General Motors Company — FY 2012 Form 10-K
Reporting period: Fiscal year ended December 31, 2012; the filing also reports fourth-quarter results. GM designs, manufactures and sells vehicles and parts globally, and provides automotive financing through GM Financial. The financial statements are audited under U.S. GAAP; the auditor issued an unqualified opinion.
Financial performance and key metrics
| Metric | FY 2012 | FY 2011 |
|---|---|---|
| Total net sales and revenue | $152.3 billion | $150.3 billion |
| Operating income (loss) | $(30.4) billion | $5.7 billion |
| Net income | $6.1 billion | $9.3 billion |
| Net income attributable to common stockholders | $4.9 billion | $7.6 billion |
| Diluted EPS | $2.92 | $4.58 |
| Automotive gross margin | $10.1 billion (about 6.7% of automotive revenue) | $18.5 billion (about 12.4%) |
| Cash provided by operating activities | $10.6 billion | $8.2 billion |
| Capital expenditures | $8.1 billion | $6.2 billion |
| Automotive free cash flow, as defined by management | $1.6 billion | $1.2 billion |
Revenue rose 1.3%. Worldwide vehicle sales increased to 9.3 million from 9.0 million, while global market share declined to 11.5% from 11.9%. U.S. market share fell to 17.5% from 19.2%. Cash and cash equivalents were $18.4 billion and marketable securities were $9.0 billion at year-end. Total available liquidity, including $11.1 billion of credit-facility capacity, was $37.2 billion.
Year-end automotive debt was $5.2 billion and GM Financial debt was $10.9 billion. Reported pension underfunding was $27.8 billion, up from $25.4 billion; unfunded other postretirement benefits were $7.8 billion. GM reported total assets of $149.4 billion, liabilities of $112.4 billion and equity of $37.0 billion.
Material changes and unusual items
- FY 2012 net income included a non-cash income-tax benefit of about $36.3 billion, primarily from releasing most U.S. and Canadian deferred-tax valuation allowances. The benefit reflected management’s conclusion that future taxable income was more likely than not to support realization of those assets.
- GM recorded $27.1 billion of goodwill impairment, including $26.4 billion in GM North America, and $5.5 billion of long-lived-asset and intangible-asset impairment in Europe. These charges drove the reported operating loss; net income remained positive largely because of the tax benefit.
- A $2.7 billion pre-tax pension settlement charge followed the purchase of annuity contracts that settled the remaining obligations of the U.S. salaried retiree plan. The transactions transferred investment risk for those settled obligations to insurers.
- GM repurchased and retired 200 million shares from the U.S. Treasury for $5.5 billion, including a $402 million premium charged to earnings. The Treasury announced plans to dispose of its remaining shares over 12–15 months, subject to market conditions.
- GM Europe revenue fell 17.6% to $22.1 billion and its adjusted EBIT loss widened to $1.8 billion from $0.7 billion. The company said it expected continued regional losses in the near term.
- GM Financial revenue rose 39% to $2.0 billion and pre-tax income rose 20% to $744 million. Its consumer portfolio remained concentrated in lower-credit borrowers; delinquent consumer receivables over 30 days were 8.2% of contractual amounts due, versus 7.2% a year earlier.
Outlook, management commentary and risks
- Management planned approximately $8 billion of 2013 capital expenditures, continued substantial engineering and product investment, and completion in stages during 2013 of GM Financial’s approximately $4.2 billion acquisition of Ally Financial international finance operations. GM anticipated the acquisition would expand its financing reach; closing remained subject to approvals and other conditions.
- GM planned major 2013 vehicle launches, including new Chevrolet Silverado and GMC Sierra pickups, and continued investment in hybrid and electric vehicles. Management said competitive pricing and incentives would be used as needed.
- Management cited weak European demand, excess industry capacity, intense competition, foreign-exchange movements, commodity prices, supplier continuity, product quality and recalls, regulatory compliance, and pension costs as material risks. It also highlighted China competition and the execution risks of its European restructuring and PSA alliance.
- GM expected no mandatory contributions to U.S. qualified pension plans in 2013, with funding relief expected to defer such contributions for at least five years under then-current conditions. It expected 2013 contributions of about $0.8 billion to non-U.S. plans and $0.1 billion to U.S. non-qualified plans.
- GM had no current plans to pay common-stock dividends. Preferred-stock dividends paid in 2012 were $859 million; expected 2013 preferred dividends were about $0.9 billion.
- Key contingencies include a $697 million accrual for GM Korea wage litigation involving more than 10,000 employees; a Canadian former-dealer class action with a stated claim not exceeding CAD $750 million, for which GM recorded no accrual; a $450 million UAW claim, also with no accrual; and a Saab-related lawsuit seeking at least $3.0 billion. GM disputes these claims. Some South American tax proceedings could require $400–$600 million in escrow deposits.
- After year-end, Venezuela changed its official exchange rate; GM expected a first-quarter 2013 charge of $0.1–$0.2 billion. The filing also described $166 million of environmental-liability accruals and a possible remediation-loss range of $130–$250 million.
Most important facts for investors to verify
- Whether the U.S. and Canadian deferred-tax assets are ultimately realized, and how the large tax benefit and goodwill impairments affect comparisons of ongoing earnings.
- Progress in Europe: losses, cash generation, restructuring execution and whether additional asset or goodwill impairments arise.
- Automotive cash generation and liquidity after planned investment, preferred dividends, pension activity, share repurchase and the Ally Financial acquisition.
- GM Financial acquisition approvals and integration, funding access, credit losses and delinquency trends in its sub-prime portfolio.
- Developments in the GM Korea wage cases, Canadian dealer action, UAW claim, Saab litigation and South American tax matters.
- Vehicle sales, market share, pricing and incentives, including the impact of Treasury share sales and potential preferred-stock conversion or warrant exercise.