GENERAL MOTORS COMPANY This MD&A should be read in conjunction with the accompanying audited consolidated financial statements and notes. Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. Risk Factors for a discussion of these risks and uncertainties. The discussion of our financial condition and results of operations for the year endedDecember 31, 2020 included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year endedDecember 31, 2021 is incorporated by reference into this MD&A. Non-GAAP Measures Our non-GAAP measures include: earnings before interest and taxes (EBIT)-adjusted, presented net of noncontrolling interests; earnings before income taxes (EBT)-adjusted for our GM Financial segment; earnings per share (EPS)-diluted-adjusted; effective tax rate-adjusted (ETR-adjusted); return on invested capital-adjusted (ROIC-adjusted) and adjusted automotive free cash flow. Our calculation of these non-GAAP measures may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a result, the use of these non-GAAP measures has limitations and should not be considered superior to, in isolation from, or as a substitute for, relatedU.S. GAAP measures. These non-GAAP measures allow management and investors to view operating trends, perform analytical comparisons and benchmark performance between periods and among geographic regions to understand operating performance without regard to items we do not consider a component of our core operating performance. Furthermore, these non-GAAP measures allow investors the opportunity to measure and monitor our performance against our externally communicated targets and evaluate the investment decisions being made by management to improve ROIC-adjusted. Management uses these measures in its financial, investment and operational decision-making processes, for internal reporting and as part of its forecasting and budgeting processes. Further, our Board of Directors uses certain of these and other measures as key metrics to determine management performance under our performance-based compensation plans. For these reasons, we believe these non-GAAP measures are useful for our investors. 25 --------------------------------------------------------------------------------
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
EBIT-adjusted EBIT-adjusted is presented net of noncontrolling interests and is
used by management and can be used by investors to review our consolidated
operating results because it excludes automotive interest income, automotive
interest expense and income taxes as well as certain additional adjustments that
are not considered part of our core operations. Examples of adjustments to EBIT
include, but are not limited to, impairment charges on long-lived assets and
other exit costs resulting from strategic shifts in our operations or discrete
market and business conditions, and certain costs arising from legal matters.
For EBIT-adjusted and our other non-GAAP measures, once we have made an
adjustment in the current period for an item, we will also adjust the related
non-GAAP measure in any future periods in which there is an impact from the
item. Our corresponding measure for our GM Financial segment is EBT-adjusted
because interest income and interest expense are part of operating results when
assessing and measuring the operational and financial performance of the
segment.
EPS-diluted-adjusted EPS-diluted-adjusted is used by management and can be used
by investors to review our consolidated diluted EPS results on a consistent
basis. EPS-diluted-adjusted is calculated as net income attributable to common
stockholders-diluted less adjustments noted above for EBIT-adjusted and certain
income tax adjustments divided by weighted-average common shares
outstanding-diluted. Examples of income tax adjustments include the
establishment or reversal of significant deferred tax asset valuation
allowances.
ETR-adjusted ETR-adjusted is used by management and can be used by investors to
review the consolidated effective tax rate for our core operations on a
consistent basis. ETR-adjusted is calculated as Income tax expense less the
income tax related to the adjustments noted above for EBIT-adjusted and the
income tax adjustments noted above for EPS-diluted-adjusted divided by Income
before income taxes less adjustments. When we provide an expected adjusted
effective tax rate, we do not provide an expected effective tax rate because the
U.S. GAAP measure may include significant adjustments that are difficult to
predict.
ROIC-adjusted ROIC-adjusted is used by management and can be used by investors
to review our investment and capital allocation decisions. We define
ROIC-adjusted as EBIT-adjusted for the trailing four quarters divided by
ROIC-adjusted average net assets, which is considered to be the average equity
balances adjusted for average automotive debt and interest liabilities,
exclusive of finance leases; average automotive net pension and other
postretirement benefits (OPEB) liabilities; and average automotive net income
tax assets during the same period.
Adjusted automotive free cash flow Adjusted automotive free cash flow is used by
management and can be used by investors to review the liquidity of our
automotive operations and to measure and monitor our performance against our
capital allocation program and evaluate our automotive liquidity against the
substantial cash requirements of our automotive operations. We measure adjusted
automotive free cash flow as automotive operating cash flow from operations less
capital expenditures adjusted for management actions. Management actions can
include voluntary events such as discretionary contributions to employee benefit
plans or nonrecurring specific events such as a closure of a facility that are
considered special for EBIT-adjusted purposes. Refer to the "Liquidity and
Capital Resources" section of this MD&A for additional information.
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The following table reconciles Net income attributable to stockholders under
Years Ended
2022 2021 2020
Net income attributable to stockholders$ 9,934 $ 10,019 $ 6,427 Income tax expense 1,888 2,771 1,774 Automotive interest expense 987 950 1,098 Automotive interest income (460) (146) (241) Adjustments Cruise compensation modifications(a) 1,057 - - Russia exit(b) 657 - - Buick dealer strategy(c) 511 - - Patent royalty matters(d) (100) 250 - GM Brazil indirect tax matters(e) - 194 - Cadillac dealer strategy(f) - 175 99 GM Korea wage litigation(g) - 82 - GMI restructuring(h) - - 683 Ignition switch recall and related legal matters(i) - - (130) Total adjustments 2,125 701 652 EBIT-adjusted$ 14,474 $ 14,295 $ 9,710 ________ (a)This adjustment was excluded because it relates to the one-time modification of Cruise stock incentive awards. (b)This adjustment was excluded because it relates to the shutdown of ourRussia business including the write off of our net investment and release of accumulated translation losses into earnings. (c)This adjustment was excluded because it relates to strategic activities to transition certain Buick dealers out of our dealer network as part of Buick's EV strategy. In 2023, we expect to incur additional charges as we continue to optimize our Buick dealer network. The ultimate amount of any future charges will depend on negotiations with our dealers. (d)These adjustments were excluded because they relate to certain royalties accrued with respect to past-year vehicle sales in 2021 and the resolution of substantially all of these matters in 2022. (e)This adjustment was excluded because it relates to a settlement with third parties relating to retrospective recoveries of indirect taxes inBrazil realized in prior periods. (f)These adjustments were excluded because they relate to strategic activities to transition certainCadillac dealers out of our dealer network as part ofCadillac's EV strategy. (g)This adjustment was excluded because of the unique events associated withSupreme Court of the Republic of Korea (Korea Supreme Court ) decisions related to our salaried workers. (h)This adjustment was excluded because of a strategic decision to rationalize our core operations by exiting or significantly reducing our presence in various international markets to focus resources on opportunities expected to deliver higher returns. The adjustments primarily consist of dealer restructurings, asset impairments, inventory provisions and employee separation charges inAustralia ,New Zealand ,Thailand andIndia . (i)This adjustment was excluded because of the unique events associated with the ignition switch recall. 27
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The following table reconciles diluted earnings per common share under
Years Ended December 31,
2022 2021 2020
Amount Per Share Amount Per Share Amount Per Share
Diluted earnings per common share $ 8,915 $ 6.13 $ 9,837 $ 6.70 $ 6,247 $ 4.33
Adjustments(a) 2,125 1.46 701 0.47 652 0.46
Tax effect on adjustments(b) (423) (0.29) (105) (0.07) (70) (0.05)
Tax adjustments(c) (482) (0.33) (51) (0.03) 236 0.16
Deemed dividend adjustment(d) 909 0.63 - - - -
EPS-diluted-adjusted $ 11,044 $ 7.59 $ 10,382 $ 7.07 $ 7,065 $ 4.90
________
(a) Refer to the reconciliation of Net income attributable to stockholders
under U.S. GAAP to EBIT-adjusted within this section of the MD&A for adjustment
details.
(b) The tax effect of each adjustment is determined based on the tax laws and
valuation allowance status of the jurisdiction to which the adjustment relates.
(c) In the year ended December 31, 2022, the adjustment consists of tax benefit
related to the release of a valuation allowance against deferred tax assets
considered realizable as a result of Cruise tax reconsolidation. In the year
ended December 31, 2021 , the adjustments consist of tax benefits related to a
deduction for an investment in a subsidiary and resolution of uncertainty
relating to an indirect tax refund claim in Brazil , partially offset by tax
expense related to the establishment of a valuation allowance against Cruise
deferred tax assets. In the year ended December 31, 2020 , the adjustment
consists of tax expense related to the establishment of a valuation allowance
against deferred tax assets in Australia and New Zealand . This adjustment was
excluded because significant impacts of valuation allowances are not considered
part of our core operations.
(d) This adjustment consists of a deemed dividend related to the redemption of
Cruise preferred shares from SoftBank Vision Fund (AIV M2) L.P. (SoftBank) in
the year ended December 31, 2022 .
The following table reconciles our effective tax rate under U.S. GAAP to
ETR-adjusted:
Years Ended December 31,
2022 2021 2020
Income before Income tax Effectivetax Income before Income tax Effective tax Income before Income tax Effective tax
income taxes expense rate income taxes expense rate income taxes expense rate
Effective tax rate $ 11,597 $ 1,888 16.3 % $ 12,716 $ 2,771 21.8 % $ 8,095 $ 1,774 21.9 %
Adjustments(a) 2,221 423 726 105 652 70
Tax adjustments(b) 482 51 (236)
ETR-adjusted $ 13,818 $ 2,793 20.2 % $ 13,442 $ 2,927 21.8 % $ 8,747 $ 1,608 18.4 %
________
(a) Refer to the reconciliation of Net income attributable to stockholders underU.S. GAAP to EBIT-adjusted within this section of the MD&A for adjustment details. Net income attributable to noncontrolling interests for these adjustments is included in the years endedDecember 31, 2022 and 2021. The tax effect of each adjustment is determined based on the tax laws and valuation allowance status of the jurisdiction to which the adjustment relates. (b) Refer to the reconciliation of diluted earnings per common share underU.S. GAAP to EPS-diluted-adjusted within this section of the MD&A for adjustment details. We define return on equity (ROE) as Net income attributable to stockholders for the trailing four quarters divided by average equity for the same period. Management uses average equity to provide comparable amounts in the calculation of ROE. The following table summarizes the calculation of ROE (dollars in billions): Years Ended December 31, 2022 2021 2020 Net income attributable to stockholders$ 9.9 $ 10.0 $ 6.4 Average equity(a)$ 66.6 $ 56.5 $ 43.3 ROE 14.9 % 17.7 % 14.9 %
________
(a) Includes equity of noncontrolling interests where the corresponding earnings (loss) are included in Net income attributable to stockholders.
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The following table summarizes the calculation of ROIC-adjusted (dollars in
billions):
Years Ended December 31,
2022 2021 2020
EBIT-adjusted(a) $ 14.5 $ 14.3 $ 9.7
Average equity(b) $ 66.6
17.6 17.1 27.8
Add: Average automotive net pension & OPEB liability 9.4 15.8 17.6
Less: Average automotive net income tax asset (21.2) (22.2) (24.0)
ROIC-adjusted average net assets $ 72.3 $ 67.2 $ 64.7
ROIC-adjusted 20.0 % 21.3 % 15.0 %
________
(a) Refer to the reconciliation of Net income attributable to stockholders
under
Overview Our vision for the future is a world with zero crashes, zero emissions and zero congestion, which guides our growth-focused strategy to invest in EVs and AVs, software-enabled services and subscriptions and new business opportunities, while strengthening our market position in profitable ICE vehicles, such as trucks and SUVs. We will execute our strategy with a diverse team and a steadfast commitment to good citizenship through sustainable operations and a leading health and safety culture. The automotive industry andGM continue to experience supply chain and logistics disruptions from multiple suppliers that have impacted, and may continue to impact, our planned production schedules. Despite these challenges, in the second half of 2022, we experienced improved parts availability that enabled us to increase production and improve dealer inventory levels for certain vehicles. In addition, we faced significant inflationary pressure in 2022 that resulted in approximately$5.5 billion in higher commodity and logistics costs. These increases were more than offset by strong product pricing. While we anticipate incentives to increase from the low levels in 2022, we expect product pricing to remain strong in 2023, particularly for our full-size SUVs, full-size trucks and expected new launches. We also expect commodity and logistics cost to improve, but be partially offset by costs we expect to incur as we strategically localize our battery raw materials supply chain inNorth America . Refer to the Consolidated Results and regional analysis sections of this MD&A for additional information. In 2022, theBoard of Governors of theFederal Reserve System raised interest rates to lower the rate of inflation. The higher interest rate environment did not have a material impact on our 2022 financial results, but we expect it will have an approximately$1.0 billion unfavorable impact on our results of operations in 2023, as a result of lower forecasted pension income. Refer to the Critical Accounting Estimates section of this MD&A for additional information including our interest rate sensitivity analysis. We expect higher interest rates to have an immaterial impact on our Automotive interest expense in 2023, as substantially all of our debt instruments are fixed rate. For a discussion of the net interest income sensitivity of GM Financial, see Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Furthermore, holding other factors constant, the higher interest rate environment may decrease the affordability of our vehicles for customers who rely on financing to purchase a vehicle. We also face continuing market, operating and regulatory challenges in several countries across the globe due to, among other factors, competitive pressures, our product portfolio offerings, heightened emission standards, potentially weakening economic conditions, labor disruptions, foreign exchange volatility, evolving trade policy and political uncertainty. Refer to Part I, Item 1A. Risk Factors for a discussion of these challenges. We also continue to monitor the impact of the COVID-19 pandemic, and government actions and measures taken to prevent its spread, and the potential to affect our operations. Refer to Part I, Item 1A. Risk Factors for further discussion of these risks. 29
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As we continue to assess our performance and the needs of our evolving business,
additional restructuring and rationalization actions could be required. These
actions could give rise to future asset impairments or other charges, which may
have a material impact on our operating results.
On August 16, 2022 , the Inflation Reduction Act of 2022 (the "Act") was signed
into law. The Act implements a new 15% corporate minimum tax based on modified
U.S. financial statement net income that is effective beginning in 2023. The new
corporate minimum tax is not expected to have a significant impact on our net
earnings or cash flow in 2023. The Act also modified climate and clean energy
corporate tax provisions, including the consumer credit for EV purchases, and
beginning in 2023, new tax credits for commercial EV purchases and investments
in clean energy production, supply chains and manufacturing facilities became
effective. We expect to generate commercial EV tax credits and credits from our
production of battery components that will increase net income and impact income
tax cash payments. While waiting on pending Department of Treasury regulatory
guidance, we are continuing to evaluate the ultimate impact of the tax credits
on our financial results, including our net earnings and cash flow.
For the year ending
The following table reconciles expected Net income attributable to stockholders
under
Year Ending December 31, 2023
Net income attributable to stockholders $ 8.7-10.1
Income tax expense 1.6-2.2
Automotive interest expense, net 0.2
EBIT-adjusted(a) $ 10.5-12.5 ________
(a)We do not consider the potential future impact of adjustments on our expected financial results.
GMNA Industry sales inNorth America were 17.3 million units in the year endedDecember 31, 2022 , representing a decrease of 6.6% compared to the corresponding period in 2021.U.S. industry sales were 14.2 million units in the year endedDecember 31, 2022 , representing a decrease of 7.9% compared to the corresponding period in 2021. The COVID-19 pandemic originally resulted in a contraction of totalNorth America industry volumes in 2020 that continued through 2022. Dealer inventory remains constrained for several critical vehicles, including our full-size SUVs. Our total vehicle sales in theU.S. , our largest market inNorth America , were 2.3 million units for a market share of 16.0% in the year endedDecember 31, 2022 , representing an increase of 1.6 percentage points compared to the corresponding period in 2021. We expect to sustain relatively strong EBIT-adjusted margins in 2023 on the continued strength of vehicle pricing and healthyU.S. industry light vehicle demand, partially offset by elevated costs associated with commodities, raw materials and logistics. Our outlook is dependent on the pricing environment, continuing improvement of supply chain availability and overall economic conditions. As a result of supply chain disruptions in 2022, we experienced interruptions to our planned production schedules and prioritized production of our most popular and in-demand products, including our full-size trucks, full-size SUVs and EVs. In 2023, our collective bargaining agreements with the UAW inthe United States andUnifor inCanada , as well as collective bargaining agreements inMexico , will expire, which will require negotiation of new agreements. Refer to Part I, Item 1A. Risk Factors for a discussion of the risks related to any significant disruption at one of our manufacturing facilities. GMI Industry sales inChina were 23.5 million units in the year endedDecember 31, 2022 , representing a decrease of 9.2% compared to the corresponding period in 2021. Our total vehicle sales inChina were 2.3 million units resulting in a market share of 9.8% in the year endedDecember 31, 2022 , representing a decrease of 1.4 percentage points compared to the corresponding period in 2021. The ongoing supply chain disruptions, macro-economic impact of COVID-19 and geopolitical tensions continue to place pressure onChina's automotive industry and our vehicle sales inChina . Our Automotive China JVs 30 --------------------------------------------------------------------------------
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generated equity income of $0.7 billion in the year ended December 31, 2022 .
Although price competition, higher costs associated with commodities and raw
materials, and a more challenging regulatory environment related to emissions,
fuel consumption and NEV requirements will place pressure on our operations in
China , we will continue to build upon our strong brands, network, and
partnerships in China as well as drive improvements in vehicle mix and cost.
Outside of
We historically operated a small import business inRussia and soldGM -badged vehicles intoRussia throughGM's alliance partner inUzbekistan .GM's direct and indirect profitability inRussia was insignificant. WithRussia's invasion ofUkraine , western sanctions onRussia have and may continue to progressively increase. In addition, reputational, legal and other concerns impacted our ability to continue to operate inRussia . InFebruary 2022 , we suspended our exports intoRussia and instructed our Russian sales company to cease selling vehicles withinRussia . InApril 2022 , we took additional actions to extend the suspension of our Russian business, including the cessation of commercial operations. InNovember 2022 , we shut down ourRussia business and recorded a$0.7 billion charge to write off our net investment and release accumulated translation losses into earnings. The predominately non-cash charge associated with our exit is considered special for EBIT-adjusted, adjusted automotive free cash flow and EPS-diluted-adjusted purposes. Currently, we do not believe any loss contingencies arising from our exit are probable and we are unable to estimate any reasonably possible losses that may result from claims that may be asserted against us by third parties, including retail customers or government authorities inRussia . We continue to monitor the situation and its macroeconomic impacts on our financial position and results of operations. Although we have limited supply chain exposure toRussia andUkraine , we are working closely with our supply base to mitigate any potential risks. Cruise Gated by safety and regulation, Cruise continues to make significant progress towards commercialization of a network of on-demand AVs inthe United States and globally. In 2021, Cruise received a driverless test permit from theCalifornia Public Utilities Commission (CPUC) to provide unpaid rides to the public in driverless vehicles and received approval of its Autonomous Vehicle Deployment Permit from theCalifornia Department of Motor Vehicles to commercially deploy driverless AVs. InJune 2022 , Cruise received the first ever Driverless Deployment Permit granted by the CPUC, which allows them to charge a fare for the driverless rides they are providing to members of the public in certain parts ofSan Francisco . Additionally, inSeptember 2022 , Cruise acquired regulatory permits to operate driverless ride hail services inPhoenix, Arizona and began pursuing ride hail operations inAustin, Texas .GM and Cruise are also awaiting a decision on an exemption petition that was filed with NHTSA seeking regulatory approval for the deployment of the Cruise Origin. Refer to the "Liquidity and Capital Resources" section of this MD&A for information aboutGM's additional investment in Cruise. Automotive Financing - GM Financial Summary and Outlook We believe that offering a comprehensive suite of financing products will generate incremental sales of our vehicles, drive incremental GM Financial earnings and help support our sales throughout various economic cycles. GM Financial's leasing program is exposed to residual values, which are heavily dependent on used vehicle prices. Used vehicle prices were generally higher than contractual residual values in 2022, primarily due to low new vehicle inventory. In 2023, we expect used vehicle prices to continue moderating through the year as market prices on used vehicles fall below contractual residual values. The increase in used vehicle prices resulted in gains on terminations of leased vehicles of$1.2 billion inGM Financial interest, operating and other expenses for the year endedDecember 31, 2022 , and$2.0 billion in the corresponding period in 2021. The following table summarizes the estimated residual value based on GM Financial's most recent estimates and the number of units included in GM Financial Equipment on operating leases, net by vehicle type (units in thousands): December 31, 2022 December 31, 2021 Residual Residual Value Units Percentage Value Units Percentage Crossovers$ 14,207 736 67.3 %$ 16,696 897 67.3 % Trucks 6,961 228 20.9 % 7,886 264 19.8 % SUVs 2,595 66 6.0 % 3,104 80 5.9 % Cars 964 63 5.8 % 1,430 93 7.0 % Total$ 24,727 1,092 100.0 %$ 29,116 1,334 100.0 % 31
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GM Financial's penetration of our retail sales in the U.S. was 43% in the year
ended December 31, 2022 and 44% in the corresponding period in 2021. Penetration
levels vary depending on incentive financing programs available and competing
third-party financing products in the market. GM Financial's prime loan
originations as a percentage of total loan originations in North America was 80%
in the year ended December 31, 2022 and 73% in the corresponding period in 2021.
In the year ended December 31, 2022 , GM Financial's revenue consisted of leased
vehicle income of 61%, retail finance charge income of 32% and commercial
finance charge income of 3%.
Consolidated Results We review changes in our results of operations under five
categories: volume, mix, price, cost and other. Volume measures the impact of
changes in wholesale vehicle volumes driven by industry volume, market share and
changes in dealer stock levels. Mix measures the impact of changes to the
regional portfolio due to product, model, trim, country and option penetration
in current year wholesale vehicle volumes. Price measures the impact of changes
related to Manufacturer's Suggested Retail Price and various sales allowances.
Cost primarily includes: (1) material and freight; (2) manufacturing,
engineering, advertising, administrative and selling and warranty expense; and
(3) non-vehicle related activity. Other primarily includes foreign exchange and
non-vehicle related automotive revenues as well as equity income or loss from
our nonconsolidated affiliates. Refer to the regional sections of this MD&A for
additional information.
Total Net Sales and Revenue
Years Ended December 31, Favorable/ Variance Due To
2022 2021 (Unfavorable) % Volume Mix Price Other
(Dollars in billions)
GMNA $ 128,378 $ 101,308 $ 27,070 26.7 % $ 24.9 $ (5.3) $ 7.1 $ 0.3
GMI 15,420 12,172 3,248 26.7 % $ 2.0 $ 0.1 $ 1.4 $ (0.3)
Corporate 177 104 73 70.2 % $ - $ 0.1
Automotive 143,974 113,584 30,390 26.8 % $ 26.9 $ (5.1) $ 8.5 $ 0.1
Cruise 102 106 (4) (3.8) % $ -
GM Financial 12,766 13,419 (653) (4.9) % $ (0.7)
Eliminations/reclassifications (107) (105) (2) (1.9) % $ - $ -
Total net sales and revenue $ 156,735 $ 127,004 $ 29,731 23.4 % $ 26.9 $ (5.1) $ 8.5 $ (0.6) Refer to the regional sections of this MD&A for additional information on volume, mix and price.
Automotive and Other Cost of Sales
Years Ended December 31, Favorable/ Variance Due To
2022 2021 (Unfavorable) % Volume Mix Cost Other
(Dollars in billions)
GMNA $ 109,651 $ 87,419 $ (22,232) (25.4) % $ (16.7) $ (0.3) $ (5.7) $ 0.4
GMI 14,166 11,802 (2,364) (20.0) % $ (1.6) $ - $ (1.0) $ 0.2
Corporate 500 200 (300) n.m. $ - $ (0.3) $ -
Cruise 2,576 1,124 (1,452) n.m. $ (1.5)
Eliminations (2) (1) 1 n.m. $ -
Total automotive and other
cost of sales $ 126,892 $ 100,544 $ (26,348) (26.2) % $ (18.3) $ (0.2) $ (8.4) $ 0.6
________
n.m. = not meaningful
The most significant element of our Automotive and other cost of sales is material cost, which makes up approximately two-thirds of the total amount. The remaining portion includes labor costs, depreciation and amortization, engineering, freight and product warranty and recall campaigns.
Factors that most significantly influence a region's profitability are industry volume, market share, and the relative mix of vehicles (trucks, crossovers, cars) sold. Variable profit is a key indicator of product profitability. Variable profit is defined as
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revenue less material cost, freight, the variable component of manufacturing
expense and warranty and recall-related costs. Vehicles with higher selling
prices generally have higher variable profit. Refer to the regional sections of
this MD&A for additional information on volume and mix.
In the year ended December 31, 2022 , increased Cost was primarily due to: (1)
increased material and freight costs of $5.5 billion ; (2) increased costs of
$1.1 billion primarily related to parts and accessories; (3) increased
manufacturing costs of $1.1 billion ; (4) increased engineering costs of $1.0
billion primarily related to accelerating our EV portfolio and an increase in
development costs as Cruise progresses towards the commercialization of a
network of on-demand AVs in the United States and globally; and (5) increased
costs of $0.8 billion related to modification of Cruise stock incentive awards;
partially offset by (6) decreased campaigns and other warranty-related costs of
$0.4 billion ; and (7) a decrease of $0.4 billion related to the resolution of
substantially all patent royalty matters accrued with respect to past-year
vehicle sales. In the year ended December 31, 2022 , favorable Other was due to
the weakening of the Korean Won and other currencies against the U.S. Dollar,
partially offset by the strengthening of the Brazilian Real and other currencies
against the U.S. Dollar.
Automotive and Other Selling, General and Administrative Expense
Year Ended
Years Ended December 31, 2022 vs. 2021 Change
Favorable/
2022 2021 2020 (Unfavorable) %
Automotive and other selling, general and
administrative expense $ 10,667 $ 8,554 $ 7,038 $ (2,113) (24.7) %
In the year ended December 31, 2022 , Automotive and other selling, general and
administrative expense increased primarily due to: (1) increased advertising,
selling, and administrative costs of $1.3 billion ; (2) charges of $0.5 billion
for strategic activities related to Buick dealerships; and (3) increased costs
of $0.3 billion related to modification of Cruise stock incentive awards.
Interest Income and Other Non-operating Income, net
Year Ended
Years Ended December 31, 2022 vs. 2021 Change
Favorable/
2022 2021 2020 (Unfavorable) %
Interest income and other non-operating
income, net $ 1,432 $ 3,041 $ 1,885 $ (1,609) (52.9) %
In the year ended December 31, 2022 , Interest income and other non-operating
income, net decreased primarily due to: (1) $0.4 billion in losses in 2022
compared to $0.3 billion in gains in 2021 related to Stellantis N.V.
(Stellantis) warrants; and (2) $0.7 billion related to the shutdown of our
Russia business.
Income Tax Expense
Year Ended
Years Ended December 31, 2022 vs. 2021 Change
Favorable/
2022 2021 2020 (Unfavorable) %
Income tax expense $ 1,888 $ 2,771 $ 1,774 $ 883 31.9 %
In the year ended December 31, 2022 , Income tax expense decreased primarily due
to Cruise valuation allowance adjustments, lower effective tax rate as a result
of Cruise reconsolidation and lower pre-tax income. The decrease was partially
offset by absence of tax benefit related to a deduction for an investment in a
subsidiary, which occurred in the year ended December 31, 2021 .
For the year ended
Refer to Note 17 to our consolidated financial statements for additional information related to Income tax expense.
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GM North America
Years Ended December 31, Favorable/ Variance Due To
2022 2021 (Unfavorable) % Volume Mix Price Cost Other
(Dollars in billions)
Total net sales and revenue $ 128,378 $ 101,308 $ 27,070 26.7 % $ 24.9 $ (5.3) $ 7.1 $ 0.3
EBIT-adjusted $ 12,988 $ 10,318 $ 2,670 25.9 % $ 8.2 $ (5.5) $ 7.1 $ (6.9) $ (0.1)
EBIT-adjusted margin 10.1 % 10.2 % (0.1) %
(Vehicles in thousands)
Wholesale vehicle sales 2,926 2,308 618 26.8 %
GMNA Total Net Sales and Revenue In the year ended December 31, 2022 , Total net
sales and revenue increased primarily due to: (1) increased net wholesale
volumes primarily due to increased sales of crossover vehicles, passenger cars,
full-size pickup trucks, vans, mid-size pickup trucks and full-size SUVs due to
improved parts availability that allowed us to increase production in 2022; (2)
favorable price as a result of low dealer inventory levels and strong demand for
our products; and (3) favorable Other due to increased sales of parts and
accessories, partially offset by the foreign currency effect resulting from the
weakening of the Canadian Dollar against the U.S. Dollar; partially offset by
(4) unfavorable mix associated with increased sales of crossover vehicles,
passenger cars, vans and mid-size pickup trucks, partially offset by increased
sales of full-size pickup trucks and full-size SUVs.
GMNA EBIT-Adjusted The most significant factors that influence profitability are
industry volume and market share. While not as significant as industry volume
and market share, another factor affecting profitability is the relative mix of
vehicles sold. Trucks, crossovers and cars sold currently have a variable profit
of approximately 150%, 50% and 40% of our GMNA portfolio on a weighted-average
basis.
In the year ended December 31, 2022 , EBIT-adjusted increased primarily due to:
(1) favorable volume; and (2) favorable price; partially offset by (3) increased
Cost primarily due to increased material and freight cost of $4.7 billion ,
increased selling, general and administrative costs of $1.2 billion , increased
manufacturing cost of $0.8 billion and increased engineering cost of $0.4
billion including accelerating our EV portfolio, partially offset by a decrease
in campaigns and other warranty-related costs of $0.4 billion ; and (4)
unfavorable mix.
GM International
Years Ended December 31, Favorable/ Variance Due To
2022 2021 (Unfavorable) % Volume Mix Price Cost Other
(Dollars in billions)
Total net sales and revenue $ 15,420 $ 12,172 $ 3,248 26.7 % $ 2.0 $ 0.1 $ 1.4 $ (0.3)
EBIT-adjusted $ 1,143 $ 827 $ 316 38.2 % $ 0.4 $ 0.2 $ 1.4 $ (1.1) $ (0.6)
EBIT-adjusted margin 7.4 % 6.8 % 0.6 %
Equity income - Automotive
China $ 677 $ 1,098 $ (421) (38.3) %
EBIT (loss)-adjusted -
excluding Equity income $ 466 $ (271) $ 737 n.m.
(Vehicles in thousands)
Wholesale vehicle sales 653 551
102 18.5 %
________
n.m. = not meaningful
The vehicle sales of our Automotive China JVs are not recorded in Total net sales and revenue. The results of our joint ventures are recorded in Equity income, which is included in EBIT-adjusted above.
GMI TotalNet Sales and Revenue In the year endedDecember 31, 2022 , Total net sales and revenue increased primarily due to: (1) increased net wholesale volumes due to improved parts availability that allowed us to increase production in 2022; (2) favorable pricing across multiple vehicle lines inSouth America and theMiddle East ; and (3) favorable mix in theMiddle East andAsia/Pacific , partially offset by unfavorable mix inSouth America ; partially offset by (4) unfavorable Other primarily due to the foreign currency effect resulting from the weakening of various currencies against theU.S. dollar, partially offset by increased components, parts and accessories sales. 34 --------------------------------------------------------------------------------
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
GMI EBIT-Adjusted In the year ended December 31, 2022 , EBIT-adjusted increased
primarily due to: (1) favorable price; (2) increased net wholesale volumes; and
(3) favorable mix; partially offset by (4) unfavorable Cost primarily due to
increased material and logistic costs; and (5) unfavorable Other primarily due
to foreign currency effect resulting from the weakening of various currencies
against the U.S. dollar and decreased equity income.
We view the Chinese market as important to our global growth strategy and are
employing a multi-brand strategy. In the coming years, we plan to leverage our
global architectures to increase the number of product offerings under the
Buick, Chevrolet and Cadillac brands in China and continue to grow our business
under the local Baojun and Wuling brands while we are accelerating the
development and rollout of EVs across our brands in China in response to our
commitment to an all-electric future. We operate in the Chinese market through a
number of joint ventures and maintaining strong relationships with our joint
venture partners is an important part of our China growth strategy.
The following table summarizes certain key operational and financial data for the Automotive China JVs (vehicles in thousands):
Years
Ended
2022 2021 2020
Wholesale vehicle sales including vehicles exported to
markets outside of China 2,639 3,007 3,029
Total net sales and revenue $ 35,857 $ 42,776 $ 38,736
Net income $ 1,407 $ 2,109 $ 1,239
December 31, 2022 December 31, 2021
Cash and cash equivalents $ 8,552 $
10,254
Debt $ 197 $ 374
Cruise
Years Ended December 31, 2022 vs. 2021 Change
Favorable/
2022 2021 2020 (Unfavorable) %
Total net sales and revenue(a) $ 102 $ 106 $ 103 $ (4) (3.8) %
EBIT (loss)-adjusted(b) $ (1,890) $ (1,196) $ (887) $ (694) (58.0) %
________
(a) Primarily reclassified to Interest income and other non-operating income,
net in our consolidated income statements in each of the years ended December
31, 2022 , 2021 and 2020.
(b) Excludes $1.1 billion in compensation expense in the year ended December
31, 2022 resulting from modification of the Cruise stock incentive awards.
Cruise EBIT (Loss)-Adjusted In the year ended December 31, 2022 , EBIT
(loss)-adjusted increased primarily due to an increase in development costs as
we progress towards the commercialization of a network of on-demand rideshare
and delivery AVs in the U.S. and globally.
GM Financial
Years Ended December 31, 2022 vs. 2021 Change
2022 2021 2020 Amount %
Total revenue $ 12,766 $ 13,419 $ 13,831 $ (653) (4.9) %
Provision for loan losses $ 654 $ 248 $ 881 $ 406 n.m.
EBT-adjusted $ 4,076 $ 5,036 $ 2,702 $ (960) (19.1) %
Average debt outstanding (dollars in
billions) $ 93.8 $ 94.1 $ 91.4 $ (0.3) (0.3) %
Effective rate of interest paid 3.1 % 2.7 % 3.3 % 0.4 %
________
n.m. = not meaningful
GM Financial Revenue In the year ended
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
by increased finance charge income of $0.4 billion primarily due to growth in
the retail finance receivables portfolio, partially offset by a decrease in the
effective yield due to increased lending to borrowers with prime credit; and an
increase in the effective yield on commercial finance receivables as a result of
higher benchmark rates, as well as an increase in the size of the portfolio.
GM Financial EBT-Adjusted In the year ended December 31, 2022 , EBT-adjusted
decreased primarily due to: (1) decreased leased vehicle income net of leased
vehicle expenses of $0.7 billion primarily due to decreased depreciation on
leased vehicles resulting from increased residual value estimates and a decrease
in the size of the portfolio, decreased lease vehicle income primarily due to a
decrease in the average balance of the leased vehicles portfolio, and decreased
lease termination gains; (2) increased provision for loan losses of $0.4 billion
primarily due to increased loan origination volume in 2022, and the reduction in
reserve levels recorded in 2021 as a result of actual credit performance that
was better than forecast and favorable expectations for future charge-offs and
recoveries, as well as an economic forecast weighted more heavily to a weaker
outlook as of December 31, 2022 ; and (3) increased interest expense of $0.3
billion primarily due to an increased effective rate of interest on our debt;
partially offset by (4) increased finance charge income of $0.4 billion
primarily due to growth in the retail finance receivables portfolio, partially
offset by a decrease in the effective yield due to increased lending to
borrowers with prime credit; and an increase in the effective yield on
commercial finance receivables as a result of higher benchmark rates, as well as
an increase in the size of the portfolio.
Liquidity and Capital Resources We believe our current levels of cash, cash
equivalents, marketable debt securities, available borrowing capacity under our
revolving credit facilities and other liquidity actions currently available to
us are sufficient to meet our liquidity requirements. We also maintain access to
the capital markets and may issue debt or equity securities, which may provide
an additional source of liquidity. We have substantial cash requirements going
forward, which we plan to fund through our total available liquidity, cash flows
from operating activities and additional liquidity measures, if determined to be
necessary.
Our known current material uses of cash include, among other possible demands:
(1) capital spending and our investments in our battery cell manufacturing joint
ventures of approximately $11.0 billion to $13.0 billion per year through 2025;
(2) payments for engineering and product development activities; (3) payments
associated with previously announced vehicle recalls and any other
recall-related contingencies; (4) payments to service debt and other long-term
obligations, including discretionary and mandatory contributions to our pension
plans; (5) payments associated with the liquidity program for holders of
equity-based incentive awards issued to employees of Cruise; (6) dividend
payments on our common stock that are declared by our Board of Directors; and
(7) payments to purchase shares of our common stock authorized by our Board of
Directors. Refer to Note 7, Note 13 and Note 15 to our consolidated financial
statements for additional funding requirements for our operating leases, debt
and pension plans. Our material future uses of cash, which may vary from time to
time based on market conditions and other factors, are focused on the three
objectives of our capital allocation program: (1) grow our business at an
average target ROIC-adjusted rate of 20% or greater; (2) maintain a strong
investment-grade balance sheet, including a target average automotive cash
balance of $18.0 billion ; and (3) after the first two objectives are met, return
available cash to shareholders. Our senior management evaluates our capital
allocation program on an ongoing basis and recommends any modifications to the
program to our Board of Directors not less than once annually.
We continue to monitor and evaluate opportunities to strengthen our competitive
position over the long term while maintaining a strong investment-grade balance
sheet. These actions may include opportunistic payments to reduce our long-term
obligations, as well as the possibility of acquisitions, dispositions and
investments with joint venture partners, as well as strategic alliances that we
believe would generate significant advantages and substantially strengthen our
business. To support our transition to EVs, we anticipate making investments in
suppliers or providing funding towards the execution of strategic, multi-year
supply agreements to secure critical materials. In addition, we have entered,
and plan to continue to enter, into offtake agreements that generally obligate
us to purchase defined quantities of output. These arrangements could have a
short-term adverse impact on our cash and increase our inventory.
Our liquidity plans are subject to a number of risks and uncertainties, including those described in the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. Risk Factors, some of which are outside of our control.
InAugust 2022 , our Board of Directors increased the capacity under our previously announced common stock repurchase program to$5.0 billion from the$3.3 billion that remained under the program as ofJune 30, 2022 . During the year endedDecember 31, 2022 , we completed$2.5 billion of repurchases under the program and retired approximately 64 million shares of our common stock. 36 --------------------------------------------------------------------------------
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
In September 2022 , we reinstated a quarterly dividend of $0.09 per share of our
common stock. During the year ended December 31, 2022 , we paid dividends of $0.3
billion to holders of our common stock.
In November 2022 , Ultium Cells LLC , a wholly owned subsidiary of Ultium Cells
Holding LLC , entered into a loan agreement with the U.S. Department of Energy
(DOE) through the Advanced Technology Vehicles Manufacturing program, pursuant
to which Ultium Cells LLC may borrow up to $2.5 billion . The proceeds of the
loans will be used to finance the construction of new battery cell manufacturing
facilities in the U.S. Under the terms of the loan agreement, the DOE will not
have recourse on the principal and interest of the loan against General Motors
Company or any of its consolidated subsidiaries.
In December 2022 , we early redeemed our $1.0 billion 5.40% senior unsecured
notes with a maturity date of October 2023 and recorded an insignificant loss.
Additionally, during 2022, we paid, prior to maturity, $0.5 billion of unsecured
term loans in GMI.
In January 2023 , we gave notice to early redeem our $1.5 billion 4.875% senior
unsecured notes with a maturity date of October 2023 . The settlement of the
early redemption of these senior unsecured notes is expected to occur during the
first quarter of 2023 and is expected to have an immaterial impact on our 2023
results.
Cash flows that occur amongst our Automotive, Cruise and GM Financial operations
are eliminated when we consolidate our cash flows. Such eliminations include,
among other things, collections by Automotive on wholesale accounts receivables
financed by dealers through GM Financial, payments between Automotive and GM
Financial for accounts receivables transferred by Automotive to GM Financial,
loans to Automotive and Cruise from GM Financial, dividends issued by GM
Financial to Automotive, tax payments by GM Financial to Automotive and
Automotive cash injections in Cruise. The presentation of Automotive liquidity,
Cruise liquidity and GM Financial liquidity presented below includes the impact
of cash transactions amongst the sectors that are ultimately eliminated in
consolidation.
Automotive Liquidity Total available liquidity includes cash, cash equivalents,
marketable debt securities and funds available under credit facilities. The
amount of available liquidity is subject to seasonal fluctuations and includes
balances held by various business units and subsidiaries worldwide that are
needed to fund their operations.
We manage our liquidity primarily at our treasury centers as well as at certain
of our significant consolidated overseas subsidiaries. Over 90% of our cash and
marketable debt securities were managed within North America and at our regional
treasury centers at December 31, 2022 . We have used, and will continue to use,
other methods including intercompany loans to utilize these funds across our
global operations as needed.
Our cash equivalents and marketable debt securities balances are primarily
denominated in U.S. Dollars and include investments in U.S. government and
agency obligations, foreign government securities, time deposits, corporate debt
securities and mortgage and asset-backed securities. Our investment guidelines,
which we may change from time to time, prescribe certain minimum credit
worthiness thresholds and limit our exposures to any particular sector, asset
class, issuance or security type. The majority of our current investments in
debt securities are with A/A2 or better rated issuers.
We use credit facilities as a mechanism to provide additional flexibility in
managing our global liquidity. Our Automotive borrowing capacity under credit
facilities totaled $15.5 billion at December 31, 2022 and 2021, which consisted
primarily of two credit facilities. Total Automotive borrowing capacity under
our credit facilities does not include our 364-day, $2.0 billion facility
allocated for exclusive use of GM Financial. We did not have any borrowings
against our primary facilities, but had letters of credit outstanding under our
sub-facility of $0.4 billion and $0.3 billion at December 31, 2022 and 2021.
In April 2022 , we renewed our 364-day, $2.0 billion revolving credit facility
allocated for the exclusive use of GM Financial, which now matures on April 4,
2023 . If available capacity permits, GM Financial continues to have access to
our automotive credit facilities. GM Financial did not have borrowings
outstanding against any of these facilities at December 31, 2022 and 2021. We
had intercompany loans from GM Financial of $0.2 billion at December 31, 2022
and 2021, which primarily consisted of commercial loans to dealers we
consolidate. We did not have intercompany loans to GM Financial at December 31,
2022 and 2021. Refer to Note 5 to our consolidated financial statements for
additional information.
In August 2022 , we issued $2.25 billion in aggregate principal amount of senior
unsecured notes under our new Sustainable Finance Framework with a weighted
average interest rate of 5.51% and maturity dates in 2029 and 2032. We intend to
allocate an amount equal to the net proceeds from these senior unsecured notes
to finance or refinance, in whole or in part, new or existing green projects,
assets or activities undertaken or owned by the Company that meet one or more
eligibility criteria outlined in our Sustainable Finance Framework.
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Several of our loan facilities, including our revolving credit facilities,
require compliance with certain financial and operational covenants as well as
regular reporting to lenders. We have reviewed our covenants in effect as of
December 31, 2022 and determined we are in compliance and expect to remain in
compliance in the future.
In March 2022 , under the Share Purchase Agreement, we acquired SoftBank's equity
ownership stake in Cruise for $2.1 billion and, separately, we made an
additional $1.35 billion investment in Cruise in place of SoftBank. During the
year ended December 31, 2022 , we made additional investments in Cruise of $1.1
billion .
In September 2022 , we exercised our 39.7 million warrants in Stellantis. Upon
exercise, the warrants converted into 69.1 million common shares of Stellantis,
which we immediately sold back to Stellantis. Total net pre-tax proceeds,
including dividends received, in connection with this transaction were
approximately $1.1 billion .
GM Financial's Board of Directors declared and paid dividends of $1.7 billion ,
$3.5 billion , and $0.8 billion on its common stock in 2022, 2021, and 2020.
Future dividends from GM Financial will depend on several factors including
business and economic conditions, its financial condition, earnings, liquidity
requirements and leverage ratio.
The following table summarizes our Automotive available liquidity (dollars in
billions):
December 31, 2022 December 31, 2021
Automotive cash and cash equivalents $ 13.6 $ 14.5
Marketable debt securities 10.8 7.1
Automotive cash, cash equivalents and marketable debt securities
24.4 21.6
Available under credit facilities(a) 15.1 15.2
Total Automotive available liquidity $ 39.5 $ 36.8
_________
(a) We had letters of credit outstanding under our sub-facility of
The following table summarizes the changes in our Automotive available liquidity
(dollars in billions):
Year Ended December
31, 2022
Operating cash flow $ 19.1
Capital expenditures (9.0)
Dividends paid and payments to purchase common stock (2.8)
GM investment in Cruise (2.4)
Purchase of SoftBank's equity stake in Cruise (2.1)
Issuance of senior unsecured notes 2.2
Net proceeds from sale of Stellantis common shares(a) 0.9
Payment of senior unsecured note (1.0)
Investment in Ultium Cells Holdings LLC (0.8)
Payment of GMI unsecured term debt (0.5)
Other non-operating (0.9)
Total change in automotive available liquidity $ 2.7
_________
(a) Excludes dividends received and tax withholding.
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GENERAL MOTORS COMPANY AND SUBSIDIARIESAutomotive Cash Flow (Dollars in billions)
Years Ended December 31, 2022 vs. 2021
2022 2021 2020 Change
Operating Activities
Net income $ 8.5 $ 7.8 $ 5.0 $ 0.7
Depreciation, amortization and impairment charges 6.3 5.9 5.5 0.4
Pension and OPEB activities (2.0) (2.4) (1.6) 0.4
Working capital 0.5 (4.0) (1.7) 4.5
Accrued and other liabilities and income taxes 3.1 0.9 (1.4) 2.2
Other 2.7 1.5 1.7 1.2
Net automotive cash provided by (used in)
operating activities $ 19.1 $ 9.7 $ 7.5 $ 9.4
In the year ended December 31, 2022 , the increase in Net automotive cash
provided by operating activities was primarily due to: (1) lower sales incentive
payments of $4.7 billion ; and (2) working capital; partially offset by (3) lower
dividends received from GM Financial of $1.8 billion .
Years Ended December 31, 2022 vs. 2021
2022 2021 2020 Change
Investing Activities
Capital expenditures $ (9.0) $ (7.4) $ (5.3) $ (1.6)
Acquisitions and liquidations of marketable
securities, net(a) (3.9) 1.0 (3.6) (4.9)
Other(b) (4.5) (1.8) 0.1 (2.7)
Net automotive cash provided by (used in)
investing activities $ (17.5) $ (8.2) $ (8.8) $ (9.3)
__________
(a)Amount includes $0.6 billion of proceeds for the sale of our share in Lyft,
Inc. in the year ended December 31, 2020 .
(b)Includes $2.4 billion and $1.0 billion for GM's investment in Cruise in the
years ended December 31, 2022 and 2021, $2.1 billion related to the redemption
of Cruise preferred shares from SoftBank in the year ended December 31, 2022 ,
$0.9 billion related to the sale of Stellantis common shares, excluding
dividends received and tax withholding, in the year ended December 31, 2022 , and
a $0.8 billion and $0.5 billion investment in Ultium Cells Holdings LLC in the
years ended December 31, 2022 and 2021.
In the year ended December 31, 2022 , cash used in acquisitions and liquidations
of marketable securities, net increased due to acquisitions of securities and
investments compared to liquidations of securities to fund operating activities
and investments during the year ended December 31, 2021 .
Years Ended December 31, 2022 vs. 2021
2022 2021 2020 Change
Financing Activities
Net proceeds (payments) from short-term debt $ (1.4) $ (0.5) $ (0.5) $ (0.9)
Issuance of senior notes 2.3 - 4.0 2.3
Other(a) (3.3) (0.4) (1.4) (2.9)
Net automotive cash provided by (used in)
financing activities $ (2.5) $ (0.9) $ 2.1 $ (1.6)
__________
(a)Includes $2.8 billion and $0.6 billion for dividends paid and payments to
purchase common stock in the years ended December 31, 2022 and December 31,
2020 , and $0.5 billion for repayments of senior unsecured notes for the years
ended December 31, 2021 and 2020.
Adjusted Automotive Free Cash Flow We measure adjusted automotive free cash flow
as automotive operating cash flow from operations less capital expenditures
adjusted for management actions. For the year ended December 31, 2022 , net
automotive cash provided by operating activities under U.S. GAAP was $19.1
billion , capital expenditures were $9.0 billion and adjustments for management
actions were $0.4 billion . For the year ended December 31, 2021 , net automotive
cash provided by operating activities under U.S. GAAP was $9.7 billion , capital
expenditures were $7.4 billion and adjustments for management actions, were $0.3
billion .
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
Status of Credit Ratings We receive ratings from four independent credit rating
agencies: DBRS Limited (DBRS), Fitch Ratings (Fitch), Moody's Investor Service
(Moody's) and Standard & Poor's (S&P). All four credit rating agencies currently
rate our corporate credit at investment grade. The following table summarizes
our credit ratings at January 17, 2023 :
Corporate Revolving Credit Facilities Senior Unsecured Outlook
DBRS BBB (high) BBB (high) N/A Stable
Fitch BBB- BBB- BBB- Positive
Moody's Investment Grade Baa2 Baa3 Stable
S&P BBB BBB BBB Stable
Cruise Liquidity In
Additionally, inMarch 2022 ,GM and Cruise announced a liquidity program for holders of equity-based incentive awards issued to the employees of Cruise pursuant to Cruise's 2018 Employee Incentive Plan, under whichGM will purchase newly issued Cruise Class B Common Shares to fund the tax withholding on vested awards andGM will conduct tender offers for Cruise Class B Common Shares issued to settle vested awards. During the year endedDecember 31, 2022 , Cruise issued approximately$0.5 billion of Cruise Class B Common Shares, primarily to us, to fund the payment of statutory tax withholding obligations resulting from the settlement or exercise of vested awards. Also,GM conducted quarterly tender offers, and paid approximately$0.6 billion in cash to settle tendered Cruise Class B Common Shares under the announced liquidity program during the year endedDecember 31, 2022 . Refer to Note 20 to our consolidated financial statements for additional information.
The following table summarizes Cruise's available liquidity (dollars in billions):
December 31, 2022 December 31 ,
2021
Cruise cash and cash equivalents $ 1.5 $
1.6
Cruise marketable securities 1.4
1.5
Total Cruise available liquidity(a) $ 2.9 $
3.1
__________
(a)Excludes a multi-year credit agreement between Cruise and GM Financial
whereby Cruise can request to borrow, over time, up to an additional aggregate
of
The following table summarizes the changes in Cruise's available liquidity
(dollars in billions):
Year Ended December 31, 2022
Operating cash flow(a) $ (1.8)
GM investment in Cruise 2.4
Employee Incentive Plan (0.6)
Other non-operating (0.1)
Total change in Cruise available liquidity $ (0.2)
__________
(a)Includes
Cruise Cash Flow (Dollars in billions)
Years Ended December 31, 2022 vs. 2021
2022 2021 2020 Change
Net cash provided by (used in) operating
activities $ (1.8) $ (1.2) $ (0.8) $ (0.6)
Net cash provided by (used in) investing
activities $ - $ (0.7) $ (0.7) $ 0.7
Net cash provided by (used in) financing
activities $ 1.8 $ 2.6 $ - $ (0.8)
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Automotive Financing - GM Financial Liquidity GM Financial's primary sources of
cash are finance charge income, leasing income and proceeds from the sale of
terminated leased vehicles, net distributions from credit facilities,
securitizations, secured and unsecured borrowings and collections and recoveries
on finance receivables. GM Financial's primary uses of cash are purchases and
funding of finance receivables and leased vehicles, repayment or repurchases of
secured and unsecured debt, funding credit enhancement requirements in
connection with securitizations and secured credit facilities, interest costs,
operating expenses, income taxes and dividend payments. GM Financial continues
to monitor and evaluate opportunities to optimize its liquidity position and the
mix of its debt between secured and unsecured debt. The following table
summarizes GM Financial's available liquidity (dollars in billions):
December 31, 2022 December 31, 2021
Cash and cash equivalents $ 4.0 $ 4.0
Borrowing capacity on unpledged eligible assets 22.0 19.2
Borrowing capacity on committed unsecured lines of credit 0.5 0.5
Borrowing capacity on revolving credit facility, exclusive to GM Financial
2.0 2.0
Total GM Financial available liquidity $ 28.5 $ 25.7
In the year ended December 31, 2022 , GM Financial's available liquidity
increased primarily due to increased available borrowing capacity on unpledged
eligible assets, resulting from the issuance of securitization transactions and
unsecured debt. GM Financial structures liquidity to support at least six months
of GM Financial's expected net cash flows, including new originations, without
access to new debt financing transactions or other capital markets activity.
GM Financial has access to $15.5 billion of our revolving credit facilities with
exclusive access to the 364-day, $2.0 billion facility. Refer to the "Automotive
Liquidity" section of this MD&A for additional details. We have a support
agreement with GM Financial which, among other things, establishes commitments
of funding from us to GM Financial. This agreement also provides that we will
continue to own all of GM Financial's outstanding voting shares so long as any
unsecured debt securities remain outstanding at GM Financial. In addition, we
are required to use our commercially reasonable efforts to ensure GM Financial
remains a subsidiary borrower under our corporate revolving credit facilities.
Credit Facilities In the normal course of business, in addition to using its
available cash, GM Financial utilizes borrowings under its credit facilities,
which may be secured or unsecured, and GM Financial repays these borrowings as
appropriate under its cash management strategy. At December 31, 2022 , secured,
committed unsecured and uncommitted unsecured credit facilities totaled $26.2
billion , $0.5 billion and $1.4 billion with advances outstanding of $3.9
billion , an insignificant amount and $1.4 billion .
GM Financial Cash Flow (Dollars in billions)
Years Ended December 31, 2022 vs. 2021
2022 2021 2020 Change
Net cash provided by (used in) operating
activities $ 5.5 $ 7.3 $ 8.0 $ (1.8)
Net cash provided by (used in) investing
activities $ (10.0) $ (5.5) $ (9.3) $ (4.5)
Net cash provided by (used in) financing
activities $ 4.0 $ (2.6) $ 2.4 $ 6.6 In the year ended
In the year endedDecember 31, 2022 , Net cash used in investing activities increased primarily due to: (1) an increase in purchases and originations of finance receivables of$6.1 billion ; (2) a decrease in collections and recoveries on finance receivables of$0.7 billion ; and (3) a decrease in the proceeds from termination of leased vehicles of$0.2 billion ; partially offset by (4) a decrease in purchases of leased vehicles of$2.7 billion . In the year endedDecember 31, 2022 , Net cash provided by financing activities increased primarily due to: (1) a decrease in debt repayments of$8.8 billion ; and (2) a decrease in dividend payments of$1.8 billion ; partially offset by (3) a decrease in borrowings of$4.0 billion . 41 --------------------------------------------------------------------------------
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GENERAL MOTORS COMPANY AND SUBSIDIARIES
LIBOR Transition As discussed in Part I, Item 1A. Risk Factors, banks will no
longer be persuaded or compelled to submit rates for the calculation of LIBOR.
GM Financial established a LIBOR transition initiative in 2019 to evaluate the
potential impacts of the transition, and continues to implement strategies to
mitigate the risks associated with the LIBOR discontinuation such as amending
existing LIBOR-based transactions where feasible. GM Financial has only a
limited amount of LIBOR-based debt outstanding that is currently scheduled to
mature after June 30, 2023 and if not amendable, would utilize the Alternative
Reference Rates Committee fallback process where applicable. Furthermore, GM
Financial has adhered to the International Swaps and Derivatives Association's
Fallbacks Protocol and is transitioning its existing LIBOR-based derivative
exposure in advance of the June 30, 2023 date when applicable LIBOR will no
longer be published. For any residual exposure after the end of 2022, GM
Financial expects to leverage relevant contractual and statutory solutions to
transition such exposure.
Critical Accounting Estimates The consolidated financial statements are prepared
in conformity with U.S. GAAP, which requires the use of estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses in the periods
presented. We believe the accounting estimates employed are appropriate and the
resulting balances are reasonable; however, due to the inherent uncertainties in
developing estimates, actual results could differ from the original estimates,
requiring adjustments to these balances in future periods. Refer to Note 2 to
our consolidated financial statements for our significant accounting policies
related to our critical accounting estimates.
Product Warranty and Recall Campaigns The estimates related to product
warranties are established using historical information on the nature, frequency
and average cost of claims of each vehicle line or each model year of the
vehicle line and assumptions about future activity and events. When little or no
claims experience exists for a model year or a vehicle line, the estimate is
based on comparable models.
We accrue the costs related to product warranty at the time of vehicle sale and we accrue the estimated cost of recall campaigns when they are probable and estimable.
The estimates related to recall campaigns accrued at the time of vehicle sale are established by applying a paid loss approach that considers the number of historical recall campaigns and the estimated cost for each recall campaign. These estimates consider the nature, frequency and magnitude of historical recall campaigns, and use key assumptions including the number of historical periods and the weighting of historical data in the reserve studies. Costs associated with recall campaigns not accrued at the time of vehicle sale are estimated based on the estimated cost of repairs and the estimated vehicles to be repaired. Depending on part availability and time to complete repairs we may, from time to time, offer courtesy transportation at no cost to our customers. These estimates are re-evaluated on an ongoing basis and based on the best available information. Revisions are made when necessary based on changes in these factors. The estimated amount accrued for recall campaigns at the time of vehicle sale is most sensitive to the estimated number of recall events, the number of vehicles per recall event, the assumed number of vehicles that will be brought in by customers for repair (take rate) and the cost per vehicle for each recall event. The estimated cost of a recall campaign that is accrued on an individual basis is most sensitive to our estimated assumed take rate that is primarily developed based on our historical take rate experience. A 10% increase in the estimated take rate for all recall campaigns would increase the estimated cost by approximately$0.4 billion . Actual experience could differ from the amounts estimated requiring adjustments to these liabilities in future periods. Due to the uncertainty and potential volatility of the factors contributing to developing estimates, changes in our assumptions could materially affect our results of operations. Sales Incentives The estimated effect of sales incentives offered to dealers and end customers is recorded as a reduction of Automotive net sales and revenue at the time of sale. There may be numerous types of incentives available at any particular time. Incentive programs are generally specific to brand, model or sales region and are for specified time periods, which may be extended. Significant factors used in estimating the cost of incentives include type of program, forecasted sales volume, product mix, and the rate of customer acceptance of incentive programs, all of which are estimated based on historical experience and assumptions concerning future customer behavior and market conditions. A change in any of these factors affecting the estimate could have a significant effect on recorded sales incentives. A 10% increase in the cost of incentives would increase the sales incentive liability by an insignificant amount. Subsequent adjustments to incentive estimates are possible as facts and circumstances change over time, which could affect the revenue previously recognized in Automotive net sales and revenue. 42 --------------------------------------------------------------------------------
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GM Financial Allowance for Loan Losses The GM Financial retail finance
receivables portfolio consists of smaller-balance, homogeneous loans that are
carried at amortized cost, net of allowance for loan losses. The allowance for
loan losses on retail finance receivables reflects net credit losses expected to
be incurred over the remaining life of the retail finance receivables, which
have a weighted average remaining life of approximately two years. GM Financial
forecasts net credit losses based on relevant information about past events,
current conditions and forecast economic performance. GM Financial believes that
the allowance is adequate to cover expected credit losses on the retail finance
receivables; however, because the allowance for loan losses is based on
estimates, there can be no assurance that the ultimate charge-off amount will
not exceed such estimates or that our credit loss assumptions will not increase.
GM Financial incorporates its outlook on forecast recovery rates and overall
economic performance in its allowance estimate. Each 5% relative
decrease/increase in the forecast recovery rates would increase/decrease the
allowance for loan losses by $0.1 billion .
At December 31, 2022 , the weightings applied to the economic forecast scenarios
considered resulted in an allowance for loan losses on the retail finance
receivables portfolio of $2.1 billion . If the forecast economic conditions were
based entirely on the weakest scenario considered, the allowance for loan losses
would increase by $74 million . Actual economic data and recovery rates that are
lower than those forecasted by GM Financial could result in an increase to the
allowance for loan losses.
The GM Financial commercial finance receivables portfolio consists of floorplan
financing as well as dealer loans, which are loans to finance improvements to
dealership facilities, to provide working capital, or to purchase and/or finance
dealership real estate. The allowance for loan losses on commercial finance
receivables is based on historical loss experience for the consolidated
portfolio, in addition to forecasted industry vehicle sales. There can be no
assurance that the ultimate charge-off amount will not exceed such estimates or
that GM Financial's credit loss assumptions will not increase.
Valuation of GM Financial Equipment on Operating Lease Assets and Residuals GM
Financial has investments in leased vehicles recorded as operating leases. Each
leased asset in the portfolio represents a vehicle that GM Financial owns and
has leased to a customer. At lease inception, an estimate is made of the
expected residual value for the vehicle at the end of the lease term, which
typically ranges from two to five years. GM Financial estimates the expected
residual value based on third-party data that considers various data points and
assumptions, including, but not limited to, recent auction values, the expected
future volume of returning leased vehicles, significant liquidation of rental or
fleet inventory, used vehicle prices, manufacturer incentive programs and fuel
prices.
During the term of a lease, GM Financial periodically evaluates the estimated
residual value and may adjust the value downward, which increases the
prospective depreciation, or upward (limited to the contractual residual value),
which decreases the prospective depreciation.
The customer is obligated to make payments during the lease term for the
difference between the purchase price and the contract residual value plus a
money factor. However, since the customer is not obligated to purchase the
vehicle at the end of the contract, GM Financial is exposed to a risk of loss to
the extent the customer returns the vehicle prior to or at the end of the lease
term and the proceeds GM Financial receives on the disposition of the vehicle
are lower than the residual value estimated at lease inception. Realization of
the residual values is dependent on GM Financial's future ability to market the
vehicles under prevailing market conditions.
At December 31, 2022 , the estimated residual value of GM Financial's leased
vehicles was $24.7 billion . Depreciation reduces the carrying value of each
leased asset in GM Financial's operating lease portfolio over time from its
original acquisition value to its expected residual value at the end of the
lease term. If used vehicle prices weaken compared to estimates, GM Financial
would increase depreciation expense and/or record an impairment charge on the
lease portfolio. If an impairment exists, GM Financial would determine any
shortfall in recoverability of the leased vehicle asset groups by year, make and
model. Recoverability is calculated as the excess of: (1) the sum of remaining
lease payments plus estimated residual value; over (2) leased vehicles, net less
deferred revenue. Alternatively, if used vehicle prices outperform GM
Financial's latest estimates, it may record gains on sales of off-lease vehicles
and/or decreased depreciation expense.
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The following table illustrates the effect of a 1% relative change in the
estimated residual values at December 31, 2022 , which could increase or decrease
depreciation expense over the remaining term of the leased vehicle portfolio,
holding all other assumptions constant (dollars in millions):
Impact to Depreciation Expense
2023 $ 181
2024 52
2025 13
2026 and thereafter 1
Total $ 247
Changes to residual values are rarely simultaneous across all maturities and
segments, and also may impact return rates. If a decrease in residual values is
concentrated among specific asset groups, the decrease could result in an
immediate impairment charge. GM Financial reviewed the leased vehicle portfolio
for indicators of impairment and determined that no impairment indicators were
present at December 31, 2022 and 2021.
Used vehicle prices decreased since the end of 2021 due to normalization of supply and demand; however, prices remain above pre-pandemic levels. In 2023, GM Financial expects used vehicle prices to continue moderating through the year.
Pension and OPEB Plans Our defined benefit pension plans are accounted for on an actuarial basis, which requires the selection of various assumptions, including an expected long-term rate of return on plan assets, a discount rate, mortality rates of participants and expectation of mortality improvement. Our pension obligations include Korean statutory pension payments that are valued on a walk away basis. The expected long-term rate of return onU.S. plan assets that is utilized in determining pension expense is derived from periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks using standard deviations and correlations of returns among the asset classes that comprise the plans' asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. InDecember 2022 , an investment policy study was completed for theU.S. pension plans. As a result of changes to our capital market assumptions, the weighted-average long-term rate of return on assets increased from 5.4% atDecember 31, 2021 to 6.3% atDecember 31, 2022 . The expected long-term rate of return on plan assets used in determining pension expense for non-U.S. plans is determined in a similar manner to theU.S. plans. Another key assumption in determining net pension and OPEB expense is the assumed discount rate used to discount plan obligations. We estimate the assumed discount rate forU.S. plans using a cash flow matching approach, which uses projected cash flows matched to spot rates along a high quality corporate bond yield curve to determine the weighted-average discount rate for the calculation of the present value of cash flows. We apply the individual annual yield curve rates instead of the assumed discount rate to determine the service cost and interest cost, which more specifically links the cash flows related to service cost and interest cost to bonds maturing in their year of payment.The Society of Actuaries (SOA) issued mortality improvement tables in the three months endedDecember 31, 2022 . We reviewed our recent mortality experience and we determined our current mortality assumptions are appropriate to measure ourU.S. pension and OPEB plans obligations as ofDecember 31, 2022 . Significant differences in actual experience or significant changes in assumptions may materially affect the pension obligations. The effects of actual results differing from assumptions and the changing of assumptions are included in unamortized net actuarial gains and losses that are subject to amortization to pension expense over future periods. The unamortized pre-tax actuarial loss on our pension plans was$3.3 billion and$3.7 billion atDecember 31, 2022 and 2021. The year-over-year change is primarily due to an increase in discount rates partially offset by lower than expected asset returns. The funded status of theU.S. pension plans improved in the year endedDecember 31, 2022 to$0.1 billion overfunded status from$0.3 billion underfunded status primarily due to: (1) the favorable effect of an increase in discount rates of$11.9 billion ; and (2) changes in actuarial assumptions, demographic data updates and contributions of$0.3 billion ; partially offset by (3) the unfavorable effect of negative actual returns on plan assets of$10.3 billion ; and (4) service and interest costs of$1.5 billion . 44 --------------------------------------------------------------------------------
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GENERAL MOTORS COMPANY AND SUBSIDIARIESThe following table illustrates the sensitivity to a change in certain assumptions for the pension plans, holding all other assumptions constant:
U.S. Plans(a) Non-U.S. Plans(a)
Effect on
Effect on 2023 December 31, Effect on 2023 Effect on December
Pension Expense 2022 PBO Pension Expense 31, 2022 PBO
25 basis point decrease in discount rate -$48 +$918 -$4 +$296
25 basis point increase in discount rate +$32 -$885 +$9 -$284
25 basis point decrease in expected rate of
return on assets +$116 N/A +$25 N/A
25 basis point increase in expected rate of
return on assets -$116 N/A -$25 N/A
__________(a)The sensitivity does not include the effects of the individual annual yield curve rates applied for the calculation of the service and interest cost.
Refer to Note 15 to our consolidated financial statements for additional information on pension contributions, investment strategies, assumptions, the change in benefit obligations and related plan assets, pension funding requirements and future net benefit payments. Refer to Note 2 to our consolidated financial statements for a discussion of the inputs used to determine fair value for each significant asset class or category.
Valuation of Deferred Tax Assets The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and also considers all available positive and negative evidence factors. Our accounting for the valuation of deferred tax assets represents our best estimate of future events. Changes in our current estimates, due to unanticipated market conditions, governmental legislative actions or events, could have a material effect on our ability to utilize deferred tax assets. Refer to Note 17 to our consolidated financial statements for additional information on the composition of valuation allowances. Forward-Looking Statements This report and the other reports filed by us with theSEC from time to time, as well as statements incorporated by reference herein and related comments by our management, may include "forward-looking statements" within the meaning of theU.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements represent our current judgment about possible future events and are often identified by words like "aim," "anticipate," "appears," "approximately," "believe," "continue," "could," "designed," "effect," "estimate," "evaluate," "expect," "forecast," "goal," "initiative," "intend," "may," "objective," "outlook," "plan," "potential," "priorities," "project," "pursue," "seek," "should," "target," "when," "will," "would," or the negative of any of those words or similar expressions. In making these statements, we rely on assumptions and analysis based on our experience and perception of historical trends, current conditions and expected future developments as well as other factors we consider appropriate under the circumstances. We believe these judgments are reasonable, but these statements are not guarantees of any future events or financial results, and our actual results may differ materially due to a variety of important factors, many of which are beyond our control. These factors, which may be revised or supplemented in subsequent reports we file with theSEC , include, among others, the following: (1) our ability to deliver new products, services, technologies and customer experiences in response to increased competition and changing consumer preferences in the automotive industry; (2) our ability to timely fund and introduce new and improved vehicle models, including electric vehicles, that are able to attract a sufficient number of consumers; (3) our ability to profitably deliver a broad portfolio of electric vehicles that will help drive consumer adoption; (4) the success of our current line of full-size SUVs and full-size pickup trucks; (5) our highly competitive industry, which has been historically characterized by excess manufacturing capacity and the use of incentives, and the introduction of new and improved vehicle models by our competitors; (6) the unique technological, operational, regulatory and competitive risks related to the timing and commercialization of autonomous vehicles; (7) risks associated with climate change, including increased regulation of GHG emissions, our transition to electric vehicles and the potential increased impacts of severe weather events; (8) global automobile market sales volume, which can be volatile; (9) inflationary pressures and persistently high prices and uncertain availability of raw materials and commodities used by us and our suppliers, and instability in logistics and related costs; (10) our business inChina , which is subject to unique operational, competitive, regulatory and economic risks; (11) the success of our ongoing strategic business relationships and of our joint ventures, which we cannot operate solely for our benefit and over which we may have limited control; (12) the international scale and footprint of our operations, which exposes us to a variety of unique political, economic, competitive and regulatory risks, including the risk of changes in government leadership 45 --------------------------------------------------------------------------------
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and laws (including labor, trade, tax and other laws), political uncertainty or
instability and economic tensions between governments and changes in
international trade policies, new barriers to entry and changes to or
withdrawals from free trade agreements, changes in foreign exchange rates and
interest rates, economic downturns in the countries in which we operate,
differing local product preferences and product requirements, changes to and
compliance with U.S. and foreign countries' export controls and economic
sanctions, differing labor regulations, requirements and union relationships,
differing dealer and franchise regulations and relationships, difficulties in
obtaining financing in foreign countries, and public health crises, including
the occurrence of a contagious disease or illness, such as the COVID-19
pandemic; (13) any significant disruption, including any work stoppages, at any
of our manufacturing facilities; (14) the ability of our suppliers to deliver
parts, systems and components without disruption and at such times to allow us
to meet production schedules; (15) pandemics, epidemics, disease outbreaks and
other public health crises, including the COVID-19 pandemic; (16) the
possibility that competitors may independently develop products and services
similar to ours, or that our intellectual property rights are not sufficient to
prevent competitors from developing or selling those products or services; (17)
our ability to manage risks related to security breaches and other disruptions
to our information technology systems and networked products, including
connected vehicles and in-vehicle systems; (18) our ability to comply with
increasingly complex, restrictive and punitive regulations relating to our
enterprise data practices, including the collection, use, sharing and security
of the Personal Identifiable Information of our customers, employees, or
suppliers; (19) our ability to comply with extensive laws, regulations and
policies applicable to our operations and products, including those relating to
fuel economy, emissions and autonomous vehicles; (20) costs and risks associated
with litigation and government investigations; (21) the costs and effect on our
reputation of product safety recalls and alleged defects in products and
services; (22) any additional tax expense or exposure or failure to fully
realize available tax incentives; (23) our continued ability to develop captive
financing capability through GM Financial; and (24) any significant increase in
our pension funding requirements. For a further discussion of these and other
risks and uncertainties, refer to Part I, Item 1A. Risk Factors.
We caution readers not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors, except where we are expressly required to do so by law.
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