General Motors Company — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. The filing is an annual report; quarterly figures below identify the fourth quarter where relevant. GM designs, manufactures and sells vehicles and parts globally and provides automotive financing through GM Financial.
Financial results and operating metrics
| Metric | 2015 | 2014 |
|---|---|---|
| Total net sales and revenue | $152.4 billion | $155.9 billion |
| Net income | $9.6 billion | $4.0 billion |
| Net income attributable to stockholders | $9.7 billion | $3.9 billion |
| Diluted EPS / adjusted diluted EPS | $5.91 / $5.02 | $1.65 / $3.05 |
| Operating cash flow, consolidated | $12.0 billion | $10.1 billion |
| Automotive operating cash flow / capital expenditures / adjusted free cash flow | $10.0 billion / $7.8 billion / $2.2 billion | $10.1 billion / $7.0 billion / $3.1 billion |
| Automotive available liquidity, including credit facilities | $32.5 billion | $37.2 billion |
| Automotive debt / GM Financial debt | $8.8 billion / $54.3 billion | $9.4 billion / $37.3 billion |
Revenue declined 2.3%, while reported net income rose substantially. The 2015 result included a $3.9 billion tax benefit from releasing European deferred-tax valuation allowances, a $449 million gain on debt extinguishment, and approximately $1.6 billion of ignition-switch-related legal charges. Adjusted EBIT was $10.8 billion versus $6.5 billion; adjusted EPS excludes specified items and tax adjustments. Automotive gross margin and consolidated gross margin are not given as a comparable annual headline measure in the filing text.
Fourth-quarter revenue was $39.6 billion and net income was $6.2 billion, including the $3.9 billion deferred-tax benefit and $449 million debt-extinguishment gain. Diluted EPS was $3.92.
Total assets were $194.5 billion and total equity $40.3 billion at year-end. Automotive cash and marketable securities were $20.3 billion, against management’s $20 billion target; total automotive available liquidity also includes $12.2 billion of available credit facilities. GM Financial available liquidity was $13.7 billion. Automotive and GM Financial debt are distinct businesses and should not be treated as directly comparable operating leverage measures.
Material changes versus prior year
- GMNA revenue increased 5.4% to $106.6 billion and adjusted EBIT rose to $11.0 billion from $6.6 billion, supported by volume, mix, lower material and freight costs, and lower recall charges. GMNA adjusted margin was 10.3%.
- GME revenue fell 15.9% to $18.7 billion; its adjusted loss narrowed to $813 million from $1.4 billion. GM ceased manufacturing and ended Opel distribution in Russia and reduced Chevrolet distribution there.
- GMIO revenue decreased 12.3% to $12.6 billion, while adjusted EBIT increased to $1.4 billion. Automotive China JVs generated $2.1 billion of equity income, approximately flat year over year.
- GMSA revenue fell 40.4% to $7.8 billion and its adjusted loss widened to $622 million, reflecting economic contraction and currency weakness, including Venezuela devaluation charges.
- GM Financial revenue increased 33.0% to $6.5 billion as its lease portfolio expanded; adjusted pretax income edged up to $837 million. Debt rose to $54.3 billion, alongside growth in receivables and leased vehicles.
- Worldwide wholesale vehicle sales declined to 5.876 million from 6.033 million. Retail sales were nearly flat at 9.958 million versus 9.925 million, while global share declined 0.2 percentage points to 11.2%.
Outlook, capital allocation and notable matters
- For 2016, management expected adjusted diluted EPS of $5.25–$5.75 and automotive adjusted free cash flow of approximately $6 billion; it also forecast improving adjusted EBIT and margins. GMNA expected to sustain a 10% adjusted EBIT margin, and GME intended to break even.
- Longer-term targets include 9%–10% consolidated adjusted EBIT margins by early next decade, $5.5 billion of annual operational and functional cost savings by 2018, average automotive adjusted free cash flow of $6–$7 billion in 2016–2018, and consolidated ROIC above 20%.
- Management’s capital allocation plan targets $20 billion in combined cash and marketable securities and investment-grade credit ratings. The board authorized up to $9 billion in total share repurchases by the end of 2017; GM had repurchased $3.5 billion through February 1, 2016. The quarterly dividend was raised to $0.38 per share beginning in 2016.
- GM expected approximately $9 billion of capital expenditures and planned a discretionary $2 billion U.S. hourly pension contribution by mid-2016, expected to be debt-funded. U.S. pension underfunding was $10.4 billion at year-end; global pension obligations and contributions remain sensitive to rates, asset returns and assumptions.
- Ignition-switch matters remain material. GM entered a three-year Deferred Prosecution Agreement, paid a $900 million penalty and retained an independent monitor. The filing records additional legal accruals but says losses on remaining claims and investigations cannot be reliably bounded. The ignition-switch compensation program had recorded charges of $595 million since inception.
- GM was conducting recalls involving Takata air-bag inflators and warned that further recalls could materially affect results. Other key risks include emissions regulation and investigations, product safety, litigation, foreign exchange, weak markets in Russia and South America, China competition and pricing, supplier disruption, vehicle residual values, and pension funding.
- Subsequent to year-end, GM invested $500 million for a 9% interest in Lyft and announced its Maven car-sharing brand. Deloitte issued unqualified opinions on the financial statements and internal controls; management also concluded disclosure controls and internal controls were effective at year-end.
Investor verification priorities
- Separate recurring operating performance from the $3.9 billion tax benefit, debt-extinguishment gain, recall and legal costs, currency items, and restructuring charges; reconcile reported EPS to adjusted EPS.
- Review cash flow and liquidity definitions, especially automotive adjusted free cash flow, the $20 billion cash-and-securities target, and the distinct funding needs of GM Financial.
- Track unresolved ignition-switch litigation and DPA compliance, Takata-related recalls, and the adequacy of warranty and recall accruals.
- Test the assumptions behind 2016 guidance and longer-term margin, cost-savings, cash-flow and ROIC targets against regional performance, product launches, pricing and foreign exchange.
- Monitor GM Financial portfolio credit quality, lease residual values, debt growth and funding access, as well as pension funded status and the planned debt-funded contribution.