GENERAL MOTORS COMPANY Basis of Presentation This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the accompanying condensed consolidated financial statements and the notes thereto, and the audited consolidated financial statements and notes thereto included in our 2019 Form 10-K. 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 1, Item 1A. Risk Factors of our 2019 Form 10-K for a discussion of these risks and uncertainties. Except for per share amounts or as otherwise specified, dollar amounts presented within tables are stated in millions. Non-GAAP Measures Our non-GAAP measures include: EBIT-adjusted, presented net of noncontrolling interests; EBT-adjusted for our GM Financial segment; 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. 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; costs arising from the ignition switch recall and related legal matters; and certain currency devaluations associated with hyperinflationary economies. 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 theU.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 OPEB liabilities; and average automotive net income tax assets during the same period. 29
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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.
The following table reconciles Net income (loss) attributable to stockholders
under
Three Months Ended
September 30, June 30, March 31, December 31,
2020 2019 2020 2019 2020 2019 2019 2018
Net income (loss) attributable to stockholders$ 4,045 $ 2,351 $ (758)
271 (112) 524 357 137 (163) (611)
Automotive interest expense 327 206 303 195 193 181 200
185
Automotive interest income (51) (129) (61) (106) (83) (98) (96) (117) Adjustments GMI restructuring(a) 76 - 92 - 489 - - - Transformation activities(b) - 390 - 361 - 790 194 1,327 GMBrazil indirect tax recoveries(c) - (123) - (380) - (857) - - FAW-GM divestiture(d) - - - - - - 164 - Total adjustments 76 267 92 (19) 489 (67) 358 1,327 EBIT (loss)-adjusted$ 5,284 $ 2,966 $ (536)
$ 3,012 $ 1,250 $ 2,310 $ 105 $ 2,828 _________ (a)These adjustments were 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. These adjustments primarily consist of supplier claims in the three months endedSeptember 30, 2020 , inventory provisions in the three months endedJune 30, 2020 and asset impairments, dealer restructurings, employee separation charges and sales allowances in the three months endedMarch 31, 2020 inAustralia ,New Zealand andThailand . (b)These adjustments were excluded because of a strategic decision to accelerate our transformation for the future to strengthen our core business, capitalize on the future of personal mobility and drive significant cost efficiencies. The adjustments primarily consist of supplier-related charges and pension curtailment and other charges in the three months endedSeptember 30, 2019 , supplier-related charges and accelerated depreciation in the three months endedJune 30, 2019 , accelerated depreciation in the three months endedMarch 31, 2019 , accelerated depreciation and employee separation charges in the three months endedDecember 31, 2019 and employee separation charges and accelerated depreciation in the three months endedDecember 31, 2018 . (c)These adjustments were excluded because of the unique events associated with decisions rendered by theSuperior Judicial Court of Brazil resulting in retrospective recoveries of indirect taxes. (d)This adjustment was excluded because we divested our joint ventureFAW-GM Light Duty Commercial Vehicle Co., Ltd. (FAW-GM), as a result of a strategic decision by both shareholders, allowing us to focus our resources on opportunities expected to deliver higher returns. 30
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The following table reconciles diluted earnings per common share under
Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Amount Per Share Amount Per Share Amount Per Share Amount Per Share
Diluted earnings per common share $ 4,005 $ 2.78 $ 2,313 $ 1.60 $ 3,446 $ 2.40 $ 6,813 $ 4.74
Adjustments(a) 76 0.05 267 0.18 657 0.46 181 0.12
Tax effect on adjustment(b) (14) - (93) (0.06) (82) (0.06) (134) (0.09)
Tax adjustment(c) - - - - 236 0.16 - -
EPS-diluted-adjusted $ 4,067 $ 2.83 $ 2,487 $ 1.72 $ 4,257 $ 2.96 $ 6,860 $ 4.77
________
(a)Refer to the reconciliation of Net income (loss) attributable to stockholders
under U.S. GAAP to EBIT (loss)-adjusted within this section of MD&A for the
details of each individual adjustment.
(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)This 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.
The following table reconciles our effective tax rate under U.S. GAAP to
ETR-adjusted:
Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Income before Income tax Effective tax Income before Income tax Effective tax
Income before Income tax Effective tax Income before Income tax Effective tax
income taxes expense rate income taxes expense rate income taxes expense rate income taxes expense rate
Effective tax rate $ 4,905 $ 887 18.1 % $ 2,582 $ 271 10.5 % $ 4,656 $ 1,132 24.3 % $ 7,791 $ 932 12.0 %
Adjustments(a) 76 14 268 93 657 82 185 134
Tax adjustment(b) - - (236) -
ETR-adjusted $ 4,981 $ 901 18.1 % $ 2,850 $ 364 12.8 % $ 5,313 $ 978 18.4 % $ 7,976 $ 1,066 13.4 %
________
(a)Refer to the reconciliation of Net income (loss) attributable to stockholders
under U.S. GAAP to EBIT (loss)-adjusted within this section of MD&A for
adjustment details. Net income attributable to noncontrolling interests included
for these adjustments is insignificant in the three and nine months ended
September 30, 2019 . 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 under U.S.
GAAP to EPS-diluted-adjusted within this section of MD&A for adjustment details.
We define return on equity (ROE) as Net income (loss) 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):
Four Quarters Ended
September 30, 2020 September 30, 2019
Net income (loss) attributable to stockholders $ 3.4 $ 9.0
Average equity(a) $ 42.5 $ 42.8
ROE 8.0 % 20.9 %
__________(a)Includes equity of noncontrolling interests where the corresponding earnings (loss) are included in Net income (loss) attributable to stockholders.
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The following table summarizes the calculation of ROIC-adjusted (dollars in
billions):
Four Quarters Ended
September 30, 2020 September 30, 2019
EBIT (loss)-adjusted(a) $ 6.1 $ 11.1
Average equity(b) $ 42.5 $ 42.8Add: Average automotive debt and interest liabilities (excluding finance leases)
27.0 14.8
Add: Average automotive net pension & OPEB liability 17.4 16.5
Less: Average automotive and other net income tax asset (24.1) (23.3)
ROIC-adjusted average net assets $ 62.8 $ 50.8
ROIC-adjusted 9.7 % 21.9 %
__________
(a)Refer to the reconciliation of Net income (loss) attributable to stockholders
under U.S. GAAP to EBIT (loss)-adjusted within this section of MD&A.
(b)Includes equity of noncontrolling interests where the corresponding earnings
(loss) are included in EBIT (loss)-adjusted.
Overview Our management team has adopted a strategic plan to transform GM into
the world's most valued automotive company. Our plan includes several major
initiatives that we anticipate will redefine the future of personal mobility and
advance our vision of zero crashes, zero emissions, zero congestion while also
strengthening the core of our business: earning customers for life by delivering
winning vehicles, leading the industry in quality and safety and improving the
customer ownership experience; leading in technology and innovation, including
electrification, autonomous vehicles and data connectivity; growing our brands;
making tough, strategic decisions about the markets and products in which we
will invest and compete; building profitable adjacent businesses; and targeting
10% core margins on an EBIT-adjusted basis.
The COVID-19 pandemic and government actions and measures taken to prevent its
spread continue to affect our operations. In response to COVID-19, we previously
suspended the majority of our global manufacturing operations and our Automotive
China JVs' manufacturing operations. By May 2020 , we had resumed our global
manufacturing operations. Government-imposed restrictions on businesses,
operations and travel and the related economic uncertainty have impacted demand
for our vehicles in most of our global markets. During the first half of 2020,
we executed a number of austerity measures, including aggressive actions to
reduce costs, such as limiting advertising and other third-party spending,
deferring salaried employee compensation and delaying non-critical projects,
including certain future product programs. The majority of the austerity
measures we put into place will normalize as production normalizes. The extent
of COVID-19's impact on our future operations, liquidity and the demand for our
products will depend upon, among other things, the duration and severity of the
outbreak or subsequent outbreaks and related government responses such as
required physical distancing, restrictions on business operations and travel,
the pace of recovery of economic activity and the impact to consumers, all of
which are uncertain and difficult to predict in light of the rapidly evolving
landscape. Refer to Part II, Item 1A. Risk Factors for a full discussion of the
risks associated with the COVID-19 pandemic.
We also face continuing market, operating and regulatory challenges in several
countries across the globe due to, among other factors, weak economic
conditions, competitive pressures, our product portfolio offerings, heightened
emissions standards, labor disruptions, foreign exchange volatility, rising
material prices, evolving trade policy and political uncertainty. Refer to Part
I, Item 1A. Risk Factors of our 2019 Form 10-K for a discussion of these
challenges.
In November 2018 , we announced plans to accelerate steps to improve our overall
business performance, including the reorganization of global product development
staffs, the realignment of manufacturing capacity in response to market-related
volume declines in passenger cars and a reduction of our salaried workforce. We
are on track for these transformation activities to drive between $5.5 billion
and $6.0 billion of annual cash savings by the end of 2020, consisting of $4.0
billion to $4.5 billion in cost savings primarily from reductions in Automotive
and other cost of sales in our condensed consolidated financial statements, with
the remainder in reduced capital expenditures. We previously announced plans to
reduce capital expenditures from approximately $8.5 billion to approximately
$7.0 billion , on a normalized run-rate basis. However, as a result of re-timing
2020 spending due to pandemic related austerity measures and a strategic
decision to accelerate investments in our all-electric future, we expect that
our annual capital expenditures will exceed $7.0 billion through at least 2023.
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.
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GMNA Industry sales in North America were 12.6 million units in the nine months
ended September 30, 2020 , representing a decrease of 20.3% compared to the
corresponding period in 2019. U.S. industry sales were 10.6 million units in the
nine months ended September 30, 2020 , representing a decrease of 19.0% compared
to the corresponding period in 2019. As described above, the COVID-19 pandemic
has resulted in a significant contraction of total North America industry
volumes in 2020. Industry volumes will ultimately depend upon, among other
things, the duration and severity of the outbreak or subsequent outbreaks,
related government responses and economic recovery, all of which are uncertain
and difficult to predict in light of the rapidly evolving landscape. Dealer
inventory remains constrained for several critical vehicles, including our
full-size trucks.
Our total vehicle sales in the U.S. , our largest market in North America ,
totaled 1.8 million units for market share of 16.7% in the nine months ended
September 30, 2020 , representing an increase of 0.3 percentage points compared
to the corresponding period in 2019. We continue to lead the U.S. industry in
market share.
As discussed above, in response to COVID-19, we suspended production across our
manufacturing facilities in March 2020 . By May 2020 , we had resumed critical
manufacturing operations and reached normalized production levels in June 2020 .
We continue to follow physical distancing guidance, enhanced deep cleaning
procedures and provide personal protective equipment to protect our employees.
GMI Industry sales in China were 17.0 million units in the nine months ended
September 30, 2020 , representing a decrease of 7.5% compared to the
corresponding period in 2019. Our total vehicle sales in China were 1.9 million
units for market share of 11.4% in the nine months ended September 30, 2020 ,
representing a decrease of 0.8 percentage points compared to the corresponding
period in 2019. The sales across all brands decreased in the nine months ended
September 30, 2020 , compared to the corresponding period in 2019, primarily
driven by an industry downturn significantly impacted by the COVID-19 pandemic.
We expect both GM and industry sales to continue to recover as the impact of the
COVID-19 pandemic in China subsides; however, the ongoing global macro-economic
impact of COVID-19 and geopolitical tensions may continue to place pressure on
China's automotive industry. Our Automotive China JVs generated equity income of
$0.3 billion in the nine months ended September 30, 2020 . A continuation of
industry weakness and pricing pressures, a more challenging regulatory
environment related to emissions, fuel consumption and new energy vehicles will
continue to place pressure on our operations in China . We will continue to build
upon our strong brands, network, and partnerships in China as well as continue
to drive improvements in vehicle mix and cost.
Outside of China, industry sales were 14.6 million units in the nine months
ended September 30, 2020 , representing a decrease of 24.3% compared to the
corresponding period in 2019, primarily due to the ongoing global macro-economic
impact of COVID-19. Our total vehicle sales outside of China were 0.7 million
units for market share of 4.9% in the nine months ended September 30, 2020 ,
representing an increase of 0.2 percentage points compared to the corresponding
period in 2019.
In the nine months ended September 30, 2020 , restructuring actions in GMI were
related to the wind-down of Holden sales, design and engineering operations in
Australia and New Zealand , with cessation of Holden vehicle sales by 2021, the
execution of definitive agreements with Great Wall Motors to sell our vehicle
and powertrain manufacturing facilities in Thailand , and the wind-down of our
vehicle sales operations in Thailand , targeted for completion by the end of
2020. These actions were taken to strengthen the Company's core business and
focus investment on other opportunities that will derive the greatest returns
for shareholders and support investment in future technologies. We recorded
charges of $0.7 billion in the nine months ended September 30, 2020 and expect
to incur additional charges and net cash outflows of insignificant amounts in
the three months ending December 31, 2020 . We also recorded deferred tax charges
of $0.2 billion in the nine months ended September 30, 2020 . The charges will
primarily be considered special for EBIT-adjusted, EPS-diluted-adjusted and
adjusted automotive free cash flow purposes. We intend to continue to provide
servicing and spare parts to customers for an extended period of time in
Australia , New Zealand and Thailand . Refer to Note 17 to our condensed
consolidated financial statements for additional information related to these
restructuring actions.
Cruise We are actively testing our autonomous vehicles in the
Corporate Mark-to-market equity securities and warrants held by Corporate totaled$0.7 billion atSeptember 30, 2020 , a decrease of$0.8 billion fromDecember 2019 , due to the liquidation of our shares in Lyft and market price fluctuations. Market price changes of our PSA warrants generated unrealized losses of$0.2 billion in the nine months endedSeptember 30, 2020 , compared to gains of$0.2 billion in the corresponding period in 2019. 33
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Vehicle Sales The principal factors that determine consumer vehicle preferences
in the markets in which we operate include overall vehicle design, price,
quality, available options, safety, reliability, fuel economy and functionality.
Market leadership in individual countries in which we compete varies widely.
We present both wholesale and total vehicle sales data to assist in the analysis
of our revenue and our market share. Wholesale vehicle sales data consists of
sales to GM's dealers and distributors as well as sales to the U.S. Government
and excludes vehicles sold by our joint ventures. Wholesale vehicle sales data
correlates to our revenue recognized from the sale of vehicles, which is the
largest component of Automotive net sales and revenue. In the nine months ended
September 30, 2020 , 30.0% of our wholesale vehicle sales volume was generated
outside the U.S. The following table summarizes wholesale vehicle sales by
automotive segment (vehicles in thousands):
Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
GMNA 799 82.7 % 801 77.5 % 1,905 81.0 % 2,530 77.7 %
GMI 166 17.3 % 232 22.5 % 447 19.0 % 727 22.3 %
Total 965 100.0 % 1,033 100.0 % 2,352 100.0 % 3,257 100.0 %
Total vehicle sales data represents: (1) retail sales (i.e., sales to consumers
who purchase new vehicles from dealers or distributors); (2) fleet sales, such
as sales to large and small businesses, governments, and daily rental car
companies; and (3) vehicles used by dealers in their businesses, including
courtesy transportation vehicles. Total vehicle sales data includes all sales by
joint ventures on a total vehicle basis, not based on our percentage ownership
interest in the joint venture. Certain joint venture agreements in China allow
for the contractual right to report vehicle sales of non-GM trademarked vehicles
by those joint ventures, which are included in the total vehicle sales we report
for China. While total vehicle sales data does not correlate directly to the
revenue we recognize during a particular period, we believe it is indicative of
the underlying demand for our vehicles. Total vehicle sales data represents
management's good faith estimate based on sales reported by GM's dealers,
distributors, and joint ventures, commercially available data sources such as
registration and insurance data, and internal estimates and forecasts when other
data is not available.
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The following table summarizes industry and
Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
Market Market Market Market
Industry GM Share Industry GM Share Industry GM Share Industry GM Share
North America
United States 4,015 665 16.6 % 4,449 739 16.6 % 10,629 1,776 16.7 % 13,117 2,151 16.4 %
Other 807 100 12.4 % 938 124 13.3 % 2,017 273 13.5 % 2,752 363 13.2 %
Total North America 4,822 765 15.9 % 5,387 863 16.0 % 12,646 2,049 16.2 % 15,869 2,514 15.8 %
Asia/Pacific , Middle East
and Africa
China (a) 6,668 771 11.6 % 5,707 690 12.1 % 17,005 1,947 11.4 % 18,385 2,257 12.3 %
Other 4,558 134 2.9 % 5,224 138 2.6 % 12,504 408 3.3 % 16,111 417 2.6 %
Total Asia/Pacific , Middle
East and Africa 11,226 905 8.1 % 10,931 828 7.6 % 29,509 2,355 8.0 % 34,496 2,674 7.7 %
South America
Brazil 565 89 15.7 % 721 124 17.2 % 1,374 223 16.2 % 2,029 346 17.0 %
Other 293 34 11.7 % 411 52 12.6 % 739 89 12.1 % 1,180 147 12.5 %
Total South America 858 123 14.3 % 1,132 176 15.5 % 2,113 312 14.8 % 3,209 493 15.4 %
Total in GM markets 16,906 1,793 10.6 % 17,450 1,867 10.7 % 44,268 4,716 10.7 % 53,574 5,681 10.6 %
Total Europe 4,298 - - % 4,396 1 - % 10,609 - - % 14,477 3 - %
Total Worldwide(b) 21,204 1,793 8.5 % 21,846 1,868 8.5 % 54,877 4,716 8.6 % 68,051 5,684 8.4 %
United States
Cars 887 62 7.0 % 1,137 83 7.3 % 2,447 171 7.0 % 3,579 306 8.6 %
Trucks 1,071 319 29.8 % 1,163 357 30.7 % 2,867 864 30.1 % 3,314 986 29.8 %
Crossovers 2,057 284 13.8 % 2,149 299 13.9 % 5,315 741 13.9 % 6,224 859 13.8 %
Total United States 4,015 665 16.6 % 4,449 739 16.6 % 10,629 1,776 16.7 % 13,117 2,151 16.4 %
China(a)
SGMS 395 348 952 1,102
SGMW 376 342 995 1,155
Total China 6,668 771 11.6 % 5,707 690 12.1 % 17,005 1,947 11.4 % 18,385 2,257 12.3 %
__________
(a)Includes sales by the Automotive China JVs: SAIC General Motors Sales Co.,
Ltd. (SGMS) and SAIC GM Wuling Automobile Co., Ltd. (SGMW).
(b)Cuba , Iran , North Korea , Sudan and Syria are subject to broad economic
sanctions. Accordingly these countries are excluded from industry sales data and
corresponding calculation of market share.
In the nine months ended
As discussed above, total vehicle sales and market share data provided in the
table above includes fleet vehicles. Certain fleet transactions, particularly
sales to daily rental car companies, are generally less profitable than retail
sales to end customers. The following table summarizes estimated fleet sales and
those sales as a percentage of total vehicle sales (vehicles in thousands):
Three Months Ended Nine Months Ended
September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019
GMNA 94 173 363 570
GMI 93 120 219 339
Total fleet sales 187 293 582 909
Fleet sales as a percentage of total
vehicle sales 10.4 % 15.7 % 12.3 % 16.0 %
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GM Financial 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 fluctuated during
the nine months ended September 30, 2020 . After decreasing in March and April,
used vehicle sales volume and pricing steadily rebounded through August,
primarily due to low new vehicle inventory and strong demand for used vehicles.
GM Financial currently expects used vehicle prices will increase for the full
year 2020 compared to 2019 by an amount in the low-single digits on a percentage
basis. Used vehicle prices may face pressure in 2021 relative to 2020 driven by
normalizing new vehicle inventory, rising used vehicle supply primarily due to
an increase in trade-in activity and off-lease vehicles, and ongoing economic
uncertainty resulting in an outlook for a decline in used vehicle prices of
mid-single digits on a percentage basis. As of March 31, 2020 , following the
onset of the COVID-19 pandemic, GM Financial updated residual value estimates
based upon weak used vehicle market forecasts and increased the depreciation
rate for the remaining term of the leased vehicles portfolio. GM Financial
recorded gains on termination of leased vehicles of $0.7 billion and $0.9
billion in GM Financial interest, operating and other expenses in the three and
nine months ended September 30, 2020 , compared to gains of $0.3 billion and $0.6
billion in the corresponding periods in 2019, primarily due to unexpected
strength in used vehicle prices as well as lower net book values from increased
depreciation rates. GM Financial updated residual value estimates as of
September 30, 2020 , and is decreasing the depreciation rate for the remaining
term of its leased vehicle portfolio. If used vehicle prices outperform GM
Financial's latest estimates, it may record gains on sales of off-lease vehicles
due to lower net book values and/or further decrease depreciation expense in
future quarters. Likewise, if used vehicle prices weaken compared to estimates,
GM Financial may record losses on sales of off-lease vehicles due to higher net
book values and/or increase depreciation expense in future quarters. 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):
September 30, 2020 December 31, 2019
Residual Residual
Value Units Percentage Value Units Percentage
Crossovers $ 16,177 971 65.0 % $ 15,950 972 60.5 %
Trucks 7,129 272 18.2 % 7,256 288 18.0 %
SUVs 3,401 94 6.3 % 3,917 108 6.7 %
Cars 2,187 158 10.5 % 3,276 238 14.8 %
Total $ 28,894 1,495 100.0 % $ 30,399 1,606 100.0 %
GM Financial's penetration of our retail sales in the U.S. increased to 46% in
the nine months ended September 30, 2020 from 45% in the corresponding period in
2019. 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 increased to 74% in the nine months ended September 30, 2020
from 70% in the nine months ended September 30, 2019 . In the nine months ended
September 30, 2020 , GM Financial's revenue consisted of leased vehicle income of
69%, retail finance charge income of 26% 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. Due to the impact of the COVID-19 pandemic, the
relationship between revenues and costs in the three and nine months ended
September 30, 2020 may not be indicative of results for the remainder of 2020.
Refer to the regional sections of this MD&A for additional information.
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Total
Three Months Ended Variance Due To
September 30, September 30, Favorable/
2020 2019 (Unfavorable) % Volume Mix Price Other
(Dollars in billions)
GMNA $ 29,128 $ 27,971 $ 1,157 4.1 % $ (0.1) $ 0.6 $ 0.6 $ -
GMI 2,735 3,794 (1,059) (27.9) % $ (0.9) $ 0.2 $ 0.2 $ (0.6) Corporate 203 52 151 n.m.$ 0.2 Automotive 32,066 31,817 249 0.8 %$ (1.0) $ 0.8 $ 0.7 $ (0.4) Cruise 26 25 1 4.0 % $ - GM Financial 3,421 3,659 (238) (6.5) %$ (0.2) Eliminations/reclassifications (33) (28) (5) (17.9) % $ -
Total net sales and revenue
$ 7 - %$ (1.0) $ 0.8 $ 0.7 $ (0.6) ________ n.m. = not meaningful Nine Months Ended Variance Due To September 30, September 30, Favorable/ 2020 2019 (Unfavorable) % Volume Mix Price Other (Dollars in billions) GMNA$ 66,563 $ 83,660 $ (17,097) (20.4) %$ (18.6) $ 0.5 $ 1.5 $ (0.5) GMI 7,692 11,691 (3,999) (34.2) %$ (3.7) $ 0.8 $ 0.2 $ (1.3) Corporate 321 152 169 n.m.$ 0.2 Automotive 74,576 95,503 (20,927) (21.9) %$ (22.3) $ 1.2 $ 1.7 $ (1.6) Cruise 79 75 4 5.3 % $ - GM Financial 10,405 10,918 (513) (4.7) %$ (0.5) Eliminations/reclassifications (93) (85) (8) (9.4) % $ - $ -
Total net sales and revenue
$ (21,444) (20.2) %$ (22.3) $ 1.2 $ 1.7 $ (2.1) ________ n.m. = not meaningful 37
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Automotive and Other Cost of Sales
Three Months Ended Variance Due To
September 30, September 30, Favorable/
2020 2019 (Unfavorable) % Volume Mix Cost Other
(Dollars in billions)
GMNA $ 24,021 $ 24,089 $ 68 0.3 % $ 0.1 $ (0.8) $ 0.8 $ -
GMI 2,859 3,814 955 25.0 % $ 0.8 $ (0.2) $ (0.1) $ 0.4
Corporate 100 16 (84) n.m. $ (0.1) $ -
Cruise 190 256 66 25.8 % $ 0.1
Eliminations (1) (1) - - %
Total automotive and
other cost of sales $ 27,169 $ 28,174 $ 1,005 3.6 % $ 0.8 $ (1.0) $ 0.7 $ 0.4
________
n.m. = not meaningful
Nine Months Ended Variance Due To
September 30, September 30, Favorable/
2020 2019 (Unfavorable) % Volume Mix Cost Other
(Dollars in billions)
GMNA $ 57,739 $ 73,431 $ 15,692 21.4 % $ 13.6 $ (1.0) $ 3.2 $ (0.1)
GMI 8,757 10,476 1,719 16.4 % $ 3.3 $ (0.7) $ (1.6) $ 0.7
Corporate 283 83 (200) n.m. $ (0.2) $ -
Cruise 561 743 182 24.5 % $ 0.2
Eliminations (1) (3) (2) (66.7) % $ - $ -
Total automotive and
other cost of sales $ 67,339 $ 84,730 $ 17,391 20.5 % $ 16.9 $ (1.7) $ 1.6 $ 0.6
________
n.m. = not meaningful
In the three months ended September 30, 2020 , favorable Cost was primarily due
to: (1) favorable cost of $0.6 billion primarily due to the impact of COVID-19,
inclusive of austerity measures as well as cost savings associated with
transformation activities; (2) a decrease in campaigns and other
warranty-related costs of $0.3 billion ; and (3) charges of $0.3 billion
primarily in supplier-related charges resulting from transformation activities
in 2019; partially offset by (4) increased material costs of $0.3 billion . In
the three months ended September 30, 2020 , favorable Other was due to the
foreign currency effect resulting from the weakening of the Brazilian Real and
other currencies against the U.S. Dollar.
In the nine months ended September 30, 2020 , favorable Cost was primarily due
to: (1) favorable cost of $1.6 billion primarily due to the impact of COVID-19,
inclusive of the suspension of production and austerity measures as well as cost
savings associated with transformation activities; (2) charges of $1.4 billion
primarily related to accelerated depreciation and supplier-related charges
resulting from transformation activities in 2019; (3) decreased costs of $0.3
billion related to parts and accessories sales; and (4) a decrease in campaigns
and other warranty-related costs of $0.3 billion ; partially offset by (5) a
benefit of $1.4 billion related to the retrospective recoveries of indirect
taxes in Brazil in 2019; and (6) charges of $0.6 billion primarily related to
dealer restructuring charges, property and intangible asset impairments and
inventory provisions in Australia , Thailand and New Zealand . In the nine months
ended September 30, 2020 , favorable Other was due to the foreign currency effect
resulting from the weakening of the Brazilian Real and other currencies against
the U.S. Dollar.
Automotive and other selling, general and administrative expense
Three Months Ended Nine Months Ended
September 30, Favorable/ September 30, September 30, Favorable/
September 30, 2020 2019 (Unfavorable) % 2020 2019 (Unfavorable) %
Automotive and other selling,
general and administrative expense $ 1,628 $ 2,008 $ 380 18.9 % $ 4,908 $ 6,209 $ 1,301 21.0 %
38
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In the three months ended September 30, 2020 , Automotive and other selling,
general and administrative expense decreased due to decreased advertising and
other costs of $0.4 billion primarily related to the impact of COVID-19,
inclusive of austerity measures and cost savings associated with transformation
activities.
In the nine months ended September 30, 2020 , Automotive and other selling,
general and administrative expense decreased due to decreased advertising and
other costs of $1.3 billion primarily related to the impact of COVID-19,
inclusive of austerity measures and cost savings associated with transformation
activities.
Interest Income and Other Non-operating Income, net
Three Months Ended Nine Months Ended
September 30, September 30, Favorable/ September 30, September 30, Favorable/
2020 2019 (Unfavorable) % 2020 2019 (Unfavorable) %
Interest income and other
non-operating income, net $ 499 $ 169 $ 330 n.m. $ 1,223 $ 1,338 $ (115) (8.6) %
________
n.m. = not meaningful
In the three months ended
In the nine months ended
The following table summarizes gains (losses) related to our investment in Lyft
and PSA warrants:
Three Months Ended Nine Months Ended
September 30, September 30, Favorable/ September 30, Favorable/
2020 2019 (Unfavorable) September 30, 2020 2019 (Unfavorable)
Gains (losses) related to
Lyft $ - $ (332) $ 332 $ 10 $ (112) $ 122
Gains (losses) related to PSA
warrants 76 51 25 (227) 222 (449)
Total gains (losses) on
investments $ 76 $ (281) $ 357 $ (217) $ 110 $ (327)
Income Tax Expense
Three Months Ended Nine Months Ended
September 30, September 30, Favorable/ September 30, Favorable/
2020 2019 (Unfavorable) % September 30, 2020 2019 (Unfavorable) %
Income tax expense $ 887 $ 271 $ (616) n.m. $ 1,132 $ 932 $ (200) (21.5) %
________
n.m. = not meaningful
In the three months ended
In the nine months endedSeptember 30, 2020 , Income tax expense increased primarily due to changes in valuation allowance, the absence ofU.S. benefits from foreign activity and several other insignificant items, partially offset by a decrease in pre-tax income.
For the three and nine months ended
Refer to Note 16 to our condensed consolidated financial statements for additional information related to Income tax expense.
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GM North America
Three Months Ended Variance Due To
September 30, September 30, Favorable /
2020 2019 (Unfavorable) % Volume Mix Price Cost Other
(Dollars in billions)
Total net sales and revenue $ 29,128 $ 27,971 $ 1,157 4.1 % $ (0.1) $ 0.6 $ 0.6 $ -
EBIT-adjusted $ 4,366 $ 3,023 $ 1,343 44.4 % $ - $ (0.2) $ 0.6 $ 1.0 $ -
EBIT-adjusted margin 15.0 % 10.8 % 4.2 %
(Vehicles in thousands)
Wholesale vehicle sales 799 801 (2) (0.2) %
Nine Months Ended Variance Due To
September 30, September 30, Favorable /
2020 2019 (Unfavorable) % Volume Mix Price Cost Other
(Dollars in billions)
Total net sales and revenue $ 66,563 $ 83,660 $ (17,097) (20.4) % $ (18.6) $ 0.5 $ 1.5 $ (0.5)
EBIT-adjusted $ 6,459 $ 7,941 $ (1,482) (18.7) % $ (5.0) $ (0.5) $ 1.5 $ 2.9 $ (0.3)
EBIT-adjusted margin 9.7 % 9.5 % 0.2 %
(Vehicles in thousands)
Wholesale vehicle sales 1,905 2,530 (625) (24.7) % GMNA TotalNet Sales and Revenue In the three months endedSeptember 30, 2020 , Total net sales and revenue increased primarily due to: (1) favorable mix associated with increased sales of full-size pickup trucks and decreased sales of passenger cars, partially offset by decreased sales associated with the launch of our new full-size SUVs; and (2) favorable price primarily due to full-size SUVs. In the nine months endedSeptember 30, 2020 , Total net sales and revenue decreased primarily due to: (1) decreased net wholesale volumes across most vehicle lines as a result of suspending production due to the COVID-19 pandemic, partially offset by lost production volumes associated with the UAW strike in 2019; and (2) unfavorable Other primarily due to decreased sales of parts and accessories and the foreign currency effect resulting from the weakening of the Mexican Peso against theU.S. Dollar; partially offset by (3) favorable price primarily due to full-size SUVs, pickup trucks and crossover vehicles; and (4) favorable mix associated with decreased sales of passenger cars and crossover vehicles, partially offset by decreased sales of full-size SUVs and pickup trucks. GMNA EBIT-Adjusted In the three months endedSeptember 30, 2020 , EBIT-adjusted increased primarily due to: (1) favorable Cost due to savings in manufacturing, advertising, and engineering of$0.6 billion , inclusive of austerity measures in response to the COVID-19 pandemic as well as transformation activities and a decrease in campaigns and other warranty-related costs of$0.3 billion , partially offset by increased material costs of$0.2 billion ; and (2) favorable price. In the nine months endedSeptember 30, 2020 , EBIT-adjusted decreased primarily due to: (1) decreased net wholesale volumes; (2) unfavorable mix associated with decreased sales of full-size SUVs and pickup trucks, partially offset by decreased sales of passenger cars and crossover vehicles; and (3) unfavorable Other primarily due to the foreign currency effect resulting from the weakening of the Mexican Peso against theU.S. Dollar; partially offset by (4) favorable Cost due to savings in advertising, manufacturing, engineering and other administrative and selling of$2.3 billion , inclusive of austerity measures in response to the COVID-19 pandemic as well as transformation activities, increased non-service pension income of$0.3 billion and a decrease in campaigns and other warranty-related costs of$0.3 billion ; and (5) favorable price. 40
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GM International
Three Months Ended Variance Due To
September 30, September Favorable /
2020 30, 2019 (Unfavorable) % Volume Mix Price Cost Other
(Dollars
in billions)
Total net sales and revenue
(27.9) % $ (0.9) $ 0.2 $ 0.2 $ (0.6) EBIT (loss)-adjusted
75 n.m. $ (0.1) $ 0.1 $ 0.2 $ - $ (0.1)
EBIT (loss)-adjusted margin 0.4 % (1.7) % 2.1 %
Equity income - Automotive
China $ 262 $ 282 $ (20) (7.1) %
EBIT (loss)-adjusted -
excluding Equity income $ (252) $ (347) $ 95 27.4 %
(Vehicles in thousands)
Wholesale vehicle sales 166 232 (66) (28.4) %
__________
n.m. = not meaningful
Nine Months Ended Variance Due To
September 30, September 30, Favorable /
2020 2019 (Unfavorable) % Volume Mix Price Cost Other
(Dollars in billions)
Total net sales and revenue $ 7,692 $ 11,691 $ (3,999) (34.2) % $ (3.7) $ 0.8 $ 0.2 $ (1.3) EBIT (loss)-adjusted
(729) n.m. $ (0.4) $ 0.1 $ 0.3 $ 0.2 $ (0.8)
EBIT (loss)-adjusted margin (10.5) % (0.7) % (9.8) %
Equity income - Automotive
China $ 264 $ 893 $ (629) (70.4) %
EBIT (loss)-adjusted -
excluding Equity income $ (1,075) $ (975) $ (100) (10.3) %
(Vehicles in thousands)
Wholesale vehicle sales 447 727 (280) (38.5) %
__________
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 (loss)-adjusted above.
GMI TotalNet Sales and Revenue In the three months endedSeptember 30, 2020 , Total net sales and revenue decreased primarily due to: (1) decreased wholesale volumes primarily due to lower industry volumes due to the COVID-19 pandemic primarily inSouth America and theMiddle East and the wind-down of our vehicle sales operations inAustralia ,New Zealand andThailand ; and (2) unfavorable Other primarily due to the foreign currency effect resulting from the weakening of the Brazilian Real and Argentine Peso against theU.S. Dollar and decreased components, parts and accessories sales; partially offset by (3) favorable mix primarily inBrazil , partially offset by unfavorable mix in theMiddle East ; and (4) favorable pricing across multiple vehicle lines inBrazil andArgentina . In the nine months endedSeptember 30, 2020 , Total net sales and revenue decreased primarily due to: (1) decreased wholesale volumes primarily due to lower industry volumes due to the COVID-19 pandemic primarily inSouth America and theMiddle East and lower volumes inAsia/Pacific inclusive of the wind-down of our vehicle sales operations inAustralia ,New Zealand andThailand ; and (2) unfavorable Other primarily due to the foreign currency effect resulting from the weakening of the Brazilian Real, Argentine Peso and other currencies against theU.S. Dollar and decreased components, parts and accessories sales; partially offset by (3) favorable mix primarily inBrazil andKorea , partially offset by unfavorable mix in theMiddle East ; and (4) favorable pricing across multiple vehicle lines inArgentina andBrazil . GMI EBIT (Loss)-Adjusted In the three months endedSeptember 30, 2020 , EBIT-adjusted increased primarily due to: (1) favorable pricing; and (2) favorable mix primarily inBrazil andAsia/Pacific , partially offset by unfavorable mix in theMiddle East ; partially offset by (3) unfavorable volume; and (4) unfavorable Other primarily due to the foreign currency effect resulting from the weakening of the Brazilian Real and other currencies against theU.S. Dollar. 41
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In the nine months ended September 30, 2020 , EBIT (loss)-adjusted increased
primarily due to: (1) unfavorable volume; and (2) unfavorable Other primarily
due to decreased equity income and the foreign currency effect resulting from
the weakening of the Brazilian Real, Argentine Peso and other currencies against
the U.S. Dollar; partially offset by (3) favorable pricing; and (4) favorable
Cost primarily due to decreased advertising.
We view the Chinese market as important to our global growth strategy and are
employing a multi-brand strategy led by our Buick, Chevrolet and Cadillac
brands. 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, with Baojun focusing its expansion in less developed cities and
markets. 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):
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2020 2019 2020 2019
Wholesale vehicle sales, including vehicles
exported to markets outside of China 848 774 1,923 2,361
Total net sales and revenue $ 11,029 $ 9,695 $ 24,589 $ 28,843
Net income $ 535 $ 455 $ 749 $ 1,721
Cruise
Three Months Ended Nine Months Ended
September 30, Favorable / September 30, Favorable /
September 30, 2020 2019 (Unfavorable) % September 30, 2020 2019 (Unfavorable) %
Total net sales and revenue(a) $ 26 $ 25 $ 1 4.0 % $ 79 $ 75 $ 4 5.3 %
EBIT (loss)-adjusted $ (204) $ (251) $ 47 18.7 % $ (627) $ (699) $ 72 10.3 %
__________
(a)Reclassified to Interest income and other non-operating income, net in our
condensed consolidated income statements in the three and nine months ended
Cruise EBIT (Loss)-Adjusted In the three and nine months endedSeptember 30, 2020 , EBIT (loss)-adjusted decreased primarily due to a reduction in development costs as we progress towards the commercialization of a network of on-demand autonomous vehicles in theU.S. , partially offset by an increase in administrative expense. GM Financial Three Months Ended Nine Months Ended September 30, September Increase/ September 30, September 30, Increase/ 2020 30, 2019 (Decrease) % 2020 2019 (Decrease) % Total revenue$ 3,421 $ 3,659 $ (238) (6.5) %$ 10,405 $ 10,918 $ (513) (4.7) % Provision for loan losses$ 31 $ 150 $ (119) (79.3) %$ 824 $ 504 $ 320 63.5 % EBT-adjusted$ 1,207 $ 711 $ 496 69.8 %$ 1,663 $ 1,606 $ 57 3.5 % Average debt outstanding (dollars in billions)$ 90.2 $ 90.5 $ (0.3) (0.4) %$ 91.6 $ 91.8 $ (0.2) (0.2) % Effective rate of interest paid 3.1 % 3.9 % (0.8) % 3.4 % 4.0 % (0.6) %
GM Financial Revenue In the three months ended
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In the nine months ended September 30, 2020 , total revenue decreased primarily
due to decreased leased vehicle income of $0.3 billion primarily due to a
decrease in the leased vehicle portfolio and decreased investment income of $0.1
billion resulting from a decline in benchmark interest rates.
GM Financial EBT-Adjusted In the three months ended September 30, 2020 ,
EBT-adjusted increased primarily due to: (1) decreased leased vehicle expenses
net of leased vehicle income of $0.3 billion primarily due to increased leased
vehicle termination gains, due to outperformance of used vehicle prices compared
to residual value estimates and a decrease in the leased vehicle portfolio; (2)
decreased interest expense of $0.2 billion due to a lower effective rate of
interest on debt resulting from a decline in benchmark interest rates; and (3)
decreased provision for loan losses of $0.1 billion primarily due to an improved
recovery rate forecast, inclusive of new CECL standard impacts.
In the nine months ended September 30, 2020 EBT-adjusted increased primarily due
to: (1) decreased interest expense of $0.4 billion due to a lower effective rate
of interest on debt resulting from a decline in benchmark interest rates; (2)
decreased leased vehicle expenses net of decreased leased vehicle income of $0.1
billion primarily due to increased leased vehicle termination gains and a
decrease in the leased vehicle portfolio; partially offset by (3) increased
provision for loan losses of $0.3 billion primarily due to increased expected
charge-offs as a result of the forecasted economic impact of the COVID-19
pandemic, inclusive of new CECL standard impacts; and (4) decreased investment
income of $0.1 billion .
Liquidity and Capital Resources As described in the "Overview" section of this
MD&A, the COVID-19 pandemic has had a material impact on our financial results
and it may have a material impact on future periods, including our cash flows
from operating activities and liquidity. The extent of COVID-19's impact on our
liquidity will depend upon, among other things, the duration and severity of the
outbreak or subsequent outbreaks and related government responses such as
required physical distancing, restrictions on business operations and travel,
the pace of recovery of economic activity and the impact to consumers, all of
which are uncertain and difficult to predict. Refer to Part II, Item 1A. Risk
Factors for a full discussion of the risks associated with the COVID-19
pandemic.
To preserve financial flexibility in light of the current uncertainty in global
markets resulting from the COVID-19 pandemic, we borrowed $15.9 billion under
our revolving credit facilities, extended a portion of our revolving credit
facilities for an additional year, issued $4.0 billion in senior unsecured notes
and entered into a new unsecured 364-day, $2.0 billion revolving credit
facility. In September 2020 , we repaid $5.2 billion of the $15.9 billion drawn
under the revolving credit facilities and in October 2020 , we repaid an
additional $3.9 billion . We expect to repay the revolver balance by the end of
2020; however, this is dependent on the impact of the COVID-19 pandemic on our
Automotive liquidity. See the "Automotive Liquidity" section of this MD&A for
additional information on these liquidity actions. In response to the
uncertainties created by the pandemic, during the first half of 2020 we executed
a number of austerity measures to reduce costs, such as limiting advertising and
other third-party spending, suspending our dividend on common shares, deferring
salaried employee compensation and delaying non-critical projects, including
certain future product programs. The majority of the austerity measures we put
into place will normalize as production normalizes.
Despite the uncertainty resulting from the COVID-19 pandemic, 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 and future material uses of cash relate to funding near-term
operations through the current economic cycle including: (1) ongoing cash costs
including payments associated with previously announced vehicle recalls, the
settlements of the multi-district litigation and any other recall-related
contingencies, payments to service debt and other long-term obligations,
including repayment of amounts drawn on our revolving credit facilities and
discretionary and mandatory contributions to our pension plans; and (2) capital
expenditures and payments for engineering and product development activities,
which will be significantly less than originally forecasted for 2020 due to our
austerity measures. Our future uses of cash will be focused on the three
objectives of our capital allocation program: (1) reinvest in 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 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.
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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, Part II, Item 1A. Risk Factors in this Form 10-Q and Part I, Item 1A. Risk
Factors of our 2019 Form 10-K, some of which are outside of our control.
Cash flows occur amongst our Automotive, Cruise and GM Financial operations that
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 from GM Financial, dividends issued 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. In response to the COVID-19 pandemic, we took
immediate actions to provide for additional liquidity, including drawing $15.9
billion on our revolving credit facilities and implementing austerity measures.
In May 2020 , we issued $4.0 billion in aggregate principal amount of senior
unsecured notes with a weighted average interest rate of 6.11% and maturity
dates ranging from 2023 to 2027. The notes are governed by a sixth supplemental
indenture and the same base indenture that governs our existing notes, which
contains terms and covenants customary for these types of securities, including
a limitation on the amount of certain secured debt we may incur. The net
proceeds from the issuance of these senior unsecured notes provides additional
financial flexibility and will be used for general corporate purposes. In May
2020 , we also entered into a new unsecured 364-day, $2.0 billion revolving
credit facility as an additional source of available liquidity. In August 2020 ,
we repaid $0.5 billion of floating rate senior unsecured debt upon maturity. In
September 2020 , we repaid $5.2 billion of the $15.9 billion drawn under the
revolving credit facilities and in October 2020 , we repaid an additional $3.9
billion . We expect to repay the revolver balance by the end of 2020; however,
this is dependent on the impact of the COVID-19 pandemic on our Automotive
liquidity. We have changed the management of our liquidity by borrowing on our
credit facilities, changing our investment portfolio composition and taking
significant austerity measures to provide better flexibility in response to
COVID-19; however, we have not significantly changed our investment guidelines
since December 31, 2019 .
We use credit facilities as a mechanism to provide additional flexibility in
managing our global liquidity. We increased our automotive borrowing capacity
under credit facilities from $17.5 billion at December 31, 2019 to $18.5 billion
at September 30, 2020 . At September 30, 2020 , our automotive borrowing capacity
under credit facilities consisted of four revolving credit facilities. These
facilities consist of a three-year, $4.0 billion facility that includes a letter
of credit-sub facility of $1.1 billion , a five-year, $10.5 billion facility, a
three-year, $2.0 billion transformation facility and a new 364-day, $2.0 billion
revolving credit facility entered into in May 2020 . Total borrowing capacity
under our automotive credit facilities does not include a 364-day, $2.0 billion
facility designated for exclusive use by GM Financial.
In April 2020 , we renewed our 364-day, $2.0 billion facility designated for
exclusive use by GM Financial for an additional 364-day term and extended $3.6
billion of the three-year, $4.0 billion facility for an additional year expiring
in April 2022 . The remaining portion will expire in April 2021 , unless extended.
As part of the extension of the three-year, $4.0 billion facility, we have
agreed not to execute any share repurchases until we no longer have outstanding
borrowings under the revolving credit facilities, except for the three-year,
$2.0 billion transformation facility. In addition, we are restricted from paying
dividends on our common shares if outstanding borrowings under the revolving
credit facilities exceed $5.0 billion , with the exception of the three-year,
$2.0 billion transformation facility.
In the nine months ended September 30, 2020 , we borrowed $3.4 billion against
our three-year, $4.0 billion facility, $2.0 billion against our three-year, $2.0
billion transformation facility and $10.5 billion against our five-year, $10.5
billion facility to preserve financial flexibility in response to the current
uncertainty in global markets and the economic environment resulting from the
COVID-19 pandemic. In the three and nine months ended September 30, 2020 , we
repaid $3.2 billion of the three-year, $4.0 billion facility and repaid in full
the three-year, $2.0 billion transformation facility. In October 2020 , we repaid
$3.9 billion of our five-year, $10.5 billion facility. We did not have any
borrowings against our facilities at December 31, 2019 . We had letters of credit
outstanding under our sub-facility of $0.3 billion and $0.2 billion at September
30, 2020 and December 31, 2019 . Refer to Note 11 to our condensed consolidated
financial statements for additional information on the contractual maturities of
our debt obligations.
If available capacity permits, GM Financial has access to our automotive credit
facilities, except for the three-year, $2.0 billion transformation facility and
the new 364-day, $2.0 billion facility. In addition, GM Financial has exclusive
use of the 364-day, $2.0 billion facility that expires in April 2021 . GM
Financial did not have borrowings outstanding against any facilities at
September 30, 2020 and December 31, 2019 . We had intercompany loans from GM
Financial of $0.4 billion and
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GENERAL MOTORS COMPANY AND SUBSIDIARIESGM Financial's Board of Directors declared and paid dividends of$0.8 billion on its common stock in the nine months endedSeptember 30, 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. In addition, we expect to continue to receive dividends from our Automotive China JVs on a normal cadence. 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, investments with joint venture partners and strategic alliances that we believe would generate significant advantages and substantially strengthen our business. 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 ofSeptember 30, 2020 and determined we are in compliance and expect to remain in compliance in the future. InJanuary 2017 we announced that our Board of Directors had authorized the purchase of up to$5.0 billion of our common stock with no expiration date as part of our common stock repurchase program. We have completed$1.7 billion of the$5.0 billion program throughSeptember 30, 2020 . InApril 2020 we agreed not to execute any share repurchases until we no longer have outstanding borrowings under the revolving credit facilities, except for the three-year,$2.0 billion transformation facility.
The following table summarizes our available liquidity (dollars in billions):
September 30, 2020 December 31, 2019
Automotive cash and cash equivalents, net $ 21.7 $ 13.4
Marketable debt securities 8.5 3.9
Automotive cash, cash equivalents and marketable debt securities, net
30.2 17.3
Cruise cash and cash equivalents(a) 0.5 2.3
Cruise marketable debt securities(a) 1.4 0.3
Available liquidity(b) 32.2 19.9
Available under credit facilities 7.6 17.3
Total available liquidity(b) $ 39.8 $ 37.2
__________(a)Amounts are designated exclusively for the use of Cruise. (b)Amounts may not sum due to rounding.
The following table summarizes the changes in our Automotive available liquidity (excluding Cruise, dollars in billions):
Nine Months
Ended September
30, 2020
Operating cash flow $ 2.3
Capital expenditures (3.3)
Dividends paid and payments to purchase common stock (0.6)
Issuance of senior unsecured notes 4.0
Repayment of senior unsecured notes (0.5)
Borrowings against credit facilities, net 10.6
Other non-operating(a) 0.4
Decrease in available credit facilities (9.7)
Total change in automotive available liquidity $ 3.2
__________
(a)Amount includes
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GENERAL MOTORS COMPANY AND SUBSIDIARIESAutomotive Cash Flow (dollars in billions)
Nine Months Ended
September 30, September 30,
2020 2019 Change
Operating Activities
Net income $ 2.7 $ 6.2 $ (3.5)
Depreciation, amortization and impairment charges 4.1 5.2 (1.1)
Pension and OPEB activities (1.4) (1.1) (0.3)
Working capital (2.6) (3.2) 0.6
Accrued and other liabilities and income taxes (2.1) 0.3 (2.4)
Other 1.6 (0.8) 2.4
Net automotive cash provided by operating activities
$ 6.6
In the nine months endedSeptember 30, 2020 , the decrease in Net automotive cash provided by operating activities was primarily due to: (1) lower pre-tax earnings of$3.3 billion and the unwind of sales incentives of$2.6 billion , both impacted by COVID-19; (2) lower dividends received from our nonconsolidated affiliates of$0.7 billion ; partially offset by (3) dividends received fromGM Financial of$0.8 billion ; (4) working capital; and (5) several other insignificant items. Nine Months Ended September 30, September 30, 2020 2019 Change Investing Activities Capital expenditures$ (3.3) $ (4.8) $ 1.5 Acquisitions and liquidations of marketable securities, net(a) (4.0) - (4.0) GM investment in Cruise - (0.7) 0.7 Other - 0.2 (0.2)
Net automotive cash used in investing activities
__________
(a)Amount includes
In the nine months endedSeptember 30, 2020 , capital expenditures decreased due to the delay of non-critical projects, including certain future product programs, in response to the COVID-19 pandemic. Cash used in acquisitions and liquidations of marketable securities, net increased due to the increased purchases of marketable securities with proceeds from the issuance of debt in response to the COVID-19 pandemic. Nine Months Ended September 30, September 30, 2020 2019 Change Financing Activities Borrowings against credit facilities, net$ 10.6 $ 0.7 $ 9.9 Net proceeds from short-term debt 0.4 0.8 (0.4) Issuance of senior unsecured notes 4.0 - 4.0 Repayment of senior unsecured notes (0.5) - (0.5) Dividends paid and payments to purchase common stock (0.6) (1.7) 1.1 Other (0.4) (0.1) (0.3) Net automotive cash provided by (used in) financing activities$ 13.5 $ (0.3) $ 13.8 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. In the nine months endedSeptember 30, 2020 , net automotive cash provided by operating activities underU.S. GAAP was$2.3 billion , capital expenditures were$3.3 billion , and adjustments for management actions were$0.2 billion . 46
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In the nine months ended September 30, 2019 , net automotive cash provided by
operating activities under U.S. GAAP was $6.6 billion , capital expenditures were
$4.8 billion , and adjustments for management actions primarily related to
transformation activities were $0.6 billion .
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 October 19, 2020 :
Corporate Revolving Credit Facilities Senior Unsecured Outlook
DBRS BBB BBB N/A Negative
Fitch BBB- BBB- BBB- Stable
Moody's Investment Grade Baa2 Baa3 Negative
S&P BBB BBB BBB Negative
Rating actions taken by each of the credit rating agencies from January 1, 2020
through October 19, 2020 were as follows: (1) S&P revised their outlook to
Credit watch with negative implications from Stable in March 2020 ; confirmed our
ratings and revised their outlook to Negative from Credit watch with negative
implications in August 2020 ; (2) Moody's revised their outlook to Under review
for downgrade from Stable in March 2020 ; confirmed our ratings and revised their
outlook to Negative from Under review for downgrade in May 2020 ; (3) DBRS
revised their outlook to Under review with negative implications from Stable in
March 2020 ; downgraded our ratings to BBB from BBB (high) and revised their
outlook to Negative from Under review with negative implications in June 2020 ;
and (4) Fitch downgraded our ratings to BBB- from BBB in May 2020 .
Cruise Liquidity The changes in our Cruise available liquidity in the nine
months ended September 30, 2020 were primarily driven by operating cash flow.
When Cruise's autonomous vehicles are ready for commercial deployment, The
Vision Fund is obligated to purchase additional Cruise convertible preferred
shares for $1.35 billion .
Cruise Cash Flow (dollars in billions)
Nine Months Ended
September 30,
September 30, 2020 2019 Change
Net cash used in operating activities $ (0.6) $ (0.6) $ -
Net cash used in investing activities $ (1.2) $ (0.6) $ (0.6)
Net cash provided by financing activities $ -
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 of
retail finance receivables and leased vehicles, the funding of commercial
finance receivables, repayment of secured and unsecured debt, funding credit
enhancement requirements in connection with securitizations and secured credit
facilities, interest costs, and operating expenses. 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):
September 30, 2020 December 31, 2019
Cash and cash equivalents $ 4.7 $ 3.3
Borrowing capacity on unpledged eligible assets 20.9 17.5
Borrowing capacity on committed unsecured lines of credit 0.5 0.3
Borrowing capacity on revolving credit facility, exclusive to GM Financial
2.0 2.0
Total GM Financial available liquidity $ 28.1 $ 23.1
At September 30, 2020 , GM Financial's available liquidity increased from
December 31, 2019 due to an increase in cash and cash equivalents and borrowing
capacity on secured revolving credit facilities resulting from the issuance of
securitization transactions, unsecured debt and preferred stock. 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.
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GM Financial did not have any borrowings outstanding against our credit facility
designated for their exclusive use or the remainder of our revolving credit
facilities at September 30, 2020 and December 31, 2019 . Refer to the Automotive
Liquidity section of this MD&A for additional details.
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 September 30, 2020 secured,
committed unsecured and uncommitted unsecured credit facilities totaled $25.9
billion , $0.5 billion and $1.4 billion with advances outstanding of $2.0
billion , an insignificant amount and $1.4 billion .
GM Financial Cash Flow (dollars in billions)
Nine Months Ended
September 30,
September 30, 2020 2019 Change
Net cash provided by operating activities $ 6.0 $ 6.3 $ (0.3)
Net cash used in investing activities $ (5.0) $ (5.3) $ 0.3
Net cash used in financing activities $ (0.4) In the nine months endedSeptember 30, 2020 , Net cash provided by operating activities decreased primarily due to: (1) a decrease in leased vehicle income of$0.3 billion ; and (2) a decrease in derivative collateral posting activities of$0.2 billion ; partially offset by (3) a decrease in interest paid of$0.3 billion . In the nine months endedSeptember 30, 2020 , Net cash used in investing activities decreased primarily due to: (1) a decrease in purchases of leased vehicles of$2.0 billion ; and (2) increased collections and recoveries on finance receivables of$0.2 billion ; partially offset by (3) increased purchases of finance receivables of$2.0 billion . In the nine months endedSeptember 30, 2020 , Net cash used in financing activities decreased primarily due to: (1) an increase in borrowings of$17.6 billion ; and (2) issuance of preferred stock of$0.5 billion ; partially offset by (3) an increase in debt repayments of$15.1 billion ; and (4) an increase in dividend payments of$0.8 billion . 48
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Contractual Obligations and Other Long-Term Liabilities We have minimum
commitments under contractual obligations, including purchase obligations. A
purchase obligation is defined as an agreement to purchase goods or services
that is enforceable and legally binding on us and that specifies all significant
terms, including fixed or minimum quantities to be purchased or fixed minimum
price provisions and the approximate timing of the transaction. Based on these
definitions, the following table includes only those contracts that include
fixed or minimum obligations. The majority of our purchases are not included in
the table as they are made under purchase orders that are requirements-based and
accordingly do not specify minimum quantities. The following table summarizes
aggregated information about our outstanding contractual obligations and other
long-term liabilities at September 30, 2020 :
Payments Due by Period
October 1, 2020
to December 31, 2026 and
2020 2021 2022-2023 2024-2025 after Total
Automotive debt(a) $ 480 $ 1,584
10,569 27,835 29,453 13,273 7,233 88,363
Finance lease obligations 46 199 70 24 20 359
Automotive interest payments(b) 491 1,081 1,965 1,517 8,335 13,389
Automotive Financing interest
payments(c) 623 1,953 2,250 946 443 6,215
Postretirement benefits(d) 58 233 461 - - 752
Operating lease obligations 62 253 413 284 426 1,438
Other contractual commitments:
Material 748 620 134 71 20 1,593
Marketing 308 253 93 8 - 662
Other (e) 574 1,098 1,066 200 185 3,123
Total contractual commitments(f)
Non-contractual benefit(g) $ 78
__________
(a)$3.9 billion of the amount due in 2023 has been repaid on our five-year,$10.5 billion facility inOctober 2020 . (b)Amounts include automotive interest payments based on contractual terms and current interest rates on our debt and finance lease obligations. Automotive interest payments based on variable interest rates were determined using the interest rate in effect atSeptember 30, 2020 . (c)GM Financial interest payments were determined using the interest rate in effect atSeptember 30, 2020 for floating rate debt and the contractual rates for fixed rate debt. GM Financial interest payments on floating rate tranches of the securitization notes payable were converted to a fixed rate based on the floating rate plus any expected hedge payments. (d)Amounts include OPEB payments under the contract term of the current labor agreements inNorth America and do not include pension funding obligations. (e)Amounts include$0.8 billion related to committed capital contributions to a non-consolidated VIE. (f)Amounts do not include future cash payments for purchase obligations and certain other accrued expenditures (unless listed in the table above) that were recorded in Accounts payable, Accrued liabilities and Other liabilities in our condensed consolidated financial statements atSeptember 30, 2020 . (g)Amounts include all expected future payments for both current and expected future service atSeptember 30, 2020 for OPEB obligations for salaried and hourly employees extending beyond the current North American union contract agreements, workers' compensation and extended disability benefits. Amounts do not include pension funding obligations. The table above does not reflect product warranty and related liabilities, certified pre-owned, extended warranty and free maintenance of$7.9 billion and unrecognized tax benefits of$0.7 billion due to the uncertainty regarding the future cash outflows potentially associated with these amounts. In addition, future cash outflows related to previously announced restructuring actions are not included in the table above. Refer to Note 17 to our condensed consolidated financial statements for additional information. Critical Accounting Estimates The condensed consolidated financial statements are prepared in conformity withU.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. The critical accounting estimates that affect the condensed consolidated financial statements and the judgments and assumptions used are consistent with those described in the MD&A in 49
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our 2019 Form 10-K, as supplemented by the subsequent discussions of the
allowance for loan losses on GM Financial receivables and the residual value of
GM Financial leased vehicles.
GM Financial Allowance for Loan Losses Refer to Note 2 to our condensed
consolidated financial statements for additional information regarding our
allowance for loan losses on retail and commercial finance receivables. 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. We believe 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 updated the forecast of economic performance in March 2020 ,
following the onset of the COVID-19 pandemic, and has continued to monitor and
update the forecast through September 30, 2020 . Used vehicle prices rebounded
after decreasing in March and April 2020 , and recoveries outperformed the
forecast. Therefore, GM Financial increased the recovery rate forecast as of
September 30, 2020 . Actual economic data and recovery rates that are lower than
those we forecast would 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, and to purchase and/or
finance dealership real estate. The allowance for loan losses on commercial
finance receivables is also based on estimates that, effective January 1, 2020 ,
include historical loss experience for the consolidated portfolio, as well as
the forecast for industry vehicle sales. 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.
Residual Value of GM Financial Leased Vehicles At September 30, 2020 , the
estimated residual value of GM Financial's leased vehicles at the end of the
lease term was $28.9 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. GM Financial reviewed the operating lease portfolio for indicators
of impairment and determined that no impairment indicators were present at
September 30, 2020 .
GM Financial updated the residual value estimates on the operating lease
portfolio to reflect the decrease in forecasted used vehicle prices in March
2020 , following the onset of the COVID-19 pandemic, and has continued to monitor
and update the residual value estimates through September 30, 2020 . Used vehicle
prices rebounded after decreasing in March and April 2020 , and sales proceeds on
terminated leased vehicles outperformed the residual value estimates during the
nine months ended September 30, 2020 . The estimated residual value as of
September 30, 2020 increased from June 30, 2020 , resulting in a prospective
decrease to the depreciation rate over the remaining term of the leased vehicle
portfolio. If used vehicle prices decrease, 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.
Forward-Looking Statements This report and the other reports filed by us with
the SEC 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 the U.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 events or financial results, and our actual results
may differ materially due to a variety of important factors, both positive and
negative. These factors, which may be revised or supplemented in subsequent
reports we file with the SEC , include, among others, the following: (1) our
ability to deliver new products, services and customer experiences in response
to increased competition in the automotive industry; (2) our ability to timely
fund and introduce new and improved vehicle models that are able to attract a
sufficient number of consumers; (3) the success of our crossovers, SUVs and
full-size pickup trucks; (4) our ability to successfully and cost-effectively
restructure our operations in the U.S. and various other countries and initiate
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additional cost reduction actions with minimal disruption; (5) our ability to
reduce the cost of manufacturing electric vehicles and drive increased consumer
adoption; (6) the unique technological, operational, regulatory and competitive
risks related to the timing and commercialization of autonomous vehicles; (7)
global automobile market sales volume, which can be volatile; (8) our
significant business in China , which is subject to unique operational,
competitive, regulatory and economic risks; (9) our joint ventures, which we
cannot operate solely for our benefit and over which we may have limited
control; (10) 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 and
laws (including labor, tax and other laws), political 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,
public health crises, including the occurrence of a contagious disease or
illness, such as the COVID-19 pandemic, changes in foreign exchange rates and
interest rates, economic downturns in foreign countries, differing local product
preferences and product requirements, 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, and difficulties in obtaining financing in foreign countries;
(11) any significant disruption, including any work stoppages, at any of our
manufacturing facilities; (12) the ability of our suppliers to deliver parts,
systems and components without disruption and at such times to allow us to meet
production schedules; (13) prices of raw materials used by us and our suppliers;
(14) our highly competitive industry, which is characterized by excess
manufacturing capacity and the use of incentives and the introduction of new and
improved vehicle models by our competitors; (15) 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; (16) 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; (17) 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; (18) our
ability to comply with extensive laws, regulations and policies applicable to
our operations and products, including those relating to fuel economy and
emissions and autonomous vehicles; (19) costs and risks associated with
litigation and government investigations; (20) the costs and effect on our
reputation of product safety recalls and alleged defects in products and
services; (21) any additional tax expense or exposure; (22) our continued
ability to develop captive financing capability through GM Financial; (23) any
significant increase in our pension funding requirements; and (24) the ongoing
COVID-19 pandemic. A further list and description of these risks, uncertainties
and other factors can be found in our 2019 Form 10-K and our subsequent filings
with the SEC .
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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