior to December 31, 1983, or (bb) for Limitation Years beginning prior to December 31, 1987, or (cc) $90,000 for Limitation Years beginning on or after December 31, 1987, or such other amount prescribed by the Secretary of the Treasury applicable to the Limitation Year. As a result of an increased amount prescribed by the Secretary, an annual benefit limited by this provision in a prior year may be increased with respect to future payments to the lesser of the increased amount or the employe's annual benefit without regard to this provision. (2) Annual benefits will be tested on the basis of an actuarially equivalent straight life annuity on the employe's life ignoring benefits not directly related to retirement income or death benefits payable prior to retirement and also ignoring benefits payable to the surviving spouse of a retired employe. In the event that benefits commence before the employe's Social Security retirement age, the dollar limitation under section 18(f)(1)(ii) shall be adjusted so that it is the actuarial equivalent of an annual benefit of $90,000, or such other adjusted amount prescribed by the Secretary of the Treasury, beginning at such employe's Social Security retirement age. In the event that benefits 135 145 Gen. Pro., 18(f)(2) commence after the employe's Social Security retirement age, the dollar limitation as described under section 18(f)(1)(ii) shall be increased actuarially to be the equivalent of an annual benefit of $90,000, or such other adjusted amount prescribed by the Secretary of the Treasury, beginning at such employe's Social Security retirement age. In the event that benefits commence prior to age 55 for Limitation Years beginning before December 31, 1983, the benefit shall be adjusted to the actuarial equivalent of a benefit commencing at age 55, for purposes of testing the limitation amount applicable under Section 18(f)(1)(ii) above. Actuarial adjustments provided for in this subsection (f)(2) shall be made using an interest rate assumption equal to 5%. (3) If an employe has less than 10 years of credited service with the Corporation, the limitation under Section 18(f)(1)(i) with respect to his benefit as otherwise determined will be proportionately reduced. If an employe has less than 10 years of participation in this Program, the limitation under Section 18(f)(1)(ii) with respect to his benefit shall be adjusted by multiplying such amount by a fraction, the numerator of which is the employe's years of participation in this Program, and the denominator of which is ten (10). 136 146 Gen. Pro., 18(f)(4) (4) In the case of an employe who had credited service prior to October 3, 1973, the limitation described in paragraph (1) preceding shall not be less than his benefit (excluding any benefit attributable to employe contributions) based on the terms of the Program as in effect on October 2, 1973 and based on the continuation of his Compensation at the rate in effect on October 2, 1973. The limitation applicable to an employe who broke credited service before October 3, 1973 shall be the deferred retirement benefit payable to such employe determined as of the date his credited service was broken. (5) In the case of an employe who was a participant in this Program prior to January 1, 1983, the limitation described in Section 18(f)(1)(ii) shall not be less than his accrued benefit as of December 30, 1983 under the terms and conditions of this Program as in effect on July 1, 1982. (g) OVERALL LIMITATION For any employe who is participating under both this Program and any defined contribution plans or programs of the Corporation, the projected benefit for such employe under the defined benefit plans or programs shall be reduced to the extent necessary to prevent the sum of the following fractions computed as of the end of any Limitation Year from exceeding 1.4 for any Limitation Year ending before December 31, 1983, and 1.0 for any Limitation Year beginning on or after December 31, 1983. (1) DEFINED BENEFIT PLAN FRACTION: The defined benefit plan fraction shall be equal to the ratio of (i) divided by (ii) below, where: 137 147 Gen. Pro., 18(g)(1)(i) (i) equals the projected annual benefit of the employe as of the close of the Limitation Year under the Corporation's defined benefit plans or programs less any portion of such benefits attributable to employe contributions, and (ii) equals the lesser of 100% of such employe's average Compensation during his three consecutive highest paid years of service with the Corporation, multiplied by 1.4 in determining the fraction applicable in any limitation year beginning on or after December 31, 1983 or the amount prescribed by the Secretary of the Treasury applicable to the Limitation Year as described under Section 18(f)(1)(ii) of this Program, multiplied by 1.25 In determining the fraction as applicable in any limitation year beginning on or after December 31, 1983. This amount shall be adjusted, if appropriate, to reflect the availability of greater benefits under the Program as in effect on October 2, 1973 and Compensation as of that date. (2) DEFINED CONTRIBUTION PLAN FRACTION: The defined contribution plan fraction shall be equal to the ratio of (i) divided by (ii) below, where: (i) equals the sum of the Annual Additions to an employe's account for each Limitation Year, and (ii) equals the sum of the defined contribution denominator increments for that year and all prior Limitation Years. For each Limitation Year, the defined contribution denominator increment is 138 148 Gen. Pro., 18(g)(2)(ii) the lesser of (a) 1.25 times the dollar limitation for that year, or (b) 1.4 times the Compensation limitation for that year. For any employe who was participating in this Program as of the last day of the Limitation Year beginning December 31, 1986, as prescribed in regulations, an amount shall be subtracted from (2)(i) above so that the sum of this fraction and the defined benefit plan fraction does not exceed 1.0 For such year. The Annual Additions for any Limitation Year beginning before January 1, 1987, shall not be recomputed to treat all employe contributions as Annual Additions. SECTION 19. CERTAIN PROVISIONS REQUIRED TO COMPLY WITH SECTION 416 OF THE INTERNAL REVENUE CODE In any Plan Year in which the Program is a "Top-Heavy Plan", as defined in Section 416 of the Internal Revenue Code, the requirements of this Section are applicable and must be satisfied. (a) DEFINITIONS (1) "Cumulative Account" means the sum of an employe's accounts under a defined contribution plan (for an unaggregated plan), or under all defined contribution plans included in an Aggregation Group (for aggregated plans), determined as of the most recent plan valuation date within a 12-month period ending on the Determination Date, increased by any contributions due after such valuation date and before the Determination Date. 139 149 Gen. Pro., 19(a)(2) (2) "Cumulative Accrued Benefit" means the sum of benefits under a defined benefit plan (for an unaggregated plan) or under all defined benefit plans included in an Aggregation Group (for aggregated plans), determined under the actuarial assumptions set forth in such plan or plans, as of the most recent plan valuation date within a 12-month period ending on the Determination Date as if the employe voluntarily terminated service as of such valuation date. (3) "Determination Date" means the last day of the preceding Plan Year. (4) "Valuation Date" means the last day of a Plan Year as of which date participants' accounts shall be valued at fair market value and as of which date the present value of accrued benefits shall be valued. (5) "Key Employe" means any employe described in Internal Revenue Code Section 416(i)(1) and regulations thereunder. (6) "Top-Heavy Plan" means for any plan year beginning after 1983, this Program is top-heavy if any of the following conditions exists: (a) If the top-heavy ratio for this Program exceeds 60 percent and this Program is not part of any required aggregation group or permissive aggregation group of plans. (b) If this Program is a part of a required aggregation group of plans (but which is not part of a permissive aggregation group) and the top-heavy ratio for the group of plans exceeds 60 percent, or (c) If this Program is a part of a required aggregation group of plans and part of a permissive aggregation group and the top-heavy ratio for the permissive aggregation group exceeds 60 percent. 140 150 Gen. Pro., 19(a)(7) (7) TOP-HEAVY RATIO: (a) If the Corporation maintains one or more defined benefit plans and the Corporation maintains or has maintained one or more defined contribution plans which during the 5-year period ending on the determination date(s) has or has had any account balances, the top-heavy ratio for any required or permissive aggregation group, as appropriate, is a fraction, the numerator of which is the sum of the present value of accrued benefits determined in accordance with (b) below, and the sum of account balances under the aggregated defined contribution plan or plans for all key employes as of the determination date(s), and the denominator of which is the sum of the present values of accrued benefits under the aggregated defined benefit plan or plans, determined in accordance with (b) below, for all participants and the sum of the account balances under the aggregated defined contribution plan or plans for all participants as of the determination date(s), all determined in accordance with Section 416 of the Code and the regulations thereunder. The account balances under a defined contribution plan in both the numerator and denominator of the top-heavy ratio are adjusted to include any distribution of an account balance made in the 5-year period ending on the determination date. (b) For purposes of (a) above, the value of account balances and the present value of accrued benefits will be determined as of the most recent valuation date that falls within or ends with the 12-month period ending on the determination date. The account 141 151 Gen. Pro., 19(a)(7)(b) balances and accrued benefits of a participant (1) who is not a key employe but who was a key employe in a prior year, or (2) who has not received any compensation from any employer maintaining the plan at any time during the 5-year period ending on the determination date will be disregarded. The calculations of the top-heavy ratio, and the extent to which distributions, rollovers, and transfers are taken into account will be made in accordance with Section 416 of the Code and the regulations thereunder. When aggregating plans, the value of account balances and accrued benefits will be calculated with reference to the determination dates that fall within the same calendar year. (8) "Permissive Aggregation Group" means the required aggregation group of plans plus any other plan or plans of the Corporation which, when considered as a group with the required aggregation group, would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Internal Revenue Code. (9) "Required Aggregation Group" means: (1) each qualified plan of the Corporation in which at least one key employe participates, and (2) any other qualified plan of the Corporation which enables a plan described in (1) to meet the requirements of Sections 401(a)(4) or 410 of the Internal Revenue Code. (10) "Present Value" means the present value of accrued benefits which shall be determined based on actuarial factors including an interest rate assumption of 7% and the UP 1984 mortality table. 142 152 Gen. Pro., 19(b) (b) MINIMUM ACCRUED BENEFIT (1) Notwithstanding any other provision in this Program except (3) and (4) below, for any Plan Year in which this Program is top-heavy, each participant who is not a key employe and has completed 1,000 hours of service will accrue a benefit (to be provided solely by employer contributions and expressed as a life annuity commencing at normal retirement age) of not less than two percent of the highest average compensation for the five consecutive years for which the participant had the highest compensation. The minimum accrual is determined without regard to any Social Security contribution. The minimum accrual applies even though under other Program provisions the participant would not otherwise be entitled to receive an accrual, or would have received a lesser accrual for the year because (i) the non-key employe fails to make contributions under Part B of the Program, (ii) the non-key employe's compensation is less than a stated amount, (iii) the non-key employe is not employed on the last day of the accrual computation period, or (iv) the Program is integrated with Social Security. (2) For purposes of computing the minimum accrued benefit, compensation will include all compensation, as that term is defined for Section 415 purposes. 143 153 Gen. Pro., 19(b)(3) (3) No additional benefit accruals shall be provided pursuant to (1) above to the extent that the total accruals on behalf of the participant attributable to employer contributions will provide a benefit expressed as a life annuity commencing at normal retirement age that equals or exceeds 20 percent of the participant's highest average compensation for the five consecutive years for which the participant had the highest compensation. (4) All accruals of an employer derived benefit, whether or not attributable to years for which the plan is top-heavy, may be used in computing whether the minimum accruals requirements of paragraph (3) above are satisfied. (c) MAXIMUM COMPENSATION Annual compensation of any employe shall not be taken into account under the Program in excess of $200,000, such amount to be adjusted annually for increases in the cost of living in accordance with Section 416(d) of the Internal Revenue Code. (d) MINIMUM VESTING (1) For any plan year in which this program is top-heavy, the following minimum vesting schedule will automatically apply: (a) 20% vesting after 2 years of service, 144 154 Gen. Pro., 19(d)(1)(b) (b) 40% vesting after 3 years of service, (c) 60% vesting after 4 years of service, (d) 80% vesting after 5 years of service, (e) 100% vesting after 6 years of service. The minimum vesting schedule applies to all accrued benefits within the meaning of Section 411(a)(7) of the Internal Revenue Code except those attributable to employe contributions. Further, no reduction in vested benefits may occur in the event the Program's status as top-heavy changes for any plan year. Any participant who has completed at least five years of service when the plan ceases to be top-heavy, will remain under this vesting schedule with respect to his accrued benefit determined at any time following the date the plan ceases to be top-heavy. However, this section does not apply to the accrued benefits of any employe who does not have an hour of service after the plan has initially become top-heavy and such employe's accrued benefits attributable to employer contributions will be determined without regard to this section. (2) The minimum accrued benefit required (to the extent required to be nonforfeitable under Section 416(b)) may not be suspended or forfeited under Sections 411(a)(3)(B) or 411(a)(3)(D) of the Internal Revenue Code. 145 155 Gen. Pro., 19(e) (e) DISTRIBUTIONS FOR CERTAIN KEY EMPLOYES Notwithstanding any other provision of this Program, if a key employe is a five percent owner (as defined in Section 416) in the plan year in which the employe attains age 70-1/2, benefit distributions shall commence no later than April 1 of the following plan year (whether or not the employe has retired). (f) DETERMINATION OF SUPER TOP HEAVINESS The Program shall be super top-heavy if it would be a top-heavy plan under the provisions of (a)(6), but substituting "90%" for "60%" in such provisions. (g) ADJUSTMENTS IN SECTION 415 LIMITS For any plan year in which the Program is top-heavy, for purposes of the limitations on contributions and benefits under Section 415 of the Internal Revenue Code, the dollar limitations in the defined benefit plan fraction and the defined contribution plan fraction shall be multiplied by 1.0 rather than 1.25. (h) ACCOUNT BALANCES AND ACCRUED BENEFITS Account balances and accrued benefits shall be calculated to include all amounts attributable to both Corporation and employe contributions. 146 156 Appendix A APPENDIX A For the sole purpose of Part A, Article II, Section 10 of this Program, the following salaried positions are designated foundry jobs in each listed plant location under the conditions specifically set forth herein. No other salaried position is designated as a foundry job. CENTRAL FOUNDRY PLANT, DANVILLE, ILLINOIS
Position Code Position Title ------------- ------------------------------------------------------------- 4M10 Laboratory Tester (Excludes Spectrometer Operator, Chief Chemist (Wet), Metalographer, Radiographer (Cobalt), Raw Materials Inspector, Spectro-Sample Preparation) 5M24 Metallurgist (Excludes Spectrometer Operator, Chief Chemist (Wet), Metalographer, Radiographer (Cobalt), Raw Materials Inspector, Spectro-Sample Preparation) 6M08 Foreman - Production 6M42 Foreman - Maintenance 6M47 Supervisor - Laboratory 6R41 Foreman - Inspection 7M03 Chief Electrician 7M14 General Foreman - Production 7M19 General Foreman - Maintenance 7P02 Supervisor - Safety 7R38 General Foreman - Inspection 7R58 Supervisor - Quality Control
147 157 Appendix A APPENDIX A (Cont.) CENTRAL FOUNDRY PLANT, DEFIANCE, OHIO
Position Code Position Title ------------- ----------------------------------------------------------- 4M10 Laboratory Tester (Excludes Molding Sand Tester, Carbon Determinator & Spectrometer Operator, Spectrometer Operator, Cobalt Operator, Furnace Control, Wet Chemist, Receiving Inspection, Core Sand Tester, Cut-Up, Carbon Analyzer, Carbon Train) 5M24 Metallurgist (Excludes Molding Sand Tester, Carbon Determinator & Spectrometer Operator, Spectrometer Operator, Cobalt Operator, Furnace Control, Wet Chemist, Receiving Inspection, Core Sand Tester, Cut-up, Carbon Analyzer, Carbon Train) 6M08 Foreman - Production 6M42 Foreman - Maintenance 6M47 Supervisor - Laboratory 6R41 Foreman - Inspection 7M03 Chief Electrician 7M14 General Foreman - Production 7M19 General Foreman - Maintenance 7M41 General Supervisor - Laboratory 7P02 Supervisor - Safety 7R38 General Foreman - Inspection
148 158 Appendix A APPENDIX A (Cont.) CENTRAL FOUNDRY MALLEABLE IRON PLANT, SAGINAW, MICHIGAN
Position Code Position Title ------------- -------------------------------------------------------- 4M10 Laboratory Tester (Excludes Quantovac Operator, Induction Furnace Operator, Raw Materials Handler, Radiographer (Cobalt), Sample Preparation, Special Chemist, Metalographer, Sample Cut-Up) 5M24 Metallurgist (Excludes Quantovac Operator, Induction Furnace Operator, Raw Materials Handler, Radiographer (Cobalt), Sample Preparation, Special Chemist, Metalographer, Sample Cut-Up) 6M08 Foreman - Production 6M42 Foreman - Maintenance 6M47 Supervisor - Laboratory 6R41 Foreman - Inspection 7M14 General Foreman - Production 7M19 General Foreman - Maintenance 7M41 General Supervisor - Laboratory 7M57 Supervisor - Pattern Shop 7R38 General Foreman - Inspection
149 159 Appendix A APPENDIX A (Cont.) CENTRAL FOUNDRY GREY IRON PLANT, SAGINAW, MICHIGAN
Position Code Position Title ------------- ---------------------------------------------------------- 5R24 Metallurgist (Excludes Metallurgist assigned to Chemistry Laboratory duties outside plant production area) 6M08 Supervisor - Productive Department 6M42 Supervisor - Maintenance (Excludes supervisors assigned to the Garage and Machine Shop) 6M47 Supervisor - Laboratory (Instrumentation) 6R41 Supervisor - Inspection 7M14 General Supervisor - Productive Departments 7M19 General Supervisor - Maintenance (Excludes General Supervisors of Garage and Machine Shop) 7R38 General Supervisor - Inspection
150 160 Appendix B APPENDIX B For the sole purpose of Part A, Article II, Section 12 of this Program, the following salaried positions are designated asbestos jobs in each listed plant location under the conditions specifically set forth herein. No other salaried position is designated as an asbestos job. As of April 1, 1991, no GM unit or salaried position is involved in the blending and processing of raw asbestos. 151 161 Appendix C APPENDIX C In accordance with Section 1(a)(1) and Section 8 of the General Provisions, the following sets forth certain benefit rates and a benefit formula, which are applicable to General Motors salaried employes in Puerto Rico who retire under this Program with benefits payable commencing on or after October 1, 1990, in lieu of the benefit rates set forth in Section 1(b), 4(a)(ii), 7(a)(1) and 7(a)(2) of Article 1 of Part A and the formula set forth in Section 2(a)(2) of Article 1 of Part B. Salaried employes in Puerto Rico who retired with benefits payable commencing prior to October 1, 1990, continue to be covered under the terms and conditions of this Program, except that the provisions of Section 9 of Article 1 of Part A and Section 7 of Article 1 of Part B shall not be applicable to any GM salaried employe in Puerto Rico. BASIC BENEFIT RATE
Basic Benefit Rate Per Year of Credited Service Retirement for Months Commencing With Benefits Benefit 10-1-90 Payable Class and Commencing Code After -------------------------------------------------------------- $ October 1, 1990 A 18.20 and After B 18.45 C 18.70 D 18.95
TEMPORARY BENEFIT RATE
Monthly Temporary Retirement Benefit Amount With Benefits Per Year of Payable Credited Commencing Service Maximum --------------------------------------------------------- $ $ October 1, 1990 and After 15.00 450.00
152 162 Appendix C APPENDIX C (Cont.) EARLY RETIREMENT SUPPLEMENT
Total Monthly Benefit Rate For Determining Monthly Early Retirement Supplement Prior to Age 62 and One Month For Retirements With 30 or More Years Retirement of Credited Service With Benefits 10-1-90 Payable and Commencing After ------------------------------------------------------------------------ $ October 1, 1990 and After 935
INTERIM SUPPLEMENT
Monthly Amount of Interim Supplement Age at Payable Prior to Age 62 and One Month Retirement for Each Year of Credited Service ----------------------------------------------------------------- $ 55 5.25 56 6.25 57 7.50 58 8.75 59 10.00 60 11.50 61 11.50
SUPPLEMENTARY BENEFITS The monthly supplementary retirement benefit shall be 1% of the employe's average monthly base salary in excess of $1,895, times the number of years and months of the employe's credited service. For purposes of determining average monthly base salary, $1,895 shall be used for any month prior to termination of employment for which the employe's full monthly base salary rate was less than $1,895. 153 EX-11 4 EXHIBIT 11 1 EXHIBIT 11 COMPUTATION OF EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKS
YEAR ENDED DECEMBER 31, 1994 ------------------------------------------ $1 2/3 PAR VALUE COMMON CLASS E CLASS H STOCK COMMON STOCK COMMON STOCK ------------ ------------ ------------ (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net income attributable to stocks (before cumulative effect of accounting change)......................... $4,965.9 $444.4 $248.4 Dividends on preference stocks......................... 320.7 -- -- -------- ------ ------ Earnings attributable to common stocks................. 4,645.2 444.4 248.4 Dividends on common stocks............................. 592.6 124.8 73.8 -------- ------ ------ Undistributed earnings................................. 4,052.6 319.6 174.6 Adjustments Add-back dividends on assumed conversion of preference stock.................................. 32.5 -- -- Change in earnings attributable to each class of common stock related to the assumed exercise of stock options*.................................... (5.3) -- 5.3 Dividends on assumed common stock transactions....... (10.4) -- (1.6) -------- ------ ------ Adjusted earnings attributable to common stocks........ $4,069.4 $319.6 $178.3 ======== ====== ====== Weighted average shares outstanding (in millions)...... 741.3 260.3 92.1 Adjustments Shares issued on assumed conversion of preference stock*............................................ 8.2 -- -- Assumed exercise of dilutive stock options*.......... 4.8 -- 2.0 -------- ------ ------ Adjusted weighted average shares outstanding........... 754.3 260.3 94.1 ======== ====== ====== Per Share Data Earnings per share attributable to undistributed earnings on common stocks (before cumulative effect of accounting change)...................... $5.40 $1.23 $1.90 Cumulative effect of accounting change at January 1, 1994................................................. (0.08) Dividends.............................................. 0.80 0.48 0.80 ----- ----- ----- Earnings per share attributable to common stocks....... $5.15 $1.71 $2.62 ===== ===== =====
- ------------------------- Note: The difference between fully diluted and primary earnings per share is immaterial. * The assumed conversion of preference stock and exercise of stock options reflected by these adjustments has no effect on Class E or Class H common stock earnings per share, because to the extent that shares of Class E or Class H common stock deemed to be outstanding would increase, such increased shares would also increase the numerator of the fraction used to determine Available Separate Consolidated Net Income. IV-6 2 COMPUTATION OF EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKS -- CONTINUED
YEAR ENDED DECEMBER 31, 1993 -------------------------------------------- $1 2/3 PAR VALUE CLASS E CLASS H COMMON STOCK COMMON STOCK COMMON STOCK ------------ ------------ ------------ (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net income attributable to stocks................... $1,894.1 $367.2 $204.5 Dividends on preferred and preference stocks........ 356.8 -- -- -------- ------- ------- Earnings attributable to common stocks.............. 1,537.3 367.2 204.5 Dividends on common stocks.......................... 565.8 97.2 64.1 -------- ------- ------- Undistributed earnings.............................. 971.5 270.0 140.4 Adjustments Add-back dividends on assumed conversion of preference stocks.............................. 4.6 -- -- Change in earnings attributable to each class of common stock related to the assumed share transactions*.................................. (10.5) 10.5 -- Attributable to conversion of options*............ (6.6) 0.1 6.5 Dividends on assumed common stock transactions.... (6.1) (2.8) (2.0) -------- ------- ------- Adjusted earnings attributable to common stocks..... $ 952.9 $277.8 $144.9 ======== ======= ======= Weighted average shares outstanding (in millions)... 710.2 243.0 88.6 Adjustments Shares issued on assumed conversion of preference stocks*........................................ -- 7.0 -- Assumed exercise of dilutive stock options*....... 7.5 -- 2.8 -------- ------- ------- Adjusted weighted average shares outstanding........ 717.7 250.0 91.4 ======== ======= ======= Per Share Data Earnings per share attributable to undistributed earnings on common stocks......................... $1.33 $1.11 $1.58 Dividends........................................... 0.80 0.40 0.72 -------- ------- ------- Earnings per share attributable to common stocks.... $2.13 $1.51 $2.30 ======== ======= =======
- ------------------------- Note: The difference between fully diluted and primary earnings per share is immaterial. * The assumed conversion of preference stocks and exercise of stock options reflected by these adjustments has no effect on Class E or Class H common stock earnings per share, because to the extent that shares of Class E or Class H common stock deemed to be outstanding would increase, such increased shares would also increase the numerator of the fraction used to determine Available Separate Consolidated Net Income. IV-7 3 COMPUTATION OF EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO COMMON STOCKS -- CONCLUDED
YEAR ENDED DECEMBER 31, 1992 ---------------------------------------------- $1 2/3 PAR VALUE CLASS E CLASS H COMMON STOCK COMMON STOCK COMMON STOCK ------------ ------------ ------------ (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Net income (loss) attributable to stocks (before cumulative effect of accounting changes).................................... $ (2,914.3) $278.4 $ 15.3 Dividends and accumulation of redemption value on preferred and preference stocks.......... 306.3 -- -- ----------- ------- ------- Earnings (Loss) attributable to common stocks...................................... (3,220.6) 278.4 15.3 Dividends on common stocks.................... 945.4 76.1 53.3 ----------- ------- ------- Undistributed earnings (loss)................. (4,166.0) 202.3 (38.0) Adjustments Add-back dividends on assumed conversion of preference stocks........................ 19.8 -- -- Change in earnings attributable to each class of common stock related to the assumed share transactions(1)............ (46.2) 46.2 -- Dividends on assumed common stock transactions............................. -- (12.5) -- ----------- ------- ------- Adjusted earnings (loss) attributable to common stocks............................... $ (4,192.4) $236.0 (38.0) =========== ======= ======= Weighted average shares outstanding (in millions)................................... 670.5 209.1 75.3 Adjustments Shares issued on assumed conversion of preference stocks(1)..................... -- 34.8 -- ----------- ------- ------- Adjusted weighted average shares outstanding................................. 670.5 243.9 75.3 =========== ======= ======= Per Share Data Earnings (Loss) per share attributable to undistributed earnings (loss) on common stocks (before cumulative effect of accounting changes)...................... $(6.25) $0.97 $(0.50) Cumulative effect of accounting changes at January 1, 1992............................. (33.43) -- (2.18) Dividends..................................... 1.40 0.36 0.72 Adjustment.................................... -- -- (0.33)(2) ----------- ------- ------- Earnings (Loss) per share attributable to common stocks............................... $(38.28) $1.33 $(2.29) =========== ======= =======
- ------------------------- Note: The difference between fully diluted and primary earnings per share is immaterial. (1) The assumed conversion of preference stocks and exercise of stock options reflected by these adjustments has no effect on Class E or Class H common stock earnings per share, because to the extent that shares of Class E or Class H common stock deemed to be outstanding would increase, such increased shares would also increase the numerator of the fraction used to determine Available Separate Consolidated Net Income (Loss). (2) The per-share reported loss attributable to Class H common stock of $(2.29) equals the sum of the separate computations of each of the four quarters, consistent with the requirements for calculating earnings per share based on GMHE earnings and the Class H denominator. The calendar year calculation shown above (based on 1992 weighted average outstanding Class H shares for the year) requires an adjustment of $(0.33) due to the significant differences in the average number of shares outstanding in each quarter and the variations in quarterly earnings. IV-8 EX-12 5 EXHIBIT 12 1 EXHIBIT 12 COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
YEARS ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 --------- -------- --------- (DOLLARS IN MILLIONS) Income (Loss) before cumulative effect of accounting changes.................................................... $ 5,658.7 $2,465.8 $(2,620.6) United States, foreign, and other income taxes (credit)...... 2,694.6 109.5 (712.5) Equity in (income) losses of associates...................... (21.7) 18.1 216.4 Cash dividends received from associates...................... 10.0 5.0 4.4 Amortization of capitalized interest......................... 50.0 54.7 43.3 --------- -------- --------- Income (Loss) before income taxes, undistributed (income) losses of associates, and amortization of capitalized interest................................................... 8,391.6 2,653.1 (3,069.0) --------- -------- --------- Fixed charges included in net income (loss) Interest and related charges on debt....................... 5,035.7 5,552.0 6,973.2 Portion of rentals deemed to be interest................... 465.1 459.4 461.3 --------- -------- --------- Total fixed charges included in net income (loss)....... 5,500.8 6,011.4 7,434.5 --------- -------- --------- Earnings available for fixed charges......................... $13,892.4 $8,664.5 $ 4,365.5 ========= ======= ========= Fixed charges Fixed charges included in net income (loss)................ $ 5,500.8 $6,011.4 $ 7,434.5 Interest capitalized in the period......................... 33.9 44.1 43.6 --------- -------- --------- Total fixed charges..................................... $ 5,534.7 $6,055.5 $ 7,478.1 ========= ======= ========= Ratios of earnings to fixed charges.......................... 2.51 1.43 * ========= ======= =========
- ------------------------- * In 1992, earnings were inadequate to cover fixed charges by $3,112.6 million. IV-9 EX-18 6 EXHIBIT 18 1 EXHIBIT 18 General Motors Corporation: We have audited the Consolidated Balance Sheets of General Motors Corporation and subsidiaries as of December 31, 1994 and 1993 and the related Statements of Consolidated Operations and Consolidated Cash Flows for each of the three years in the period ended December 31, 1994 included in your Annual Report on Form 10-K to the Securities and Exchange Commission and have issued our report thereon dated January 30, 1995. Note 4 to such financial statements contains a description of your adoption during the year ended December 31, 1994 of the change in the measurement date, as defined in Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions," for the principal U.S. pension plans from October 1 to December 31. In our judgment, such change is to an alternative accounting principle that is preferable under the circumstances. /s/ DELOITTE & TOUCHE LLP - ------------------------------------------------------ DELOITTE & TOUCHE LLP Detroit, Michigan January 30, 1995 IV-10 EX-21 7 EXHIBIT 21 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1994 Subsidiary companies of the Registrant are listed below. With respect to the companies named, all voting securities are owned directly or indirectly by the Registrant, except where otherwise indicated.
STATE OR SOVEREIGN POWER NAME OF SUBSIDIARY OF INCORPORATION - ------------------------------------------------------------------------ --------------------- Subsidiaries included in the Registrant's consolidated financial statements AC Battery Corporation................................................ Michigan ACDelco Systems (M) Sdn Bhd........................................... Malaysia ACG France (50.4% owned by General Motors Corporation and 49.6% owned by Adam Opel Aktiengesellschaft)................................... France ACG Italia S.r.1. (99% owned by subsidiary and 1% owned by Opel France S.A.)............................................. Italy ACGI S.p.A. (98% owned by subsidiary and 2% owned by Opel France S.A.)............................................. Italy Aura Srl (75% owned by subsidiary)............................... Italy DRB s.a./n.v. (51% owned by subsidiary).......................... France Diavia Aire, S.A. (75% owned by subsidiary)...................... Italy Diavia S.r.1. (75% owned by subsidiary).......................... Italy Opel France S.A. (99% owned by subsidiary)....................... France Texton S.A. ..................................................... France ENCI S.A.R.L. (99.8% owned by subsidiary)..................... France Texton P.L.C. (97.5% owned by subsidiary)..................... United Kingdom Adam Opel Aktiengesellschaft.......................................... Germany ACG Deutschland GmbH (99% owned by subsidiary and 1% owned by ACG France)...................................................... Germany Asset Leasing GmbH (95% owned by subsidiary)....................... Germany Carus Grundstucks-Vermietungsgesellschaft mbH & Co. Object Kuno 65 KG (94% owned by subsidiary)...................... Germany Carus Grundstucks-Vermietungsgesellschaft mbH & Co. Object Leo 40 KG (94% owned by subsidiary)....................... Germany General Motors GmbH & Co. OHG (99% owned by subsidiary)............ Germany GM Europe GmbH (99% owned by subsidiary and 1% owned by GM Service GmbH)................................................. Germany GM Service GmbH.................................................... Germany Opel-Automobilwerk Eisenach-PKW GmbH (80% owned by subsidiary)..... Germany Opel Eisenach GmbH................................................. Germany Opel Hungary Automobile Production Ltd. ........................... Hungary Opel Service GmbH.................................................. Germany Opel Turkiye Limited Sirketi (99.5% owned by subsidiary and 0.5% owned by General Motors Overseas Corporation)..................... Turkey Saginaw Deutschland GmbH........................................... Germany Arabian Battery Holding Company....................................... Delaware Automotive Battery Manufacturing, Inc. ............................... Delaware Automotive Components Group Worldwide, Inc. .......................... Delaware Automotive Components Group Worldwide Singapore PTE Ltd. ............. Singapore Battery Technology Services, Inc. .................................... Delaware Controladora General Motors, S.A. de C.V. ............................ Mexico Centro Tecnico Herramental, S.A. de C.V. (80% owned by subsidiary)....................................................... Mexico
IV-11 2
STATE OR SOVEREIGN POWER NAME OF SUBSIDIARY OF INCORPORATION - ------------------------------------------------------------------------ --------------------- Componentes Para Automotores, S.A. de C.V. ........................ Mexico Alambrados Automotrices, S.A. de C.V. ........................... Mexico Cableados, S.A. de C.V. ......................................... Mexico Componentes Mecanicos de Matamoros, S.A. de C.V. ................ Mexico Ensamble de Cables y Componentes, S.A. de C.V. .................. Mexico Productos Delco de Chihuahua, S.A. de C.V. ...................... Mexico Sistemas Electricos y Conmutadores, S.A. de C.V. ................ Mexico General Motors de Mexico, S.A. de C.V. ............................ Mexico Sistemas Para Automotores de Mexico, S.A. de C.V. ................. Mexico Alambrados y Circuitos Electricos, S.A. de C.V. ................. Mexico Conductores y Componentes Electricos de Juarez, S.A. de C.V. .... Mexico Dr De Chihuahua, S.A. de C.V. ................................... Mexico Ensamble de Cubiertas Automotrices, S.A. de C.V. ................ Mexico Rio Bravo Electricos, S.A. de C.V. .............................. Mexico Vestiduras Fronterizas, S.A. de C.V. ............................ Mexico Electro-Motive Maintenance Operations Pty Ltd. ......................... Australia Empresas Ca-Le de Tlaxcala, S.A. de C.V. (57% owned by General Motors Corporation and 43% owned by Controladora General Motors, S.A. de C.V.)................................................................. Mexico Exhaust Systems Corporation............................................. Delaware General Motors Acceptance Corporation................................... New York Banque Opel (98% owned by subsidiary)................................. France Capital Auto Receivables, Inc. ....................................... Delaware GMAC, Australia (Finance) Limited..................................... Australia GMAC Auto Receivables Corporation..................................... Delaware GMAC Capital Corporation.............................................. Utah GMAC Comercial Automotriz Chile S.A. ................................. Chile GMAC Commercial Corporation........................................... Delaware GMAC Holding S.A. de C.V. (99.95% owned by subsidiary and .05% owned by various GMAC subsidiaries)...................................... Mexico GMAC Arrendadora S.A. de C.V. ..................................... Mexico General Motors Acceptance Corporation, S.A. de C.V. ............... Mexico Servicios GMAC S.A. de C.V. ....................................... Mexico GMAC International Finance, B.V. ..................................... Netherlands GMAC Italia Leasing S.p.A. ........................................... Italy GMAC Leasing Corporation.............................................. Delaware Patlan Corporation................................................. Delaware Patlan Marina, Inc. ............................................... Michigan Patlan Restaurants, Inc. .......................................... Michigan GMAC Mortgage Corporation............................................. Michigan Colonial Mortgage Service Company Associates, Inc. ................ Pennsylvania GMAC Commercial Mortgage Corporation............................... California GMAC Mortgage Corporation of PA.................................... Pennsylvania GMAC Mortgage Holdings, Inc. ...................................... Delaware GMAC Mortgage Securities II, Inc. ................................. Michigan GMAC RF, Inc. ..................................................... Michigan RMC Acquisition Corporation........................................ Delaware GMAC Overseas Finance Corporation N.V. ............................... Netherlands Antilles GMAC Sverige AB....................................................... Sweden General Motors Acceptance Corporation, Australia...................... Delaware General Motors Acceptance Corporation of Canada, Limited.............. Canada Canadian Securitized Auto Receivables Corporation.................. Canada
IV-12 3
STATE OR SOVEREIGN POWER NAME OF SUBSIDIARY OF INCORPORATION - ------------------------------------------------------------------------ --------------------- GMAC Leaseco Limited............................................... Canada General Motors Acceptance Corporation, Colombia S.A. ................. Delaware General Motors Acceptance Corporation, Continental.................... Delaware General Motors Acceptance Corporation Hungary Financial Services Limited Liability Company.......................................... Hungary General Motors Acceptance Corporation International................... Delaware General Motors Acceptance Corporation Italia S.p.A. .................. Italy General Motors Acceptance Corporation Nederland N.V. ................. Netherlands GMAC Espana, S.A. de Financiacion.................................. Spain General Motors Acceptance Corporation, North America.................. Delaware General Motors Acceptance Corporation (N.Z.) Limited.................. New Zealand General Motors Acceptance Corporation de Portugal -- Servicos Financeiros, S.A. (99% owned by subsidiary and 1% owned by General Motors Acceptance Corporation International)....................... Portugal General Motors Acceptance Corporation, South America.................. Delaware General Motors Acceptance Corporation de Venezuela, C.A. .......... Venezuela General Motors Acceptance Corporation Suisse S.A. .................... Switzerland General Motors Austria Beteiligungsgesellschaft m.b.H................. Austria OPEL Leasinggesellschaft mbH (74% owned by subsidiary)............. Austria Motors Insurance Corporation.......................................... New York Cadmic Agency Corporation.......................................... Delaware Car Care Plan (Holdings) Limited (99.9% owned by subsidiary and .1% owned by GMOC Administrative Corporation)......................... England Car Care Plan (Securities Division) Limited (99.9% owned by Car Care Plan (Holdings) Limited and .1% owned by GMOC Administrative Corporation)...................................................... England CIM Insurance Corporation.......................................... New York MIC General Insurance Corporation.................................. Indiana MIC Life Insurance Corporation..................................... Delaware MIC Property and Casualty Insurance Corporation.................... Michigan MIC Re Corp. ...................................................... Delaware MIC Services Corporation........................................... Delaware Motors Insurance Company Limited................................... England Motors Insurance Purchasing Group, Inc. ........................... Michigan Motors Mechanical Reinsurance Company, Limited..................... Barbados NAVCO Corp. ....................................................... Missouri Trinity General Agency, Inc. ...................................... Texas Opel Bank GmbH........................................................ Germany Opel Leasing GmbH & Co. OHG........................................... Germany Opel Leasing Verwaltungs GmbH (60% owned by Opel Bank GmbH, 20% owned by General Motors Acceptance Corporation, and 20% owned by Adam Opel Aktiengesellschaft)................................. Germany Wholesale Auto Receivables Corporation................................ Delaware General Motors de Argentina S.A. (80% owned by General Motors Corporation).......................................................... Argentina General Motors Asia, Inc. .............................................. Delaware General Motors (Thailand) Ltd. ....................................... Thailand General Motors Asian and Pacific Operations............................. Singapore General Motors do Brasil Ltda. ......................................... Brazil Brazauto Trading (Cayman) Limited..................................... Cayman Island Cruz Alta -- Comercio e Participacoes Ltda. .......................... Brazil GM Factoring Sociedade de Fomento Comercial Ltda. .................... Brazil General Motors of Canada Limited........................................ Canada
IV-13 4
STATE OR SOVEREIGN POWER NAME OF SUBSIDIARY OF INCORPORATION - ------------------------------------------------------------------------ --------------------- General Motors Chile S.A., Industria Automotriz......................... Chile General Motors China (Components), Inc. ................................ Delaware Beijing WY-GM Automotive Electronic Control Co., Limited (51% owned by subsidiary).......................................... People's Republic of China General Motors China, Inc. ............................................. Delaware General Motors Colmotores, S.A. (82.6% owned by General Motors Corporation).......................................................... Colombia General Motors Commercial Corporation................................... Delaware General Motors Development Corporation.................................. Delaware General Motors del Ecuador S.A. (98% owned by General Motors Corporation).......................................................... Ecuador General Motors (Europe) AG.............................................. Switzerland General Motors Export Corporation....................................... Delaware General Motors Foreign Sales Corporation................................ U.S. Virgin Islands General Motors Holdings (U.K.).......................................... England General International (UK) Limited (50% owned by subsidiary and 50% owned by GMOC Administrative Services Corporation)................. England General Motors Acceptance Corporation (U.K.) Public Limited Company... England General Motors Acceptance Corporation (U.K.) Finance plc........... England GMAC Leasing (U.K.) Limited........................................ England GMAC Leasing (U.K.) (No. 1) Limited................................ England GMAC Leasing (U.K.) (No. 2) Limited................................ England GMAC Leasing (U.K.) (No. 3) Limited................................ England Group Lotus, plc (84.6% owned by subsidiary and 15.4% owned by GMLG Ltd.).............................................................. United Kingdom MLS UK Ltd. ..................................................... England IBC Vehicles Limited (60% owned by subsidiary)..................... United Kingdom Millbrook Land and Co. Ltd. ....................................... England Millbrook Pension Management Ltd. (99% owned by subsidiary)........ England Millbrook Proving Ground Ltd. ..................................... England VHC Sub-Holdings (UK) Ltd. ........................................ England Vauxhall Motors (Finance) Plc. .................................... England Vauxhall Motors Limited............................................ England General Motors Indonesia, Inc. ......................................... Delaware General Motors Interamerica Corporation................................. Delaware General Motors International Operations, Inc. .......................... Delaware General Motors Investment Management Corporation........................ Delaware General Motors Japan Ltd. .............................................. Japan General Motors Korea, Inc. ............................................. Delaware General Motors Market Development of Canada Limited..................... Canada General Motors Nederland B.V. .......................................... Netherlands Allison Transmission Europe B.V. ..................................... Netherlands General Motors Poland Spolka, zo.o.................................... Poland General Motors Yugoslavia, d.o.o. .................................... Yugoslavia Opel C&S spol. s.r.o. ................................................ Czechoslovakia Opel Nederland B.V. .................................................. Netherlands General Motors Overseas Corporation..................................... Delaware AC Delco Systems Australia Ltd. ...................................... Australia AC Delco Systems Overseas Corporation................................. Delaware Delco Chassis Overseas Corporation.................................... Delaware Automotive Components Group Espana, S.A. .......................... Spain Delco Limited...................................................... England
IV-14 5
STATE OR SOVEREIGN POWER NAME OF SUBSIDIARY OF INCORPORATION - ------------------------------------------------------------------------ --------------------- Saginaw Limited.................................................... England G.M. Holding (Portugal) SGPS, Lda. (50% owned by subsidiary and 50% owned by General Motors Corporation)............................... Portugal CABLESA-Industria de Componentes Electricos Sociedade Anonima.... Portugal INLAN -- Industria de Componentes Mecanicos, S.A. ................. Portugal Opel Portugal, Lda. ............................................... Portugal GMOC Administrative Services Corporation.............................. Delaware Fisher Body Limited (50% owned by subsidiary and 50% owned by GM (UK) Pension Trustees Limited)................................... Ireland GM (UK) Pension Trustees Limited (50% owned by subsidiary and 50% owned by Vauxhall Motors Limited)................................. United Kingdom GMOC Australia Pty. Ltd. ............................................. Australia General Motors-Holden's Automotive Limited (49% owned by subsidiary and 51% owned by United Australian Automotive Industries Limited)........................................................... Australia General Motors Overseas Commercial Vehicle Corporation................ Delaware Holden's Motor Overseas Corporation Limited........................... Delaware Lidlington Engineering Company, Ltd. ................................. Delaware Truck and Bus Engineering U.K., Limited............................... Delaware Venezolana de Industrias Automotrices, C.A. .......................... Venezuela General Motors Venezolana, C.A. ................................... Venezuela General Motors de Venezuela, C.A. ................................. Venezuela General Motors Overseas Distribution Corporation........................ Delaware General Motors Import & Distribution GmbH............................. Germany General Motors Investment Services Company N.V. ...................... Belgium General Motors Luxembourg Operations S.A. ............................ Luxembourg GMODC Finance N.V. ................................................... Netherlands Antilles Packard Elektrik Sistemleri Limited Sirketi (97.6% owned by subsidiary and 2.4% owned by General Motors Overseas Corporation)............. Turkey General Motors Peru S.A................................................. Peru General Motors Receivables Corporation.................................. Delaware General Motors Uruguay, S.A............................................. Uruguay GM Allison Japan Limited................................................ Japan GM Auto Receivables Co. ................................................ Delaware GMC Truck Motors Development Corporation................................ Delaware GM-DI Leasing Corporation............................................... Delaware GM Hughes Electronics Corporation....................................... Delaware Delco Electronics Corporation......................................... Delaware Delco Electronics Asia/Pacific Pte Ltd. ........................... Singapore Delco Electronics Europe GmbH...................................... Germany Delco Electronics Overseas Corporation............................. Delaware Delco Electronics Service Corporation.............................. Delaware Delnosa, S.A. de C.V. ............................................. Mexico Deltronicos de Matamoros, S.A. de C.V. ............................ Mexico GM Singapore Pte. Ltd. ............................................ Singapore Mecel AB........................................................... Sweden H E Microwave Corporation............................................. Delaware Hughes Aircraft Company............................................... Delaware Advanced Electronics Systems International......................... California AMI Instruments, Inc. ............................................. Oklahoma DIRECTV Enterprises, Inc. ......................................... Delaware HUSINT S.A. ....................................................... Switzerland
IV-15 6
STATE OR SOVEREIGN POWER NAME OF SUBSIDIARY OF INCORPORATION - ------------------------------------------------------------------------ --------------------- Hughes Aircraft of Canada Limited.................................. Canada Hughes Aircraft Holdings Canada Ltd. .............................. Canada Hughes Aircraft Mississippi, Inc. ................................. California Hughes Aircraft -- South Carolina.................................. California Hughes Aircraft Systems International.............................. California Hughes Asia Pacific Hong Kong Limited.............................. Hong Kong Hughes Australia International PTY Ltd. ........................... Australia Hughes-Avicom International, Inc. ................................. California Hughes Communications, Inc. ....................................... California Hughes Danbury Optical Systems, Inc. .............................. Delaware Hughes Data Systems................................................ California Hughes Document Production Services, Inc. ......................... Delaware Hughes Electronic Technologies, Inc. .............................. Delaware Hughes Electronics Manufacturing Service Company................... Delaware Hughes Environmental Systems, Inc. ................................ California Hughes Espana S.A. ................................................ Spain Hughes Europe N.V. ................................................ Belgium Hughes Foreign Sales Corporation................................... U.S. Virgin Islands Hughes Georgia, Inc. .............................................. Delaware Hughes Identification Devices, Inc. ............................... Delaware Hughes Information Technology Corporation.......................... Delaware Hughes International Corporation................................... Delaware Hughes International de Mexico, S.A. de C.V. ...................... Mexico Hughes International Sales Corporation............................. California Hughes International Sales Corporation No. 2....................... California Hughes Investment Management Company............................... California Hughes-JVC Technology Corporation (60% owned by subsidiary......... Delaware Hughes LAN Systems, Inc. .......................................... California Hughes Lexington, Inc. ............................................ Delaware Hughes Microelectronics Limited.................................... United Kingdom Hughes Missiles Electronics, Inc. ................................. California Hughes Missile Systems Company..................................... Delaware Hughes Nadge Corporation........................................... Delaware Hughes Network Systems, Inc. ...................................... Delaware Hughes Network Systems Limited..................................... United Kingdom Hughes Power Products, Inc. (60% owned by subsidiary and 40% owned by General Motors Corporation).................................... Delaware Hughes Power Supplies Corporation.................................. Delaware Hughes Research Analytics, Inc. ................................... Delaware Hughes STX Corporation............................................. Delaware Hughes Saudi Arabia Limited........................................ Delaware Hughes Space and Communications International, Inc. ............... Delaware Hughes Systems Management International............................ California Hughes Technical Services Company.................................. California Hughes Training, Inc. ............................................. Delaware Hughes Transportation Control Systems, Inc. ....................... Delaware Hughes (U.K.) Limited.............................................. England International Electronics Systems, Inc. ........................... California L-T Ranches, Inc. ................................................. California MDP, Ltd. ......................................................... California Santa Barbara Research Center...................................... California
IV-16 7
STATE OR SOVEREIGN POWER NAME OF SUBSIDIARY OF INCORPORATION - ------------------------------------------------------------------------ --------------------- Spectrolab, Inc. .................................................. California Systems Building Corp. ............................................ Arizona GMLG Ltd. .............................................................. Delaware MLS USA, Inc. ........................................................ Delaware GM Ovonic L.L.C. (60% owned by General Motors Corporation).............. Michigan Holden New Zealand Limited.............................................. New Zealand IBC Vehicles (Distribution) Limited (60% owned by General Motors Corporation).......................................................... United Kingdom Kabelwerke Reinshagen GmbH (97.9% owned by General Motors Corporation).......................................................... Germany F&G Megamos Sicherheitselektronik GmbH............................. Germany Kabelwerke Reinshagen Werk Berlin GmbH (75.5% owned by subsidiary and 18.5% by General Motors Corporation).......................... West Berlin Kabelwerke Reinshagen Werk Neumarkt GmbH (75.5% owned by subsidiary and 18.5% by General Motors Corporation).......................... Germany Reinshagen GmbH.................................................... Germany Motors Trading Corporation.............................................. Michigan National Car Rental System Inc. ........................................ Delaware New Center Neighborhood Services Corporation............................ Michigan Opel Austria GmbH....................................................... Austria AC Delco Systems Austria GmbH......................................... Austria Opel Hungary Automotive Distribution Ltd.............................. Hungary Opel Hungary Automotive Manufacturing Ltd. ........................... Hungary Opel Belgium N.V. ...................................................... Belgium Opel Espana, S.A. (73.5% owned by General Motors Corporation and 26.5% owned by Adam Opel Aktiengesellschaft)................................ Spain ACG Componentes, S.A. ............................................. Spain General Motors ACG, S.A. .......................................... Spain Opel Ireland Limited.................................................... Ireland Opel Italia S.p.A. (99.9% owned by General Motors Corporation and 0.1% owned by General Motors Overseas Distribution Corporation)............ Italy Opel Norge AS........................................................... Norway Opel Oy................................................................. Finland Opel Suisse S.A. ....................................................... Switzerland GM-Saab Communication GmbH (55% owned by subsidiary).................. Switzerland Packard CTA Pty. Ltd. (60% owned by General Motors Corporation)......... Australia Packard Electric China, Inc. ........................................... Delaware Packard Electric Europa Ges.m.b.H. ..................................... Austria Packard Electric Burgenland GmbH...................................... Austria Packard Electric Vas kft (60% owned by subsidiary).................... Hungary Reinshagen Tournai S.A. (99% owned by subsidiary and 1% owned by Packard Electric Burgenland GmbH).................................. Belgium Packard Electric Ireland Limited........................................ Ireland Packard Electric Poland Sp. zo.o. ...................................... Poland Packard Hughes Interconnect Company..................................... Delaware Packard Hughes Interconnect Connection Systems........................ California Packard Hughes Interconnect Engineering Services...................... Delaware Packard Hughes Interconnect Wiring Systems............................ California PT General Motors Buana Indonesia (60% owned by General Motors Corporation)................................................... Indonesia RGR Holdings, Inc. ..................................................... Delaware Electronic Data Systems Corporation................................... Texas Alpha Joshua, Inc. .............................................. California
IV-17 8
STATE OR SOVEREIGN POWER NAME OF SUBSIDIARY OF INCORPORATION - ------------------------------------------------------------------------ --------------------- Alpha Mariah, Inc. .............................................. California American Network Leasing Corporation............................. Nevada Appex, Inc. ..................................................... Delaware Beta Mariah, Inc. ............................................... California Beta Willow, Inc. ............................................... California Deep Star, Inc. ................................................. California EDS Acquisition Corporation #4................................... Delaware EDS Antares, Inc. ............................................... Nevada E.D.S. of Canada, Ltd. .......................................... Canada EDS Crisis Response Foundation................................... Texas E.D.S. De Mexico, S.A. De C.V. .................................. Mexico EDS Electronic Financial Services, Inc. ......................... Delaware EDS Export Corporation........................................... U.S. Virgin Islands EDS Fleet Services, Inc. ........................................ Texas EDS Global Services, Inc. ....................................... Delaware E.D.S. International Corporation................................. Texas EDS Personal Communications Corporation (87% owned by subsidiary and 13% by Appex, Inc.)......................................... Delaware EDS-Scicon, US Software Products Group Incorporated.............. Delaware E.D.S. Spectrum Corporation...................................... Nevada EDS Technical Products Corporation............................... Delaware EDS VLT Holdings, Inc. .......................................... Nevada EDS Vermogensverwaltungs GmbH.................................... Germany E.D.S. World Corporation (Far East).............................. Nevada E.D.S. World Corporation (Netherlands)........................... Texas Federal Computer Services Corporation (66.7% owned by subsidiary)..................................................... Delaware Japan Systems Company Limited (51% owned by subsidiary).......... Japan M&SD Network Services, Inc. ..................................... Delaware OAN Services, Inc. .............................................. Texas Oy EDS Electronic Data Systems Ab................................ Finland Power Investment Corporation..................................... Nevada PREMISYS Corporation............................................. Texas Scicon Energy, Inc. ............................................. Delaware Scicon International Systems Company Incorporated................ Delaware Subarban Limited Liability Company (74.2% owned by subsidiary and 1.1% owned by EDS Technical Products Corporation)............. Nevada Telecommunications International, Inc. .......................... California Ward FSC, Ltd. .................................................. Bermuda Rimir, S.A. de C.V. .................................................... Mexico Saab Opel Sverige AB.................................................... Sweden Saturn Corporation...................................................... Delaware Saturn Distribution Corporation....................................... Delaware Saturn County Bond Corporation.......................................... Delaware Unicables, S.A. ........................................................ Spain Asientos IFG, S.A. ................................................... Spain Cableados Integrados S.A. ............................................ Spain Conexionados Electricos Tarazona S.A. ................................ Spain
IV-18 9 236 directly or indirectly owned subsidiaries Companies not included in the Registrant's consolidated financial statements, for which no financial statements are submitted: 18 other directly or indirectly owned domestic and foreign subsidiaries 13 active subsidiaries 5 inactive subsidiaries 35 fifty-percent owned companies and 79 less than fifty-percent owned companies the investments in which are accounted for by the equity method. In addition, the Registrant owns 100% of the voting control of the following companies: 397 dealerships operating under dealership assistance plans and engaged in retail distribution of General Motors products 267 dealerships operating in the United States 130 dealerships operating in foreign countries Companies not shown by name, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary. During 1994, there were changes in the number of subsidiaries and companies of the Registrant, as follows: 11 directly and 27 indirectly owned domestic subsidiaries, and 9 directly and 78 indirectly owned foreign subsidiaries were organized or acquired. 5 indirectly owned domestic subsidiaries, and 2 directly and 16 indirectly owned foreign subsidiaries were dissolved or sold. A fifty-percent interest and less than fifty-percent interests were acquired in 7 companies and 15 companies, while interests in 3 fifty-percent owned and 5 less than fifty-percent owned companies were terminated. 1 directly owned active nonconsolidated domestic subsidiary was reclassified to inactive nonconsolidated subsidiary. 1 indirectly owned foreign subsidiary was reclassified to fifty-percent owned associate. 1 directly owned domestic subsidiary acquired in 1994 decreased in ownership to less than twenty-percent owned and was removed from the list. 1 indirectly owned domestic subsidiary changed ownership to less than 20% owned and was removed from list. 2 directly owned foreign subsidiaries changed to directly less than fifty-percent owned foreign associates. 1 fifty-percent owned foreign associate and 5 less than fifty-percent owned foreign associates increased in ownership to greater than fifty-percent and moved to indirectly owned foreign subsidiaries. 1 less than fifty-percent owned foreign associate decreased in ownership to less than twenty-percent owned and removed from list. 1 directly owned foreign affiliate increased ownership and changed to indirectly less than fifty-percent owned foreign associate. 1 indirectly less than fifty-percent owned foreign associate increased ownership and changed to indirectly owned foreign subsidiary. The number of dealerships operating under dealership assistance plans decreased by a net of 25. * * * * * * * IV-19 EX-23 8 EXHIBIT 23 1 EXHIBIT 23 GENERAL MOTORS CORPORATION AND SUBSIDIARIES CONSENT OF INDEPENDENT AUDITORS General Motors Corporation: We consent to the incorporation by reference of our reports dated January 30, 1995 appearing in this Annual Report on Form 10-K of General Motors Corporation for the year ended December 31, 1994 in the following Registration Statements:
REGISTRATION FORM STATEMENT NO. DESCRIPTION - ----- ------------------ ----------------------------------------------------------------- S-3 33-41557 General Motors Corporation Debt Securities S-3 33-47343 General Motors Corporation $1 2/3 Par Value Common Stock (Post-Effective Amendment No. 1) S-3 33-49035 General Motors Corporation $1 2/3 Par Value Common Stock (Amendment No. 1) S-3 33-56671 General Motors Corporation $1 2/3 Par Value Common Stock (Amendment No. 1) S-3 33-49309 General Motors Corporation Dividend Reinvestment Plan S-8 33-56753 The General Motors Personal Savings Plan for Hourly-Rate Employees in the United States S-8 33-54841 General Motors Amended 1987 Stock Incentive Plan S-8 33-49245 General Motors Savings-Stock Purchase Program for Salaried Employees in the United States S-8 2-94690 1984 Electronic Data Systems Corporation Stock Purchase Plan (Post-Effective Amendment No. 1) S-8 2-94691 1984 Electronic Data Systems Corporation Stock Incentive Plan (Post-Effective Amendment No. 1) S-8 33-36443 EDS Deferred Compensation Plan S-8 33-54833 EDS Puerto Rico Savings Plan S-8 33-32322 Hughes Aircraft Company Salaried Employees' Thrift and Savings Plan Hughes Aircraft Company Tucson Bargaining Employees' Thrift and Savings Plan Hughes Aircraft Company California Hourly Employees' Thrift and Savings Plan Hughes Thrift and Savings Plan S-8 33-54835 The GMAC Mortgage Corporation Savings Incentive Plan S-8 33-40423 GM Hughes Electronics Corporation Incentive Plan S-8 33-43746 Saturn Individual Savings Plan for Union-Represented Employees S-8 33-49243 Saturn Personal Choices Savings Plan for Non-Represented Employees S-8 33-28714 Marketing & Systems Development Corporation 1985 Incentive Stock Option Plan
/s/ DELOITTE & TOUCHE LLP - ------------------------------------------------------ DELOITTE & TOUCHE LLP Detroit, Michigan March 13, 1995 IV-20 EX-27 9 EXHIBIT 27
5 This schedule contains summary financial information extracted from General Motors Corporation December 31, 1994 Consolidated Financial Statements and is qualified in its entirety by reference to 1994 Form 10-K. 0000040730 GENERAL MOTORS CORPORATION 1,000,000 U.S. DOLLAR YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 1.0 10,939 5,137 63,055 0 10,128 0 77,367 42,586 198,599 0 73,730 1,292 0 2 11,530 198,599 134,760 154,951 117,221 127,246 226 177 5,432 8,353 2,695 5,659 0 0 (758) 4,901 5.15 0
EX-99.(A) 10 EXHIBIT 99(A) 1 EXHIBIT 99(A) ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements of EDS were prepared by management, which is responsible for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles and, as such, include amounts based on judgments of management. Financial information elsewhere in this Exhibit 99(a) is consistent with that in the consolidated financial statements. Management is further responsible for maintaining a system of internal accounting controls designed to provide reasonable assurance that the books and records reflect the transactions of the Company and that its established policies and procedures are carefully followed. Perhaps the most important feature in the system of control is that it is continually reviewed for its effectiveness and is augmented by written policies and guidelines, the careful selection and training of qualified personnel, and a strong program of internal audit. The Company's independent auditors, KPMG Peat Marwick LLP, have audited the financial statements. Their audits were conducted in accordance with generally accepted auditing standards, which include the consideration of the Company's internal controls to the extent necessary to form an independent opinion on the financial statements prepared by management. The Board of Directors, through the EDS Audit Committee, is responsible for assuring that management fulfills its responsibilities in the preparation of the consolidated financial statements and for engaging the independent auditors. The Committee reviews the scope of the audits and the accounting principles being applied in financial reporting. The independent auditors, representatives of management, and the internal auditors meet regularly (separately and jointly) with the Committee to review the activities of each, to ensure that each is properly discharging its responsibilities, and to discuss the effectiveness of the system of internal accounting controls. It is management's conclusion that the system of internal accounting controls at December 31, 1994 provides reasonable assurance that the books and records reflect the transactions of the Company and that the Company complies with established policies and procedures. To ensure complete independence, KPMG Peat Marwick LLP have full and free access to meet with the Committee, without management representatives present, to discuss the results of their audits and the quality of the financial reporting. /s/ Lester M. Alberthal, Jr. - ------------------------------------------------------ Lester M. Alberthal, Jr. Chairman of the Board President and Chief Executive Officer /s/ Joseph M. Grant - ------------------------------------------------------ Joseph M. Grant Senior Vice President Chief Financial Officer IV-21 2 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES INDEPENDENT AUDITORS' REPORT AND CONSENT The Board of Directors Electronic Data Systems Corporation: We have audited the accompanying consolidated balance sheets of Electronic Data Systems Corporation and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income and cash flows for each of the years in the three-year period ended December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Electronic Data Systems Corporation and subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. We hereby consent to the incorporation by reference of our report stated above in the following Registration Statements:
REGISTRATION FORM STATEMENT NO. DESCRIPTION - ----- ------------------ ----------------------------------------------------------------- S-3 33-41557 General Motors Corporation Debt Securities S-3 33-47343 General Motors Corporation $1 2/3 Par Value Common Stock (Post-Effective Amendment No. 1) S-3 33-49035 General Motors Corporation $1 2/3 Par Value Common Stock (Amendment No. 1) S-3 33-56671 General Motors Corporation $1 2/3 Par Value Common Stock (Amendment No. 1) S-3 33-49309 General Motors Corporation Dividend Reinvestment Plan S-8 33-56753 The General Motors Personal Savings Plan for Hourly-Rate Employees in the United States S-8 33-54841 General Motors Amended 1987 Stock Incentive Plan S-8 33-49245 General Motors Savings-Stock Purchase Program for Salaried Employees in the United States S-8 2-94690 1984 Electronic Data Systems Corporation Stock Purchase Plan (Post-Effective Amendment No. 1) S-8 2-94691 1984 Electronic Data Systems Corporation Stock Incentive Plan (Post-Effective Amendment No. 1) S-8 33-36443 EDS Deferred Compensation Plan S-8 33-54833 EDS Puerto Rico Savings Plan
IV-22 3
REGISTRATION FORM STATEMENT NO. DESCRIPTION - ----- ------------------ ----------------------------------------------------------------- S-8 33-32322 Hughes Aircraft Company Salaried Employees' Thrift and Savings Plan Hughes Aircraft Company Tucson Bargaining Employees' Thrift and Savings Plan Hughes Aircraft Company California Hourly Employees' Thrift and Savings Plan Hughes Thrift and Savings Plan S-8 33-54835 The GMAC Mortgage Corporation Savings Incentive Plan S-8 33-40423 GM Hughes Electronics Corporation Incentive Plan S-8 33-43746 Saturn Individual Savings Plan for Union-Represented Employees S-8 33-49243 Saturn Personal Choices Savings Plan for Non-Represented Employees S-8 33-28714 Marketing & Systems Development Corporation 1985 Incentive Stock Option Plan
/s/ KPMG PEAT MARWICK LLP - ------------------------------------------------------ KPMG PEAT MARWICK LLP Dallas, Texas January 25, 1995 (March 13, 1995 as to the consent in the last paragraph on the preceding page) IV-23 4 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, --------------------------------- 1994 1993 1992 --------- -------- -------- Revenues Systems and other contracts GM and affiliates........................................ $ 3,547.2 $3,323.7 $3,348.5 Outside customers........................................ 6,412.9 5,183.6 4,806.7 Interest and other income................................... 92.3 54.5 63.7 --------- -------- -------- Total revenues......................................... 10,052.4 8,561.8 8,218.9 --------- -------- -------- Costs and expenses Cost of revenues............................................ 7,529.4 6,390.6 6,205.8 Selling, general, and administrative........................ 1,187.1 1,005.4 969.3 Interest (Note 9)........................................... 51.7 34.5 43.0 --------- -------- -------- Total costs and expenses............................... 8,768.2 7,430.5 7,218.1 --------- -------- -------- Income before income taxes.................................... 1,284.2 1,131.3 1,000.8 Provision for income taxes (Note 11).......................... 462.3 407.3 365.3 --------- -------- -------- Separate Consolidated Net Income.............................. $ 821.9 $ 724.0 $ 635.5 ========= ======== ======== Available Separate Consolidated Net Income Average number of shares of GM Class E common stock outstanding (in millions) (Note 1) (Numerator).............. 260.3 243.0 209.1 Class E dividend base (in millions) (Denominator)............. 481.7 480.6 479.3 Available Separate Consolidated Net Income.................... $ 444.4 $ 367.2 $ 278.4 ========= ======== ======== Earnings Attributable to GM Class E Common Stock on a Per Share Basis (Note 1)........................................ $ 1.71 $ 1.51 $ 1.33 ========= ======== ========
See accompanying notes to consolidated financial statements. IV-24 5 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, -------------------- 1993 1994 -------- -------- (IN MILLIONS) ASSETS Current assets Cash and cash equivalents.............................................. $ 608.2 $ 383.4 Marketable securities (Note 3)......................................... 149.6 224.1 Accounts receivable.................................................... 2,082.1 1,412.5 Accounts receivable from GM and affiliates............................. 65.4 112.6 Inventories............................................................ 137.8 130.7 Prepaids and other..................................................... 311.0 243.5 -------- -------- Total current assets................................................ 3,354.1 2,506.8 -------- -------- Property and equipment, at cost less accumulated depreciation (Note 4) Land................................................................... 125.3 121.6 Buildings and facilities............................................... 559.2 532.0 Computer equipment..................................................... 1,871.0 1,275.5 Other equipment and furniture.......................................... 201.1 185.6 -------- -------- Total property and equipment, net................................... 2,756.6 2,114.7 -------- -------- Operating and other assets Land held for development, at cost (Note 5)............................ 97.4 94.4 Investment in leases and other (Note 6)................................ 1,308.8 1,159.9 Software, goodwill, and other intangibles, net (Notes 7 and 19)........ 1,269.6 1,066.3 -------- -------- Total operating and other assets.................................... 2,675.8 2,320.6 -------- -------- Total Assets............................................................. $8,786.5 $6,942.1 ======== ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable....................................................... $ 571.1 $ 359.8 Accrued liabilities (Note 8)........................................... 1,451.0 996.0 Deferred revenue....................................................... 536.7 429.7 Income taxes (Note 11)................................................. 111.0 202.2 Notes payable (Note 9)................................................. 203.4 172.7 -------- -------- Total current liabilities........................................... 2,873.2 2,160.4 -------- -------- Deferred income taxes (Note 11).......................................... 659.8 641.5 -------- -------- Notes payable (Note 9)................................................... 1,021.0 522.8 -------- -------- Commitments and contingent liabilities (Notes 17 and 18) Stockholder's equity (Notes 10 and 12) Common stock, without par value; authorized 1,000.0 shares. Issued and outstanding 481.7 and 480.9 shares at December 31, 1994 and 1993, respectively. ...................................................... 455.1 421.2 Retained earnings...................................................... 3,777.4 3,196.2 -------- -------- Total stockholder's equity.......................................... 4,232.5 3,617.4 -------- -------- Total Liabilities and Stockholder's Equity............................... $8,786.5 $6,942.1 ======== ========
See accompanying notes to consolidated financial statements. IV-25 6 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, ---------------------------------- 1994 1993 1992 --------- --------- -------- (IN MILLIONS) Cash Flows from Operating Activities Net income................................................. $ 821.9 $ 724.0 $ 635.5 --------- --------- -------- Adjustments to reconcile net income to net cash provided by operating activities (net of effects of acquired companies) Depreciation and amortization........................... 741.3 607.9 603.2 Accretion of discount related to commercial paper....... 30.9 13.4 8.3 (Increase) decrease in accounts receivable.............. (585.0) (199.8) 18.6 (Increase) decrease in accounts receivable from GM and affiliates............................................ 51.1 (56.0) 2.3 Increase in inventories................................. (1.9) (15.5) (22.3) Increase in prepaids and other.......................... (57.0) (26.8) (29.8) Increase (decrease) in accounts payable and accrued liabilities........................................... 482.9 22.0 (181.4) Increase in deferred revenue............................ 79.1 137.1 1.6 Increase (decrease) in income taxes..................... (94.4) 138.9 (98.2) Increase in deferred income taxes....................... 21.9 49.8 198.0 --------- --------- -------- Total adjustments 668.9 671.0 500.3 --------- --------- -------- Net cash provided by operating activities.................. 1,490.8 1,395.0 1,135.8 --------- --------- -------- Cash Flows from Investing Activities Payments for purchase of available-for-sale securities..... (248.9) (305.7) (291.2) Proceeds from sale of available-for-sale securities........ 370.0 247.4 277.9 Payments related to land held for development.............. (3.0) (6.2) (16.6) Payments for investment in leases and certain other assets.................................................. (518.0) (293.5) (456.7) Proceeds from investment in leases and certain other assets.................................................. 318.5 348.8 406.7 Payments for purchase of software and certain other intangibles............................................. (96.7) (119.0) (64.5) Payments for purchase of property and equipment............ (1,120.9) (799.4) (639.0) Payments related to acquisitions, net of cash acquired..... (186.6) (122.1) (30.2) --------- --------- -------- Net cash used in investing activities...................... (1,485.6) (1,049.7) (813.6) --------- --------- -------- Cash Flows from Financing Activities Net decrease in current notes payable with maturities less than 90 days............................................ (102.9) (99.0) (239.4) Payments on notes payable.................................. (197.2) (220.5) (800.2) Proceeds from notes payable................................ 690.3 91.5 1,032.5 Proceeds from (payments on) advances from GM............... 1.1 (5.4) (16.0) Proceeds from issuance of common stock..................... 33.9 55.3 42.5 Cash dividends paid to GM.................................. (231.1) (192.1) (172.4) --------- --------- -------- Net cash provided by (used in) financing activities........ 194.1 (370.2) (153.0) --------- --------- -------- Effect of Exchange Rate Changes on Cash and Cash Equivalents................................................ 25.5 (13.6) (7.9) --------- --------- -------- Net Increase (Decrease) in Cash and Cash Equivalents......... 224.8 (38.5) 161.3 Cash and Cash Equivalents at Beginning of Year............... 383.4 421.9 260.6 --------- --------- -------- Cash and Cash Equivalents at End of Year..................... $ 608.2 $ 383.4 $ 421.9 ========= ========= ========
See accompanying notes to consolidated financial statements. IV-26 7 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Electronic Data Systems Corporation and all majority-owned subsidiaries. As used herein, the terms "EDS" and "the Company" refer to Electronic Data Systems Corporation and its consolidated subsidiaries. EDS is a wholly owned subsidiary of General Motors Corporation (GM). The Company's investments in companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for under the equity method, with the remaining investments carried at cost. Earnings Attributable to GM Class E Common Stock on a Per Share Basis have been determined based on the relative amounts available for the payment of dividends to holders of GM Class E common stock. Holders of GM Class E common stock have no direct rights in the equity or assets of EDS, but rather have rights in the equity and assets of GM (which includes 100% of the stock of EDS). Dividends on the GM Class E common stock are declared out of the Available Separate Consolidated Net Income of EDS earned since the acquisition of EDS by GM. The Available Separate Consolidated Net Income of EDS is determined quarterly and is equal to the separate consolidated net income of EDS, excluding the effects of purchase accounting adjustments arising from the acquisition of EDS, multiplied by a fraction, the numerator of which is a number equal to the weighted average number of shares of GM Class E common stock outstanding during the period and the denominator of which was 481.7 million during the fourth quarter of 1994. Comparable denominators for the fourth quarters of 1993 and 1992 were 480.6 million and 479.3 million, respectively. GM Series C depositary shares represent ownership of one-tenth of a share of GM Series C convertible preference stock. GM Series C depositary shares and GM Series C preference stocks are convertible into GM Class E common stock and are common stock equivalents for purposes of computing Earnings Attributable to GM Class E Common Stock on a Per Share Basis. On November 2, 1992, GM Series E-II and E-III preference stocks, previously held by the GM pension plans, were converted to GM Class E common stock. In 1993 and 1992, GM Series E-1 preference stock was converted to GM Class E common stock, or redeemed by GM. The issuances and conversions of such preference stocks have no dilutive effect on the GM Class E common stock, because to the extent that shares of GM Class E common stock deemed to be outstanding would increase, such increased shares would increase the numerator of the fraction used to determine Available Separate Consolidated Net Income, but would have no effect on the denominator. The denominator used in determining the Available Separate Consolidated Net Income of EDS is adjusted as deemed appropriate by the GM Board of Directors to reflect subdivisions or combinations of the GM Class E common stock and to reflect certain transfers of capital to or from EDS. The Board's discretion to make such adjustments is limited by criteria set forth in GM's Certificate of Incorporation. In 1994 and 1988, EDS initiated programs to repurchase 9.5 million and 11.0 million shares, respectively, of GM Class E common stock in order to meet certain future requirements of the Company's employee benefit plans. The GM Board has generally caused the denominator used in calculating the Available Separate Consolidated Net Income of EDS to decrease as shares are purchased and to increase as shares are used for the employee benefit plans. The current GM Board policy is that the cash dividends on the GM Class E common stock, when, as, and if declared by the GM Board in its sole discretion, will equal approximately 30% of the Available Separate Consolidated Net Income of EDS for the prior year. Consistent with Delaware law, which governs the amount legally available for the payment of dividends on GM's common stock, the GM Board of Directors has determined that such amount is materially higher than GM's capital surplus plus net income retained for use in the business (less accumulated deficit). IV-27 8 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED CASH AND CASH EQUIVALENTS The carrying amount approximates fair value because of the short maturity of these instruments. DEBT AND MARKETABLE EQUITY SECURITIES Marketable securities at December 31, 1994 consist of securities issued by the U.S. Treasury, states, and political subdivisions, as well as mortgage-backed debt, corporate debt and corporate equity securities. The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, effective January 1, 1994. Pursuant to SFAS No. 115, the provisions of the Statement were not applied retroactively. The change had no material cumulative effect on the Company's financial position or results of operations. Prior to the adoption of SFAS No. 115, equity and debt securities were carried at the lower of aggregate cost or market and on an amortized cost basis, respectively. Under SFAS No. 115, the Company classifies all of its debt and marketable equity securities as available-for-sale. Management determines the appropriate classification of all securities at the time of purchase and re-evaluates such designation as of each balance sheet date. Noncurrent available-for-sale securities are reported within the balance sheet classification Investment in Leases and Other. The Company's available-for-sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of stockholder's equity until realized. A decline in the market value of any available-for-sale security below cost that is deemed other than temporary is charged to earnings, resulting in the establishment of a new cost basis for the security. INVENTORY VALUATION Inventories are stated principally at the lower of cost or market using the first-in, first-out method. PROPERTY AND EQUIPMENT Property and equipment are carried at cost. Depreciation of property and equipment is calculated using the straight-line method over the lesser of the asset's estimated useful life, the life of the related customer contract, or the term of the lease in the case of leasehold improvements. The ranges of estimated useful lives are as follows:
YEARS ----- Buildings..................................... 20-40 Facilities.................................... 5-20 Computer equipment............................ 3-7 Other equipment and furniture................. 3-15
SOFTWARE, GOODWILL, AND OTHER INTANGIBLES Software purchased by the Company and utilized in designing, installing, and operating business information and communications systems is capitalized and amortized on a straight-line basis over a five- to eight-year period. Costs of developing and maintaining software systems are incurred primarily in connection with customer contracts and are generally expensed as incurred. Software development costs that meet the capitalization and recoverability requirements of SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, are capitalized and generally amortized on a straight-line basis over three years. Such amounts were not significant. Goodwill, which represents the excess of the purchase price over the fair value of identifiable net assets acquired, is amortized on a straight-line basis over the expected period of benefit, five to 40 years. The Company assesses the recoverability of this intangible asset by determining whether its balance can be IV-28 9 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED recovered over its remaining life. The amount of goodwill impairment, if any, is measured based on the expected undiscounted cash flows of the acquired operation. Other intangibles are amortized on a straight-line basis over the anticipated period of benefit, which is generally five to 10 years. REVENUE RECOGNITION The Company provides services under level-of-effort and fixed-price contracts, with the length of the Company's contracts ranging up to ten years. For level-of-effort types of contracts, revenue is earned based on the agreed-upon billing amounts as services are provided to the customer. For certain fixed-price contracts, revenue is recognized on the percentage-of-completion method. Revenue earned is based on the percentage that incurred costs to date bear to total estimated costs after giving effect to the most recent estimates of total cost. Deferred revenue of $536.7 million and $429.7 million at December 31, 1994 and 1993, respectively, represents billings in excess of costs and related profits on certain contracts. Included in accounts receivable are unbilled receivables of $448.5 million and $314.9 million at December 31, 1994 and 1993, respectively. Such unbilled receivables for certain contracts in progress represent costs and related profits in excess of billings, and such amounts were not billable at the balance sheet date. These billings on fixed-price contracts will be made in the future in accordance with contractual agreements. Of the unbilled receivables at December 31, 1994, billings to such customers amounting to $194.6 million are expected to be collected in 1996 and thereafter. CURRENCY TRANSLATION Assets and liabilities of non-U.S. subsidiaries whose functional currency is not the U.S. dollar are translated at current exchange rates. Revenue and expense accounts are translated using an average rate for the period. Translation gains and losses are not included in determining net income but are reflected as a separate component of stockholder's equity. Nonfunctional currency transaction gains (losses) are included in determining net income and were $4.5 million, ($3.7) million, and ($1.5) million, net of income taxes, for the years ended December 31, 1994, 1993, and 1992, respectively. INCOME TAXES The Company provides for deferred taxes under the asset and liability method of SFAS No. 109, Accounting for Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered. The Company is included in the consolidated Federal tax returns filed by GM. Current Federal income taxes are calculated on a separate return basis and remitted to GM. The deferral method is used to account for investment tax credits. STATEMENT OF CASH FLOWS The Company uses the indirect method to present cash flows from operating activities and considers certificates of deposit, as well as the following items with original maturities of three months or less, to be cash equivalents: commercial paper, repurchase agreements, and money market funds. (See Note 20.) FAIR VALUE OF FINANCIAL INSTRUMENTS SFAS No. 107, Disclosures about the Fair Value of Financial Instruments, defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction IV-29 10 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED between willing parties. All of the Company's financial instruments, including foreign exchange-forward contracts disclosed at Note 15, are presented in the Consolidated Balance Sheets at their fair values at December 31, 1994, with the exception of the following (in millions):
DECEMBER 31, 1994 -------------------- CARRYING FAIR AMOUNT VALUE -------- -------- Financial Assets (Note 6) Investments in joint ventures and partnerships......................... $ 149.6 $ 172.0 Long-term securities................................................... 201.2 192.6 Noncurrent notes receivable............................................ 158.1 154.4 Financial liabilities Notes payable (Note 9)................................................. 1,224.4 1,230.3
Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company's customer base and their dispersion across different industry and geographic areas. DERIVATIVES Derivative financial instruments are used by the Company in the management of its interest rate and foreign currency exposures. Net payments or receipts under the Company's interest rate swap agreements are recorded as adjustments to interest expense. Foreign exchange-forward contracts are recorded in the Company's Consolidated Balance Sheets at fair value as of the reporting date. Realized and unrealized changes in fair value are recognized in income, as other income, in the period in which the changes occur. NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board (FASB) has issued SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures, which will become effective for fiscal years beginning in 1995. The effect of this Statement, if implemented currently, would not be material. NOTE 2. NATIONAL HERITAGE INSURANCE COMPANY National Heritage Insurance Company (NHIC), a wholly owned subsidiary of EDS, acts as underwriter for claims benefit payments for the Medicaid welfare program contract for the state of Texas. The state of Indiana awarded EDS a fiscal agent contract for the Medicaid welfare program effective July 1, 1994, which was previously underwritten by NHIC. The contracts provide that payments from the states be deposited in trust accounts that are not included in the consolidated financial statements. Of such payments received for the years ended December 31, 1994, 1993, and 1992, $4,188.7 million, $4,453.4 million, and $3,664.1 million, respectively, were designated for the payment of benefit claims or to be returned to the states. At December 31, 1994 and 1993, $983.5 million and $1,316.3 million, respectively, of such designated funds at amortized cost remained in the trust accounts. Approximate market values of these invested funds at December 31, 1994 and 1993 were $975.2 million and $1,315.3 million, respectively. These investments primarily consist of corporate and government bonds. NHIC intends to hold these investments until their full face value can be realized. Gains and losses from the sale of these investments held in trust accounts are combined with gains and losses from the Company's other investments. IV-30 11 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 3. DEBT AND MARKETABLE EQUITY SECURITIES Following is a summary of available-for-sale securities as of December 31, 1994 (in millions):
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE --------- ---------- ---------- ------ Current: U.S. government and agency obligations............... $ 31.9 $ -- $0.6 $ 31.3 Other debt securities................................ 94.9 0.2 4.7 90.4 -------- ---- ---- ------ Total debt securities............................. 126.8 0.2 5.3 121.7 Equity Securities.................................... 29.2 -- 1.3 27.9 -------- ---- ---- ------ Total current available-for-sale securities............ $ 156.0 $0.2 $6.6 $149.6 ======= ==== ==== ====== Non-Current (Note 6) Other debt securities................................ $ 0.6 $ -- $ -- $ 0.6 Equity securities.................................... 60.5 -- 2.4 58.1 -------- ---- ---- ------ Total noncurrent available-for-sale securities.... $ 61.1 $ -- $2.4 $ 58.7 ======= ==== ===== ======
The amortized cost and estimated fair value of debt and marketable equity securities at December 31, 1994, by contractual maturity, are shown below (in millions). Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to repay obligations without prepayment penalties.
DECEMBER 31, 1994 ------------------- AMORTIZED FAIR COST VALUE --------- ------ Debt securities Due in one year or less................................... $ 41.6 $ 41.1 Due after one year through five years..................... 51.8 50.8 Due after five years through 10 years..................... 7.1 7.0 Due after 10 years........................................ 13.5 13.3 Mortgage-backed securities................................ 13.4 10.1 ------- ------ Total debt securities.................................. 127.4 122.3 Equity securities........................................... 89.7 86.0 ------- ------ Total available-for-sale securities.................... $ 217.1 $208.3 ======= ======
Proceeds from sales of available-for-sale securities (excluding gains, losses, amortization of related discount or premium, effects of foreign currency translation, and acquisitions) were $370.0 million. Without these adjustments, proceeds from sales of available-for-sale securities during 1994 were $387.6 million. Gross gains of $17.4 million and gross losses of ($4.1) million were realized during 1994 on sales of available-for-sale securities. Realized gains and losses in 1993 and 1992 were not significant. Specific identification was used to determine cost in computing realized gain or loss. IV-31 12 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 4. PROPERTY AND EQUIPMENT
ACCUMULATED COST DEPRECIATION NET -------- ------------ -------- (IN MILLIONS) DECEMBER 31, 1994 Land.......................................................... $ 125.3 $ -- $ 125.3 Buildings and facilities...................................... 878.7 319.5 559.2 Computer equipment............................................ 3,967.6 2,096.6 1,871.0 Other equipment and furniture................................. 465.9 264.8 201.1 -------- --------- -------- Total.................................................... $5,437.5 $2,680.9 $2,756.6 ======== ======== ======== DECEMBER 31, 1993 Land.......................................................... $ 121.6 $ -- $ 121.6 Buildings and facilities...................................... 815.1 283.1 532.0 Computer equipment............................................ 3,158.6 1,883.1 1,275.5 Other equipment and furniture................................. 425.1 239.5 185.6 -------- -------- -------- Total.................................................... $4,520.4 $2,405.7 $2,114.7 ======== ======== ========
NOTE 5. LAND HELD FOR DEVELOPMENT Land held for development at December 31, 1994 consists of approximately 2,222 acres located throughout the Dallas metropolitan area. Approximately 1,590 acres of land, site of a commercial real estate development, are located in Plano, Texas. NOTE 6. INVESTMENT IN LEASES AND OTHER
DECEMBER 31, -------------------- 1994 1993 -------- -------- (IN MILLIONS) Lease contracts receivable (net of principal and interest on nonrecourse debt).................................................................. $ 384.5 $ 396.8 Estimated residual values of leased assets (not guaranteed).............. 339.0 337.7 Unearned income, including deferred investment tax credits............... (260.6) (271.3) -------- -------- Investment in leveraged leases (excluding deferred taxes of $284.7 and $307.4 at December 31, 1994 and 1993, respectively)................. 462.9 463.2 Investment in securities, joint ventures, and partnerships............... 357.2 249.9 Investment in direct financing leases, net of unearned income............ 153.8 158.6 Noncurrent notes receivable.............................................. 158.1 118.1 GM Class E common stock held for benefit plans........................... 54.7 62.4 Investment in tax benefit transfers...................................... 38.6 40.9 Other.................................................................... 83.5 66.8 -------- -------- Total............................................................... $1,308.8 $1,159.9 ======== ========
The fair values of certain long-term investments are estimated based on quoted market prices for these or similar investments. For other investments, a variety of methods are used to estimate fair value, including external valuations and discounted cash flows. At December 31, 1994, the fair values of investments in joint ventures and partnerships (accounted for using the cost method), long-term securities, and noncurrent notes receivable were estimated to be $172.0 million, $192.6 million, and $154.4 million, respectively, with carrying amounts of $149.6 million, $201.2 million, and $158.1 million, respectively. At December 31, 1993, the fair IV-32 13 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED values of investments in joint ventures and partnerships (accounted for using the cost method), long-term securities, and noncurrent notes receivable were estimated to be $275.0 million, $152.8 million, and $114.9 million, respectively, with carrying amounts of $241.1 million, $128.5 million, and $118.1 million, respectively. Long-term securities include GM Class E common stock and other securities. The carrying value of the GM Class E common stock, which was less than the market value, was utilized to estimate the investment's fair value shown above because the stock will be used to satisfy future benefit plan obligations. Financing leases that are financed with nonrecourse borrowings at lease inception are accounted for as leveraged leases. Such borrowings are secured by substantially all of the lessor's rights under the lease plus the residual value of the asset. For Federal income tax purposes, the Company receives the investment tax credit (if available) at lease inception and has the benefit of tax deductions for depreciation on the leased asset and for interest on the nonrecourse debt. A portion of the Company's leveraged lease portfolio is concentrated within the airline industry. The Company historically has not experienced credit losses from these transactions, and the portfolio is diversified among unrelated lessees. NOTE 7. SOFTWARE, GOODWILL, AND OTHER INTANGIBLES
ACCUMULATED COST AMORTIZATION NET -------- ------------ -------- (IN MILLIONS) DECEMBER 31, 1994 Software...................................................... $ 876.0 $462.1 $ 413.9 Goodwill...................................................... 833.9 80.4 753.5 Other intangibles............................................. 312.8 210.6 102.2 -------- ------ -------- Total.................................................... $2,022.7 $753.1 $1,269.6 ======== ====== ======== DECEMBER 31, 1993 Software...................................................... $ 791.5 $374.2 $ 417.3 Goodwill...................................................... 595.8 58.4 537.4 Other intangibles............................................. 235.2 123.6 111.6 -------- ------ -------- Total.................................................... $1,622.5 $556.2 $1,066.3 ======== ====== ========
NOTE 8. ACCRUED LIABILITIES
DECEMBER 31, -------------------- 1994 1993 -------- ------ (IN MILLIONS) Contract related........................................................ $ 880.9 $368.6 Payroll related......................................................... 196.4 286.8 Operating expenses...................................................... 196.1 205.2 Property, sales, and franchise taxes.................................... 100.1 82.5 Claims settlement (Note 2).............................................. 21.3 30.1 Other................................................................... 56.2 22.8 -------- ------ Total.............................................................. $1,451.0 $996.0 ======== ======
IV-33 14 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 9. NOTES PAYABLE
DECEMBER 31, -------------------- 1994 1993 -------- ------ (IN MILLIONS) Commercial paper, 5.5% to 6.3%.......................................... $ 933.0 $398.6 Lines of credit, variable rate 6.5% to 10.3%, due 1995.................. 48.7 135.7 Notes, variable rate 5.7% to 12.5%, due 1995 to 2006.................... 91.2 85.1 Notes, fixed rate 2.8% to 12.95%, due 1995 to 2003...................... 151.5 76.1 -------- ------ Total.............................................................. 1,224.4 695.5 Less current maturities classified as notes payable................ 203.4 172.7 -------- ------ Noncurrent notes payable........................................... $1,021.0 $522.8 ======== ======
Commercial paper is classified as noncurrent debt as it is intended to be maintained on a long-term basis with ongoing credit availability provided by the Company's revolving, committed lines of credit. During 1994, the Company revised its agreement with a syndicate of banks, which increased to $1,800.0 million its committed lines of credit, of which $900.0 million expires in 1995 with the option to convert any outstanding amounts under these lines into term loans that mature in 1997. The remaining $900.0 million expires in 1999. Upon expiration of the commitment periods, the lenders and EDS have the option to extend the commitment. In addition, as of December 31, 1994, the Company had available another $15.5 million in committed lines of credit, of which $2.2 million remained unused. The Company also had available $529.9 million in uncommitted short-term lines of credit, of which $494.5 million remained unused at December 31, 1994. These lines of credit do not require material commitment fees, compensating balances, or collateral. Under the terms of the $1,800.0 million agreement, the Company is required to maintain a consolidated net worth of $2,631.8 million, increasing quarterly by 50 percent of the Company's consolidated net income after June 30, 1994. Notes payable relate to land held for development, property and equipment, acquisitions, and other items. These notes are generally unsecured, with certain notes secured by assets of a majority-owned subsidiary. At December 31, 1994, the Company had no interest rate swap agreements outstanding. At December 31, 1993, the Company had interest rate swap agreements outstanding that effectively converted the variable interest rates on an aggregate notional amount of $54.4 million to fixed interest rates ranging from 5.3% to 8.1%. At December 31, 1993, the estimated fair value of such contracts was ($0.8) million. Maturities of notes payable for years subsequent to December 31, 1994 are as follows (in millions): 1995......................................... $203.4 1996......................................... 43.3 1997......................................... 940.4 1998......................................... 5.4 1999......................................... 13.3 Thereafter................................... 18.6
For the years ended December 31, 1994, 1993, and 1992, interest costs of $1.2 million, $5.4 million, and $18.1 million, respectively, were capitalized, which, if charged to expense, would have resulted in reductions in net income of $0.7 million, $3.5 million, and $11.9 million, respectively. The fair value of notes payable is estimated based on the current rates offered to the Company for the same remaining maturities. At December 31, 1994 and 1993, the estimated fair value was $1,230.3 million and $703.5 million, respectively. IV-34 15 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 10. STOCKHOLDER'S EQUITY
COMMON STOCK CURRENCY MARKET ---------------- TRANS. VALUE RETAINED STOCKHOLDER'S (IN MILLIONS EXCEPT PER SHARE AMOUNTS) SHARES AMOUNT ADJUST. ADJUST. EARNINGS EQUITY - ------------------------------------------------- ------ ------ -------- ------ -------- ------------- Balance at December 31, 1991..................... 478.0 $323.4 $ (0.2) $ -- $2,287.1 $ 2,610.3 Separate consolidated net income............... -- -- -- -- 635.5 635.5 Cash dividends declared -- $0.36 per share -- -- -- -- (172.4) (172.4) Stock option and award transactions............ 1.3 42.5 -- -- -- 42.5 Currency translation adjustment................ -- -- (52.5) -- -- (52.5) ------ ------ -------- ------ -------- ------------- Balance at December 31, 1992..................... 479.3 365.9 (52.7) -- 2,750.2 3,063.4 Separate consolidated net income............... -- -- -- -- 724.0 724.0 Cash dividends declared -- $0.40 per share..... -- -- -- -- (192.1) (192.1) Stock option and award transactions............ 1.6 55.3 -- -- -- 55.3 Currency translation adjustment................ -- -- (33.2) -- -- (33.2) ------ ------ -------- ------ -------- ------------- Balance at December 31, 1993..................... 480.9 421.2 (85.9) -- 3,282.1 3,617.4 Separate consolidated net income............... -- -- -- -- 821.9 821.9 Cash dividends declared -- $0.48 per share..... -- -- -- -- (231.1) (231.1) Stock option and award transactions............ 0.8 33.9 -- -- -- 33.9 Currency translation adjustment................ -- -- (3.0) -- -- (3.0) Unrealized loss on securities, net (Note 3).... -- -- -- (6.6 ) -- (6.6) ------ ------ ------ ------ -------- --------- Balance at December 31, 1994..................... 481.7 $455.1 $(88.9) $(6.6 ) $3,872.9 $ 4,232.5 ====== ====== ====== ====== ======== =========
As the sole stockholder of EDS, GM is able to cause EDS to pay cash dividends and make advances to or otherwise enter into transactions with GM as GM deems desirable and appropriate. GM reserves the right to cause EDS to pay cash dividends to GM in such amounts as GM determines are desirable under the then prevailing facts and circumstances. Such amounts may be the same as, greater than, or less than the cash dividends paid by GM on its Class E common stock. There is no fixed relationship, on a per share or aggregate basis, between the cash dividends that may be paid by GM to holders of its Class E common stock and the cash dividends or other amounts that may be paid by EDS to GM. NOTE 11. INCOME TAXES The current and deferred income tax liabilities (assets) are summarized as follows:
DECEMBER 31, ---------------- 1994 1993 ------ ------ (IN MILLIONS) Current payable.............................................. $ 49.3 $ 66.3 Current deferred............................................. 61.7 135.9 ------ ------ Total income taxes -- current........................... 111.0 202.2 Noncurrent deferred.......................................... 659.8 641.5 ------ ------ Total current and noncurrent income taxes............... $770.8 $843.7 ====== ======
IV-35 16 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The provision for income tax expense is summarized as follows:
U.S. U.S. YEAR ENDED FEDERAL NON-U.S. STATE TOTAL - ------------------------------------------------------------ ------- -------- ----- ------ (IN MILLIONS) DECEMBER 31, 1994 Current..................................................... $ 279.0 $167.9 $32.6 $479.5 Deferred.................................................... 15.8 (33.0) -- (17.2) ------- ------ ----- ------ Total.................................................. $ 294.8 $134.9 $32.6 $462.3 ======= ====== ===== ====== DECEMBER 31, 1993 Current..................................................... $ 130.1 $ 77.8 $17.0 $224.9 Deferred.................................................... 161.0 21.4 -- 182.4 ------- ------ ----- ------ Total.................................................. $ 291.1 $ 99.2 $17.0 $407.3 ======= ====== ===== ====== DECEMBER 31, 1992 Current..................................................... $ 113.9 $ 97.3 $21.0 $232.2 Deferred.................................................... 145.0 (11.9) -- 133.1 ------- ------ ----- ------ Total.................................................. $ 258.9 $ 85.4 $21.0 $365.3 ======= ====== ===== ======
Income before income taxes included the following components:
YEARS ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 -------- -------- -------- (IN MILLIONS) U.S. income...................................... $ 963.5 $ 886.1 $ 781.9 Non-U.S. income.................................. 320.7 245.2 218.9 -------- -------- -------- Total....................................... $1,284.2 $1,131.3 $1,000.8 ======== ======== ========
A reconciliation of income tax expense using the statutory Federal income tax rate of 35.0% for 1994 and 1993 and 34.0% for 1992 to the actual income tax expense follows:
YEARS ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 -------- -------- -------- (IN MILLIONS) Income before income taxes..................................... $1,284.2 $1,131.3 $1,000.8 ======== ======== ======== Statutory Federal income tax................................... $ 449.5 $ 395.9 $ 340.3 Non-U.S. taxes, net of credit.................................. 18.9 13.4 10.3 U.S. State income tax, net..................................... 21.2 11.1 13.8 Investment tax credit -- leveraged leases...................... (3.1) (4.4) (2.8) Research and experimentation credits........................... (11.3) (8.8) (5.2) Other.......................................................... (12.9) 0.1 8.9 -------- -------- -------- Total..................................................... $ 462.3 $ 407.3 $ 365.3 ======== ======== ======== Effective income tax rate...................................... 36.0% 36.0% 36.5% ==== ==== ====
IV-36 17 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The tax effects of temporary differences and carryforwards, which result in a significant portion of the deferred tax assets and liabilities, are as follows:
DECEMBER 31, 1994 DECEMBER 31, 1993 ---------------------- --------------------- ASSETS LIABILITIES ASSETS LIABILITIES ------- ----------- ------ ----------- (IN MILLIONS) Basis differences attributable to leasing activities.... $ 2.5 $ 504.8 $ 6.4 $ 515.3 Adjustments necessary to convert accruals to a tax basis................................................. 111.9 215.1 76.8 200.1 Employee benefit plans.................................. 32.0 25.9 17.5 27.0 Accumulated tax depreciation/amortization versus accumulated financial statement depreciation/amortization............................. 18.7 211.2 26.1 186.0 Effect on deferred taxes of carryforwards............... 102.9 -- 110.0 -- Other................................................... 232.1 153.5 126.0 119.5 ------- ---------- ------ ---------- Subtotal........................................... 500.1 1,110.5 362.8 1,047.9 Less valuation allowance........................... (111.1) -- (92.3) -- ------- ---------- ------ ---------- Total deferred taxes............................... $ 389.0 $ 1,110.5 $270.5 $ 1,047.9 ======= ========= ====== ==========
The net changes in the total valuation allowance for the years ended December 31, 1994 and 1993 were increases of $18.8 million and $43.7 million, respectively. Certain of the Company's foreign subsidiaries have net operating loss carryforwards which expire over an indefinite period. A majority of such carryforwards are included in the valuation allowance. NOTE 12. STOCK PURCHASE AND INCENTIVE PLANS The 1984 Electronic Data Systems Corporation Employee Stock Purchase Plan (Purchase Plan) enables EDS employees to purchase up to 80.0 million shares of GM Class E common stock at 85% of the quoted market price through payroll deductions of up to 10% of their compensation. Shares of GM Class E common stock purchased under the Purchase Plan may not be sold or transferred within two years of the date of purchase unless they are first offered to GM or EDS at the lesser of the original purchase price or the fair market value on the date of sale. The number of shares available for future sale under the Purchase Plan was 59.5 million shares at December 31, 1994. The 1984 Electronic Data Systems Corporation Stock Incentive Plan (1984 Plan) covers up to 160.0 million shares of GM Class E common stock. The 1984 Plan, which was scheduled to expire on October 17, 1994, was amended to change the expiration date to October 17, 2004, thus extending the term for an additional 10 years. During the 20-year life of the 1984 Plan, shares and rights or options to acquire shares, which may be subject to restrictions, may be granted or sold. The maximum number of shares for which additional shares, rights, or options may be granted or sold under the provisions of the 1984 Plan was 99.6 million shares at December 31, 1994. The EDS Incentive and Compensation Committee (the Committee) has granted the right to purchase a total of 27.6 million shares of GM Class E common stock, at prices of $0.0125 and $0.025 per share, to key employees under the provisions of the 1984 Plan. These shares will vest over various periods up to 10 years from the date of grant. The difference between the quoted market price as of the date of grant and the purchase price of shares granted is charged to operations over the vesting period. Expense for these awards amounted to $13.3 million, $16.3 million, and $14.9 million for the years ended December 31, 1994, 1993, and 1992, respectively. As of December 31, 1989, the Company had purchased 11.0 million shares of GM Class E common stock to be distributed to key employees under the provisions of the 1984 Plan. In 1994, 1991, and 1988, the IV-37 18 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Committee approved restricted stock unit grants. The 1994 grant, totaling 9.5 million shares of GM Class E common stock, will be distributed to key employees under the provisions of the 1984 Plan. The right to receive shares is a restricted stock unit. All units granted are generally scheduled to vest over a period of 10 years. The 1994 units are scheduled to vest beginning March 1995. The 1991 grant began vesting in March 1992, while the 1988 grant began vesting in March 1989. The quoted market price as of the date of grant is charged to operations over the vesting period. The Company has a bonus plan under which awards are granted to key executives and employees. Bonus expense amounted to $86.6 million, $49.8 million, and $44.6 million for the years ended December 31, 1994, 1993, and 1992, respectively. Included in bonus expense is $48.7 million, $17.5 million, and $15.5 million relating to the restricted stock unit grants for the years ended December 31, 1994, 1993, and 1992, respectively. NOTE 13. DEFERRED COMPENSATION PLAN The EDS Deferred Compensation Plan (Plan) provides a long-term savings program for participants. The Plan allows eligible employees to contribute a percentage of their compensation to a savings program and to defer income taxes until the time of distribution. NOTE 14. SEGMENT INFORMATION INDUSTRY SEGMENTS The Company's business involves operations in principally one industry segment: designing, installing, and operating business information and communications systems. Revenues from GM contributed approximately 36%, 39%, and 41% of gross revenues for the years ended December 31, 1994, 1993, and 1992, respectively. GEOGRAPHIC SEGMENTS The following presents information about the Company's operations in different geographic areas: As of and for the Year Ended December 31, 1994
U.S. EUROPE OTHER TOTAL -------- -------- ------ -------- (IN MILLIONS) Systems and other contracts revenue GM and affiliates..................................... $2,764.4 $ 523.4 $259.4 $3,547.2 Outside customers..................................... 4,611.2 1,308.1 493.6 6,412.9 -------- -------- ------ -------- Total systems and other contracts revenue............... $7,375.6 $1,831.5 $753.0 $9,960.1 ======== ======== ====== ======== Operating income........................................ $1,008.6 $ 168.3 $ 66.7 $1,243.6 ======== ======== ====== ======== Identifiable assets..................................... $6,618.0 $1,573.8 $594.7 $8,786.5 ======== ======== ====== ========
IV-38 19 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED As of and for the Year Ended December 31, 1993
U.S. EUROPE OTHER TOTAL -------- -------- ------ -------- (IN MILLIONS) Systems and other contracts revenue GM and affiliates..................................... $2,574.5 $ 511.2 $238.0 $3,323.7 Outside customers..................................... 4,004.5 911.6 267.5 5,183.6 -------- -------- ------ -------- Total systems and other contracts revenue............... $6,579.0 $1,422.8 $505.5 $8,507.3 ======== ======== ====== ======== Operating income........................................ $ 906.5 $ 148.7 $ 56.1 $1,111.3 ======== ======== ====== ======== Identifiable assets..................................... $5,350.6 $1,185.9 $405.6 $6,942.1 ======== ======== ====== ========
As of and for the Year Ended December 31, 1992
U.S. EUROPE OTHER TOTAL -------- -------- ------ -------- (IN MILLIONS) Systems and other contracts revenue GM and affiliates..................................... $2,562.9 $ 546.5 $239.1 $3,348.5 Outside customers..................................... 3,693.6 828.3 284.8 4,806.7 -------- -------- ------ -------- Total systems and other contracts revenue............... $6,256.5 $1,374.8 $523.9 $8,155.2 ======== ======== ====== ======== Operating income........................................ $ 773.3 $ 131.3 $ 75.5 $ 980.1 ======== ======== ====== ======== Identifiable assets..................................... $4,750.3 $1,008.7 $364.5 $6,123.5 ======== ======== ====== ========
NOTE 15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The Company operates on a global basis, receiving revenues and incurring expenses in many different countries. As a result of these activities, the Company has exposure to market risks arising from changes in interest rates and foreign exchange rates. Derivative financial instruments are used by the Company for the purpose of hedging against these risks, to which the Company is exposed in the normal course of business, by creating offsetting market exposures. The Company's use of such instruments in relation to such risks is explained below. The Company does not hold or issue financial instruments for trading purposes. The notional amounts of derivatives contracts are summarized below as part of the description of the instruments utilized. The notional amounts do not represent the amounts exchanged by the parties, and thus are not a measure of the exposure of the Company through its use of derivatives. The amounts exchanged by the parties are normally based upon the notional amounts and the other terms of the derivatives. The Company is not a party to leveraged derivatives. INTEREST RISK MANAGEMENT The Company has historically entered into interest rate swap agreements in order to reduce the impact of changes in interest rates upon its floating-rate debt. As of December 31, 1994, all such contracts had matured and the Company had no outstanding interest rate swap agreements. FOREIGN EXCHANGE RISK MANAGEMENT The Company uses derivative financial instruments, particularly foreign exchange-forward contracts, to hedge transactions denominated in different currencies on a continuing basis. The purpose of the Company's hedging activities is to reduce the levels of risk to which it is exposed resulting from exchange-rate movements. At December 31, 1994 and 1993, the Company had forward exchange contracts maturing in the following year to purchase various foreign currencies in the amount of $289.0 million and $276.9 million, IV-39 20 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED respectively, and to sell $766.5 million and $286.0 million, respectively. The estimated fair value of forward exchange contracts is based on quoted market prices. At December 31, 1994, the estimated fair value of outstanding contracts in a gain position was $3.3 million and the estimated fair value of outstanding contracts in a loss position was ($4.2) million. At December 31, 1993, the estimated fair value of outstanding contracts in a gain position was $2.7 million and the estimated fair value of outstanding contracts in a loss position was ($3.3) million. The Company recognizes realized and unrealized gains and losses on foreign exchange contracts by marking to market all outstanding forward exchange contracts. The Company is exposed to credit risk in the event of nonperformance by counterparties to foreign exchange contracts, but because the Company deals only with major commercial banks with high quality credit, the Company does not anticipate nonperformance by any of these counterparties. NOTE 16. RETIREMENT PLANS The Company has pension plans (the Plans) covering substantially all of its employees, the majority of which are noncontributory. In general, employees become fully vested upon attaining five years of service, and benefits are based on years of service and earnings. The actuarial cost method currently used is the projected unit credit cost method. The Company's U.S. funding policy is to contribute amounts that fall within the range of deductible contributions for Federal income tax purposes. The weighted average assumptions used for the Plans are as follows:
YEARS ENDED DECEMBER 31, ------------------------ 1994 1993 1992 ---- ---- ---- Discount rate........................................................ 8.9% 7.7% 9.1% Rate of increase in compensation levels.............................. 5.7% 5.9% 5.3% Long-term rate of return on assets................................... 10.0% 9.8% 9.7%
Net pension cost consisted of the following components:
YEARS ENDED DECEMBER 31, --------------------------- 1994 1993 1992 ------ ------- ------ (IN MILLIONS) Service cost of the current period................................. $ 96.1 $ 72.6 $ 67.8 Interest cost on projected benefit obligation...................... 82.3 69.8 62.0 Actual return on assets............................................ (22.3) (121.3) (19.3) Net amortization and deferral...................................... (37.9) 75.2 (24.1) ------ ------- ------ Net pension cost................................................... $118.2 $ 96.3 $ 86.4 ====== ======= ======
At December 31, 1994 and 1993, the Plans' assets consisted principally of marketable securities. Accrued and/or prepaid pension cost is included in Accrued Liabilities and Prepaids and Other in the Company's Consolidated Balance Sheets. IV-40 21 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The following is a reconciliation of the funded status of the Plans (in millions):
DECEMBER 31, 1994 DECEMBER 31, 1993 -------------------- -------------------- ASSETS ACCUM. ASSETS ACCUM. EXCEED BENEFITS EXCEED BENEFITS ACCUM. EXCEED ACCUM. EXCEED BENEFITS ASSETS BENEFITS ASSETS -------- -------- -------- -------- Plans' assets at fair value.............................. $ 918.3 $ -- $ 671.0 $ 6.1 ======= ======== ======== ======== Actuarial present value of benefit obligation Vested benefits........................................ $ 485.9 $ 56.1 $ 472.6 $ 50.8 Nonvested benefits..................................... 57.6 11.2 69.1 17.9 ------- -------- -------- -------- Accumulated benefit obligation........................... 543.5 67.3 541.7 68.7 Effect of projected future salary increases.............. 326.4 25.5 368.6 44.1 ------- -------- -------- -------- Projected benefit obligation (PBO)....................... $ 869.9 $ 92.8 $ 910.3 $ 112.8 ======= ======== ======== ======== Excess (deficiency) of Plans' assets over PBO............ $ 48.4 $ (92.8) $ (239.3) $ (106.7) Unrecognized net (gain) loss............................. (28.3) (35.3) 150.9 (5.8) Unrecognized net (asset) obligation at date of adoption............................................... (9.6) 23.4 (6.8) 26.5 Unrecognized prior service cost.......................... 12.8 (1.0) 32.8 0.9 Additional minimum liability............................. -- -- -- (3.7) ------- -------- -------- -------- Net prepaid (accrued) pension cost....................... $ 23.3 $ (105.7) $ (62.4) $ (88.8) ======= ======== ======== ========
NOTE 17. COMMITMENTS AND RENTAL EXPENSE Commitments for rental payments under noncancellable operating leases for each of the next five years ending December 31 and thereafter for computer equipment, software, and facilities are as follows (in millions): 1995................................................... $339.1 1996................................................... 233.5 1997................................................... 175.7 1998................................................... 131.1 1999................................................... 114.7 Thereafter............................................. 720.1
Total rentals under cancellable and noncancellable leases, principally computer equipment and software, included in costs and charged to expenses were $524.3 million, $564.9 million, and $614.6 million for the years ended December 31, 1994, 1993, and 1992, respectively. NOTE 18. CONTINGENT LIABILITIES There are various claims and pending actions against the Company arising in the ordinary course of the conduct of its business. Certain of these actions seek damages in significant amounts. The amount of liability on these claims and actions at December 31, 1994 was not determinable, but in the opinion of management, the ultimate liability, if any, will not have a material adverse effect on the Company's consolidated operations or financial position. IV-41 22 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 19. ACQUISITIONS The Company made various acquisitions during the years ended December 31, 1994 and 1993, none of which had a material effect on the Company's financial position or results of operations. In conjunction with those acquisitions, assets were acquired and liabilities were assumed as follows:
YEARS ENDED DECEMBER 31, ------------------ 1994 1993 ------ ------ (IN MILLIONS) Fair value of assets acquired.............................. $427.8 $319.8 Less: Cash paid for stock and assets, net of cash acquired................................................. 186.6 122.1 Debt issued for stocks and assets.......................... 94.9 91.2 ------ ------ Liabilities assumed...................................... $146.3 $106.5 ====== ======
NOTE 20. SUPPLEMENTARY FINANCIAL INFORMATION The following summarizes certain costs charged to expense for the years indicated:
YEARS ENDED DECEMBER 31, -------------------------- 1994 1993 1992 ------ ------ ------ (IN MILLIONS) Depreciation of property and equipment................ $577.5 $465.6 $457.9 ====== ====== ====== Amortization.......................................... $163.8 $142.3 $145.3 ====== ====== ======
Supplemental cash flow information is presented below:
YEARS ENDED DECEMBER 31, -------------------------- 1994 1993 1992 ------ ------ ------ (IN MILLIONS) Cash paid for Income taxes, net of refunds........................ $465.6 $183.8 $252.6 ====== ====== ====== Interest, net of amount capitalized................. $ 49.7 $ 40.2 $ 46.8 ====== ====== ======
IV-42 23 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONCLUDED NOTE 21. QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- (IN MILLIONS EXCEPT PER SHARE AMOUNTS) YEAR ENDED DECEMBER 31, 1994 Revenues.............................................. $2,239.3 $2,334.0 $2,564.9 $2,914.2 Gross profit from operations.......................... 506.6 584.1 602.1 737.9 Income before income taxes............................ 268.3 308.2 338.1 369.6 Separate Consolidated Net Income...................... 171.7 197.3 216.4 236.5 Available Separate Consolidated Net Income............ $ 92.1 $ 106.5 $ 117.3 $ 128.5 Earnings Attributable to GM Class E Common Stock on a Per Share Basis..................................... $ 0.36 $ 0.41 $ 0.45 $ 0.49 Stock price range of GM Class E common High $ 36.88 $ 38.00 $ 38.50 $ 39.50 Low................................................. $ 27.50 $ 32.88 $ 33.00 $ 34.75 YEAR ENDED DECEMBER 31, 1993 Revenues.............................................. $2,073.2 $2,090.5 $2,084.3 $2,313.8 Gross profit from operations.......................... 490.1 501.3 525.0 600.3 Income before income taxes............................ 236.6 278.2 299.4 317.1 Separate Consolidated Net Income...................... 151.4 178.1 191.6 202.9 Available Separate Consolidated Net Income............ $ 74.1 $ 87.7 $ 98.4 $ 107.0 Earnings Attributable to GM Class E Common Stock on a Per Share Basis..................................... $ 0.32 $ 0.37 $ 0.40 $ 0.42 Stock price range of GM Class E common High................................................ $ 35.88 $ 33.38 $ 32.50 $ 31.13 Low................................................. $ 27.63 $ 28.25 $ 26.00 $ 26.50
IV-43 24 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION SELECTED FINANCIAL DATA
AS OF AND FOR THE YEARS ENDED DECEMBER 31, --------------------------------------------------------- 1994 1993 1992 1991 1990 --------- -------- -------- -------- -------- (IN MILLIONS EXCEPT PER SHARE AMOUNTS) Revenues.................................... $10,052.4 $8,561.8 $8,218.9 $7,099.0 $6,108.8 Separate Consolidated Net Income Before Cumulative Effect of Accounting Change.... 821.9 724.0 635.5 563.0 496.9 Separate Consolidated Net Income After Cumulative Effect of Accounting Change.... $ 821.9 $ 724.0 $ 635.5 $ 547.5 $ 496.9 Average number of shares of GM Class E common stock outstanding (in millions).... 260.3 243.0 209.1 195.3 187.1 Class E dividend base (in millions)......... 481.7 480.6 479.3 478.1 478.6 Available Separate Consolidated Net Income.................................... $ 444.4 $ 367.2 $ 278.4 $ 223.6 $ 194.4 Earnings Attributable to GM Class E Common Stock on a Per Share Basis Before Cumulative Effect of Accounting Change.... $ 1.71 $ 1.51 $ 1.33 $ 1.17 $ 1.04 Earnings Attributable to GM Class E Common Stock on a Per Share Basis After Cumulative Effect of Accounting Change.... $ 1.71 $ 1.51 $ 1.33 $ 1.14 $ 1.04 Expenditures for property and equipment..... $ 1,120.9 $ 799.4 $ 639.0 $ 673.2 $ 514.8 Cash and marketable securities.............. $ 757.8 $ 607.5 $ 587.9 $ 415.8 $ 715.4 Current assets.............................. $ 3,354.1 $2,506.8 $2,157.0 $1,945.6 $1,716.4 Current liabilities......................... $ 2,873.2 $2,160.4 $1,903.1 $2,396.7 $1,653.9 Total assets................................ $ 8,786.5 $6,942.1 $6,123.5 $5,703.2 $4,565.3 Long-term debt.............................. $ 1,021.0 $ 522.8 $ 561.1 $ 281.9 $ 285.1
IV-44 25 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONCLUDED EDS had the best year on record in 1994, signing the largest base business (non-GM) global outsourcing contract in the Company's history, and achieving more than $10 billion in total revenue. The total value of contracts sold during the year also surpassed EDS' previous record year, 1993, continuing the trend of global business expansion. RESULTS OF OPERATIONS 1994 was the first year in which more than a quarter of total systems revenue was generated outside of the U.S. The total revenue of $10,052.4 million represented an increase of 17 percent over 1993's total revenue. The comparable amounts for 1993 and 1992 were 4 percent and 16 percent, respectively. The base portion of 1994 revenue grew 24 percent over 1993 to $6,505.2 million, while GM revenue grew 7 percent over the same period to $3,547.2 million. The growth in base business compares with 8 percent in 1993 and 30 percent in 1992. GM revenue was relatively stable in 1993 and 1992. Total U.S. base systems revenue for 1994 increased 15 percent, or $606.7 million, over 1993 to $4,611.2 million. This compares with U.S. growth of 8 percent in 1993 and 23 percent in 1992. Base systems revenue from outside the United States was $1,801.7 million, or 28 percent of base systems revenue in 1994, compared with $1,179.1 million, or 23 percent in 1993. The increase in non-U.S. base revenue of $622.6 million was largely attributable to growth in European business. European base revenue increased $396.5 million, or 43 percent, in 1994 to $1,308.1 million, compared with $911.6 million in 1993 and $828.3 million in 1992. This increase was related to business in the United Kingdom and Germany. Other non-U.S. base revenue was up 85 percent over 1993 to $493.6 million, compared with $267.5 million in 1993 and $284.8 million in 1992. This growth was primarily due to business in Japan and New Zealand. Systems and other contracts revenue for the year ended December 31, 1994 included $3,547.2 million of revenue related to GM contracts, compared with $3,323.7 million and $3,348.5 million in 1993 and 1992, respectively. It is anticipated that GM will continue to contribute a significant portion of systems revenue. However, as base revenue has continued to increase, the percentage of revenue coming from GM and its subsidiaries continues to decline. In 1994, 35 percent of total revenue came from GM and its subsidiaries; last year, GM revenue was 39 percent of the total, and in 1992 it was 41 percent. EDS expects this trend to continue as base revenue grows. Net interest and other income increased to $40.6 million in 1994, compared with $20.0 million in 1993 and $20.7 million in 1992. The increase occurred as EDS realized higher earnings and gains created by a strong market for certain investments, partially offset by increased costs of debt. Cost of revenues as a percentage of systems and other contracts revenue was 76 percent in 1994, compared with 75 and 76 percent in 1993 and 1992, respectively. Selling, general, and administrative expenses remained constant at 12 percent of systems and other contracts revenue in 1994, 1993, and 1992. EDS achieved strong revenue growth of 17 percent in 1994 and the second highest pretax margin in recent history, 12.8 percent, surpassed only by the margin of 13.2 percent in 1993, which was coupled with 4 percent revenue growth in that year. The 1992 pretax figure was 12.2 percent. The effective income tax rate was 36.0 percent in 1994 and 1993, down from 36.5 percent in 1992. EDS' separate consolidated net income increased 14 percent to $821.9 million for 1994, compared with $724.0 million in 1993 and $635.5 million in 1992. Return on stockholder's equity was 21 percent in 1994, compared with 22 percent in 1993 and 1992. Return on assets remained constant at 11 percent for 1994, 1993, and 1992. LIQUIDITY AND CAPITAL RESOURCES EDS' liquidity and capital structure changed during 1994 to reflect the steady growth in significant customer relationships established in recent years. Working capital increased to support revenue growth by $134.5 million, or 39 percent over the prior year, to $480.9 million. This compares with a working capital increase of 36 percent, or $92.5 million, in 1993. The 1994 increase was primarily in the areas of cash and accounts receivable, offset by increases in accounts payable and accrued liabilities. The current ratio remained constant at 1.2-to-1 at December 31, 1994 and December 31, 1993. The ratio of noncurrent debt-to-capital was 19 percent at December 31, 1994, indicating EDS meets most of its capital IV-45 26 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS -- CONCLUDED needs internally. The comparable figure for 1993 was 13 percent. The increased debt in 1994 was primarily due to the financing of non-U.S. acquisitions and the purchase of assets to support significant long-term contracts. EDS' capital at December 31, 1994 consists of $1,021.0 million in noncurrent notes payable and $4,232.5 million in stockholder's equity. Total debt was $1,224.4 million at December 31, 1994, which consisted entirely of notes payable. This compares to total debt of $695.5 million at December 31, 1993. The long-term debt in 1993 also consisted entirely of notes payable. At year-end 1994, EDS has unused, uncommitted short-term lines of credit totaling $494.5 million and unused, committed lines of credit of $1,800.0 million. The total debt-to-capital ratio (which includes current debt as a component of capital) was 22 percent at December 31, 1994, compared with 16 percent at December 31, 1993. (For additional information on EDS' debt see Note 9, Notes Payable.) Debt ratings by the various rating agencies reflect each agency's opinion of the ability of the issuer to repay the debt obligation punctually. Lower ratings generally result in higher borrowing costs. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating. In November 1992, Moody's Investors Service, Inc. lowered its rating of senior debt of GM and its subsidiaries (excluding EDS) and affirmed the rating of commercial paper of EDS at Prime-1, the highest of three investment grade ratings available from Moody's for commercial paper. In February 1993, Standard & Poors Corporation lowered the long-term debt, commercial paper, and preference stock ratings of GM and its subsidiaries, which include EDS. EDS' ratings were lowered from A-1 to A-2 for commercial paper, third highest within the four investment grade ratings available from S&P for commercial paper, indicating strong capacity for timely payment determined by significant safety characteristics. EDS anticipates no liquidity problems if access to the commercial paper market is reduced as a result of any lower rating because the commercial paper is 100 percent backed by long-term bank lines of credit. The impact of any incremental increased interest cost would have no material effect upon future operations. (For additional information on EDS' commercial paper see Note 9, Notes Payable.) EDS continues to maintain a strong cash position. Cash flows from operations were $1,490.8 million, up $95.8 million from 1993. Net cash used in investing activities increased $435.9 million to $1,485.6 million in 1994 from $1,049.7 million in 1993. This was primarily due to purchases of property and equipment of $1,120.9 million, as well as increased participation in business combinations and other investments to support business growth. EDS made cash payments in connection with 1994 acquisitions of $186.6 million, acquiring assets with a fair value of $427.8 million, issuing debt of $94.9 million, and assuming liabilities of $146.3 million. EDS made net additions to software and certain other intangibles of $96.7 million in 1994 and net additions to land held for development of $3 million. Net cash provided by financing activities was $194.1 million in 1994, compared with cash used in financing activities of $370.2 million in 1993. EDS made dividend payments totaling $231.1 million in 1994 and has consistently paid dividends since 1974. EDS' capital expenditures for calendar year 1995 are projected at approximately $1.2 billion to $1.5 billion. Future capital expenditures may consist of purchases of computer and telecommunications equipment, buildings and facilities, land, and software, as well as acquisitions of outside companies. EDS will finances these investments through a combination of internally generated funds and outside sources. RELATIONSHIP BETWEEN EDS AND GM The pricing policy between EDS and GM contemplates three alternative pricing methods. First, GM and EDS operating units use fixed-price contracts where the scope of the work can be precisely defined. The second alternative permits GM operating units to use a cost-based incentive method of pricing for EDS' services. This method of pricing, within specified limits, provides for equal sharing by the companies of cost savings and overruns. Also under this method, some EDS units may earn a before-tax markup based, within limits, on performance. Under the third alternative, commercially available products and services are provided to GM at uniform, competitive rates. The majority of the services EDS provides to GM is covered by fixed-price, multiyear agreements. * * * * IV-46 EX-99.(B) 11 EX-99(B) 1 EXHIBIT 99(B) GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES RESPONSIBILITIES FOR CONSOLIDATED FINANCIAL STATEMENTS The following consolidated financial statements of GM Hughes Electronics Corporation and subsidiaries were prepared by management which is responsible for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles and, as such, include amounts based on judgments of management. Management is further responsible for maintaining a system of internal accounting controls, designed to provide reasonable assurance that the books and records reflect the transactions of the companies and that its established policies and procedures are carefully followed. Perhaps the most important feature in the system of control is that it is continually reviewed for its effectiveness and is augmented by written policies and guidelines, the careful selection and training of qualified personnel, and a strong program of internal audit. Deloitte & Touche LLP, an independent auditing firm, is engaged to audit the consolidated financial statements of GM Hughes Electronics Corporation and its subsidiaries and issue reports thereon. The audit is conducted in accordance with generally accepted auditing standards which comprehend the consideration of internal accounting controls and tests of transactions to the extent necessary to form an independent opinion on the financial statements prepared by management. The Independent Auditors' Report appears on the next page. The Board of Directors, through its Audit Committee, is responsible for assuring that management fulfills its responsibilities in the preparation of the consolidated financial statements and engaging the independent auditors. The Committee reviews the scope of the audits and the accounting principles being applied in financial reporting. The independent auditors, representatives of management, and the internal auditors meet regularly (separately and jointly) with the Committee to review the activities of each, to ensure that each is properly discharging its responsibilities, and to assess the effectiveness of the system of internal accounting controls. It is management's conclusion that the system of internal accounting controls at December 31, 1994 provides reasonable assurance that the books and records reflect the transactions of the companies and that its established policies and procedures are complied with. To ensure complete independence, Deloitte & Touche LLP has full and free access to meet with the Committee, without management representatives present, to discuss the results of the audit, the adequacy of internal accounting controls, and the quality of the financial reporting. /s/ C. Michael Armstrong - ------------------------------------------------------ C. Michael Armstrong Chairman of the Board and Chief Executive Officer /s/ Charles H. Noski - ------------------------------------------------------ Charles H. Noski Senior Vice President and Chief Financial Officer IV-47 2 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES INDEPENDENT AUDITORS' REPORT To the Stockholder and Board of Directors of GM Hughes Electronics Corporation: We have audited the Consolidated Balance Sheet of GM Hughes Electronics Corporation and subsidiaries as of December 31, 1994 and 1993 and the related Statements of Consolidated Operations and Available Separate Consolidated Net Income (Loss) and Consolidated Cash Flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of GM Hughes Electronics Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of GM Hughes Electronics Corporation and subsidiaries at December 31, 1994 and 1993 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, effective January 1, 1994 GM Hughes Electronics Corporation changed its method of accounting for postemployment benefits. Also, as discussed in Notes 1 and 5 to the financial statements, effective January 1, 1992 GM Hughes Electronics Corporation changed its revenue recognition policy for certain commercial businesses and its method of accounting for postretirement benefits other than pensions. /s/ DELOITTE & TOUCHE LLP - ------------------------------------------------------ DELOITTE & TOUCHE LLP Los Angeles, California January 30, 1995 IV-48 3 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED OPERATIONS AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS)
YEARS ENDED DECEMBER 31, ----------------------------------- 1994 1993 1992 --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Revenues Net sales Outside customers......................................... $ 9,108.7 $ 9,062.8 $ 8,267.6 General Motors and affiliates (Note 2).................... 4,953.6 4,387.4 3,901.4 Other income -- net......................................... 37.1 67.3 128.1 --------- --------- --------- Total Revenues.............................................. 14,099.4 13,517.5 12,297.1 --------- --------- --------- Costs and Expenses Cost of sales and other operating charges, exclusive of items listed below (Note 2)............................... 10,943.4 10,557.5 9,602.9 Selling, general, and administrative expenses............... 1,018.3 929.1 1,036.2 Depreciation and amortization............................... 470.2 503.5 487.1 Amortization of GM purchase accounting adjustments related to Hughes (Note 1)........................................ 123.8 123.8 123.8 Interest expense -- net..................................... 15.1 33.2 60.6 Special provision for restructuring (Note 12)............... -- -- 1,237.0 --------- --------- --------- Total Costs and Expenses.................................... 12,570.8 12,147.1 12,547.6 --------- --------- --------- Income (Loss) before Income Taxes........................... 1,528.6 1,370.4 (250.5) Income taxes (credit) (Note 6).............................. 572.8 572.6 (77.2) --------- --------- --------- Income (Loss) before cumulative effect of accounting changes................................................... 955.8 797.8 (173.3) Cumulative effect of accounting changes (Notes 1 and 5)..... (30.4) -- (872.1) --------- --------- --------- Net Income (Loss)........................................... 925.4 797.8 (1,045.4) Adjustments to exclude the effect of GM purchase accounting adjustments related to Hughes (Note 7).................... 123.8 123.8 123.8 --------- --------- --------- Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss)............................ $ 1,049.2 $ 921.6 $ (921.6) ========= ========= ========= Available Separate Consolidated Net Income (Loss) (Note 7) Average number of shares of General Motors Class H Common Stock outstanding (in millions) (Numerator)............ 92.1 88.6 75.3 Class H dividend base (in millions) (Denominator)......... 399.9 399.9 399.9 Available Separate Consolidated Net Income (Loss)......... $ 241.6 $ 204.5 $ (142.3) ========= ========= ========= Earnings (Loss) Attributable to General Motors Class H Common Stock on a Per Share Basis (Note 7) Before cumulative effect of accounting changes......... $ 2.70 $ 2.30 $ (0.11) Cumulative effect of accounting changes (Notes 1 and 5)................................................... (0.08) -- (2.18) --------- --------- --------- Net earnings (loss) attributable to General Motors Class H Common Stock................................. $ 2.62 $ 2.30 $ (2.29) ========= ========= =========
Reference should be made to the Notes to Consolidated Financial Statements. IV-49 4 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET
DECEMBER 31, --------------------------- 1994 1993 --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNT) ASSETS Current Assets Cash and cash equivalents (Note 1)......................................... $ 1,501.8 $ 1,008.7 Accounts and notes receivable Trade receivables (less allowances)...................................... 1,039.5 736.7 General Motors and affiliates (Note 2)................................... 153.9 404.1 Contracts in process, less advances and progress payments of $2,311.2 and $2,739.2................................................................. 2,265.4 2,376.8 Inventories (less allowances) (Note 1)..................................... 1,087.9 1,060.4 Prepaid expenses, including deferred income taxes of $89.0 and $36.7....... 195.1 127.6 --------- --------- Total Current Assets....................................................... 6,243.6 5,714.3 --------- --------- Property-Net (Notes 8 and 9)............................................... 2,611.8 2,634.4 --------- --------- Telecommunications and Other Equipment, net of accumulated depreciation of $198.0 and $150.2..................................................... 1,071.7 767.6 --------- --------- Intangible Assets, net of amortization of $1,276.7 and $1,144.6 (Note 1)... 3,271.3 3,374.4 --------- --------- Investments and Other Assets, including deferred income taxes of $214.0 and $203.7 -- principally at cost (less allowances).......................... 1,652.1 1,626.4 --------- --------- Total Assets........................................................... $14,850.5 $14,117.1 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts payable Outside.................................................................. $ 779.9 $ 717.1 General Motors and affiliates (Note 2)................................... 80.5 117.5 Advances on contracts...................................................... 645.1 660.6 Notes and loans payable (Note 9)........................................... 125.7 77.8 Income taxes payable (Note 6).............................................. 31.4 102.1 Accrued liabilities (Note 10).............................................. 1,885.5 1,874.0 --------- --------- Total Current Liabilities.............................................. 3,548.1 3,549.1 --------- --------- Long-Term Debt and Capitalized Leases (Note 9)............................. 353.5 416.8 --------- --------- Postretirement Benefits Other Than Pensions (Note 5)....................... 1,541.4 1,446.3 --------- --------- Other Liabilities, Deferred Income Taxes, and Deferred Credits............. 1,431.7 1,376.8 --------- --------- Stockholder's Equity (Note 11) Capital stock (outstanding, 1,000 shares, $0.10 par value) and additional paid-in capital.......................................................... 6,326.5 6,323.1 Net income retained for use in the business.............................. 1,743.6 1,138.2 --------- --------- Subtotal............................................................... 8,070.1 7,461.3 Minimum pension liability adjustment..................................... (76.1) (120.4) Accumulated foreign currency translation adjustments..................... (18.2) (12.8) --------- --------- Total Stockholder's Equity............................................... 7,975.8 7,328.1 --------- --------- Total Liabilities and Stockholder's Equity................................. $14,850.5 $14,117.1 ========= =========
Reference should be made to the Notes to Consolidated Financial Statements. IV-50 5 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES STATEMENT OF CONSOLIDATED CASH FLOWS
YEARS ENDED DECEMBER 31, -------------------------------- 1994 1993 1992 -------- -------- -------- (DOLLARS IN MILLIONS) Cash Flows from Operating Activities Income (Loss) before cumulative effect of accounting changes...................... $ 955.8 $ 797.8 $ (173.3) Adjustments to reconcile income (loss) before cumulative effect of accounting changes to net cash provided by operating activities Depreciation and amortization............................. 470.2 503.5 487.1 Amortization of GM purchase accounting adjustments related to Hughes............................................... 123.8 123.8 123.8 Special provision for restructuring....................... -- -- 1,237.0 Pension expense (credit), net of cash contributions....... 20.3 (25.6) (137.7) Provision for postretirement benefits other than pensions, net of cash payments.................................... 78.4 91.0 78.7 Net (gain) loss on sale of property....................... 14.3 36.1 (18.0) Net gain on sale of investments and businesses............ (3.6) (50.3) -- Change in deferred income taxes and other*................ (60.1) 207.1 (350.2) Change in other operating assets and liabilities Accounts receivable..................................... (238.1) (153.7) 161.9 Contracts in process*................................... 111.4 70.9 46.6 Inventories*............................................ (27.5) 104.6 26.8 Prepaid expenses........................................ (15.2) 3.4 (10.0) Accounts payable........................................ 25.8 81.5 63.2 Income taxes*........................................... (70.7) 30.1 (54.5) Accrued and other liabilities*.......................... (28.2) (143.5) (49.2) Other*.................................................. 20.2 (183.2) (232.8) -------- -------- -------- Net Cash Provided by Operating Activities...................... 1,376.8 1,493.5 1,199.4 -------- -------- -------- Cash Flows from Investing Activities Investment in companies, net of cash acquired................ (7.0) (149.3) (69.9) Expenditures for property and special tools.................. (490.5) (448.9) (456.9) Increase in telecommunications and other equipment........... (351.9) (230.3) (71.6) Proceeds from disposal of property........................... 90.6 115.0 108.4 Proceeds from sale of investments and businesses............. 3.6 281.6 -- Proceeds from sale and leaseback of satellite transponders... -- -- 314.8 Decrease (increase) in notes receivable...................... 206.9 7.6 (45.2) -------- -------- -------- Net Cash Used in Investing Activities.......................... (548.3) (424.3) (220.4) -------- -------- -------- Cash Flows from Financing Activities Net decrease in notes and loans payable........................ (2.1) (189.4) (525.8) Increase in long-term debt................................... 7.5 84.0 236.0 Decrease in long-term debt................................... (20.8) (369.8) (46.8) Cash dividends paid to General Motors........................ (320.0) (288.0) (288.0) -------- -------- -------- Net Cash Used in Financing Activities.......................... (335.4) (763.2) (624.6) -------- -------- -------- Net increase in cash and cash equivalents...................... 493.1 306.0 354.4 Cash and cash equivalents at beginning of the year............. 1,008.7 702.7 348.3 -------- -------- -------- Cash and cash equivalents at end of the year................... $1,501.8 $1,008.7 $ 702.7 ======== ======== ========
- ------------------------- * 1994 and 1992 amounts exclude the effects of accounting changes. Reference should be made to the Notes to Consolidated Financial Statements. IV-51 6 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION AND CONSOLIDATION The consolidated financial statements include the accounts of GM Hughes Electronics Corporation (GMHE) and its domestic and foreign subsidiaries that are more than 50% owned, principally Hughes Aircraft Company (Hughes) and Delco Electronics Corporation (Delco Electronics). Investments in associated companies in which at least 20% of the voting securities is owned are accounted for under the equity method of accounting. Effective December 31, 1985, General Motors Corporation (General Motors or GM) acquired Hughes and its subsidiaries for $2.7 billion in cash and cash equivalents and 100 million shares of GM Class H common stock having an estimated value of $2,561.9 million, which carried certain guarantees. On February 28, 1989, GM and the Howard Hughes Medical Institute (Institute) reached an agreement to terminate GM's then-existing guarantee obligations with respect to the Institute's holding of GM Class H common stock. Under terms of the agreement as amended, the Institute received put options exercisable under most circumstances at $30 per share on March 1, 1991, 1992, 1993, and 1995 for 20 million, 10 million, 10.5 million, and 15 million shares, respectively. The Institute exercised these put options at $30 per share on March 1, 1991, March 2, 1992, and March 1, 1993. GM has the option to call the Institute's remaining 15 million shares until February 28, 1995, at a call price of $37.50 per share. The acquisition of Hughes was accounted for as a purchase. The purchase price exceeded the net book value of Hughes by $4,244.7 million, which was assigned as follows: $500.0 million to patents and related technology, $125.0 million to the future economic benefits to GM of the Hughes Long-Term Incentive Plan (LTIP), and $3,619.7 million to other intangible assets, including goodwill. The amounts assigned to patents and related technology are being amortized on a straight-line basis over 15 years and other intangible assets, including goodwill, over 40 years. The amount assigned to the future economic benefits of the Hughes LTIP was fully amortized in 1990. For the purpose of determining earnings per share and amounts available for dividends on the common stocks of General Motors, the amortization of these intangible assets is charged against earnings attributable to GM $1 2/3 par value common stock. The earnings of GMHE and its subsidiaries since the acquisition of Hughes form the base from which any dividends on the GM Class H common stock are declared. These earnings include income earned from sales to GM and its affiliates, but exclude purchase accounting adjustments (see Notes 2 and 7). REVENUE RECOGNITION Outside sales are attributable principally to long-term contracts, primarily recorded using the percentage-of-completion (cost-to-cost) method of accounting. Under this method, sales are recorded equivalent to costs incurred plus a portion of the profit expected to be realized, determined based on the ratio of costs incurred to estimated total costs at completion. Profits expected to be realized on contracts are based on estimates of total sales value and costs at completion. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are recorded in the accounting period in which the revisions are made. Estimated losses on contracts are recorded in the period in which they are identified. Certain contracts contain cost or performance incentives which provide for increases in profits for surpassing stated objectives and decreases in profits for failure to achieve such objectives. Amounts associated with incentives are included in estimates of total sales values when there is sufficient information to relate actual performance to the objectives. IV-52 7 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Effective January 1, 1992, Hughes changed its revenue recognition policy for certain commercial long-term contracts from the percentage-of-completion (cost-to-cost) method to the units-of-delivery method. GMHE believes this method more appropriately aligns the accounting methods of Hughes' commercial businesses with other commercial enterprises. The unfavorable effect of this change was $40.0 million after-tax ($0.10 per share of GM Class H common stock). Sales under United States Government contracts were 37.6%, 44.2%, and 46.1% of total sales in 1994, 1993, and 1992, respectively. CASH FLOWS For purposes of preparing the statement of consolidated cash flows, all highly liquid investments purchased with original maturities of 90 days or less are considered to be cash equivalents. Net cash provided by operating activities reflects cash payments for interest and income taxes as follows:
1994 1993 1992 ------ ------ ------ (DOLLARS IN MILLIONS) Interest.............................................. $ 40.7 $ 72.5 $ 75.2 ------ ------ ------ Income taxes.......................................... $686.2 $245.0 $333.0 ------ ------ ------
With respect to material noncash transactions, as described more fully in Note 13, in 1992 GMHE purchased 21,508,563 shares of GM Class H common stock in exchange for $425.0 million of notes payable to GM and cash of $25.0 million in connection with the acquisition of General Dynamics' missile business. ACCOUNTS RECEIVABLE AND CONTRACTS IN PROCESS Trade receivables are principally related to long-term contracts and programs. Amounts billed under retainage provisions of contracts are not significant, and substantially all amounts are collectible within one year. Contracts in process are stated at costs incurred plus estimated profit, less amounts billed to customers and advances and progress payments applied. Engineering, tooling, manufacturing, and applicable overhead costs, including administrative, research and development, and selling expenses, are charged to costs and expenses when incurred. Contracts in process include amounts relating to contracts with long production cycles, and $371.7 million of the 1994 amount is expected to be billed after one year. Contracts in process in 1994 also include approximately $96.2 million relating to claims, requests for equitable adjustments, and amounts withheld pending negotiation or settlement with customers. Under certain contracts with the U.S. Government, progress payments are received based on costs incurred on the respective contracts. Title to the inventories related to such contracts (included in contracts in process) vests with the U.S. Government. INVENTORIES Inventories are stated at the lower of cost or market principally using the first-in, first-out (FIFO) or average cost methods.
MAJOR CLASSES OF INVENTORIES 1994 1993 ---------------------------------------------------------- -------- -------- (DOLLARS IN MILLIONS) Productive material, work in process, and supplies........ $ 968.0 $ 957.1 Finished product.......................................... 119.9 103.3 -------- -------- Total................................................ $1,087.9 $1,060.4 ======== ========
IV-53 8 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED PROPERTY AND DEPRECIATION Property is carried at cost. Depreciation of property is provided for based on estimated useful lives (3 to 45 years) generally using accelerated methods. TELECOMMUNICATIONS AND OTHER EQUIPMENT Telecommunications and other equipment includes satellite transponders and other equipment subject to operating leases or service agreements. Such equipment is carried at GMHE's direct and indirect manufacturing cost and is amortized over the estimated useful lives (7 to 23 years) using the straight-line method. The net book value of equipment subject to operating leases was $572.9 million and $523.8 million at December 31, 1994 and 1993, respectively. INTANGIBLE ASSETS Intangible assets, principally the excess of cost over the fair value of identifiable net assets of purchased businesses, are being amortized using the straight-line method over periods not exceeding 40 years. INCOME TAXES The provision (credit) for income taxes is based on reported income (loss) before income taxes. Deferred income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes, as measured by applying currently enacted tax laws. Provision has been made for U.S. Federal income taxes to be paid on that portion of the undistributed earnings of foreign subsidiaries that has not been deemed permanently reinvested. GMHE and its domestic subsidiaries join with General Motors in filing a consolidated U.S. Federal income tax return. The portion of the consolidated income tax liability recorded by GMHE is generally equivalent to the liability it would have incurred on a separate return basis. RESEARCH AND DEVELOPMENT Expenditures for research and development are charged to costs and expenses as incurred and amounted to $699.3 million in 1994, $612.1 million in 1993, and $680.5 million in 1992. FINANCIAL INSTRUMENTS GMHE enters into foreign exchange-forward contracts and interest rate swap agreements in connection with management of its exposure to fluctuations in foreign exchange rates and interest rates. Foreign exchange-forward contracts are accounted for as hedges to the extent they are designated as, and are effective as, hedges of firm foreign currency commitments. The cash flows from interest rate swaps are accounted for as interest expense, and gains and losses from terminated contracts are deferred and amortized over the remaining life of the underlying debt. Open swap positions are reviewed regularly to ensure that they remain effective. FOREIGN CURRENCY TRANSACTIONS Foreign currency transaction net gains (losses) included in consolidated operating results amounted to ($4.2) million in 1994, $2.4 million in 1993, and $11.7 million in 1992. IV-54 9 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED POSTEMPLOYMENT BENEFITS Effective January 1, 1994, GMHE adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits. The Statement requires accrual of the costs of benefits provided to former or inactive employees after employment, but before retirement. The unfavorable cumulative effect of adopting this Standard was $30.4 million, net of income taxes of $19.2 million, or $0.08 per share of GM Class H common stock. The charge is primarily related to extended-disability benefits which, under the new accounting Standard, are accrued on a service-driven basis. NOTE 2. RELATED-PARTY TRANSACTIONS SALES, PURCHASES, AND ADMINISTRATIVE EXPENSES The amounts due from and to GM and affiliates result from sales of products to and purchases of materials and services from units controlled by GM. Purchases from GM and affiliates, including computer systems services provided by Electronic Data Systems Corporation and common administrative expenses allocated by GM, amounted to approximately $257.1 million, $285.9 million, and $447.0 million in 1994, 1993, and 1992, respectively. INCENTIVE PLANS Certain eligible employees of GMHE participate in various incentive plans of GM and its subsidiaries. OTHER Delco Electronics employees participate in GM's pension and other postretirement benefit programs. NOTE 3. INCENTIVE PLAN Under the GMHE Incentive Plan (the Plan) as approved by the GM Board of Directors in 1987 and 1992, shares, rights, or options to acquire up to 20 million shares of GM Class H common stock may be granted through May 31, 1997 (extended an additional two years in 1995). The GM Executive Compensation Committee may grant options and other rights to acquire shares of GM Class H common stock under the provisions of the Plan. The option price is equal to 100% of the fair market value of GM Class H common stock on the date the options were granted. These nonqualified options generally expire 10 years from the dates of grant and are subject to earlier termination under certain conditions. Changes in the status of outstanding options were as follows:
OPTION SHARES UNDER GM CLASS H COMMON STOCK PRICES OPTION - ------------------------------------------------------------------ ------------- ------------ Outstanding at January 1, 1992.................................... $17.07-$30.25 5,061,209 Granted........................................................... 23.63- 25.38 1,927,860 Exercised......................................................... 17.07- 24.35 (136,764) Terminated........................................................ 17.07- 30.25 (335,550) ---------- Outstanding at December 31, 1992.................................. 17.07- 30.25 6,516,755 Granted........................................................... 28.00- 28.56 2,027,260 Exercised......................................................... 17.07- 30.25 (1,960,162) Terminated........................................................ 17.07- 30.25 (217,845) ---------- Outstanding at December 31, 1993.................................. 17.07- 30.25 6,366,008 Granted........................................................... 36.75 1,612,640 Exercised......................................................... 17.07- 30.25 (712,107) Terminated........................................................ 17.07- 36.75 (202,220) ---------- Outstanding at December 31, 1994.................................. $17.07-$36.75 7,064,321 ==========
IV-55 10 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Options for 4,739,664 shares of GM Class H common stock were exercisable at December 31, 1994, and the maximum number of shares for which additional options and other rights may be granted under the Plan was 5,472,562 shares. NOTE 4. PENSION PROGRAMS GMHE's total pension expense (credit) amounted to $54.9 million in 1994, ($8.1) million in 1993, and ($54.0) million in 1992. Substantially all of the employees of Delco Electronics participate in the defined benefit pension plans of General Motors. Plans covering represented employees generally provide benefits of negotiated stated amounts for each year of service as well as significant supplemental benefits for employees who retire with 30 years of service before normal retirement age. The benefits provided by the plans covering salaried employees are generally based on years of service and the employee's salary history. Certain nonqualified pension plans covering executives are based on targeted wage replacement percentages and are unfunded. The accumulated plan benefit obligation and plan net assets for the employees of Delco Electronics are not determinable separately; however, GM charged Delco Electronics $93.3 million, $69.8 million, and $30.6 million for benefits provided to these employees in 1994, 1993, and 1992, respectively. Hughes maintains contributory and non-contributory defined benefit retirement plans covering substantially all of its employees. Benefits are based on years of service and compensation earned during a specified period of time before retirement. Hughes also has an unfunded, nonqualified pension plan covering certain executives. The net pension credit of Hughes included the components as shown below.
1994 1993 1992 ------- ------- ------- (DOLLARS IN MILLIONS) Benefits earned during the year.................................. $ 146.7 $ 121.1 $ 99.9 Interest accrued on benefits earned in prior years............... 377.0 369.1 357.9 Actual return on assets.......................................... (104.7) (953.7) (647.5) Net amortization and deferral.................................... (457.4) 385.6 105.1 ------- ------- ------- Net retirement plan credit..................................... $ (38.4) $ (77.9) $ (84.6) ======= ======= =======
Costs are actuarially determined using the projected unit credit method and are funded in accordance with U.S. Government cost accounting standards to the extent such costs are tax-deductible. SFAS No. 87, Employers' Accounting for Pensions, requires the recognition of an additional liability to increase the amounts recorded up to the unfunded accumulated benefit obligation. The adjustment required to recognize the minimum liability required by SFAS No. 87 is recorded as an intangible asset to the extent of unrecognized prior service cost and the remainder, net of applicable deferred income taxes, is recorded as a reduction of Stockholder's Equity. At December 31, 1994 and 1993, the additional minimum liability recorded was $152.4 million and $208.1 million, respectively, of which $76.1 million and $120.4 million, respectively, was recorded as a reduction of Stockholder's Equity. Plan assets are invested primarily in listed common stock, cash and short-term investment funds, U.S. Government securities, and other investments. The weighted average discount rates used in determining the actuarial present values of the projected benefit obligation shown in the table below were 8.75% and 7.5% at December 31, 1994 and 1993, respectively. The rate of increase in future compensation levels was 5.0% in 1994 and 1993. The expected long-term rate of return on assets used in determining pension cost was 9.75% for 1994 and 10.5% for 1993. IV-56 11 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The following table sets forth the funded status of the Hughes plans and the amounts included in the Consolidated Balance Sheet at December 31, 1994 and 1993.
1994 1993 -------------------- -------------------- ASSETS ACCUM. ASSETS ACCUM. EXCEED BENEFITS EXCEED BENEFITS ACCUM. EXCEED ACCUM. EXCEED BENEFITS ASSETS BENEFITS ASSETS -------- -------- -------- -------- (DOLLARS IN MILLIONS) Actuarial present value of benefits based on service to date and present pay levels Vested............................................... $3,572.5 $ 195.9 $3,936.3 $ 246.4 Nonvested............................................ 337.9 0.9 313.6 3.9 -------- -------- -------- -------- Accumulated benefit obligation......................... 3,910.4 196.8 4,249.9 250.3 Additional amounts related to projected pay increases............................................ 438.1 22.4 431.5 8.5 -------- -------- -------- -------- Total projected benefit obligation based on service to date................................................. 4,348.5 219.2 4,681.4 258.8 Plan assets at fair value.............................. 5,717.4 -- 6,001.4 -- -------- -------- -------- -------- Plan assets in excess of (less than) projected benefit obligation................................... 1,368.9 (219.2) 1,320.0 (258.8) Unamortized net amount resulting from changes in plan experience and actuarial assumptions................. (152.4) 150.2 (135.8) 209.2 Unamortized net asset at date of adoption.............. (217.3) -- (280.0) -- Unamortized net amount resulting from changes in plan provisions........................................... (14.2) 24.6 4.5 7.4 Adjustment for unfunded pension liabilities............ -- (152.4) -- (208.1) -------- -------- -------- -------- Net prepaid pension cost (accrued liability)........... $ 985.0 $ (196.8) $ 908.7 $ (250.3) ======== ======== ======== ========
NOTE 5. OTHER POSTRETIREMENT BENEFITS Effective January 1, 1992, GMHE adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. This Statement requires that the cost of such benefits be recognized in the financial statements during the period employees provide service to GMHE. GMHE's previous practice was to recognize the cost of such postretirement benefits when incurred (pay-as-you-go). The cumulative effect of this accounting change as of January 1, 1992 was $1,366.6 million, or $832.1 million after-tax ($2.08 per share of GM Class H common stock). The incremental ongoing effect increased costs and expenses by $96.8 million, $91.0 million, and $78.7 million in 1994, 1993, and 1992, respectively. GMHE has disclosed in the financial statements certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "accumulated postretirement benefit obligations," "liabilities," or "obligations." Notwithstanding the recording of such amounts and the use of these terms, GMHE does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of GMHE (other than pensions) represent legally enforceable liabilities of GMHE. Substantially all of the employees of Delco Electronics participate in various postretirement medical, dental, vision, and life insurance plans of General Motors. Hughes maintains a program for eligible retirees to participate in health care and life insurance benefits generally until they reach age 65. Qualified employees who elected to participate in the Hughes' contributory defined benefit pension plans may become eligible for these benefits if they retire from Hughes between the ages of 55 and 65. IV-57 12 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The total non-pension postretirement benefit cost of GMHE and its subsidiaries, excluding the cumulative effect of adopting SFAS No. 106 in 1992, included the components set forth as follows:
1994 1993 1992 ------ ------ ------ (DOLLARS IN MILLIONS) Benefits earned during the year..................................... $ 50.1 $ 49.2 $ 42.9 Interest accrued on benefits earned in prior years.................. 130.3 127.2 116.8 Net amortization.................................................... 7.6 -- -- ------ ------ ------ Total non-pension postretirement benefit cost..................... $188.0 $176.4 $159.7 ====== ====== ======
The following table displays the components of GMHE's obligation recognized for postretirement benefit plans included in the Consolidated Balance Sheet at December 31, 1994 and 1993:
1994 1993 -------- -------- (DOLLARS IN MILLIONS) Accumulated postretirement benefit obligation attributable to Current retirees....................................................... $ 816.6 $ 906.8 Fully eligible active plan participants................................ 191.9 193.1 Other active plan participants......................................... 576.6 844.9 -------- -------- Accumulated postretirement benefit obligation............................ 1,585.1 1,944.8 Unrecognized net amount resulting from changes in plan experience and actuarial assumptions.................................................. 44.7 (392.7) -------- -------- Net postretirement benefit obligation.................................... 1,629.8 1,552.1 Less current portion..................................................... 88.4 105.8 -------- -------- Net long-term postretirement benefit obligation.......................... $1,541.4 $1,446.3 ======== ========
The assumed weighted average discount rates used in determining the actuarial present value of the accumulated postretirement benefit obligation were 8.57% and 6.99% at December 31, 1994 and 1993, respectively. The assumed weighted average rate of increase in future compensation levels related to pay- related life insurance benefits was 4.6% at December 31, 1994 and 5.3% at December 31, 1993. The assumed weighted average health care cost trend rate was 7.39% in 1994, increasing to 9.70% in 1995 and decreasing linearly each successive year until it reaches 5.68% in 2006, after which it remains constant. A one percentage point increase in each year of this annual trend rate would increase the accumulated postretirement benefit obligation at December 31, 1994 by approximately $165 million, and increase the service and interest cost components of the 1994 postretirement benefit expense by approximately $21 million. IV-58 13 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 6. INCOME TAXES The income tax provision (credit) consists of the following:
1994 1993 1992 ------ ------ ------- (DOLLARS IN MILLIONS) Taxes currently payable U.S. Federal................................................... $532.2 $222.0 $ 319.7 Foreign........................................................ 10.3 10.7 4.2 U.S. State and local........................................... 100.5 94.3 39.8 ------ ------ ------- Total..................................................... 643.0 327.0 363.7 ------ ------ ------- Deferred tax (assets) liabilities -- net U.S. Federal................................................... (62.2) 229.7 (368.0) Foreign........................................................ 1.3 -- 0.1 U.S. State and local........................................... (9.3) 15.9 (73.0) ------ ------ ------- Total..................................................... (70.2) 245.6 (440.9) ------ ------ ------- Total income tax provision (credit).................... $572.8* $572.6 $ (77.2)* ====== ====== =======
- ------------------------- * Excluding effect of accounting changes. The deferred income tax benefit in 1994 includes a $63.0 million credit that resulted from an adjustment to the beginning of the year valuation allowance because of a change in circumstances with respect to GMHE's ability to realize the benefit from a capital loss carryforward. Income (Loss) before income taxes includes the following components:
1994 1993 1992 -------- -------- ------- (DOLLARS IN MILLIONS) U.S. income (loss).............................................. $1,448.1 $1,286.7 $(225.1) Foreign income (loss)........................................... 80.5 83.7 (25.4) -------- -------- ------- Total......................................................... $1,528.6 $1,370.4 $(250.5) ======== ======== =======
The consolidated income tax expense (credit) was different than the amount computed using the U.S. statutory income tax rate for the reasons set forth in the following table:
1994 1993 1992 ------ ------ ------ (DOLLARS IN MILLIONS) Expected tax (credit) at U.S. statutory income tax rate............. $535.0 $479.5 $(85.2) U.S. state and local income taxes................................... 59.3 70.1 (19.8) Purchase accounting adjustments..................................... 43.3 43.3 42.1 Foreign tax rate differential....................................... (17.7) (6.9) (13.1) Change in valuation allowance....................................... (63.0) -- -- Deferred tax impact of U.S. Federal income tax rate change.......... -- (10.0) -- Other............................................................... 15.9 (3.4) (1.2) ------ ------ ------ Consolidated income tax expense (credit).......................... $572.8* $572.6 $(77.2)* ====== ====== ======
- ------------------------- * Excluding effect of accounting changes. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities at December 31, 1994 and 1993 are as follows: IV-59 14 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1994 1993 ----------------------- ----------------------- DEFERRED DEFERRED DEFERRED DEFERRED TAX TAX TAX TAX ASSETS LIABILITIES ASSETS LIABILITIES -------- ----------- -------- ----------- (DOLLARS IN MILLIONS) Postretirement benefits other than pensions........... $ 695.3 $ -- $ 663.7 $ -- Profits on long-term contracts........................ 259.3 417.3 229.3 437.0 Leveraged leases...................................... 86.7 -- 99.9 -- Employee benefit programs............................. 121.4 372.9 104.0 353.0 Depreciation.......................................... -- 399.4 -- 403.0 Special provision for restructuring................... 151.8 -- 255.0 -- Other................................................. 408.0 215.6 445.5 287.6 -------- ---------- -------- ---------- Subtotal............................................ 1,722.5 1,405.2 1,797.4 1,480.6 Valuation allowance................................... (16.1) -- (76.4) -- -------- ---------- -------- ---------- Total deferred taxes.................................. $1,706.4 $ 1,405.2 $1,721.0 $ 1,480.6 ======== ========== ======== ==========
Provision has been made for U.S. Federal income taxes to be paid on that portion of the undistributed earnings of foreign subsidiaries that has not been deemed permanently reinvested. At December 31, 1994 and 1993, undistributed earnings of foreign subsidiaries amounted to approximately $311.4 million and $446.3 million, respectively. Repatriation of all accumulated foreign earnings would have resulted in tax liabilities of $90.3 million and $113.8 million, respectively, for which GMHE has provided deferred tax liabilities of $66.2 million and $75.0 million, respectively. At December 31, 1994, GMHE had $36.5 million of foreign operating loss carryforwards which expire in varying amounts between 1995 and 1999. A valuation allowance has been provided for all of the foreign operating loss carryforwards. NOTE 7. EARNINGS (LOSS) ATTRIBUTABLE TO GENERAL MOTORS CLASS H COMMON STOCK ON A PER SHARE BASIS AND AVAILABLE SEPARATE CONSOLIDATED NET INCOME (LOSS) Earnings (Loss) attributable to General Motors Class H common stock on a per share basis have been determined based on the relative amounts available for the payment of dividends to holders of the GM Class H common stock. Holders of GM Class H common stock have no direct rights in the equity or assets of GMHE, but rather have rights in the equity and assets of GM (which includes 100% of the stock of GMHE). Dividends on the GM Class H common stock are declared by GM's Board of Directors out of the Available Separate Consolidated Net Income (Loss) of GMHE earned since the acquisition of Hughes by GM. The Available Separate Consolidated Net Income (Loss) of GMHE is determined quarterly and is equal to the separate consolidated net income (loss) of GMHE, excluding the effects of GM purchase accounting adjustments arising from the acquisition of Hughes (Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss)), multiplied by a fraction, the numerator of which is a number equal to the weighted average number of shares of GM Class H common stock outstanding during the period and the denominator of which was 399.9 million during the fourth quarters of 1994, 1993, and 1992. The denominator used in determining the Available Separate Consolidated Net Income (Loss) of GMHE is adjusted as deemed appropriate by the GM Board of Directors to reflect subdivisions or combinations of the GM Class H common stock and to reflect certain transfers of capital to or from GMHE. The Board's discretion to make such adjustments is limited by criteria set forth in GM's Certificate of Incorporation. In this regard, the GM Board has generally caused the denominator to decrease as shares are purchased by GMHE, and to increase as such shares are used, at GMHE expense, for GMHE employee benefit plans or acquisitions. IV-60 15 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED Dividends may be paid on GM Class H common stock only when, as, and if declared by the GM Board of Directors in its sole discretion. The current policy of the GM Board with respect to GM Class H common stock is to pay cash dividends approximately equal to 35% of the Available Separate Consolidated Net Income of GMHE for the prior year. Notwithstanding the current dividend policy, the dividends paid on the GM Class H Common Stock during 1994, 1993, and 1992 exceeded 35% of the Available Separate Consolidated Net Income (Loss) of GMHE for the preceding year (excluding the effect of the $749.4 million after-tax special restructuring charge at Hughes in 1992). Consistent with Delaware law, which governs the amount legally available for the payment of dividends on GM's common stock, the GM Board of Directors has determined that such amount is materially higher than GM's capital surplus plus net income retained for use in the business (less accumulated deficit). NOTE 8. PROPERTY -- NET
1994 1993 -------- -------- (DOLLARS IN MILLIONS) Land and improvements.................................................... $ 196.5 $ 208.4 Buildings and unamortized leasehold improvements......................... 1,291.2 1,277.9 Machinery and equipment.................................................. 2,623.8 2,902.5 Furniture, fixtures, and office machines................................. 81.9 102.3 Construction in progress................................................. 448.9 310.6 -------- -------- Total............................................................. 4,642.3 4,801.7 Less accumulated depreciation............................................ 2,047.5 2,200.7 -------- -------- Net real estate, plants, and equipment................................... 2,594.8 2,601.0 Special tools -- less amortization....................................... 17.0 33.4 -------- -------- Property -- net................................................... $2,611.8 $2,634.4 ======== ========
NOTE 9. NOTES AND LOANS PAYABLE AND LONG-TERM DEBT AND CAPITALIZED LEASES
1994 1993 ------ ------ (DOLLARS IN MILLIONS) Loans payable to banks.................................................. $ 17.6 $ 8.6 Current portion of long-term debt....................................... 55.4 5.7 Other................................................................... 52.7 63.5 ------ ------ Total notes and loans payable.................................... $125.7 $ 77.8 ====== ====== Foreign bank debt....................................................... $ 59.8 $ 72.2 Term loans GM.................................................................... 143.8 143.8 Other................................................................. 200.0 200.0 Other debt.............................................................. 3.9 4.8 ------ ------ Total............................................................ 407.5 420.8 Less current portion.................................................... 55.4 5.7 ------ ------ Long-term debt.......................................................... 352.1 415.1 Capitalized leases...................................................... 1.4 1.7 ------ ------ Total long-term debt and capitalized leases...................... $353.5 $416.8 ====== ======
At December 31, 1994, GMHE had unused credit available of $450.0 million and $650.0 million under short-term lines of credit and an unsecured revolving credit loan agreement, respectively. IV-61 16 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED The unsecured revolving credit loan agreement provides for a commitment of $250.0 million through January 1995, subject to a facility fee of 0.09% per annum, and a commitment of $400.0 million through January 1998, subject to a facility fee of 0.125% per annum. Borrowings under the agreement bear interest at a rate which approximates the London Interbank Offered Rate plus 0.25%. No amounts were outstanding under the agreement at December 31, 1994. At December 31, 1994, foreign bank debt includes $59.8 million denominated in British pounds sterling, bearing interest at rates ranging from 3.5% to 10.3%, with maturity dates from 1995 to 2005. The GM term loans bear interest at rates ranging from 5.7% to 6.1% with maturity dates in 1996 and 1997. The other term loans consist of notes payable to an insurance company bearing interest at rates ranging from 7.1% to 8.0%, with maturity dates in 1995 and 1997. Annual maturities of long-term debt and capitalized leases are $55.9 million in 1995, $92.0 million in 1996, $213.7 million in 1997, $4.2 million in 1998, $4.5 million in 1999, and $38.6 million thereafter. Property with a net book value of $38.3 million at December 31, 1994 is pledged as collateral under such debt. NOTE 10. ACCRUED LIABILITIES
1994 1993 -------- -------- (DOLLARS IN MILLIONS) Payrolls and other compensation.......................................... $ 540.2 $ 504.4 Provision for losses on contracts........................................ 277.0 204.2 Accrual for restructuring................................................ 143.3 222.8 Other.................................................................... 925.0 942.6 -------- -------- Total............................................................. $1,885.5 $1,874.0 ======== ========
NOTE 11. STOCKHOLDER'S EQUITY The authorized capital stock of GMHE consists of 1,000 shares of $0.10 par value common stock. At December 31, 1994 and 1993, 1,000 shares having an aggregate par value of $100 were issued and outstanding. All of the outstanding capital stock of GMHE is held by General Motors. IV-62 17 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1994 1993 1992 -------- -------- -------- (DOLLARS IN MILLIONS) Capital stock and additional paid-in capital Balance at beginning of the year............................. $6,323.1 $6,314.7 $6,365.9 Tax benefit from exercise of GM Class H common stock options................................................... 3.4 8.4 -- GM Class H common stock price guarantee in connection with the acquisition of General Dynamics' missile business..... -- -- (51.2) -------- -------- -------- Balance at end of the year.............................. $6,326.5 $6,323.1 $6,314.7 ======== ======== ======== Net income retained for use in the business Balance at beginning of the year............................. $1,138.2 $ 628.4 $1,961.8 Net income (loss)............................................ 925.4 797.8 (1,045.4) Cash dividends paid to General Motors........................ (320.0) (288.0) (288.0) -------- -------- -------- Balance at end of the year.............................. $1,743.6 $1,138.2 $ 628.4 ======== ======== ======== Minimum pension liability adjustment Balance at beginning of the year............................. $ (120.4) $ (104.3) $ (101.8) Change during the year....................................... 44.3 (16.1) (2.5) -------- -------- -------- Balance at end of the year.............................. $ (76.1) $ (120.4) $ (104.3) ======== ======== ======== Accumulated foreign currency translation adjustments Balance at beginning of the year............................. $ (12.8) $ (23.8) $ (7.7) Change during the year....................................... (5.4) 11.0 (16.1) -------- -------- -------- Balance at end of the year.............................. $ (18.2) $ (12.8) $ (23.8) ======== ======== ========
As the sole stockholder of GMHE, GM is able to cause GMHE to pay cash dividends and make advances to or otherwise enter into transactions with GM as GM deems desirable and appropriate. GM reserves the right to cause GMHE to pay cash dividends to GM in such amounts as GM determines are desirable under the then prevailing facts and circumstances. Such amounts may be the same as, greater than, or less than the cash dividends paid by GM on its Class H common stock. There is no fixed relationship, on a per share or aggregate basis, between the cash dividends that may be paid by GM to holders of its Class H common stock and the cash dividends or other amounts that may be paid by GMHE to GM. NOTE 12. SPECIAL PROVISION FOR RESTRUCTURING The 1992 operating results include a special restructuring charge of $1,237.0 million ($749.4 million after-tax, or $1.87 per share of GM Class H common stock) primarily attributable to redundant facilities and related employment costs at Hughes. The special charge comprehended a reduction of Hughes' worldwide employment, a major facilities consolidation, and a re-evaluation of certain business lines that no longer met Hughes' strategic objectives. Restructuring costs of $228.3 million, $527.6 million, and $250.9 million were charged against the reserve during 1994, 1993, and 1992, respectively. In addition, in 1994 and 1993 the restructuring reserve was increased by $35.0 million and $78.0 million, respectively, primarily due to changes in estimated loss on disposition of two subsidiaries. The remaining liability of $343.2 million relates primarily to reserves for excess leased facilities and other site consolidation costs. Approximately $288.2 million of this total will require future cash outflows. It is expected that these costs will be expended predominantly over the next three years. IV-63 18 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED NOTE 13. ACQUISITIONS In December 1994, GMHE announced that it had reached an agreement with CAE Inc. of Toronto, Canada to acquire substantially all of the assets of its U.S. subsidiary, CAE-Link Corporation, for $155 million in cash. CAE-Link is an established supplier of simulation, training, and technical services, primarily to the U.S. military and NASA. The transaction is expected to close during the first quarter of 1995. In August 1992, GMHE acquired the missile business of General Dynamics Corporation (GD) in exchange for 21,508,563 shares of GM Class H common stock and cash with an aggregate value of $450.0 million. GMHE had purchased the GM Class H shares from GM in August 1992 principally in exchange for a series of notes. The acquisition was accounted for as a purchase, and accordingly, the operating results have been consolidated since the acquisition date. The pro forma effect on 1992 operating results was not material. GMHE has acquired several other enterprises with operations that complement existing technological capabilities at aggregate purchase prices, paid in cash, of $10.4 million and $9.7 million in 1993 and 1992, respectively. These acquisitions were accounted for using the purchase method of accounting. The operating results of the entities acquired, which were not material, were consolidated with those of GMHE from their respective acquisition dates. The purchase prices of these acquisitions were allocated to the net assets acquired, including intangible assets, based upon their estimated fair values at the dates of acquisition. NOTE 14. DERIVATIVE FINANCIAL INSTRUMENTS AND RISK MANAGEMENT GMHE is a party to financial instruments with off-balance sheet risk in the normal course of business to reduce its exposure to fluctuations in interest and foreign exchange rates. The primary classes of derivatives used by GMHE are foreign exchange-forward contracts and interest rate swap agreements. These instruments involve, to varying degrees, elements of credit risk in the event a counterparty should default and market risk as the instruments are subject to rate and price fluctuations. Credit risk is managed through the periodic monitoring and approval of financially sound counterparties. Market risk is mitigated because the derivatives are used to hedge underlying transactions. Cash receipts or payments on these contracts normally occur at maturity, or for interest rate swap agreements, at periodic contractually defined intervals. GMHE holds derivatives only for purposes other than trading. FOREIGN EXCHANGE-FORWARD CONTRACTS Foreign exchange-forward contracts are legal agreements between two parties to purchase and sell a foreign currency, for a price specified at the contract date, with delivery and settlement in the future. GMHE uses these agreements to hedge risk of changes in foreign currency exchange rates associated with certain firm commitments denominated in foreign currency. The total notional amount of foreign exchange-forward contracts GMHE held at December 31, 1994 and 1993, was approximately $144 million and $111 million, respectively. GMHE's open contracts extend for periods averaging nine months. INTEREST RATE SWAP AGREEMENTS Interest rate swap agreements are contractual agreements between GMHE and another party to exchange fixed and floating interest rate payments periodically over the life of the agreements without the exchange of underlying principal amounts. These instruments are used by GMHE with the objective of minimizing interest expense while maintaining the desired level of exposure to the risk of interest rate fluctuations. There were no outstanding interest rate swap agreements at December 31, 1994. At IV-64 19 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED December 31, 1993, the total notional amount of outstanding contracts was approximately $200 million. Interest rate swap agreements used to hedge an underlying debt obligation are not marked to market, but are recognized as an adjustment to interest expense over the life of the underlying debt agreement. Gains and losses on terminated swap contracts are deferred and recognized as a yield adjustment on the underlying debt; such unamortized gains totaled approximately $10.8 million and $14.9 million at December 31, 1994 and 1993, respectively. NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with the requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments, and SFAS No. 119, Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments, the following fair value estimates and information about valuation methodologies are presented. For all financial instruments not described below, fair value approximates book value. For notes and loans payable and long-term debt, the estimated fair value (which approximates book value) was $479.9 million and $506.5 million at December 31, 1994 and 1993, respectively. Such fair value is based on the quoted market prices for similar issues or on the current rates offered to GMHE for debt of similar remaining maturities. The carrying value of debt with an original term of less than 90 days is assumed to approximate fair value. The fair values of derivative financial instruments reflect the estimated amounts GMHE would receive or pay to terminate the contracts at the reporting date, which takes into account the current unrealized gains or losses on open contracts. The fair value of foreign exchange-forward contracts is estimated based on foreign exchange rate quotes at the reporting date. At December 31, 1994 and 1993, the estimated fair value of open contracts in a loss position was ($0.1) million and ($0.3) million, respectively, which was approximately equal to book value. The fair value of interest rate swap agreements is estimated using pricing models based upon current interest rates. There were no open interest rate swap agreements at December 31, 1994. At December 31, 1993, the fair value of open contracts in a gain position was $12.6 million. NOTE 16. SEGMENT REPORTING GMHE operates principally within the field of modern high-technology electronics for use in Automotive Electronics, Telecommunications and Space, Defense Electronics, and Commercial Technologies business segments. Radios, controls for engines and transmissions, monitors and sensors for airbags, controllers for anti-lock brakes, climate control, dashboard instrumentation, and other automotive electronic products are included in the Automotive Electronics segment. The Telecommunications and Space segment includes satellite construction, ownership and operation, communication services, ground equipment, and direct-to-home satellite television entertainment services. The Defense Electronics segment includes missile systems, command and control systems, electro-optical systems, airborne radar systems, military training and simulation systems, and guidance and control systems. The Commercial Technologies segment includes commercial electronics products and services such as commercial training, air traffic control, aircraft passenger communications and entertainment, inertial navigation, information systems, space sensors for IV-65 20 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED environmental and scientific applications, and entertainment and leisure products. Intercompany transfers between segments are not material. Information concerning operations by segment is shown below.
AUTOMOTIVE TELECOM. DEFENSE COMMERCIAL ELECTRONICS & SPACE ELECTRONICS TECH. CORPORATE TOTAL ----------- -------- ----------- ---------- --------- --------- (DOLLARS IN MILLIONS) Revenues 1994.......................... $5,267.5 $2,528.7 $5,590.7 $ 712.5 $ -- $14,099.4 1993.......................... 4,491.6 2,178.0 6,112.1 735.8 -- 13,517.5 1992.......................... 3,985.8 1,927.9 5,547.0 836.4 -- 12,297.1 Operating Profit (Loss)(1)(2) 1994.......................... $ 793.6 $ 266.6 $ 583.6 $ (124.5) $(12.7) $ 1,506.6 1993.......................... 626.1 195.9 538.0 (0.4) (23.3) 1,336.3 1992.......................... 462.4 33.4 (596.6) (195.1) (22.1) (318.0) Identifiable Assets at Year End(3) 1994.......................... $3,466.4 $3,473.2 $6,808.8 $ 970.6 $131.5 $14,850.5 1993.......................... 2,840.5 2,797.1 7,385.4 957.7 136.4 14,117.1 1992.......................... 2,471.8 2,843.6 7,281.7 1,505.0 107.1 14,209.2 Depreciation and Amortization(1) 1994.......................... $ 143.4 $ 144.4 $ 260.9 $ 45.3 $ -- $ 594.0 1993.......................... 153.2 118.8 298.1 57.2 -- 627.3 1992.......................... 124.1 128.8 307.3 50.7 -- 610.9 Capital Expenditures(4) 1994.......................... $ 171.9 $ 395.0 $ 152.5 $ 26.9 $ -- $ 746.3 1993.......................... 149.2 264.9 132.9 33.0 -- 580.0 1992.......................... 266.1 174.4 99.4 18.6 -- 558.5
- ------------------------- (1) 1994 includes $123.8 million ($10.7 million, $102.8 million, and $10.3 million related to Telecommunications and Space, Defense Electronics, and Commercial Technologies, respectively) and 1993 and 1992 include $123.8 million ($10.8 million, $102.7 million, and $10.3 million related to Telecommunications and Space, Defense Electronics, and Commercial Technologies, respectively) of purchase accounting adjustments associated with GM's purchase of Hughes. (2) 1992 includes $1,237.0 million ($195.3 million, $911.8 million, and $129.9 million related to Telecommunications and Space, Defense Electronics, and Commercial Technologies, respectively) for the special provision for restructuring. (3) Identifiable assets include the unamortized purchase accounting adjustments associated with the purchase of Hughes as detailed below:
TELECOM. DEFENSE COMMERCIAL & SPACE ELECTRONICS TECH. TOTAL -------- ----------- ----------- -------- (DOLLARS IN MILLIONS) 1994................................. $261.0 $2,494.5 $249.8 $3,005.3 1993................................. 271.7 2,597.3 260.1 3,129.1 1992................................. 282.5 2,700.0 270.4 3,252.9
(4) Telecommunications and Space includes expenditures related to telecommunications and other equipment amounting to $255.8 million, $131.1 million, and $101.6 million in 1994, 1993, and 1992, respectively. IV-66 21 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONCLUDED A reconciliation of operating profit (loss) shown on the previous page to Income (Loss) before Income Taxes shown in the Statement of Consolidated Operations and Available Separate Consolidated Net Income (Loss) follows:
1994 1993 1992 -------- -------- -------- (DOLLARS IN MILLIONS) Operating Profit (Loss).......................... $1,506.6 $1,336.3 $(318.0) Other Income -- net.............................. 37.1 67.3 128.1 Interest Expense................................. (15.1) (33.2) (60.6) -------- -------- -------- Income (Loss) before Income Taxes.............. $1,528.6 $1,370.4 $(250.5) ======== ======== =======
Export sales from the U.S. were as follows:
1994 1993 1992 -------- -------- -------- (DOLLARS IN MILLIONS) Africa........................................... $ 25.8 $ 28.2 $ 39.5 Asia............................................. 758.2 593.4 424.5 Canada........................................... 876.3 820.7 642.9 Europe........................................... 678.6 503.1 524.6 Mexico........................................... 96.9 122.9 199.0 Other Latin America.............................. 90.3 68.3 108.7 Middle East...................................... 370.1 404.4 274.3 -------- -------- -------- Total.......................................... $2,896.2 $2,541.0 $2,213.5 ======== ======== ========
Certain amounts for 1993 have been reclassified to conform with 1994 classifications. NOTE 17. COMMITMENTS AND CONTINGENT LIABILITIES In December 1994, Hughes entered into an agreement with Computer Sciences Corporation (CSC) whereby CSC will provide substantially all of the data processing services required by Hughes. Baseline service payments to CSC are expected to aggregate approximately $1.5 billion over the term of the eight-year agreement. The contract is cancelable by Hughes with substantial early termination penalties. Minimum future commitments under operating leases having noncancelable lease terms in excess of one year, primarily for real property and satellite transponders, aggregating $2,142.4 million, are payable as follows: $233.5 million in 1995, $200.0 million in 1996, $169.5 million in 1997, $157.5 million in 1998, $158.8 million in 1999, and $1,223.1 million thereafter. Certain of these leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases were $306.2 million in 1994, $296.3 million in 1993, and $277.9 million in 1992. GMHE and its subsidiaries are subject to potential liability under government regulations and various claims and legal actions which are pending or may be asserted against them. The aggregate ultimate liability of GMHE and its subsidiaries under these government regulations, and under these claims and actions, was not determinable at December 31, 1994. In the opinion of management of GMHE, such liability is not expected to have a material adverse effect on GMHE's consolidated operations or financial position. * * * IV-67 22 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INFORMATION SELECTED QUARTERLY DATA (UNAUDITED)
1ST 2ND 3RD 4TH -------- -------- -------- -------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) 1994 QUARTERS Revenues.............................................. $3,587.3 $3,535.9 $3,354.5 $3,621.7 ======== ======== ======== ======== Income before income taxes............................ $ 477.3 $ 400.6 $ 361.4 $ 289.3 Income taxes.......................................... 195.8 164.2 148.2 64.6 -------- -------- -------- -------- Income before cumulative effect of accounting change.............................................. 281.5 236.4 213.2 224.7 Cumulative effect of accounting change................ (30.4)* -- -- -- -------- -------- -------- -------- Net income............................................ $ 251.1 $ 236.4 $ 213.2 $ 224.7 ======== ======== ======== ======== Earnings used for computation of available separate consolidated net income............................. $ 282.1 $ 267.3 $ 244.2 $ 255.6 Average number of shares of General Motors Class H common stock outstanding (in millions).............. 90.6 91.7 92.7 93.3 Class H dividend base (in millions)................... 399.9 399.9 399.9 399.9 Available separate consolidated net income............ $ 64.0 $ 61.3 $ 56.6 $ 59.7 Earnings attributable to General Motors Class H common stock on a per share basis Before cumulative effect of accounting change.... $ 0.78 $ 0.67 $ 0.61 $ 0.64 Cumulative effect of accounting change........... (0.08)* -- -- -- -------- -------- -------- -------- Net earnings attributable to General Motors Class H common stock................................. $ 0.70 $ 0.67 $ 0.61 $ 0.64 ======== ======== ======== ======== Stock price range of General Motors Class H common High................................................ $ 40.38 $ 38.75 $ 38.00 $ 37.75 Low................................................. $ 32.63 $ 31.75 $ 34.63 $ 31.00 1993 QUARTERS Revenues.............................................. $3,181.2 $3,315.4 $3,319.9 $3,701.0 ======== ======== ======== ======== Income before income taxes............................ $ 279.4 $ 348.4 $ 334.7 $ 407.9 Income taxes.......................................... 121.1 147.3 141.6 162.6 -------- -------- -------- -------- Net income............................................ $ 158.3 $ 201.1 $ 193.1 $ 245.3 ======== ======== ======== ======== Earnings used for computation of available separate consolidated net income............................. $ 189.3 $ 232.0 $ 224.0 $ 276.3 Average number of shares of General Motors Class H common stock outstanding (in millions).............. 93.9 86.0 87.4 88.7 Class H dividend base (in millions)................... 399.9 399.9 399.9 399.9 Available separate consolidated net income............ $ 44.4 $ 50.0 $ 48.9 $ 61.2 Net earnings attributable to General Motors Class H common stock........................................ $ 0.47 $ 0.58 $ 0.56 $ 0.69 ======== ======== ======== ======== Stock price range of General Motors Class H common High................................................ $ 27.50 $ 33.00 $ 38.00 $ 42.38 Low................................................. $ 22.88 $ 23.38 $ 30.50 $ 34.50
- ------------------------- * Effective January 1, 1994, GMHE adopted SFAS No. 112. The unfavorable cumulative effect of adopting SFAS No. 112 was $30.4 million, or $6.8 million attributable to GM Class H common stock. IV-68 23 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA
1994 1993 1992 1991 1990 --------- --------- --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Revenues............................. $14,099.4 $13,517.5 $12,297.1 $11,540.6 $11,723.1 Earnings (Loss) used for computation of available separate consolidated net income (loss).................. $ 1,049.2 $ 921.6 $ (921.6) $ 559.4 $ 726.0 Average number of shares of General Motors Class H common stock outstanding (in millions).......... 92.1 88.6 75.3 73.7 88.1 Class H dividend base (in millions).......................... 399.9 399.9 399.9 399.9 399.7 Available separate consolidated net income (loss)...................... $ 241.6 $ 204.5 $ (142.3) $ 104.6 $ 160.0 GM Class H cash dividends............ $ 73.8 $ 64.1 $ 53.3 $ 54.3 $ 63.4 Dividend payout ratio(1)............. 36.0% N/A 51.0% 33.9% 33.7% Earnings (Loss) attributable to General Motors Class H common stock on a per share basis before cumulative effect of accounting changes............................ $ 2.70 $ 2.30 $ (0.11) $ 1.26 $ 1.82 Earnings (Loss) attributable to General Motors Class H common stock on a per share basis after cumulative effect of accounting changes............................ $ 2.62 $ 2.30 $ (2.29) $ 1.39 $ 1.82 Expenditures for property and special tools(2)........................... $ 746.3 $ 580.0 $ 558.5 $ 681.3 $ 884.3 Cash and marketable securities....... $ 1,501.8 $ 1,008.7 $ 702.7 $ 348.3 $ 459.3 Working capital...................... $ 2,695.5 $ 2,165.2 $ 1,692.4 $ 1,548.8 $ 1,373.9 Total assets......................... $14,850.5 $14,117.1 $14,209.2 $12,930.8 $12,727.5 Long-term debt and capitalized leases............................. $ 353.5 $ 416.8 $ 711.0 $ 147.1 $ 271.9 Return on equity*(3)................. 12.1% 11.3% (13.9)% 5.3% 7.2% Income (Loss) before interest and taxes as a percent of capitalization(4).................. 19.0% 18.0% (2.3)% 8.1% 12.4% Pre-tax return on total assets(5).... 10.6% 9.7% (1.8)% 5.2% 8.3%
- ------------------------- * Includes favorable (unfavorable) cumulative effect of accounting changes of ($30.4) million in 1994, ($872.1) million in 1992, and $54.4 million in 1991. (1) GM Class H cash dividends divided by available separate consolidated net income for the prior year. (2) Includes expenditures related to telecommunications and other equipment amounting to $255.8 million, $131.1 million, $101.6 million, $88.3 million, and $182.6 million in 1994, 1993, 1992, 1991, and 1990, respectively. (3) Net income (loss) divided by average stockholder's equity (General Motors' equity in its wholly-owned subsidiary, GMHE). Holders of GM Class H common stock have no direct rights in the equity or assets of GMHE, but rather have rights in the equity and assets of GM (which includes 100% of the stock of GMHE). (4) Income (Loss) before interest and taxes divided by average stockholder's equity plus average debt. (5) Income (Loss) before income taxes divided by average total assets. IV-69 24 GM HUGHES ELECTRONICS CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OPERATING AND FINANCIAL REVIEW The following discussion excludes the purchase accounting adjustments related to General Motors' acquisition of Hughes (see Supplemental Data on page IV-75). RESULTS OF OPERATIONS Revenues. GMHE reported revenues of $14,099.4 million in 1994, an increase of 4.3% over 1993, and $13,517.5 million in 1993, an increase of 9.9% compared with 1992 revenues of $12,297.1 million. The increase in revenues over the last three years is largely the result of continued growth in the Automotive Electronics segment, the ongoing success in the telecommunications and space businesses, and defense electronics revenues generated by the missile business acquired in August 1992. However, lower production rates and planned terminations on several defense programs resulted in a decline of Defense Electronics segment revenues in 1994. (Pro forma segment information is presented on page IV-77). Automotive Electronics. Revenues in the Automotive Electronics segment continued to increase in 1994 to $5,267.5 million from $4,491.6 million in 1993, a 17.3% increase, and from $3,985.8 million in 1992, a 12.7% increase in 1993. The growth is primarily attributable to three factors: (1) an increase in GMHE- supplied electronic content per GM North American-produced vehicle to $857 in 1994 from $782 and $760 in 1993 and 1992, respectively; (2) an increase in GM North American vehicle production of 8% between 1994 and 1993 and 9% between 1993 and 1992; and (3) an increase in sales to international and non-GM customers to $672 million in 1994 from $603 million and $484 million in 1993 and 1992, respectively. Telecommunications and Space. Revenues in the Telecommunications and Space segment were $2,528.7 million in 1994, a 16.1% increase over 1993 revenues of $2,178.0 million. The increase resulted from higher cellular communications equipment and private business network sales at Hughes Network Systems, Inc. (HNS), additional Galaxy satellite transponder sales, increased satellite construction sales, and the commencement of service by DIRECTV(R), GMHE's new direct-to-home television service. Revenues for 1993 were 13.0% higher than 1992 revenues of $1,927.9 million. The 1993 increase in revenues reflects additional sales of satellites to commercial customers and increased sales of fixed wireless and cellular communications equipment and services internationally. Defense Electronics. Defense Electronics segment revenues were $5,590.7 million in 1994, an 8.5% decrease from 1993 revenues of $6,112.1 million. The decline was principally due to the full year impact of lower production rates and planned terminations on several defense programs. Revenues increased $565.1 million, or 10.2%, between 1993 and 1992. The increase is due largely to revenues from a full year of operations of the missile business acquired in 1992, as well as increased effort on the Peace Shield air defense system for Saudi Arabia. Commercial Technologies. Revenues in the Commercial Technologies segment were $712.5 million in 1994, a 3.2% decrease from 1993 revenues of $735.8 million. Revenues for 1993 were 12.0% lower than 1992 revenues of $836.4 million. The decreases are primarily a result of the divestiture of several non-strategic business units partially offset by increased effort in the air traffic control and information systems businesses. Other Income. Included in revenues is other income of $37.1 million, $67.3 million, and $128.1 million for 1994, 1993, and 1992, respectively. The 1994 amount includes a $35.0 million pre-tax charge for the expected loss on disposition of a subsidiary. The 1993 amount includes a gain of $89.7 million on the sale of GMHE's 30% interest in Japan Communications Satellite Company, Inc. (JCSAT) and a $55.0 million charge related to the sale of Hughes Rediffusion Simulation Limited (Rediffusion) and related entities in December 1993. The 1992 amount includes proceeds of $35.0 million from settlement of a patent infringement suit and a $28.0 million gain resulting from the formation of the Hughes-JVC Technology joint venture. IV-70 25 Operating Profit. Operating profit was $1,630.4 million in 1994, $1,460.1 million in 1993, and $1,042.8 million in 1992, excluding the special provision for restructuring. Operating profit margins, on a comparable basis, were 11.6%, 10.9%, and 8.6% in 1994, 1993, and 1992, respectively. Beginning in the first quarter of 1994, the operating profit margin calculation was changed to operating profit divided by net sales rather than revenues, which include other income. Prior year operating profit margins have been restated on a comparable basis. The improvement in both profitability and profit margins over this time period was primarily the result of the continuing emphasis on cost reduction efforts, most notably in the Automotive Electronics and Defense Electronics segments, and the overall growth in revenues. Automotive Electronics. Operating profit has steadily increased over the last three years. In 1994, operating profit was $793.6 million compared with $626.1 million in 1993 and $462.4 million in 1992. The increases are attributable not only to the increased electronic content per vehicle and higher vehicle volumes, but also to an aggressive cost reduction program at Delco Electronics, which has yielded cost savings of 11% in 1994, 10% in 1993, and 9% in 1992. The operating profit margin was 15.2%, 13.9%, and 11.6% in 1994, 1993, and 1992, respectively. Operating profit margins beyond 1995 are not expected to be maintained at the current level due to the potential for reduced auto production volumes, increased pricing pressures, and GM's global sourcing initiatives. Telecommunications and Space. Operating profit for 1994 increased to $277.3 million, a 34.2% increase over the $206.7 million reported in 1993. The improvement is a result of the sale of additional Galaxy satellite transponders and increased HNS and satellite construction sales, partially offset by higher DIRECTV operating expenses relating to the commencement of service. Excluding the 1992 restructuring charge, 1993 operating profit declined 13.7% from 1992 operating profit of $239.5 million. The decrease was due to a reduction in revenues from satellite transponder sales and an increase in DIRECTV related costs, partially offset by the recognition of cost savings from satellite construction activities in 1992. Operating profit margins were 10.8% in 1994, 10.0% in 1993, and 2.3% in 1992. The 1995 margin will be negatively impacted by the increased operating expenses associated with the continued expansion of DIRECTV. After 1995, the Telecommunications and Space segment's operating margins are expected to increase as DIRECTV becomes profitable. Defense Electronics. Operating profit increased 7.1% to $686.4 million in 1994 and 53.3% to $640.7 million in 1993, compared with $417.9 million, excluding the restructuring charge, in 1992. The increases reflect the ongoing efforts to reduce costs across GMHE's defense businesses and continued benefits from the acquisition and consolidation of the missile business acquired in August 1992. Future operating profits could be negatively impacted by further reductions in the U.S. defense budget. Commercial Technologies. Operating losses were $114.2 million in 1994 compared with an operating profit of $9.9 million in 1993. The operating loss is attributable to three factors: (1) additional costs and revenue deferral at Hughes-Avicom International, Inc. related to product development and initial system service of in-flight entertainment systems; (2) air traffic control contract costs for which the expected revenues are not yet recognizable for financial reporting purposes, pending contract negotiations; and (3) development costs on several new products. The 1993 improvement in operating profit from the 1992 operating loss of $54.9 million was primarily due to reduced operating losses at Rediffusion, actions which began in 1992 to reduce costs, and increased profits from the air traffic control and information systems businesses. Costs and Expenses. Selling, general, and administrative expenses were $1,018.3 million in 1994, $929.1 million in 1993, and $1,036.2 million in 1992. The $89.2 million increase in 1994 was primarily due to the commencement of nationwide service by DIRECTV and increased international sales activities at HNS. The decrease of $107.1 million in 1993 was primarily due to the cost reductions resulting from restructuring activities which began in the second half of 1992. Interest expense decreased 54.5% in 1994 and 45.2% in 1993 primarily due to an overall decrease in debt balances and an increase in the amount of capitalized interest. IV-71 26 The effective income tax rate was 34.7%, 38.3%, and 37.0% in 1994, 1993, and 1992, respectively. The lower 1994 tax rate resulted from the recognition of capital loss carryforward benefits. The Revenue Reconciliation Act of 1993 did not have a material adverse effect on GMHE's 1994 or 1993 earnings and is not expected to have a significant impact in future years. Earnings. GMHE's 1994 earnings were $1,049.2 million, or $2.62 per share of GM Class H common stock, compared with 1993 earnings of $921.6 million, or $2.30 per share, and a loss in 1992 of $921.6 million or ($2.29) per share. Earnings in 1994 include the unfavorable effect of an accounting change for postemployment benefits while 1992 included the restructuring charge and accounting changes for postretirement benefits and revenue recognition described below. Excluding these special items, GMHE earnings in 1994 and 1992 would have been $1,079.6 million, or $2.70 per share, and $699.9 million, or $1.76 per share, respectively. Backlog. The 1994 year-end backlog of $13,210 million remained relatively unchanged from the 1993 value of $13,399 million. Year-end 1993 backlog decreased $623 million from the $14,022 million reported in 1992 primarily due to the sale of Rediffusion. A portion of the backlog is subject to appropriation decisions by the U.S. Government subsequent to award. In addition, GMHE's contracts with the U.S. Government are subject to termination by the Government either for its convenience or for default by GMHE. Sales to the U.S. Government may be affected by changes in acquisition policies, budget considerations, changing concepts in national defense, spending priorities, and other factors that are outside GMHE's control. Special Provision for Restructuring. GMHE took a special charge in June 1992 of $749.4 million (after-tax), or $1.87 per share, for the restructuring of Hughes' operations. The special charge comprehended a reduction of Hughes' worldwide employment, a major facilities consolidation, and a reevaluation of certain business lines that no longer met Hughes' strategic objectives. Restructuring costs of $228.3 million, $527.6 million, and $250.9 million were charged against the reserve during 1994, 1993, and 1992, respectively. In addition, in 1994 and 1993 the restructuring reserve was increased by $35.0 million and $78.0 million, respectively, primarily due to changes in the estimated loss on disposition of two subsidiaries. The remaining liability of $343.2 million relates primarily to reserves for excess leased facilities and other site consolidation costs. Approximately $288.2 million of this total will require future cash outflows. It is expected that these costs will be expended predominantly over the next three years. Accounting Changes. GMHE adopted SFAS No. 112, Employers' Accounting for Postemployment Benefits, effective January 1, 1994. This Statement requires accrual of the costs of benefits provided to former or inactive employees after employment, but before retirement. The cumulative effect of this accounting change as of January 1, 1994 was $49.6 million, or $30.4 million after-tax ($0.08 per share of GM Class H common stock). GMHE adopted SFAS No. 106 in January 1992. This Statement requires that the cost of postretirement benefits other than pensions be recognized in the financial statements during the period employees provide service to GMHE. GMHE's previous practice was to recognize the cost of such postretirement benefits when incurred (pay-as-you-go). The cumulative effect of this accounting change as of January 1, 1992 was $1,366.6 million, or $832.1 million after-tax ($2.08 per share of GM Class H common stock). GMHE has disclosed in its financial statements certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as "accumulated postretirement benefit obligations," "liabilities," or "obligations." Notwithstanding the recording of such amounts and the use of these terms, GMHE does not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans of GMHE (other than pensions) represent enforceable liabilities of GMHE. Hughes changed its revenue recognition policy for certain commercial long-term contracts effective January 1, 1992 from the percentage-of-completion method to the units-of-delivery method. The unfavorable effect of this change was $40.0 million after-tax, or $0.10 per share of GM Class H common stock. IV-72 27 LIQUIDITY AND CAPITAL RESOURCES Cash and Cash Equivalents. The Company's balance sheet strengthened further in 1994 as cash and cash equivalent increased $493.1 million to $1,501.8 million at December 31, 1994. Operating activities provided net cash of $1,376.8 million in 1994 as GMHE achieved record earnings while aggressively managing working capital. Additional cash of $200 million was generated by the collection of a note receivable from General Motors. Cash was used to fund capital expenditures for property and special tools and telecommunications and other equipment (primarily related to DIRECTV) as well as to pay dividends to General Motors. Cash and cash equivalents at December 31, 1993 amounted to $1,008.7 million, a $306.0 million increase from $702.7 million at December 31, 1992. The increase was due to net cash provided by operating activities of $1,493.5 million, partially offset by net cash used in investing and financing activities. Proceeds from the sale of investments and businesses, and from the disposal of property, generated an additional $396.6 million of cash in 1993. Cash was used primarily to fund capital expenditures, reduce outstanding debt, and to pay dividends to General Motors. Liquidity Measurement. As a measure of liquidity, the current ratio (ratio of current assets to current liabilities) was 1.76 at December 31, 1994, 1.61 at December 31, 1993, and 1.44 at December 31, 1992. These increases were due to the build-up of cash balances described above. Property and Equipment. Property, net of accumulated depreciation, decreased $22.6 million in 1994 while telecommunications and other equipment, net of accumulated depreciation, increased $304.1 million primarily due to expenditures related to DIRECTV. Expenditures for property and equipment were $490.5 million in 1994 compared with $448.9 million and $456.9 million in 1993 and 1992, respectively. Management anticipates that capital expenditures in 1995 will increase approximately $80 million over 1994 and will be financed primarily from cash provided by operating activities. Telecommunications and other equipment expenditures were $255.8 million in 1994 compared with $131.1 million and $101.6 million in 1993 and 1992, respectively. Management anticipates that telecommunications and other equipment expenditures in 1995 will increase approximately $50 million over 1994 and will be financed primarily from cash provided by operating activities. Automotive Electronics. Capital expenditures increased to $171.9 million in 1994, compared with $149.2 million in 1993, a decrease of $116.9 million from 1992. The increase in capital spending in 1994 reflects expenditures for technology upgrades at certain facilities. The decrease in capital spending in 1993 reflected the completion of several projects to upgrade and expand facilities and a decrease in expenditures related to model changes. Telecommunications and Space. Capital expenditures, including expenditures related to telecommunications and other equipment increased to $395.0 million from $264.9 million in 1993 and $174.4 million in 1992, primarily reflecting continuing investment in satellite equipment associated with DIRECTV. Defense Electronics. Capital expenditures in the Defense Electronics segment for 1994, 1993, and 1992 were $152.5 million, $132.9 million, and $99.4 million, respectively. The increases in 1994 and 1993 are due to expenditures related to the consolidation of facilities in an effort to increase the operational efficiencies of manufacturing and engineering activities. Commercial Technologies. Capital expenditures were $26.9 million, $33.0 million, and $18.6 million in 1994, 1993, and 1992, respectively. The increase in 1993 related to facilities and equipment for the EOSDIS program. Long-Term Debt and Capitalized Leases. Long-term debt and capitalized leases was $353.5 million at December 31, 1994, a decrease of $63.3 million from $416.8 million at December 31, 1993 reflecting scheduled principal payments. Long-term debt and capitalized leases decreased $294.2 million in 1993, from $711.0 million at December 31, 1992 partially due to the prepayment of GM debt arising from the missile business acquisition and repayment of certain Japanese yen debt related to JCSAT. The ratio of long-term IV-73 28 debt and capitalized leases to the total of such debt and pro forma stockholder's equity decreased to 6.6% in 1994 from 9.0% in 1993, and 16.6% in 1992. Other Balance Sheet Items. In evaluating both its pension and retiree medical liabilities, GMHE recognized the impact of the recent increase in long-term interest rates by increasing the discount rate used in determining the actuarial present values of the projected benefit obligations. In 1994, the weighted average discount rate for Hughes' pension obligations increased from 7.5% to 8.75% and the weighted average discount rate for GMHE's other postretirement benefits increased from 6.99% to 8.57%. Acquisitions and Divestitures. In December 1994, GMHE announced that it had reached an agreement with CAE Inc. of Toronto, Canada to acquire substantially all of the assets of its U.S. subsidiary, CAE-Link Corporation, for $155 million in cash. CAE-Link is an established supplier of simulation, training, and technical services, primarily to the U.S. military and NASA. The transaction closed on February 24, 1995. On December 31, 1993, GMHE completed the sale of Rediffusion and related entities comprising the majority of its commercial aircraft simulation and training equipment business to Thomson-CSF. The sale resulted in a $55.0 million pre-tax charge against earnings, and included Rediffusion's core flight simulation businesses and its U.S. airline marketing support organization. On August 21, 1992, GMHE acquired substantially all the assets and business of General Dynamic's Air Defense Systems Division, the Unmanned Strike Systems business unit, and the Convair Division (together, the GD Missile Business). This acquisition provided GMHE with the opportunity to expand its current military programs portfolio, its customer base, and expand its share of the market for missiles and missile systems. The GD Missile Business was acquired in exchange for 21,508,563 shares of GM Class H common stock and cash with an aggregate value of $450.0 million. GMHE purchased the GM Class H common stock from GM in August 1992, principally in exchange for a series of notes. Dividend Policy. As discussed in Note 7 to the Consolidated Financial Statements, it is GM's current policy to pay aggregate annual cash dividends on the GM Class H common stock approximately equal to 35% of the Available Separate Consolidated Net Income of GMHE for the prior year. In February 1995, the Board of Directors of GM increased the quarterly dividend on GM Class H common stock from $0.20 per share to $0.23 per share. Security Ratings. GMHE's security ratings are tied to the security ratings of General Motors. In February 1993, Standard & Poor's Corporation (S&P) lowered GMHE's long-term debt rating from A- to BBB+. The BBB+ rating for senior debt is eighth highest within the 10 investment grade ratings available from S&P for long-term debt and is based on a determination of adequate capacity to pay interest and repay principal. At the same time, S&P lowered GMHE's commercial paper rating from A-1 to A-2, third highest within the four investment grade ratings available from S&P for commercial paper, indicating strong capacity for timely payment determined by significant safety characteristics. In November 1992, Moody's Investors Service, Inc. (Moody's) lowered its rating of GMHE senior debt to Baa1 from A-2, eighth highest within the 10 investment grade ratings available from Moody's for long-term debt, reflecting adequate protection of present interest payments and principal. Concurrently, Moody's also lowered GMHE's commercial paper rating from Prime-1, the highest of three investment grade ratings available from Moody's for commercial paper, to Prime-2, indicating a strong ability for repayment based on sound earnings trends and coverage ratios, appropriate capitalization characteristics, and adequate maintenance of alternative liquidity. Debt ratings by the various rating agencies reflect each agency's opinion of the ability of issuers to repay debt obligations punctually. Lower ratings generally result in higher borrowing costs. A security rating is not a recommendation to buy, sell, or hold securities and may be subject to revision or withdrawal at any time by the assigning organization. Each rating should be evaluated independently of any other rating. IV-74 29 GM Class H Common Stock Subject to Repurchase On February 15, 1995, GM and the Howard Hughes Medical Institute entered into an agreement under which GM will assist the Institute in a registered public offering of approximately 15 million shares of GM Class H common stock. The 1995 put and call rights described in Note 1 to the Consolidated Financial Statements expired unexercised. The Institute will have a new put right with an exercise date on the earlier of the conclusion of the offering or June 30, 1995. GM will receive any net proceeds of the offering in excess of $37.50 per share. SUPPLEMENTAL DATA The Consolidated Financial Statements reflect the application of purchase accounting adjustments as described in Note 1 to the Consolidated Financial Statements. However, as provided in GM's Certificate of Incorporation, the earnings attributable to GM Class H common stock for purposes of determining the amount available for the payment of dividends on GM Class H common stock specifically excludes such adjustments. More specifically, amortization of purchase accounting adjustments associated with GM's purchase of Hughes was $123.8 million in 1994, 1993, and 1992. Such amounts were excluded from the earnings available for the payment of dividends on GM Class H common stock and were charged against the earnings available for the payment of dividends on GM's $1 2/3 par value stock. Unamortized purchase accounting adjustments associated with GM's purchase of Hughes were $3,005.3 million, $3,129.1 million, and $3,252.9 million in 1994, 1993, and 1992, respectively. In order to provide additional analytical data to the users of GMHE's financial information, supplemental data in the form of unaudited summary pro forma financial data are provided. Consistent with the basis on which earnings of GMHE available for the payment of dividends on GM Class H common stock is determined, the pro forma data exclude the General Motors' purchase accounting adjustments related to the acquisition of Hughes. Included in the supplemental data are certain financial ratios which provide measures of financial returns excluding the impact of purchase accounting adjustments. The pro forma data are not presented as a measure of GM's total return on its investment in GMHE. IV-75 30 SUMMARY PRO FORMA FINANCIAL DATA* PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS
YEARS ENDED DECEMBER 31, ----------------------------------- 1994 1993 1992 --------- --------- --------- (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Total Revenues.............................................. $14,099.4 $13,517.5 $12,297.1 Total Costs and Expenses.................................... 12,447.0 12,023.3 12,423.8(1) --------- --------- --------- Income (Loss) before Income Taxes........................... 1,652.4 1,494.2 (126.7) Income taxes (credit)....................................... 572.8 572.6 (77.2) --------- --------- --------- Income (Loss) before cumulative effect of accounting changes................................................... 1,079.6 921.6 (49.5) Cumulative effect of accounting changes..................... (30.4) -- (872.1) --------- --------- --------- Earnings (Loss) Used for Computation of Available Separate Consolidated Net Income (Loss)............................ $ 1,049.2 $ 921.6 $ (921.6) ========= ========= ========= Earnings (Loss) Attributable to General Motors Class H Common Stock on a Per Share Basis Before cumulative effect of accounting changes......... $ 2.70 $ 2.30 $ (0.11) Cumulative effect of accounting changes................ (0.08) -- (2.18) --------- --------- --------- Net earnings (loss) attributable to General Motors Class H Common Stock................................. $ 2.62 $ 2.30 $ (2.29) ========= ========= =========
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, ---------------------- 1994 1993 --------- --------- (DOLLARS IN MILLIONS) ASSETS Total Current Assets................................................... $ 6,243.6 $ 5,714.3 Property -- Net........................................................ 2,611.8 2,634.4 Telecommunications and Other Equipment -- Net.......................... 1,071.7 767.6 Intangible Assets, Investments, and Other Assets....................... 1,918.1 1,871.7 --------- --------- Total Assets........................................................... $11,845.2 $10,988.0 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Total Current Liabilities.............................................. $ 3,548.1 $ 3,549.1 Long-Term Debt and Capitalized Leases.................................. 353.5 416.8 Postretirement Benefits Other Than Pensions, Other Liabilities, Deferred Income Taxes, and Deferred Credits.......................... 2,973.1 2,823.1 Total Stockholder's Equity(2).......................................... 4,970.5 4,199.0 --------- --------- Total Liabilities and Stockholder's Equity(2).......................... $11,845.2 $10,988.0 ========= =========
- ------------------------- (1) Includes a special provision for restructuring of $1,237.0 million. (2) General Motors' equity in its wholly-owned subsidiary, GMHE. Holders of GM Class H common stock have no direct rights in the equity or assets of GMHE, but rather have rights in the equity and assets of GM (which includes 100% of the stock of GMHE). * The summary is unaudited and excludes GM purchase accounting adjustments related to the acquisition of Hughes. IV-76 31 SUMMARY PRO FORMA FINANCIAL DATA* PRO FORMA SELECTED SEGMENT DATA
YEARS ENDED DECEMBER 31, ------------------------------------ 1994 1993 1992 -------- -------- -------- (DOLLARS IN MILLIONS) AUTOMOTIVE ELECTRONICS Revenues................................................ $5,267.5 $4,491.6 $3,985.8 Revenues as a percentage of GMHE Revenues............... 37.4% 33.2% 32.4% Net Sales............................................... $5,216.5 $4,488.9 $3,977.2 Operating Profit(1)..................................... $ 793.6 $ 626.1 $ 462.4 Operating Profit Margin(2).............................. 15.2% 13.9% 11.6% Identifiable Assets at Year End......................... $3,466.4 $2,840.5 $2,471.8 Depreciation and Amortization........................... $ 143.4 $ 153.2 $ 124.1 Capital Expenditures.................................... $ 171.9 $ 149.2 $ 266.1 TELECOMMUNICATIONS AND SPACE Revenues................................................ $2,528.7 $2,178.0 $1,927.9 Revenues as a percentage of GMHE Revenues............... 17.9% 16.1% 15.7% Net Sales............................................... $2,565.1 $2,075.0 $1,918.4 Restructuring Charge.................................... $ -- $ -- $ 195.3 Operating Profit(1)..................................... $ 277.3 $ 206.7 $ 44.2 Operating Profit Margin(2).............................. 10.8% 10.0% 2.3% Identifiable Assets at Year End......................... $3,212.2 $2,525.4 $2,561.1 Depreciation and Amortization........................... $ 133.7 $ 108.0 $ 118.0 Capital Expenditures(3)................................. $ 395.0 $ 264.9 $ 174.4 DEFENSE ELECTRONICS Revenues................................................ $5,590.7 $6,112.1 $5,547.0 Revenues as a percentage of GMHE Revenues............... 39.6% 45.2% 45.1% Net Sales............................................... $5,569.1 $6,085.0 $5,498.0 Restructuring Charge.................................... $ -- $ -- $ 911.8 Operating Profit (Loss)(1).............................. $ 686.4 $ 640.7 $ (493.9) Operating Profit (Loss) Margin(2)....................... 12.3% 10.5% (9.0)% Identifiable Assets at Year End......................... $4,314.3 $4,788.1 $4,581.7 Depreciation and Amortization........................... $ 158.1 $ 195.4 $ 204.6 Capital Expenditures.................................... $ 152.5 $ 132.9 $ 99.4 COMMERCIAL TECHNOLOGIES Revenues................................................ $ 712.5 $ 735.8 $ 836.4 Revenues as a percentage of GMHE Revenues............... 5.1% 5.5% 6.8% Net Sales............................................... $ 711.6 $ 801.3 $ 775.4 Restructuring Charge.................................... $ -- $ -- $ 129.9 Operating Profit (Loss)(1).............................. $ (114.2) $ 9.9 $ (184.8) Operating Profit (Loss) Margin(2)....................... (16.0)% 1.2% (23.8)% Identifiable Assets at Year End......................... $ 720.8 $ 697.6 $1,234.6 Depreciation and Amortization........................... $ 35.0 $ 46.9 $ 40.4 Capital Expenditures.................................... $ 26.9 $ 33.0 $ 18.6 CORPORATE Operating Loss(1)....................................... $ (12.7) $ (23.3) $ (22.1) Identifiable Assets at Year End......................... $ 131.5 $ 136.4 $ 107.1
- ------------------------- Certain amounts for 1993 and 1992 have been reclassified to conform with 1994 classifications. * The summary is unaudited and excludes GM purchase accounting adjustments related to the acquisition of Hughes. (1) Net Sales less Total Costs and Expenses other than Interest Expense. (2) Operating Profit (Loss) as a percentage of Net Sales. (3) Includes expenditures related to telecommunications and other equipment amounting to $255.8 million, $131.1 million, and $101.6 million, respectively. IV-77 32 SUMMARY PRO FORMA FINANCIAL DATA* PRO FORMA SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31, -------------------------------------------------- 1994 1993 1992 1991 1990 ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS) Operating profit (loss)....................... $1,630 $1,460 $ (194) $ 800 $1,157 Income (Loss) before income taxes and cumulative effect of accounting changes..... $1,652 $1,494 $ (127) $ 795 $1,187 Earnings (Loss) used for computation of available separate consolidated net income (loss)**.................................... $1,049 $ 922 $ (922) $ 559 $ 726 Average number of GM Class H dividend base shares(1)................................... 399.9 399.9 399.9 399.9 399.7 Stockholder's equity**........................ $4,971 $4,199 $3,562 $4,841 $4,598 Dividends per share of GM Class H common stock....................................... $ 0.80 $ 0.72 $ 0.72 $ 0.72 $ 0.72 Working capital............................... $2,696 $2,165 $1,692 $1,549 $1,374 Operating profit (loss) as a percent of net sales....................................... 11.6% 10.9% (1.6)% 7.0% 10.0% Pre-tax income (loss) as a percent of revenues.................................... 11.7% 11.1% (1.0)% 6.9% 10.1% Net income (loss) as a percent of revenues**.................................. 7.4% 6.8% (7.5)% 4.8% 6.2% Return on equity**(2)......................... 22.9% 23.7% (21.9)% 11.9% 16.4% Income (Loss) before interest and taxes as a percent of capitalization(3)................ 32.9% 33.1% (1.3)% 15.3% 23.3% Pre-tax return on total assets(4)............. 14.5% 13.6% (1.2)% 8.5% 13.4%
- ------------------------- * The summary is unaudited and excludes GM purchase accounting adjustments related to the acquisition of Hughes. ** Includes favorable (unfavorable) cumulative effect of accounting changes of $(30.4) million in 1994, $(872.1) million in 1992, and $54.4 million in 1991. (1) Class H dividend base shares is used in calculating earnings attributable to GM Class H common stock on a per share basis. This is not the same as the average number of GM Class H shares outstanding, which was 92.1 million for 1994. (2) Earnings (Loss) used for computation of available separate consolidated net income (loss) divided by average stockholder's equity (General Motors' equity in its wholly-owned subsidiary, GMHE). Holders of GM Class H common stock have no direct rights in the equity or assets of GMHE, but rather have rights in the equity and assets of GM (which includes 100% of the stock of GMHE). (3) Income (Loss) before interest and taxes divided by average stockholder's equity plus average total debt. (4) Income (Loss) before income taxes divided by average total assets. * * * * * * * IV-78 -----END PRIVACY-ENHANCED MESSAGE-----