Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Form 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission file number 001-34960
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12521658&doc=11
GENERAL MOTORS COMPANY
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE
27-0756180
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
300 Renaissance Center, Detroit, Michigan
48265-3000
(Address of principal executive offices)
(Zip Code)
(313) 667-1500
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  þ  No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ  Accelerated filer  ¨  Non-accelerated filer  ¨  Smaller reporting company  ¨ Emerging growth company  ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No  þ
As of October 12, 2018 the number of shares outstanding of common stock was 1,411,403,633 shares.





INDEX
 
 
 
Page
PART I
Item 1.
Condensed Consolidated Financial Statements
 
Condensed Consolidated Income Statements (Unaudited)
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
Condensed Consolidated Balance Sheets (Unaudited)
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Condensed Consolidated Statements of Equity (Unaudited)
 
Notes to Condensed Consolidated Financial Statements
 
Note 1.
Nature of Operations and Basis of Presentation
 
Note 2.
Significant Accounting Policies
 
Note 3.
Revenue
 
Note 4.
Marketable and Other Securities
 
Note 5.
GM Financial Receivables and Transactions
 
Note 6.
Inventories
 
Note 7.
Equipment on Operating Leases
 
Note 8.
Equity in Net Assets of Nonconsolidated Affiliates
 
Note 9.
Variable Interest Entities
 
Note 10.
Automotive and GM Financial Debt
 
Note 11.
Derivative Financial Instruments
 
Note 12.
Product Warranty and Related Liabilities
 
Note 13.
Pensions and Other Postretirement Benefits
 
Note 14.
Commitments and Contingencies
 
Note 15.
Income Taxes
 
Note 16.
Restructuring and Other Initiatives
 
Note 17.
Stockholders' Equity and Noncontrolling Interests
 
Note 18.
Earnings Per Share
 
Note 19.
Discontinued Operations
 
Note 20.
Segment Reporting
 
Note 21.
Subsequent Events
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.
Exhibits
Signature
 




Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES



PART I

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED INCOME STATEMENTS
(In millions, except per share amounts) (Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018

September 30, 2017
 
September 30, 2018
 
September 30, 2017
Net sales and revenue
 
 
 
 
 
 
 
Automotive
$
32,276

 
$
30,466

 
$
98,242


$
98,983

GM Financial
3,515

 
3,157

 
10,408


8,890

Total net sales and revenue (Note 3)
35,791

 
33,623

 
108,650


107,873

Costs and expenses
 
 
 
 
 
 
 
Automotive and other cost of sales
28,533

 
26,852

 
88,788


86,148

GM Financial interest, operating and other expenses
3,064

 
2,892

 
9,074


8,133

Automotive and other selling, general and administrative expense
2,584

 
2,303

 
7,172


7,136

Total costs and expenses
34,181

 
32,047

 
105,034


101,417

Operating income
1,610

 
1,576

 
3,616


6,456

Automotive interest expense
161

 
151

 
470


430

Interest income and other non-operating income, net
651

 
505

 
2,130


1,259

Equity income (Note 8)
530

 
500

 
1,815


1,585

Income before income taxes
2,630

 
2,430

 
7,091


8,870

Income tax expense (Note 15)
100

 
2,316

 
1,085


3,637

Income from continuing operations
2,530

 
114

 
6,006


5,233

Loss from discontinued operations, net of tax (Note 19)

 
3,096

 
70


3,935

Net income (loss)
2,530

 
(2,982
)
 
5,936


1,298

Net (income) loss attributable to noncontrolling interests
4


1


34


(11
)
Net income (loss) attributable to stockholders
$
2,534

 
$
(2,981
)
 
$
5,970


$
1,287

 
 
 
 
 





Net income (loss) attributable to common stockholders
$
2,503

 
$
(2,983
)
 
$
5,910


$
1,285

 
 
 
 
 
 
 
 
Earnings per share (Note 18)
 
 
 
 
 
 
 
Basic earnings per common share – continuing operations
$
1.77

 
$
0.08

 
$
4.24


$
3.52

Basic loss per common share – discontinued operations
$

 
$
2.14

 
$
0.05


$
2.65

 
 
 
 
 
 
 
 
Basic earnings (loss) per common share
$
1.77

 
$
(2.06
)
 
$
4.19


$
0.87

Weighted-average common shares outstanding – basic
1,412

 
1,445

 
1,410


1,483

 
 
 
 
 
 
 
 
Diluted earnings per common share  continuing operations
$
1.75

 
$
0.08

 
$
4.18


$
3.46

Diluted loss per common share – discontinued operations
$

 
$
2.11

 
$
0.05


$
2.61

 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share
$
1.75

 
$
(2.03
)
 
$
4.13


$
0.85

Weighted-average common shares outstanding – diluted
1,431

 
1,472

 
1,431


1,507

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.38

 
$
0.38

 
$
1.14

 
$
1.14


CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions) (Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Net income (loss)
$
2,530

 
$
(2,982
)
 
$
5,936


$
1,298

Other comprehensive income (loss), net of tax (Note 17)
 
 
 
 
 
 
 
Foreign currency translation adjustments and other
(209
)
 
371

 
(503
)

572

Defined benefit plans
59

 
1,213

 
286


973

Other comprehensive income (loss), net of tax
(150
)
 
1,584

 
(217
)

1,545

Comprehensive income (loss)
2,380

 
(1,398
)
 
5,719


2,843

Comprehensive (income) loss attributable to noncontrolling interests
4

 
3

 
39


(9
)
Comprehensive income (loss) attributable to stockholders
$
2,384

 
$
(1,395
)
 
$
5,758


$
2,834




Reference should be made to the notes to condensed consolidated financial statements.

1


Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts) (Unaudited)
 
September 30, 2018
 
December 31, 2017
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents
$
18,435


$
15,512

Marketable securities (Note 4)
5,916


8,313

Accounts and notes receivable, net
10,376


8,164

GM Financial receivables, net (Note 5; Note 9 at VIEs)
23,432


20,521

Inventories (Note 6)
11,334


10,663

Equipment on operating leases, net (Note 7)
474


1,106

Other current assets (Note 4; Note 9 at VIEs)
4,881


4,465

Total current assets
74,848

 
68,744

Non-current Assets
 
 
 
GM Financial receivables, net (Note 5; Note 9 at VIEs)
24,086


21,208

Equity in net assets of nonconsolidated affiliates (Note 8)
9,155


9,073

Property, net
38,655


36,253

Goodwill and intangible assets, net
5,651


5,849

Equipment on operating leases, net (Note 7; Note 9 at VIEs)
44,128


42,882

Deferred income taxes
23,242


23,544

Other assets (Note 4; Note 9 at VIEs)
5,946


4,929

Total non-current assets
150,863


143,738

Total Assets
$
225,711


$
212,482

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable (principally trade)
$
25,147


$
23,929

Short-term debt and current portion of long-term debt (Note 10)
 
 
 
Automotive
2,915


2,515

GM Financial (Note 9 at VIEs)
27,950


24,450

Accrued liabilities
28,104


25,996

Total current liabilities
84,116


76,890

Non-current Liabilities



Long-term debt (Note 10)





Automotive
13,048


10,987

GM Financial (Note 9 at VIEs)
58,427


56,267

Postretirement benefits other than pensions (Note 13)
5,832


5,998

Pensions (Note 13)
11,119


13,746

Other liabilities
12,261


12,394

Total non-current liabilities
100,687


99,392

Total Liabilities
184,803


176,282

Commitments and contingencies (Note 14)





Equity (Note 17)



Common stock, $0.01 par value
14


14

Additional paid-in capital
25,503


25,371

Retained earnings
20,865


17,627

Accumulated other comprehensive loss
(8,321
)

(8,011
)
Total stockholders’ equity
38,061


35,001

Noncontrolling interests
2,847


1,199

Total Equity
40,908


36,200

Total Liabilities and Equity
$
225,711


$
212,482






Reference should be made to the notes to condensed consolidated financial statements.

2


Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)

 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
Cash flows from operating activities
 
 
 
Income from continuing operations
$
6,006


$
5,233

Depreciation and impairment of Equipment on operating leases, net
5,633


4,947

Depreciation, amortization and impairment charges on Property, net
4,390


4,137

Foreign currency remeasurement and transaction (gains) losses
280


(12
)
Undistributed earnings of nonconsolidated affiliates, net
185


370

Pension contributions and OPEB payments
(1,750
)

(1,109
)
Pension and OPEB income, net
(940
)

(646
)
Provision for deferred taxes
680


3,517

Change in other operating assets and liabilities
(5,258
)

(6,061
)
Net cash provided by operating activities – continuing operations
9,226


10,376

Net cash provided by operating activities – discontinued operations


64

Net cash provided by operating activities
9,226


10,440

Cash flows from investing activities
 
 

Expenditures for property
(6,562
)

(6,353
)
Available-for-sale marketable securities, acquisitions
(2,313
)

(4,499
)
Available-for-sale marketable securities, liquidations
4,637


7,901

Purchases of finance receivables, net
(17,297
)

(15,134
)
Principal collections and recoveries on finance receivables
11,776


9,363

Purchases of leased vehicles, net
(13,051
)

(14,809
)
Proceeds from termination of leased vehicles
8,094


4,649

Other investing activities
(25
)

93

Net cash used in investing activities – continuing operations
(14,741
)

(18,789
)
Net cash provided by (used in) investing activities – discontinued operations (Note 19)
166


(3,972
)
Net cash used in investing activities
(14,575
)

(22,761
)
Cash flows from financing activities
 
 

Net increase (decrease) in short-term debt
1,695


(374
)
Proceeds from issuance of debt (original maturities greater than three months)
32,801


43,048

Payments on debt (original maturities greater than three months)
(25,408
)

(26,034
)
Payments to purchase common stock
(100
)

(2,994
)
Proceeds from issuance of preferred stock (Note 17)
1,753


985

Dividends paid
(1,690
)

(1,701
)
Other financing activities
(439
)

(271
)
Net cash provided by financing activities – continuing operations
8,612


12,659

Net cash provided by financing activities – discontinued operations


20

Net cash provided by financing activities
8,612


12,679

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(253
)

362

Net increase in cash, cash equivalents and restricted cash
3,010


720

Cash, cash equivalents and restricted cash at beginning of period
17,848


15,160

Cash, cash equivalents and restricted cash at end of period
$
20,858


$
15,880

 
 
 
 
Cash, cash equivalents and restricted cash – continuing operations at end of period (Note 4)
$
20,858


$
15,315

Cash, cash equivalents and restricted cash – discontinued operations at end of period
$


$
565

Significant Non-cash Investing and Financing Activity
 
 
 
Non-cash property additions – continuing operations
$
4,284

 
$
3,833

Non-cash proceeds on sale of discontinued operations (Note 19)
$

 
$
808




Reference should be made to the notes to condensed consolidated financial statements.


3


Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In millions) (Unaudited)
 
Common Stockholders’
 
Noncontrolling Interests
 
Total Equity
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Balance at January 1, 2017
$
15

 
$
26,983

 
$
26,168


$
(9,330
)

$
239


$
44,075

Net income

 

 
1,287




11


1,298

Other comprehensive income

 

 


1,547


(2
)

1,545

Purchase of common stock
(1
)
 
(1,476
)
 
(1,517
)
 

 

 
(2,994
)
Exercise of common stock warrants

 
42

 






42

Issuance of preferred stock (Note 17)

 

 

 

 
985

 
985

Stock based compensation

 
293

 
(25
)





268

Cash dividends paid on common stock

 

 
(1,683
)





(1,683
)
Dividends to noncontrolling interests

 

 

 

 
(18
)
 
(18
)
Other

 
(60
)
 




19


(41
)
Balance at September 30, 2017
$
14

 
$
25,782

 
$
24,230


$
(7,783
)

$
1,234


$
43,477

 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2018
$
14


$
25,371


$
17,627


$
(8,011
)

$
1,199


$
36,200

Adoption of accounting standards (Note 1)

 

 
(1,046
)
 
(98
)
 

 
(1,144
)
Net income




5,970




(34
)

5,936

Other comprehensive loss






(212
)

(5
)

(217
)
Issuance of preferred stock (Note 17)








1,753


1,753

Purchase of common stock


(44
)

(56
)





(100
)
Exercise of common stock warrants

 
2

 

 

 

 
2

Cash dividends paid on common stock




(1,608
)





(1,608
)
Dividends to noncontrolling interests








(106
)

(106
)
Other


174


(22
)



40


192

Balance at September 30, 2018
$
14


$
25,503


$
20,865


$
(8,321
)

$
2,847


$
40,908

























Reference should be made to the notes to condensed consolidated financial statements.

4


Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations and Basis of Presentation
General Motors Company (sometimes referred to in this Quarterly Report on Form 10-Q as we, our, us, ourselves, the Company, General Motors or GM) designs, builds and sells cars, trucks, crossovers and automobile parts worldwide. We also provide automotive financing services through General Motors Financial Company, Inc. (GM Financial). We analyze the results of our continuing operations through the following segments: GM North America (GMNA), GM International (GMI), GM Cruise and GM Financial. GM Cruise is our global segment designed to build, grow and invest in our autonomous ride-sharing vehicle business. As a result of the growing importance of our autonomous vehicle operations, we moved these operations from Corporate to GM Cruise and began presenting GM Cruise as a new reportable segment in the three months ended June 30, 2018. All periods presented have been recast to reflect the segment changes. Nonsegment operations and Maven, our ride- and car-sharing business, are classified as Corporate. Corporate includes certain centrally recorded income and costs such as interest, income taxes, corporate expenditures and certain nonsegment specific revenues and expenses.

On July 31, 2017 we closed the sale of the Opel and Vauxhall businesses and certain other assets in Europe (the Opel/Vauxhall Business) to Peugeot, S.A. (PSA Group). On October 31, 2017 we closed the sale of the European financing subsidiaries and branches (the Fincos, and together with the Opel/Vauxhall Business, the European Business) to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A. The European Business is presented as discontinued operations in our condensed consolidated financial statements for all periods presented. Unless otherwise indicated, information in this report relates to our continuing operations. Refer to Note 19 for additional information on our discontinued operations.

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2017 Form 10-K. Except for per share amounts or as otherwise specified, dollar amounts presented within tables are stated in millions. In the three months ended June 30, 2018 we changed the presentation of our condensed consolidated statements of cash flows to separately classify Depreciation and impairment of Equipment on operating leases, net and Depreciation, amortization and impairment charges on Property, net. We have made corresponding reclassifications to the comparable information for all periods presented.

Principles of Consolidation The Principles of Consolidation supplements information presented in our 2017 Form 10-K for the adoption on January 1, 2018 of Accounting Standards Update (ASU) 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01). We consolidate entities that we control due to ownership of a majority voting interest and we consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met. Our share of earnings or losses of nonconsolidated affiliates is included in our consolidated operating results using the equity method of accounting when we are able to exercise significant influence over the operating and financial decisions of the affiliate. Beginning January 1, 2018 we no longer use the cost method of accounting.

Recently Adopted Accounting Standards

Effective January 1, 2018 we adopted ASU 2014-09, "Revenue from Contracts with Customers" as amended (ASU 2014-09), as incorporated into Accounting Standards Codification (ASC) 606, on a modified retrospective basis by recognizing a cumulative effect adjustment to the opening balance of Retained earnings. Under ASU 2014-09 sales incentives will now be recorded at the time of sale rather than at the later of sale or announcement, thereby resulting in the shifting of incentive amounts to an earlier quarter and fixed fee license arrangements will now be recognized when access to intellectual property is granted instead of over the contract period. We currently expect the retiming of quarterly incentive amounts to offset for the year ending December 31, 2018. Actual incentive spending is dependent upon future market conditions.

Beginning January 1, 2018 certain transfers to daily rental companies are accounted for as sales when ownership of the vehicle is not expected to transfer back to us. Such transactions were previously accounted for as operating leases. Transfers that occurred prior to January 2018 continue to be accounted for as operating leases because at the original time of transfer an expectation existed that ownership of the vehicle would transfer back to us.


5


Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

The following table summarizes the financial statement line items within our condensed consolidated income statement and balance sheet significantly impacted by ASU 2014-09:
 
Three Months Ended September 30, 2018
 
As Reported
 
Balances without Adoption of ASC 606
 
Effect of Change
Income Statement
 
 
 
 
 
Automotive net sales and revenue
$
32,276

 
$
32,959

 
$
(683
)
Income before income taxes
$
2,630

 
$
3,321

 
$
(691
)
Net income attributable to stockholders
$
2,534

 
$
3,071

 
$
(537
)

 
Nine Months Ended September 30, 2018
 
As Reported
 
Balances without Adoption of ASC 606
 
Effect of Change
Income Statement
 
 
 
 
 
Automotive net sales and revenue
$
98,242

 
$
97,961

 
$
281

Automotive and other cost of sales
$
88,788

 
$
87,749

 
$
1,039

Income before income taxes
$
7,091

 
$
7,661

 
$
(570
)
Net income attributable to stockholders
$
5,970

 
$
6,402

 
$
(432
)

 
September 30, 2018
 
As Reported
 
Balances without Adoption of ASC 606
 
Effect of Change
Balance Sheet
 
 
 
 
 
Equipment on operating leases, net
$
474

 
$
1,428

 
$
(954
)
Deferred income taxes
$
23,242

 
$
22,661

 
$
581

Accrued liabilities
$
28,104

 
$
25,963

 
$
2,141

Other liabilities
$
12,261


$
12,657


$
(396
)
Retained earnings
$
20,865

 
$
22,633

 
$
(1,768
)

Effective January 1, 2018 we adopted ASU 2016-01, on a modified retrospective basis, with a $182 million cumulative effect adjustment recorded to the opening balance of Retained earnings to adjust an investment previously carried at cost to its fair value. ASU 2016-01 requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in Net income.

In the three months ended March 31, 2018 we adopted ASU 2017-12, "Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12), on a modified retrospective basis and adopted ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02), on a modified retrospective basis. ASU 2018-02 provides the option to reclassify stranded tax effects related to the U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act) in accumulated other comprehensive income to retained earnings. The adjustment relates to the change in the U.S. corporate income tax rate. The cumulative effect of the adjustments to the opening balance of Retained earnings for these adopted standards was $108 million.
 
The following table summarizes the changes to our condensed consolidated balance sheet for the adoption of ASU 2014-09, ASU 2016-01, ASU 2017-12 and ASU 2018-02:

6


Table of Contents
GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
December 31, 2017
 
Adjustment due to ASU 2014-09
 
Adjustment due to ASU 2016-01, ASU 2017-12 and ASU 2018-02
 
January 1, 2018
Deferred income taxes
$
23,544

 
$
444

 
$
(63
)
 
$
23,925

Other assets
$
4,929

 
$
195

 
$
242

 
$
5,366

GM Financial short-term debt and current portion of long-term debt
$
24,450

 
$

 
$
(13
)
 
$
24,437

Accrued liabilities
$
25,996

 
$
2,328

 
$

 
$
28,324

Other liabilities
$
12,394

 
$
(235
)
 
$

 
$
12,159

Retained earnings
$
17,627

 
$
(1,336
)
 
$
290

 
$
16,581

Accumulated other comprehensive loss
$
(8,011
)
 
$

 
$
(98
)
 
$
(8,109
)
 
Effective January 1, 2018 we adopted ASU 2016-15, "Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Payments" (ASU 2016-15), which clarified guidance on the classification of certain cash receipts and payments in the statement of cash flows. The adoption of ASU 2016-15 did not have a material impact on our condensed consolidated financial statements and prior periods were not restated.

Effective January 1, 2018 we adopted ASU 2017-07, "Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" (ASU 2017-07) on a retrospective basis, which requires that the service cost component of net periodic pension and other postretirement benefits (OPEB) (income) expense be presented in the same income statement line item as other employee compensation costs. The remaining components of net periodic pension and OPEB (income) expense are now presented outside operating income. Amounts previously reflected in Operating income were reclassified to Interest income and other non-operating income, net in accordance with the provisions of ASU 2017-07. Refer to Note 13 for amounts that were reclassified.

Accounting Standards Not Yet Adopted

In February 2016 the Financial Accounting Standards Board issued ASU 2016-02, "Leases" (ASU 2016-02), which requires us as the lessee to recognize most leases on the balance sheet thereby resulting in the recognition of right of use assets and lease obligations for those leases currently classified as operating leases. The accounting for leases where we are the lessor remains largely unchanged. We are continuing to assess the accounting and disclosure impact of ASU 2016-02 and refine our processes to permit adoption on January 1, 2019. We plan to elect the optional transition method as well as the package of practical expedients upon adoption. We expect the primary impact to our consolidated financial position upon adoption will be the recognition, on a discounted basis, of our minimum commitments under noncancelable operating leases on our consolidated balance sheets resulting in the recording of right of use assets and lease obligations. Our minimum commitments under noncancelable operating leases are not significantly different than those disclosed in our 2017 Form 10-K.

In June 2016 the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13), which requires entities to use a new impairment model based on Current Expected Credit Losses (CECL) rather than incurred losses. We plan to adopt ASU 2016-13 on January 1, 2020 on a modified retrospective basis, which will result in an increase to our allowance for credit losses and a decrease to Retained earnings as of the adoption date. Estimated credit losses under CECL will consider relevant information about past events, current conditions and reasonable and supportable forecasts, resulting in recognition of lifetime expected credit losses upon loan origination.

Note 2. Significant Accounting Policies
The information presented on Revenue Recognition, Equipment on Operating Leases, Marketable Debt Securities, Equity Investments and Derivative Financial Instruments supplements the Significant Accounting Policies information presented in our 2017 Form 10-K for the adoption of our recently adopted accounting standards which became effective January 1, 2018. See our 2017 Form 10-K for a description of our significant accounting policies in effect prior to the adoption of the new accounting standards.

Revenue Recognition We adopted ASU 2014-09, which requires us to recognize revenue when a customer obtains control rather than when we have transferred substantially all risks and rewards of a good or service. We adopted ASU 2014-09 by applying the modified retrospective method to all noncompleted contracts as of the date of adoption. See Note 1 for additional information

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

pertaining to the adoption of ASU 2014-09. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The following accounting policies became effective upon the adoption of ASU 2014-09.

Automotive Automotive net sales and revenue represents the amount of consideration to which we expect to be entitled in exchange for vehicle, parts and accessories and services and other sales. The consideration recognized represents the amount received, typically shortly after the sale to a customer, net of estimated dealer and customer sales incentives we reasonably expect to pay. Significant factors in determining our estimates of incentives include forecasted sales volume, product type, product mix, customer behavior and assumptions concerning market conditions. Historical experience is also considered when establishing our future expectations. Subsequent adjustments to incentive estimates are possible as facts and circumstances change over time. When our customers have a right to return eligible parts and accessories, we consider the returns in our estimation of the transaction price. A portion of the consideration received is deferred for separate performance obligations, such as maintenance and vehicle connectivity, that will be provided to our customers at a future date. Taxes assessed by various government entities, such as sales, use and value-added taxes, collected at the time of the vehicle sale are excluded from Automotive net sales and revenue. Shipping and handling activities that occur after control of the vehicle transfers to the dealer are recognized at the time of sale and presented in Automotive and other cost of sales.

Vehicle, Parts and Accessories For the majority of vehicle and accessories sales our customers obtain control and we recognize revenue when the vehicle transfers to the dealer, which generally occurs when the vehicle is released to the carrier responsible for transporting it to a dealer. Revenue, net of estimated returns, is recognized on the sale of parts upon delivery to the customer.

Certain transfers to daily rental companies are accounted for as sales, with revenue recognized at the time of transfer. Such transactions were previously accounted for as operating leases. At the time of transfer, we defer revenue for remarketing obligations, record a residual value guarantee and reflect a deposit liability for amounts expected to be returned once the remarketing services are complete. Deferred revenue is recognized in earnings upon completion of the remarketing service. Transfers that occurred prior to January 1, 2018 and future transfers containing a substantive purchase obligation continue to be accounted for as operating leases and rental income is recognized over the estimated term of the lease.

Used Vehicles Proceeds from the auction of vehicles returned from daily rental car companies are recognized in Automotive net sales and revenue upon transfer of control of the vehicle to the customer and the related vehicle carrying value is recognized in Automotive and other cost of sales.

Services and Other Services and other revenue primarily consists of revenue from vehicle-related service arrangements and after-sale services such as maintenance, vehicle connectivity and extended service warranties. For those service arrangements that are bundled with a vehicle sale, a portion of the revenue from the sale is allocated to the service component and recognized as deferred revenue within Accrued liabilities or Other liabilities. We recognize revenue for bundled services and services sold separately as services are performed, typically over a period of less than three years.

Automotive Financing - GM Financial Finance charge income earned on receivables is recognized using the effective interest method. Fees and commissions (including incentive payments) received and direct costs of originating loans are deferred and amortized over the term of the related finance receivables using the effective interest method and are removed from the condensed consolidated balance sheets when the related finance receivables are sold, charged off or paid in full. Accrual of finance charge income on retail finance receivables is generally suspended on accounts that are more than 60 days delinquent, accounts in bankruptcy and accounts in repossession. Payments received on nonaccrual loans are first applied to any fees due, then to any interest due and then any remaining amounts are recorded to principal. Interest accrual generally resumes once an account has received payments bringing the delinquency to less than 60 days past due. Accrual of finance charge income on commercial finance receivables is generally suspended on accounts that are more than 90 days delinquent, upon receipt of a bankruptcy notice from a borrower, or where reasonable doubt exists about the full collectability of contractually agreed upon principal and interest. Payments received on nonaccrual loans are first applied to principal. Interest accrual resumes once an account has received payments bringing the account fully current and collection of contractual principal and interest is reasonably assured (including amounts previously charged off).

Income from operating lease assets, which includes lease origination fees, net of lease origination costs and incentives, is recorded as operating lease revenue on a straight-line basis over the term of the lease agreement.

Equipment on Operating Leases Equipment on operating leases, net consists of vehicle leases to retail customers with lease terms of two to five years and vehicle sales to rental car companies that are expected to be repurchased in an average of seven

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

months. We are exposed to changes in the residual values of these assets. The residual values represent estimates of the values of the leased vehicles at the end of the lease contracts and are determined based on forecasted auction proceeds when there is a reliable basis to make such a determination. Realization of the residual values is dependent on the future ability to market the vehicles under prevailing market conditions. The adequacy of the estimate of the residual value is evaluated over the life of the arrangement and adjustments may be made to the extent the expected value of the vehicle changes. Adjustments may be in the form of revisions to the depreciation rate or recognition of an impairment charge. Impairment is determined to exist if an impairment indicator exists and the expected future cash flows, which include estimated residual values, are lower than the carrying amount of the vehicle's asset group. If the carrying amount is considered impaired an impairment charge is recorded for the amount by which the carrying amount exceeds fair value of the vehicle's asset group. Fair value is determined primarily using the anticipated cash flows, including estimated residual values. In our automotive finance operations when a leased vehicle is returned or repossessed the asset is recorded in Other assets at the lower of amortized cost or estimated selling price, less costs to sell. Upon disposition a gain or loss is recorded in GM Financial interest, operating and other expenses for any difference between the net book value of the leased asset and the proceeds from the disposition of the asset.

Marketable Debt Securities We classify marketable debt securities as either available-for-sale or trading. Various factors, including turnover of holdings and investment guidelines, are considered in determining the classification of securities. Available-for-sale debt securities are recorded at fair value with unrealized gains and losses recorded net of related income taxes in Accumulated other comprehensive loss until realized. Trading debt securities are recorded at fair value with changes in fair value recorded in Interest income and other non-operating income, net. We determine realized gains and losses for all debt securities using the specific identification method.

We measure the fair value of our marketable debt securities using a market approach where identical or comparable prices are available and an income approach in other cases. If quoted market prices are not available, fair values of securities are determined using prices from a pricing service, pricing models, quoted prices of securities with similar characteristics or discounted cash flow models. These prices represent non-binding quotes. Our pricing service utilizes industry-standard pricing models that consider various inputs. We conduct an annual review of our pricing service and believe the prices received from our pricing service are a reliable representation of exit prices.

An evaluation is made quarterly to determine if unrealized losses related to non-trading investments in debt securities are other-than-temporary. Factors considered include the length of time and extent to which the fair value has been below cost, the financial condition and near-term prospects of the issuer and the intent to sell or likelihood to be forced to sell the debt security before any anticipated recovery.

Equity Investments When events and circumstances warrant, equity investments accounted for under the equity method of accounting are evaluated for impairment. An impairment charge is recorded whenever a decline in value of an equity investment below its carrying amount is determined to be other-than-temporary. Impairment charges related to equity method investments are recorded in Equity income. Equity investments that are not accounted for under the equity method of accounting are measured at fair value with changes in fair value recorded in Interest income and other non-operating income, net.

Derivative Financial Instruments The following changes to our accounting policies became effective upon adoption of ASU 2017-12.

Automotive Certain foreign currency and commodity forward contracts have been designated as cash flow hedges. The risk being hedged is the foreign currency and commodity price risk related to forecasted transactions. If the contract has been designated as a cash flow hedge, the change in the fair value of the cash flow hedge is deferred in Accumulated other comprehensive loss and is recognized in Automotive and other cost of sales along with the earnings effect of the hedged item when the hedged item affects earnings.

Automotive Financing - GM Financial Certain interest rate swap and foreign currency swap agreements have been designated as cash flow hedges. The risk being hedged is the foreign currency and interest rate risk related to forecasted transactions. If the contract has been designated as a cash flow hedge, the change in the fair value of the cash flow hedge is deferred in Accumulated other comprehensive loss and is recognized in GM Financial interest, operating and other expenses along with the earnings effect of the hedged item when the hedged item affects earnings. Changes in the fair value of amounts excluded from the assessment of effectiveness are recorded currently in earnings and are presented in the same income statement line as the earnings effect of the hedged item.



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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

Note 3. Revenue
The following table disaggregates our revenue by major source for revenue generating segments:
 
Three Months Ended September 30, 2018
 
GMNA
 
GMI
 
Corporate
 
Total Automotive
 
GM Financial
 
Eliminations
 
Total
Vehicle, parts and accessories
$
26,273


$
4,226


$
2


$
30,501

 
$


$
(11
)

$
30,490

Used vehicles
582

 
23

 

 
605

 

 
(1
)
 
604

Services and other
795


333


54


1,182

 




1,182

Automotive net sales and revenue
27,650


4,582


56


32,288

 


(12
)

32,276

Leased vehicle income

 

 

 

 
2,501

 

 
2,501

Finance charge income

 

 

 

 
917

 
(2
)
 
915

Other income

 

 

 

 
100

 
(1
)
 
99

GM Financial net sales and revenue







 
3,518


(3
)

3,515

Net sales and revenue
$
27,650


$
4,582


$
56


$
32,288

 
$
3,518


$
(15
)

$
35,791

 
Nine Months Ended September 30, 2018
 
GMNA
 
GMI
 
Corporate
 
Total Automotive
 
GM Financial
 
Eliminations
 
Total
Vehicle, parts and accessories
$
79,029


$
13,320


$
12


$
92,361

 
$


$
(36
)

$
92,325

Used vehicles
2,506


138




2,644

 


(34
)

2,610

Services and other
2,434


730


143


3,307

 




3,307

Automotive net sales and revenue
83,969


14,188


155


98,312

 


(70
)

98,242

Leased vehicle income







 
7,445




7,445

Finance charge income







 
2,667


(5
)

2,662

Other income







 
305


(4
)

301

GM Financial net sales and revenue







 
10,417


(9
)

10,408

Net sales and revenue
$
83,969


$
14,188


$
155


$
98,312

 
$
10,417


$
(79
)

$
108,650


Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Adjustments to sales incentives for previously recognized sales were insignificant in the three and nine months ended September 30, 2018.

Contract liabilities in our Automotive segments consist primarily of maintenance, extended warranty and other service contracts. We recognized revenue of $426 million and $1.2 billion related to contract liabilities during the three and nine months ended September 30, 2018. We expect to recognize revenue of $560 million in the three months ending December 31, 2018 and $1.0 billion, $497 million and $600 million in the years ending December 31, 2019, 2020 and thereafter related to contract liabilities as of September 30, 2018.

Note 4. Marketable and Other Securities
The following table summarizes the fair value of cash equivalents and marketable debt and equity securities which approximates cost:

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

 
Fair Value Level
 
September 30, 2018

December 31, 2017
Cash and cash equivalents
 
 




Cash and time deposits(a)
 
 
$
7,144


$
6,962

Available-for-sale debt securities
 
 




U.S. government and agencies
2
 
1,115


750

Corporate debt
2
 
2,774


3,032

Sovereign debt
2
 
2,033


1,954

Total available-for-sale debt securities – cash equivalents
 
 
5,922


5,736

Money market funds(b)
1
 
5,369


2,814

Total cash and cash equivalents
 
 
$
18,435


$
15,512

Marketable debt securities
 
 
 
 


U.S. government and agencies
2
 
$
1,229


$
3,310

Corporate debt
2
 
3,416


3,665

Mortgage and asset-backed
2
 
685


635

Sovereign debt
2
 
586


703

Total available-for-sale debt securities – marketable securities
 
 
$
5,916


$
8,313

Restricted cash
 
 
 

 
Cash and cash equivalents
 
 
$
198


$
219

Money market funds
1
 
2,225


2,117

Total restricted cash
 
 
$
2,423


$
2,336

 
 
 
 
 
 
Available-for-sale debt securities included above with contractual maturities(c)
 
 
 
 
Due in one year or less
 
 
$
6,777

 
 
Due between one and five years
 
 
4,376

 
 
Total available-for-sale debt securities with contractual maturities
 
 
$
11,153

 
 
__________
(a)
Includes $364 million that is designated exclusively to fund capital expenditures in GM Korea Company (GM Korea) at September 30, 2018. Refer to Note 17 for additional information.
(b)
Includes $1.8 billion in GM Cruise at September 30, 2018. Refer to Note 17 for additional information.
(c)
Excludes mortgage and asset-backed securities.

Proceeds from the sale of investments classified as available-for-sale and sold prior to maturity were $1.7 billion and $3.7 billion in the three months ended September 30, 2018 and 2017 and $3.6 billion and $5.1 billion in the nine months ended September 30, 2018 and 2017. Net unrealized gains and losses on available-for-sale debt securities were insignificant in the three and nine months ended September 30, 2018 and 2017. Cumulative unrealized gains and losses on available-for-sale debt securities were insignificant at September 30, 2018 and December 31, 2017.

Investments in equity securities where market quotations are not available are accounted for at fair value primarily using Level 3 inputs. We recorded an unrealized gain of $142 million in Interest income and other non-operating income, net in the three months ended June 30, 2018 to adjust an investment in an equity security to a fair value of $884 million at June 30, 2018, which remained unchanged at September 30, 2018.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the total shown in the condensed consolidated statement of cash flows:
 
September 30, 2018
Cash and cash equivalents
$
18,435

Restricted cash included in Other current assets
1,883

Restricted cash included in Other assets
540

Total
$
20,858



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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)


Note 5. GM Financial Receivables and Transactions

September 30, 2018

December 31, 2017

Retail
 
Commercial
 
Total
 
Retail
 
Commercial
 
Total
Finance receivables, collectively evaluated for impairment, net of fees
$
35,442


$
10,601


$
46,043


$
30,486


$
9,935


$
40,421

Finance receivables, individually evaluated for impairment, net of fees
2,308


67


2,375


2,228


22


2,250

GM Financial receivables
37,750


10,668


48,418


32,714


9,957


42,671

Less: allowance for loan losses
(839
)

(61
)

(900
)

(889
)

(53
)

(942
)
GM Financial receivables, net
$
36,911


$
10,607


$
47,518


$
31,825


$
9,904


$
41,729



















Fair value of GM Financial receivables utilizing Level 2 inputs






$
10,607








$
9,904

Fair value of GM Financial receivables utilizing Level 3 inputs

 
 
 
 
$
36,551

 
 
 
 
 
$
31,831

 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018

September 30, 2017
 
September 30, 2018

September 30, 2017
Allowance for loan losses at beginning of period
$
873

 
$
893

 
$
942


$
805

Provision for loan losses
180

 
204

 
444


573

Charge-offs
(285
)
 
(287
)
 
(878
)

(858
)
Recoveries
130

 
135

 
398


420

Effect of foreign currency
2

 
3

 
(6
)

8

Allowance for loan losses at end of period
$
900

 
$
948

 
$
900


$
948


The allowance for loan losses on retail and commercial finance receivables included a collective allowance of $575 million and $611 million and a specific allowance of $325 million and $331 million at September 30, 2018 and December 31, 2017.

Retail Finance Receivables We use proprietary scoring systems in the underwriting process that measure the credit quality of retail finance receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO score or its equivalent) and contract characteristics. We also consider other factors such as employment history, financial stability and capacity to pay. Subsequent to origination we review the credit quality of retail finance receivables based on customer payment activity. At September 30, 2018 and December 31, 2017, 27% and 33% of retail finance receivables were from consumers with sub-prime credit scores, which are defined as FICO or equivalent scores of less than 620 at the time of loan origination.

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. The accrual of finance charge income had been suspended on delinquent retail finance receivables with contractual amounts due of $847 million and $778 million at September 30, 2018 and December 31, 2017. The following table summarizes the contractual amount of delinquent retail finance receivables, which is not significantly different than the recorded investment of the retail finance receivables:

September 30, 2018

September 30, 2017

Amount
 
Percent of Contractual Amount Due
 
Amount
 
Percent of Contractual Amount Due
31-to-60 days delinquent
$
1,302


3.5
%

$
1,176


3.6
%
Greater-than-60 days delinquent
498


1.3
%

521


1.6
%
Total finance receivables more than 30 days delinquent
1,800


4.8
%

1,697


5.2
%
In repossession
53


0.1
%

55


0.2
%
Total finance receivables more than 30 days delinquent or in repossession
$
1,853


4.9
%

$
1,752


5.4
%


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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

Retail finance receivables classified as troubled debt restructurings and individually evaluated for impairment were $2.3 billion and $2.2 billion and the allowance for loan losses included $317 million and $328 million of specific allowances on these receivables at September 30, 2018 and December 31, 2017.

Commercial Finance Receivables Our commercial finance receivables consist of dealer financings, primarily for inventory purchases. Proprietary models are used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary. Dealers in Group VI are subject to additional restrictions on funding, including suspension of lines of credit and liquidation of assets. The commercial finance receivables on non-accrual status were insignificant at September 30, 2018 and December 31, 2017. The following table summarizes the credit risk profile by dealer risk rating of the commercial finance receivables: 
 
 
September 30, 2018
 
December 31, 2017
Group I
– Dealers with superior financial metrics
$
2,077


$
1,915

Group II
– Dealers with strong financial metrics
3,905


3,465

Group III
– Dealers with fair financial metrics
3,197


3,239

Group IV
– Dealers with weak financial metrics
960


997

Group V
– Dealers warranting special mention due to elevated risks
422


260

Group VI
– Dealers with loans classified as substandard, doubtful or impaired
107


81

 
 
$
10,668


$
9,957


Transactions with GM Financial The following table shows transactions between our Automotive segments and GM Financial. These amounts are shown in GM Financial's condensed consolidated balance sheets and statements of income. All balance sheet amounts in the table below are eliminated. Income statement amounts may not fully eliminate due to timing.
 
September 30, 2018
 
December 31, 2017
Condensed Consolidated Balance Sheets
 
 
 
Commercial finance receivables, net due from GM consolidated dealers
$
437

 
$
355

Direct-financing lease receivables from GM subsidiaries
$
125

 
$
88

Subvention receivable(a)
$
735

 
$
306

Commercial loan funding payable
$
86

 
$
90

 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Condensed Consolidated Statements of Income
 
 
 
 
 
 
 
Interest subvention earned on finance receivables
$
142

 
$
129

 
$
409

 
$
361

Leased vehicle subvention earned
$
827

 
$
786

 
$
2,438

 
$
2,246

__________
(a)
Cash paid by Automotive segments to GM Financial for subvention was $1.1 billion for the three months ended September 30, 2018 and 2017 and $2.8 billion and $3.3 billion for the nine months ended September 30, 2018 and 2017.

GM Financial’s Board of Directors declared a $375 million dividend on its common stock on October 26, 2018, which we received on October 30, 2018.

Note 6. Inventories
 
September 30, 2018
 
December 31, 2017
Total productive material, supplies and work in process
$
4,634

 
$
4,203

Finished product, including service parts
6,700

 
6,460

Total inventories
$
11,334

 
$
10,663


Note 7. Equipment on Operating Leases

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

Equipment on operating leases consists of leases to retail customers that are recorded as operating leases and vehicle sales to daily rental car companies with an actual or expected repurchase obligation.

September 30, 2018

December 31, 2017
Equipment on operating leases
$
55,840


$
53,947

Less: accumulated depreciation
(11,238
)

(9,959
)
Equipment on operating leases, net(a)
$
44,602


$
43,988

__________
(a)
Includes $44.1 billion and $42.9 billion of GM Financial Equipment on operating leases, net at September 30, 2018 and December 31, 2017.

Depreciation expense related to Equipment on operating leases, net was $1.9 billion and $1.8 billion in the three months ended September 30, 2018 and 2017 and $5.6 billion and $4.9 billion in the nine months ended September 30, 2018 and 2017.

The following table summarizes minimum rental payments due to GM Financial on leases to retail customers:
 
Year Ending December 31,
 
2018
 
2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
Minimum rental receipts under operating leases
$
1,882

 
$
6,260

 
$
3,570

 
$
1,077

 
$
97

 
$
6

 
$
12,892


Note 8. Equity in Net Assets of Nonconsolidated Affiliates
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Automotive China equity income
$
485

 
$
459

 
$
1,674


$
1,472

Other joint ventures equity income
45

 
41

 
141


113

Total Equity income
$
530

 
$
500

 
$
1,815


$
1,585

There have been no significant ownership changes in our Automotive China joint ventures (Automotive China JVs) since December 31, 2017.
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Summarized Operating Data of Automotive China JVs
 
 
 
 
 
 
 
Automotive China JVs' net sales
$
11,461

 
$
12,161

 
$
37,781

 
$
34,177

Automotive China JVs' net income
$
999

 
$
964

 
$
3,370

 
$
2,912

Dividends received from our nonconsolidated affiliates were insignificant and $382 million in the three months ended September 30, 2018 and 2017 and $2.0 billion in the nine months ended September 30, 2018 and 2017. We had undistributed earnings of $2.0 billion and $2.2 billion related to our nonconsolidated affiliates at September 30, 2018 and December 31, 2017.

Note 9. Variable Interest Entities
GM Financial uses special purpose entities (SPEs) that are considered VIEs to issue variable funding notes to third party bank-sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is backed by finance receivables and leasing related assets transferred to the VIEs (Securitized Assets). GM Financial determined that it is the primary beneficiary of the SPEs because the servicing responsibilities for the Securitized Assets give GM Financial the power to direct the activities that most significantly impact the performance of the VIEs and the variable interests in the VIEs give GM Financial the obligation to absorb losses and the right to receive residual returns that could potentially be significant. The assets serve as the sole source of repayment for the debt issued by these entities. Investors in the notes issued by the VIEs do not have recourse to GM Financial or its other assets, with the exception of customary representation and warranty repurchase provisions and indemnities that GM Financial provides as the servicer. GM Financial is not required and does not currently intend to provide additional financial support to these SPEs. While these subsidiaries are included in GM Financial's condensed consolidated financial statements, they are separate legal entities and their assets are legally owned by them and are not available to GM Financial's creditors.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)


The following table summarizes the assets and liabilities related to GM Financial's consolidated VIEs:
 
September 30, 2018
 
December 31, 2017
Restricted cash – current
$
1,733

 
$
1,740

Restricted cash – non-current
$
487

 
$
527

GM Financial receivables, net of fees – current
$
16,502

 
$
15,141

GM Financial receivables, net of fees – non-current
$
13,080

 
$
12,944

GM Financial equipment on operating leases, net
$
21,252

 
$
22,222

GM Financial short-term debt and current portion of long-term debt
$
19,086

 
$
18,972

GM Financial long-term debt
$
20,392

 
$
20,356


GM Financial recognizes finance charge, leased vehicle and fee income on the Securitized Assets and interest expense on the secured debt issued in a securitization transaction and records a provision for loan losses to recognize probable loan losses inherent in the finance receivables.

Note 10. Automotive and GM Financial Debt


September 30, 2018
 
December 31, 2017
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Total automotive debt
$
15,963

 
$
16,352

 
$
13,502

 
$
15,088

Fair value utilizing Level 1 inputs
 
 
$
13,971

 
 
 
$
13,202

Fair value utilizing Level 2 inputs
 
 
$
2,381

 
 
 
$
1,886


In April 2018 we amended and restated our two existing revolving credit facilities and entered into a third facility, increasing our aggregate borrowing capacity from $14.5 billion to $16.5 billion. These facilities consist of a 364-day, $2.0 billion facility, a three-year, $4.0 billion facility and a five-year, $10.5 billion facility. The facilities are available to us as well as certain wholly- owned subsidiaries, including GM Financial. The three-year, $4.0 billion facility allows for borrowings in U.S. Dollars and other currencies and includes a letter of credit sub-facility of $1.1 billion. The five-year, $10.5 billion facility allows for borrowings in U.S. Dollars and other currencies. The 364-day, $2.0 billion facility allows for borrowing in U.S. Dollars only. We have allocated the 364-day, $2.0 billion facility for exclusive use by GM Financial.

In September 2018 we issued $2.1 billion in aggregate principal amount of senior unsecured notes with an initial weighted average interest rate of 5.03% and maturity dates ranging from 2021 to 2049. The notes are governed by the same indenture that was used in past issuances, which contains terms and covenants customary of these types of securities including limitation on the amount of certain secured debt we may incur. The net proceeds from the issuance of these senior unsecured notes were used to repay $1.5 billion of debt in October 2018 upon maturity, pre-fund $584 million in certain mandatory contributions for our U.K. and Canada pension plans due in 2019 through 2021, and for other general corporate purposes.

 
September 30, 2018
 
December 31, 2017
 
Carrying Amount
 
Fair Value
 
Carrying Amount
 
Fair Value
Secured debt
$
39,722


$
39,679


$
39,887


$
39,948

Unsecured debt
46,655


47,062


40,830


41,989

Total GM Financial debt
$
86,377


$
86,741


$
80,717


$
81,937

 


 




 
Fair value utilizing Level 2 inputs


$
84,693





$
79,623

Fair value utilizing Level 3 inputs


$
2,048





$
2,314


Secured debt consists of revolving credit facilities and securitization notes payable. Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged assets. Refer to Note 9 for additional information on GM Financial's involvement with VIEs. In the nine months ended September 30, 2018 GM Financial entered into new or renewed

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

credit facilities with a total net additional borrowing capacity of $345 million, which had substantially the same terms as existing debt and GM Financial issued $16.3 billion in aggregate principal amount of securitization notes payable with an initial weighted average interest rate of 2.89% and maturity dates ranging from 2022 to 2026.

Unsecured debt consists of senior notes, credit facilities and other unsecured debt. In the nine months ended September 30, 2018 GM Financial issued $7.2 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 3.17% and maturity dates ranging from 2020 to 2028.

During the nine months ended September 30, 2018, GM Financial launched an unsecured commercial paper notes program in the U.S. At September 30, 2018, the principal amount outstanding of GM Financial's commercial paper in the U.S. was $1.5 billion.

Each of the revolving credit facilities and the indentures governing GM Financial's notes contain terms and covenants including limitations on GM Financial's ability to incur certain liens.

Note 11. Derivative Financial Instruments
Automotive The following table presents the notional amounts of derivative financial instruments in our automotive operations:
 
Fair Value Level
 
September 30, 2018
 
December 31, 2017
Derivatives not designated as hedges(a)
 
 
 
 
 
Foreign currency
2
 
$
2,970


$
4,022

Commodity
2
 
636


606

PSA warrants(b)
2
 
46


48

Total derivative financial instruments
 
 
$
3,652


$
4,676

__________
(a)
The fair value of these derivative instruments at September 30, 2018 and December 31, 2017 and the gains/losses included in our condensed consolidated income statements for the three and nine months ended September 30, 2018 and 2017 were insignificant, unless otherwise noted.
(b)
The fair value of the PSA warrants located in Other assets was $1.1 billion and $764 million at September 30, 2018 and December 31, 2017. We recorded gains in Interest income and other non-operating income, net of $171 million and an insignificant amount in the three months ended September 30, 2018 and 2017 and $324 million and an insignificant amount in the nine months ended September 30, 2018 and 2017.

We estimate the fair value of the PSA warrants using a Black-Scholes formula. The significant inputs to the model include the PSA stock price and the estimated dividend yield. The estimated dividend yield is adjusted based on the terms of the Master Agreement with PSA Group dated March 5, 2017 (the Agreement). Refer to Exhibit 2.1 of our 2017 Form 10-K for additional details. Under the terms of the Agreement upon exercise of the warrants we are entitled to receive any dividends by PSA between the issuance date and the conversion date.

GM Financial The following table presents the notional amounts of GM Financial's derivative financial instruments:
 
Fair Value Level
 
September 30, 2018
 
December 31, 2017
Derivatives designated as hedges(a)
 
 
 
 
 
Fair value hedges – interest rate contracts(b)(c)
2
 
$
10,510


$
11,110

Cash flow hedges
 
 
 
 
 
Interest rate contracts
2
 
905


2,177

Foreign currency
2
 
2,108


1,574

Derivatives not designated as hedges(a)
 
 
 
 
 
Interest rate contracts(c)(d)
2
 
93,162


81,938

Foreign currency
2
 
1,858


1,201

Total derivative financial instruments
 
 
$
108,543


$
98,000

__________
(a)
The fair value of these derivative instruments at September 30, 2018 and December 31, 2017 and the gains/losses included in our condensed consolidated income statements and statements of comprehensive income for the three and nine months ended September 30, 2018 and 2017 were insignificant, unless otherwise noted.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

(b)
The fair value of these derivative instruments located in Other liabilities was $510 million and $290 million at September 30, 2018 and December 31, 2017. The fair value of these derivative instruments located in Other assets was insignificant at September 30, 2018 and December 31, 2017.
(c)
Amounts accrued for interest payments in a net receivable position are included in Other assets. Amounts accrued for interest payments in a net payable position are included in Other liabilities.
(d)
The fair value of these derivative instruments located in Other assets was $551 million and $329 million at September 30, 2018 and December 31, 2017. The fair value of these derivative instruments located in Other liabilities was $670 million and $207 million at September 30, 2018 and December 31, 2017.

The fair value for Level 2 instruments was derived using the market approach based on observable market inputs including quoted prices of similar instruments and foreign exchange and interest rate forward curves.

The following amounts were recorded in the condensed consolidated balance sheet related to items designated and qualifying as hedged items in fair value hedging relationships:
 
September 30, 2018
 
Carrying Amount of Hedged Items
 
Cumulative Amount of Fair Value Hedging Adjustments(a)
GM Financial long-term debt
$
15,363

 
$
735

__________
(a)
Includes $178 million of adjustments remaining on hedged items for which hedge accounting has been discontinued.

Note 12. Product Warranty and Related Liabilities
 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Warranty balance at beginning of period
$
7,990

 
$
8,890

 
$
8,332


$
9,069

Warranties issued and assumed in period  recall campaigns
101

 
173

 
515


527

Warranties issued and assumed in period  product warranty
542

 
481

 
1,599


1,586

Payments
(723
)
 
(787
)
 
(2,175
)

(2,382
)
Adjustments to pre-existing warranties
(209
)
 
(317
)
 
(426
)

(405
)
Effect of foreign currency and other
(8
)
 
39

 
(152
)

84

Warranty balance at end of period
$
7,693

 
$
8,479

 
$
7,693


$
8,479


We estimate our reasonably possible loss in excess of amounts accrued for recall campaigns to be insignificant at September 30, 2018. Refer to Note 14 for reasonably possible losses on Takata Corporation (Takata) matters.

Note 13. Pensions and Other Postretirement Benefits

Three Months Ended September 30, 2018

Three Months Ended September 30, 2017