10-K 1 acf1231201310-k.htm 10-K ACF 12.31.2013 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________ 
FORM 10-K
(Mark One)
ý
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
OR
o
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ________________ to ________________
Commission file number 1-10667
______________________________________________ 
General Motors Financial Company, Inc.
(Exact name of registrant as specified in its charter)
Texas
 
75-2291093
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
801 Cherry Street, Suite 3500, Fort Worth, Texas 76102
(Address of principal executive offices, including Zip Code)
(817) 302-7000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
(Title of each class)
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of each class)
 ______________________________________________ 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes    ¨    No    ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes    ¨    No    ý
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    ý   No    ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes    ý    No    ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K.  ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer" "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
    Large accelerated filer  o
 
    Accelerated filer  o
 
Non-accelerated filer  x
 
Smaller Reporting Company  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes    ¨    No    ý
As of February 6, 2014, there were 502 shares of the registrant's common stock, par value $1.00 per share, outstanding. All of the registrant's common stock is owned by General Motors Holdings LLC.

DOCUMENTS INCORPORATED BY REFERENCE
NONE

The registrant meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this form on the reduced disclosure format.

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GENERAL MOTORS FINANCIAL COMPANY, INC.
INDEX TO FORM 10-K
 
Item
No.
 
Page
 
 
 
1
1A.
2
3
4
 
PART II
 
5
6
7
7A.
8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 9 - Derivative Financial Instruments and Hedging Activities
 
 
 
 
 
 
 
 
Note 17 - Segment Reporting and Geographic Information
 
 
 
 
9
 
PART III
 

2



3


FORWARD-LOOKING STATEMENTS
This Form 10-K contains several "forward-looking statements." Forward-looking statements are those that use words such as "believe," "expect," "anticipate," "intend," "plan," "may," "likely," "should," "estimate," "continue," "future" and/or other comparable expressions. These words indicate future events and trends. Forward-looking statements are our current views with respect to future events and financial performance. These forward-looking statements are subject to many assumptions, risks and uncertainties that could cause actual results to differ significantly from historical results or from those anticipated by us. The most significant risks are detailed from time to time in our filings and reports with the Securities and Exchange Commission ("SEC"), including this Annual Report on Form 10-K for the year ended December 31, 2013. It is advisable not to place undue reliance on our forward-looking statements. We undertake no obligation to, and do not, publicly update or revise any forward-looking statements, except as required by federal securities laws, whether as a result of new information, future events or otherwise.
The following factors are among those that may cause actual results to differ materially from historical results or from the forward-looking statements:
our ability to close the acquisition of Ally Financial Inc.'s ("Ally Financial") auto finance and financial services operations in China and integrate those operations into our business successfully;
changes in general economic and business conditions;
General Motors Company's ("GM") ability to sell new vehicles that we finance in the markets we serve in North America, Europe and Latin America;
interest rate and currency fluctuations;
our financial condition and liquidity, as well as future cash flows and earnings;
competition;
the effect, interpretation or application of new or existing laws, regulations, court decisions and accounting pronouncements;
the availability of sources of financing;
the level of net charge-offs, delinquencies and prepayments on the loans and leases we originate;
the viability of GM-franchised dealers that are commercial loan customers;
the prices at which used cars are sold in the wholesale auction markets; and
changes in business strategy, including acquisitions and expansion of product lines and credit risk appetite.
If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.
INDUSTRY DATA
In this Form 10-K, we rely on and refer to information regarding the automobile finance industry from market research reports, analyst reports and other publicly available information.
AVAILABLE INFORMATION
We make available free of charge through our website, www.gmfinancial.com, our AmeriCredit Automobile Receivables Trust and securitization information and all materials that we file electronically with the SEC, including our reports on Form 10-K, Form 10-Q, Form 8-K, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practical after filing or furnishing such material with or to the SEC.
The public may read and copy any materials we file with or furnish to the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website, www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

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PART I
ITEM 1.
BUSINESS
General Motors Merger
On October 1, 2010, General Motors Holdings LLC ("GM Holdings"), a Delaware limited liability company and a wholly-owned subsidiary of GM, completed its $3.5 billion acquisition of AmeriCredit Corp. (the "Merger"). Following the Merger, our name was changed to General Motors Financial Company, Inc. ("GM Financial" or the "Company").
Acquisition of Ally Financial International Operations
We acquired Ally Financial's auto finance and financial services operations in Germany, the United Kingdom ("U.K."), Italy, Sweden, Switzerland, Austria, Belgium, the Netherlands, Greece, Spain, Chile, Colombia and Mexico on April 1, 2013. We acquired Ally Financial's auto finance and financial services operations in France and Portugal on June 1, 2013, and we completed the acquisition of Ally Financial's auto finance and financial services operations in Brazil on October 1, 2013. The aggregate consideration for these acquisitions was $3.3 billion, subject to certain closing adjustments. In addition to the purchase price, we also funded intercompany loans to certain of the entities we acquired in Europe, of which $1.4 billion was used to repay loans from Ally Financial to such European entities. The operations that we have acquired as of December 31, 2013 from Ally Financial are referred to as the "international operations." Additionally, we have agreed to acquire Ally Financial's non-controlling 40% equity interest in GMAC-SAIC Automotive Finance Company Limited ("GMAC-SAIC"), which conducts auto finance operations in China, and we expect to complete the transaction in 2014.
The results of operations of the international operations since the applicable acquisition dates are included in our financial statements for the year ended December 31, 2013. Certain amounts previously presented related to the international operations have been and will continue to be updated as a result of the finalization of acquisition accounting adjustments.
General
GM Financial, the wholly-owned captive finance subsidiary of GM, is a global provider of automobile financing solutions. As of December 31, 2013, our portfolio consisted of $33.3 billion of auto loans and leases and commercial dealer loans, comprised of $16.8 billion in North America and $16.5 billion in our international operations. Our strategic relationship with GM began in September 2009 and includes a subvention program pursuant to which GM provides its customers access to discounted financing on select new GM models by paying us cash in order to offer lower rates on the loans and leases we purchase from GM-franchised dealerships. We were acquired by GM in October 2010 to provide captive financing capabilities to strategic and underserved segments of GM's markets. In 2013, we expanded the markets we serve by acquiring the international operations, which currently provide us with the ability to serve GM dealers and consumers in Europe and Latin America. Upon completion of the acquisition of the equity interest in GMAC-SAIC, we will have a global footprint that covers approximately 80% of GM's worldwide vehicle sales and includes both prime and subprime capabilities for consumer loans and leases and broad commercial lending capabilities for GM-franchised dealerships. Additionally, we maintain a significant share of the sub-prime auto finance market for used vehicles in North America, supporting used vehicle sales by both GM and non-GM-franchised dealerships.
North American Operations
General
We have been operating in the automobile finance business in North America since September 1992. We purchase auto finance contracts for new and used vehicles from GM and non-GM-franchised and select independent automobile dealerships. We also offer a lease financing product for new GM vehicles and a commercial lending program primarily for GM-franchised dealerships. Our lending product is primarily offered to consumers who typically are unable to obtain financing from traditional sources such as banks and credit unions. We utilize a proprietary credit scoring system to differentiate credit applications and to statistically rank-order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval and tailor loan and lease pricing and structure. We service our loan and lease portfolios at regional centers using automated servicing and collection systems. Funding for our auto finance activities is primarily obtained through the utilization of our credit facilities and through securitization transactions.
We have historically maintained a significant share of the sub-prime auto finance market and have, in the past, participated in the prime and leasing sectors of the auto finance industry to a more limited extent. We source our business primarily through our relationships with automobile dealers, which we maintain through our regional credit centers, marketing representatives (dealer relationship managers) and alliance relationships. We believe our growth and origination efforts are complemented by disciplined credit underwriting standards, risk-based pricing decisions and expense management.

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As GM's captive finance subsidiary, our business strategy includes increasing the amount of new GM automobile sales by offering competitive financing programs, while at the same time continuing to remain a valuable financing source for loans for non-GM-franchised dealerships. In addition to our GM-related loan origination efforts, we offer a full credit spectrum lease financing product for new GM vehicles exclusively to GM-franchised dealerships in the U.S. Through the acquisition of an independent auto lease provider in Canada, in April 2011, we also offer lease financing for new GM vehicles in Canada. In April 2012, we expanded our business to include commercial lending for GM-franchised dealerships in the U.S. and, in 2013, we expanded our commercial lending business for GM-franchised dealerships in Canada. Additionally, in August 2012, we expanded our Canadian business to include sub-prime consumer financing for GM-franchised dealerships. Our increasing linkage with GM is evidenced by the percentage of loans and leases we originate for new GM vehicles, which increased to 55% of our total consumer originations volume in 2013, up from 44% in 2012 and 40% in 2011.
Consumer
Target Market. Most of our automobile finance programs are designed to serve customers who have limited access to automobile financing through banks and credit unions. These borrowers typically have experienced prior credit difficulties or have limited credit histories and generally have credit bureau scores ranging from 500 to 700. Because we serve customers who are unable to meet the credit standards imposed by most banks and credit unions we generally charge higher rates than those charged by such sources. Since we provide financing in a relatively high-risk market, we also expect to sustain a higher level of defaults than these other automobile financing sources.
Marketing. As an indirect auto finance provider, we focus our marketing activities on automobile dealers. We are selective in choosing the dealers with whom we conduct business and primarily pursue GM and non-GM-franchised dealerships with new and used car operations; however, we also conduct business with a limited number of independent dealerships. We generally finance new GM vehicles, moderately-priced new vehicles from other manufacturers, and later-model, low-mileage used vehicles. Of the contracts we purchased during 2013, 94% were originated by manufacturer-franchised dealers and 6% by select independent dealers; further, 52% were used vehicles, 27% were new GM vehicles (not including new GM vehicles that we leased during the year) and 21% were new non-GM vehicles. We purchased contracts from 12,973 dealers during 2013, up slightly from 2012. No dealer location accounted for more than 1% of the total volume of contracts purchased by us for that same period.
We maintain non-exclusive relationships with the dealers. We actively monitor our dealer relationships with the objective of maximizing the volume of applications received from dealerships with whom we do business that meet our underwriting standards and profitability objectives. Due to the non-exclusive nature of our relationships with dealers, the dealers retain discretion to determine whether to obtain financing from us or from another source for a customer seeking to make a vehicle purchase. Our representatives regularly contact and visit dealers to solicit new business and to answer any questions dealers may have regarding our financing programs and capabilities and to explain our underwriting philosophy. To increase the effectiveness of these contacts, marketing personnel have access to our management information systems which detail current information regarding the number of applications submitted by a dealership, our response and the reasons why a particular application was rejected.
We generally purchase finance contracts without recourse to the dealership. Accordingly, the dealership has no liability to us if the consumer defaults on the contract. The dealership typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies us against any claims, defenses and set-offs that may be asserted against us because of assignment of the contract or the condition of the underlying collateral. Recourse based upon those representations and indemnities would be limited in circumstances in which the dealership has insufficient financial resources to perform upon such representations and indemnities. We do not view recourse against the dealership on these representations and indemnities to be of material significance in our decision to purchase finance contracts from a dealership. Depending upon the contract structure and consumer credit attributes, we may charge dealerships a non-refundable acquisition fee or pay dealerships a participation fee when purchasing finance contracts. These fees are assessed on a contract-by-contract basis.
Origination Network. Our origination platform provides specialized focus on marketing our financing programs and underwriting loans and leases. Responsibilities are segregated so that the sales group markets our programs and products to our dealer customers, while the underwriting group focuses on underwriting, negotiating and closing loans and leases. Our sales and underwriting groups are further segregated with separate teams servicing GM-franchised dealerships and non-GM-franchised dealerships, allowing us to continue efficient service for our non-GM dealerships under the "AmeriCredit" brand while providing GM-franchised dealerships the broader loan, lease and commercial lending products we offer under the "GM Financial" brand. The underwriters are based in credit centers while the dealer relationship managers are aligned with the credit centers and work remotely in their service area. We believe that the personal relationships our credit underwriters and dealer relationship managers establish with the dealership staff are an important factor in creating and maintaining productive relationships with our dealer customer base.
We select markets for credit center locations based upon numerous factors, most notably proximity to the geographic markets

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and dealers we seek to serve and availability of qualified personnel. Credit centers are typically situated in suburban office buildings.
A credit center vice president, regional credit managers, credit managers and credit underwriting specialists staff credit center locations. The credit center vice president reports to a senior vice president in our corporate office. Credit center personnel are compensated with base salaries and incentives based on overall credit center performance, including factors such as credit quality, pricing adequacy and volume objectives.
The credit center vice presidents, regional credit managers and senior vice presidents monitor credit center compliance with our underwriting guidelines. Our management information systems provide these managers with access to credit center information enabling them to consult with credit center teams on credit decisions and assess adherence to our credit and pricing policies. The senior vice presidents also make periodic visits to the credit centers to conduct operational reviews.
Dealer relationship managers typically work from a home office but are aligned with a credit center. Dealer relationship managers solicit dealers for applications and maintain our relationships with the dealers in their geographic vicinity, but do not have responsibility for credit approvals. We believe the local presence provided by our dealer relationship managers enables us to be more responsive to dealer concerns and local market conditions. Applications solicited by the dealer relationship managers are underwritten at our regional credit centers. The dealer relationship managers are compensated with base salaries and incentives based on contract volume objectives and dealer penetration rates. The dealer relationship managers report to regional sales managers who report to sales vice presidents.
Manufacturer Relationships. We have programs with GM and other new vehicle manufacturers, typically known as subvention programs, under which the manufacturers provide us cash payments in order for us to offer lower rates on finance and lease contracts we purchase from the manufacturers' dealership network. The programs serve our goal of increasing new loan and lease originations and the manufacturers' goal of making credit more available and more affordable to consumers purchasing vehicles sold by the manufacturer.
Origination Data. The following table sets forth information with respect to the number of credit centers, number of dealer relationship managers, aggregate amount of loan and lease contracts purchased and number of producing dealerships for the periods set forth below (dollars in millions):
 
Years Ended December 31,
 
2013
 
2012
 
2011
Number of credit centers
17
 
17

 
16

Number of dealer relationship managers
205
 
204

 
172

Origination volume(a)
$
7,956

 
$
6,922

 
$
6,072

Number of producing dealerships(b)
12,973

 
12,753

 
12,349

_________________   
(a)
Amounts for years ended December 31, 2013, 2012 and 2011 include $2.8 billion, $1.3 billion and $1.0 billion of contracts purchased through our leasing programs.
(b)
A producing dealership refers to a dealership from which we purchased a contract in the respective period.
Underwriting. We utilize a proprietary credit scoring system to support the credit approval process. The credit scoring system was developed through statistical analysis of our consumer demographic and portfolio databases consisting of data which we have collected in more than 20 years of operating history. Credit scoring is used to differentiate credit applications and to statistically rank-order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval and tailor contract pricing and structure. For example, a consumer with a lower score would indicate a higher probability of default and, therefore, we would either decline the application, or, if approved, compensate for this higher default risk through the structuring and pricing of the contract. While we employ a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations in evaluating contracts for purchase or changes in certain macroeconomic factors after purchase could negatively affect the credit performance of our portfolio.
The proprietary credit scoring system incorporates data contained in the customer's credit application, credit bureau report and other third-party data sources as well as the structure of the proposed financing and produces a statistical assessment of these attributes. This assessment is used to rank-order applicant risk profiles and recommend the prices we should charge for different risk profiles. Our credit scorecards are monitored through comparison of actual versus projected performance by score. Periodically, our proprietary scorecards are refined based on new information, including identified correlations between portfolio performance and data obtained in the underwriting process.
GM sponsors special-rate financing programs available through us to consumers purchasing or leasing new GM vehicles. Under these programs, after we determine the appropriate price to charge for an applicant's risk profile, GM may provide us with

7


an interest supplement or other support payment in return for reducing the rate actually charged to the consumer on the financing contract, thereby making the credit or leasing terms more attractive and affordable to the consumer and supporting the new vehicle sales transaction. Generally, the amount of the interest supplement or support payment from GM offsets the lower interest charges or rent factor to be received by us over the life of the financing contract.
In addition to our proprietary credit scoring system, we utilize other underwriting guidelines. These underwriting guidelines are comprised of numerous evaluation criteria, including, but not limited to, (i) identification and assessment of the applicant's willingness and capacity to repay the loan or lease, including consideration of credit history and performance on past and existing obligations; (ii) credit bureau data; (iii) collateral identification and valuation; (iv) payment structure and debt ratios; (v) insurance information; (vi) employment, income and residency verifications, as considered appropriate; and (vii) in certain cases, the creditworthiness of a co-obligor. These underwriting guidelines, and the minimum credit risk profiles of applicants we will approve as rank-ordered by our credit scorecards, are subject to change from time to time based on economic, competitive and capital market conditions as well as our overall origination strategies.
We purchase individual contracts through our underwriting specialists in regional credit centers using a credit approval process tailored to local market conditions. Underwriting personnel have a specific credit authority based upon their experience and historical portfolio results as well as established credit scoring parameters. More experienced specialists are assigned higher approval levels. If the suggested application attributes and characteristics exceed an underwriting specialist's credit authority, each specialist has the ability to escalate the application to a more senior underwriter with a higher level of approval authority. Authorized senior underwriting officers may approve any contract application in accordance with the underwriting guidelines. Although the credit approval process is decentralized, our application processing system includes controls designed to ensure that credit decisions comply with the credit scoring strategies and underwriting policies and procedures we have in place at the time.
Finance contract application packages completed by prospective obligors are received electronically through web-based platforms that automate and accelerate the financing process. Upon receipt or entry of application data into our application processing system, a credit bureau report and other third-party data sources are automatically accessed and a proprietary credit score is computed. A substantial percentage of the applications received by us fails to meet our minimum credit score requirement and is automatically declined. For applications that are not automatically declined, our underwriting personnel continue to review the application package and judgmentally determine whether to approve the application, approve the application subject to conditions that must be met, or deny the application. We approve approximately 35-40% of loan applicants and 60-70% of lease applicants for credit. Dealerships are contacted regarding credit decisions electronically or by facsimile. Declined applicants are also provided with appropriate notification of the decision.
After we have been informed that we have been selected as the financing source, the dealerships send us completed contract packages. Contract documentation is scanned to create electronic images and electronically forwarded to one of our centralized processing departments. A processing representative verifies certain applicant employment, income and residency information, if necessary. Contract terms, insurance coverage and other information may be verified or confirmed with the customer. The original documents are subsequently sent to our centralized account services department and critical documents are stored in a fire-resistant vault.
Once a contract is cleared for funding, the funds are electronically transferred to the dealer or a check is issued. Upon funding the contract, we acquire a perfected security interest in the automobile that was financed. Daily funding reports are generated for review by senior operations management. All of our loan contracts are fully-amortizing with substantially equal monthly installments.
Credit performance reports track portfolio performance at various levels of detail, including total company, credit center and dealership. Various daily reports and analytical data are also generated to monitor credit quality as well as to refine the structure and mix of new originations. We review profitability metrics on a consolidated basis, as well as at the credit center, origination channel, dealership and contract levels. Key application data, including credit bureau and credit score information, contract structures and terms and payment histories are maintained. Our credit risk management department also regularly reviews the performance of our credit scoring system and is responsible for the development and enhancement of our credit scorecards.
Servicing. Our servicing activities include collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent, maintaining the security interest in the financed vehicle, monitoring physical damage insurance coverage of the financed vehicle, and arranging for the repossession of financed vehicles, liquidation of collateral and pursuit of deficiencies when appropriate. Our payment processing and customer service activities are operated centrally in Arlington, Texas and Toronto, Ontario. Collection activities are operated through four regional standardized collection centers in North America (Arlington, Texas; Toronto, Ontario; Chandler, Arizona; and Charlotte, North Carolina). We currently use a third party to provide certain services, including early collections and customer service, on our U.S. lease portfolio.
We use monthly billing statements to serve as a reminder to customers as well as an early warning mechanism in the event a

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customer has failed to notify us of an address change. Approximately 15 days before a customer's first payment due date and each month thereafter, we mail the customer a billing statement directing the customer to mail payments to a lockbox bank for deposit in a lockbox account. Payment receipt data is electronically transferred from our lockbox bank to us for posting to the accounting system. Payments may also be received from third party payment processors, such as Western Union, or via electronic transmission of funds. Payment processing and customer account maintenance is performed centrally at our operations center in Arlington, Texas.
A predictive dialing system is utilized to make telephone calls to customers whose payments are past due. The predictive dialer is a computer-controlled telephone dialing system that simultaneously dials telephone numbers of multiple customers from a file of records extracted from our database. Once a connection is made to the automated dialer's call, the system automatically transfers the call to a collector and the relevant account information to the collector's computer screen. Accounts that the system has been unable to reach within a specified number of days are flagged, thereby promptly identifying for management all customers who cannot be reached by telephone. By eliminating the time spent on attempting to reach customers, the system gives a single collector the ability to contact a larger number of customers daily.
Once an account reaches a certain level of delinquency, the account moves to one of our advanced collection units. The objective of these collectors is to resolve the delinquent account. We may repossess a financed vehicle if an account is deemed uncollectible, the financed vehicle is deemed by collection personnel to be in danger of being damaged, destroyed or hidden, the customer deals in bad faith or the customer voluntarily surrenders the financed vehicle.
Statistically-based behavioral assessment models are used in our loan servicing activities to project the relative probability that an individual account will default. The behavioral assessment models are used to help develop servicing strategies for the portfolio or for targeted account groups within the portfolio. At times, we offer payment deferrals to customers who have encountered financial difficulty that has hindered their ability to pay as contracted. A deferral allows the customer to move delinquent payments to the end of the contract, usually by paying a fee that is calculated in a manner specified by applicable law. The collector reviews the customer's past payment history and behavioral score and assesses the customer's desire and capacity to make future payments. Before agreeing to a deferral, the collector also considers whether the deferment transaction complies with our policies and guidelines. Exceptions to our policies and guidelines for deferrals must be approved in accordance with these policies and guidelines. While payment deferrals are initiated and approved in the collections department, a separate department processes authorized deferment transactions. Exceptions are also monitored by our centralized credit risk management function.
Repossessions are subject to prescribed legal procedures, which include peaceful repossession, one or more customer notifications, a prescribed waiting period prior to disposition of the repossessed automobile and return of personal items to the customer. Some jurisdictions provide the customer with reinstatement or redemption rights. Legal requirements, particularly in the event of customer bankruptcy, may restrict our ability to dispose of the repossessed vehicle. We engage independent repossession firms to handle repossessions. All repossessions, other than bankruptcy or previously charged-off accounts, must be approved by a collections officer. Upon repossession and after any prescribed waiting period, the repossessed automobile is sold at auction. The value of the collateral underlying our portfolio is updated periodically with a loan-by-loan link to national wholesale auction values. This data, along with our own experience relative to mileage and vehicle condition, are used for evaluating collateral disposition activities. We do not sell any vehicles on a retail basis. The proceeds from the sale of the automobile at auction, and any other recoveries, are credited against the balance of the contract. Auction proceeds from sale of the repossessed vehicle and other recoveries are usually not sufficient to cover the outstanding balance of the contract, and the resulting deficiency is charged off. We pursue collection of deficiencies when we deem such action to be appropriate.
Commercial
Overview. Our commercial lending offerings consist of floor plan financing, which is lending to finance the purchase of vehicle inventory, also known as wholesale or inventory 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.
Floor Plan Financing. We support the financing of new and used vehicle inventory purchases by primarily GM-franchised dealerships and their affiliates before sale or lease to the retail customer. We also provide floor plan financing to non-GM-franchised dealerships, which are typically affiliated by common ownership with a GM-franchised dealership. Financing is provided through lines of credit extended to individual dealerships. In general, each floor plan line is secured by all financed vehicles and by other dealership assets and typically the continuing personal guarantee of the dealership's ownership. Additionally, to minimize our risk, under certain circumstances, such as dealership default, GM and other manufacturers are obligated to repurchase the new vehicle inventory. The amount we advance to dealerships for new vehicles purchased through the manufacturer is equal to 100% of the wholesale invoice price of new vehicles, which includes destination and other miscellaneous charges, and a price rebate, known as a holdback, from the manufacturer to the dealer in varying amounts stated as a percentage of the invoice price. We advance the loan proceeds directly to the manufacturer. To support the dealerships' used car inventory needs, we advance funds to the dealership

9


or auction to purchase used vehicles for inventory based on the appropriate wholesale book value for the region in which the dealer is located.
Floor plan lending is usually structured to yield interest at a floating rate indexed to the prime rate. The rate for a particular dealership is based on, among other things, the dealership's credit worthiness, the amount of the credit line, the risk rating and whether or not the dealership is in default. Interest on floor plan loans is generally payable monthly.
Dealer Loans. We also make loans to finance improvements to dealership facilities, to provide working capital and to purchase and finance dealership real estate. These loans are typically secured by mortgages or deeds of trust on dealership land and buildings, a priority security interest in other dealership assets and typically the continuing personal guarantees from the owners of the dealerships and/or the real estate. Dealer loans are structured to yield interest at fixed or floating rates. Floating rate loans are generally indexed to the prime rate. Interest on dealer loans is generally payable monthly.
Underwriting. Each dealership is assigned a risk rating based on various factors, including, but not limited to, capital sufficiency, operating performance, financial outlook and credit and payment history, if available. The risk rating may affect the pricing and guides the management of the account. We monitor the level of borrowing under each dealership's account daily. When a dealer's outstanding balance exceeds the availability on any given credit line with that dealership, we may reallocate balances across existing lines, temporarily suspend the granting of additional credit, increase the dealer's credit line, either temporarily or for an extended period of time, or take other actions following an evaluation and analysis of the dealer's financial condition and the cause of the excess or overline. Under the terms of the credit agreement with the dealership, we may demand payment of interest and principal on wholesale credit lines at any time.
Servicing. Our commercial loan servicing operations are centrally located. Commercial loan servicing activities include dealership customer service, account maintenance, exception processing, credit line monitoring and adjustment and insurance monitoring.
We require payment of the principal amount financed for a vehicle upon its sale or lease by the dealer to the retail customer. Upon the sale of the collateral, the dealer must repay the advance on the sold vehicle according to the repayment terms. Typically the dealer has two to ten business days to repay an advance on a sold vehicle, depending on the timing of the receipt of the sale proceeds. These repayment terms can vary based on the dealer's risk rating. As a result, funds advanced may be repaid in a short time period, depending on the length of time the dealer holds the vehicle until its sale. We periodically inspect and verify that the financed vehicles are on the dealership lot and available for sale. The timing of the verifications varies, and no advance notice is given to the dealer. Among other things, verifications are intended to determine dealer compliance with the master loan agreement as to repayment terms and to determine the status of our collateral.
Financing
We primarily finance our loan, lease and commercial origination volume through the use of our credit facilities and, with respect to our loan and lease originations, through securitization transactions.
Credit Facilities. Loans and leases are typically funded using credit facilities with participating banks providing financing either directly or through institutionally-managed commercial paper conduits. Under these funding agreements, we transfer financial assets to special purpose finance subsidiaries. These subsidiaries, in turn, issue notes to the bank participants or agents, collateralized by such financial assets and cash. The bank participants or agents provide funding under the notes to the subsidiaries pursuant to an advance formula, and the subsidiaries forward the funds to us in consideration for the transfer of financial assets. While these subsidiaries are included in our consolidated financial statements, these subsidiaries are separate legal entities and the finance receivables, lease-related assets and other assets held by these subsidiaries are legally owned by them and are not available to our creditors or creditors of our other subsidiaries. Advances under our funding agreements bear interest at commercial paper, London Interbank Offered Rates ("LIBOR"), Canadian Dollar Offered Rate ("CDOR") or prime rates plus a credit spread and specified fees, depending upon the source of funds provided by the bank participants or agents.
Securitizations. We pursue a financing strategy of securitizing our consumer loan and lease originations to diversify our funding sources and free up capacity on our credit facilities for the purchase of additional automobile loans and the origination of additional leases. The public asset-backed securities market has traditionally allowed us to finance our auto loan portfolio at fixed interest rates over the life of a securitization transaction, thereby locking in the excess interest spread on our loan portfolio. We also finance our consumer loan and lease program through private securitization transactions.
Proceeds from securitizations are primarily used to fund initial cash credit enhancement requirements in the securitization and to pay down borrowings under our credit facilities, thereby increasing availability thereunder for further contract purchases and lease originations.

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In our securitizations, we, through wholly-owned subsidiaries, transfer loans or lease-related assets to newly-formed securitization trusts ("Trusts"), which issue one or more classes of asset-backed securities. The asset-backed securities are in turn sold to investors. When we transfer loans or leases to a Trust, we make certain representations and warranties regarding the loans and lease-related assets. These representations and warranties pertain to specific aspects of the loans or leases, including the origination of the loans or leases, the obligors of the loans or leases, the accuracy and legality of the records, computer tapes and schedules containing information regarding the loans or leases, the financed vehicles securing the loans or leases, the security interests in the loans or leases, specific characteristics of the loans or leases, and certain matters regarding our servicing of the loans or leases, but do not pertain to the underlying performance of the loans or leases. Upon the breach of one of these representations or warranties (subject to any applicable cure period) that materially and adversely affects the noteholders' interest in any loan or lease, we are obligated to repurchase the loan or lease from the Trust. Historically, repurchases due to a breach of a representation or warranty have been insignificant.
We utilize senior subordinated securitization structures which involve the public and private sale of subordinated asset-backed securities to provide credit enhancement for the senior, or highest rated, asset-backed securities. The level of credit enhancement in future senior subordinated securitizations will depend, in part, on the net interest margin, collateral characteristics and credit performance trends of the assets transferred, as well as credit trends of our entire portfolio and overall auto finance industry credit trends. Credit enhancement levels may also be impacted by our financial condition, the economic environment and our ability to sell lower-rated subordinated bonds at rates we consider acceptable.
The credit enhancement requirements in our securitization transactions include restricted cash accounts that are generally established with an initial deposit and may subsequently be funded through excess cash flows from securitized receivables. An additional form of credit enhancement is provided in the form of overcollateralization, whereby more loans or leases are transferred to the Trusts than the amount of asset-backed securities issued by the Trusts. Our securitization transactions typically do not contain portfolio performance ratios which could increase the minimum credit enhancement levels.
From time to time, we finance consumer loans or lease-related assets in private securitization transactions. We executed two such transactions in 2013 for our U.S. and Canadian lease programs. The structures of these transactions are similar to our other securitization structures. Over time, we also plan to obtain financing for our leasing and floor plan programs through public securitization transactions.

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Financing Structure. The following chart provides a simplified overview of the relationship between us and other key parties to a credit facility or securitization transaction:

International Operations
General
Our international auto finance and financial services activities in Europe include operations in Germany, the U.K., Austria, France, Italy, Switzerland, Sweden, Belgium, the Netherlands, Luxembourg, Spain, Greece and Portugal; The Latin American operations are located in Mexico, Chile, Colombia and Brazil. The international operations had finance receivables of $16.5 billion as of December 31, 2013. The international operations have extensive histories in their respective countries of operation and broad global capabilities, having operated in Europe for over 90 years, Mexico and Brazil for over 70 years, and Chile and Colombia for over 30 years. Pending certain regulatory and other approvals, we expect to complete the acquisition of the equity interest in GMAC-SAIC in 2014. These approvals include completing a new joint venture agreement with the other equity interest holders of GMAC-SAIC and obtaining regulatory approvals of such agreement. We are currently negotiating the agreement and once complete it is expected to take approximately nine months to obtain regulatory approvals.
The international operations were formerly a part of General Motors Acceptance Corporation, the former captive finance subsidiary of GM, and due to this longstanding relationship, the international operations have substantial business related to GM and its dealer network. During 2013, the international operations financed 33% of GM's automobile sales in countries where both GM operated and where the international operations provided consumer financing. Also, during 2013, the international operations financed over 90% of GM's dealer inventory in countries where both GM operated and where the international operations provided dealer financing.
Consumer
Target Market. For consumer lending activities, we employ an indirect-to-consumer model. Consumer products include retail installment loans and finance leases, and various insurance products, such as credit life, gap and extended warranty coverage. We primarily provide financing to prime quality consumers purchasing new GM vehicles. Because the international consumer portfolio

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contains a large portion of loans to prime quality borrowers, the default rates tend to be lower than in our North America operations and, therefore, the net interest spreads on the international consumer portfolio tend to reflect this lower risk.
Dealer Relationships. We have relationships with approximately 3,000 automobile dealerships in Europe and Latin America. We use a "dealer-centric" approach and focus our marketing activities on automobile dealerships, primarily GM-franchised dealerships. Because of the long history we have in our countries of operation, we have deep relationships with dealership customers and have financed a majority of them since the dealership's inception. We employ a "high-touch" model that involves regular contact and dealer visits by relationship managers to maintain these strong relationships and to encourage volume growth. In some dealerships, our personnel maintain an on-site presence. The dealer-centric business model encourages dealers to use the broad range of products through incentive programs which reward individual dealers based on the depth and breadth of their relationship.
Manufacturer Relationships. We also have subvention programs with GM in various international markets, under which GM provides cash payments in order for us to offer lower rates on retail loans and finance leases used by consumers to purchase GM vehicles. The programs serve the manufacturer's goal of making vehicles more affordable to consumers without discounting the vehicle and potentially damaging vehicle residual values. GM also offers subvention programs on inventory financing, making it more affordable for a dealer to carry a broader selection of inventory. For 2013, 87% of our consumer loan originations were for new GM vehicles.
Origination Data. The following table sets forth the consumer origination levels for Europe and Latin America, including originations prior to the applicable acquisition dates (in millions):
 
Year Ended December 31, 2013
Europe
$
3,517

Latin America
3,715

Total
$
7,232

Underwriting. The international operations, similar to our North American operations, utilize a proprietary credit scoring system to support the credit approval process. The credit scoring system was developed through statistical analysis of customer demographic, credit bureau attributes and portfolio databases and is tailored to each country where we conduct business. The underwriting process is performed in-country or, in some cases, within certain country clusters in Europe. Credit scoring is used to differentiate credit applications and to statistically rank-order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval and tailor contract structure. While we employ a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations in evaluating contracts for purchase or changes in certain macroeconomic factors after purchase could negatively affect the credit performance of the international portfolio.
The proprietary credit scoring system incorporates data contained in the customer's credit application and automatically interfaces with multiple sources to produce a credit summary upon which the underwriter bases the decision. These sources include vehicle valuation, fraud and certain databases, as well as credit bureaus and internal servicing systems. The system then produces a statistical assessment of these attributes and rank-orders applicant risk profiles to support the approval decision. The international credit scorecards are monitored through comparison of actual versus projected performance by score. Periodically, the proprietary scorecards are refined based on new information, including identified correlations between portfolio performance and data obtained in the underwriting process. In addition to the proprietary credit scoring system, other underwriting guidelines are utilized, similar to our North America operations.
We underwrite individual credit applications through underwriting specialists in credit centers using a credit approval process tailored to local market conditions. Underwriting personnel have a specific credit authority based upon their experience and historical portfolio results as well as established credit scoring parameters. More experienced specialists are assigned higher approval levels. If the suggested application attributes and characteristics exceed an underwriting specialist's credit authority, each specialist has the ability to escalate the application to a more senior underwriter with a higher level of approval authority. Authorized senior underwriting officers may approve any contract application in accordance with the underwriting guidelines. The application processing system includes controls designed to ensure that credit decisions comply with the credit scoring strategies and underwriting policies and procedures that we have in place at the time.
Finance contract application packages completed by prospective obligors are received electronically through electronic platforms that automate and accelerate the financing process. Upon receipt or entry of application data into the application processing system, a credit bureau report and other third-party data sources are automatically accessed and a proprietary credit score is computed. Applications received that fail to meet the minimum credit score requirement are automatically declined. For applications that meet the initial requirements, underwriting personnel continue to review the application package and judgmentally

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determine whether to approve the application, approve the application subject to conditions that must be met, or deny the application. In Europe, approximately 80% of applicants are approved for credit. In Latin America, approximately 60% of applicants are approved for credit. Dealers are contacted regarding credit decisions immediately using the electronic platform. Declined applicants are also provided with appropriate notification of the decision.
When dealers select us as the financing source, they send completed contract packages to an international operations processing center. The processing centers are generally co-located with the credit centers. In some countries, the contract packages are received electronically to accelerate the on boarding process and payment to dealers. A processing representative verifies certain applicant employment, income and residency information, if necessary. Contract terms, insurance coverage and other information may be verified or confirmed with the customer. Once a contract is cleared for funding, the funds are electronically transferred to the dealer or a check is issued. Upon funding of the contract, a security interest in the automobile that was financed is generally acquired. Daily reports are generated for review by senior operations management. Credit performance reports track portfolio performance at various levels of detail, including total company, country, product and vintage. Various reports and analytical data are also generated to monitor credit quality as well as to refine the structure and mix of new originations. Key application data, including credit bureau and credit score information, contract structures and terms and payment histories are maintained. The international operations credit risk management department also regularly reviews the performance of the credit scoring system and is responsible for the development and enhancement of its credit scorecards. The credit risk management department also reviews portfolio trends and performance to determine if underwriting criteria need to be adjusted.
Servicing. Our servicing activities include collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent, maintaining the security interest in the financed vehicle, monitoring physical damage insurance coverage of the financed vehicle, and arranging for the repossession of financed vehicles, liquidation of collateral and pursuit of deficiencies when appropriate. International payment processing and customer service activities are done through a mixture of in-country personnel and third party vendors.
In larger markets, a predictive dialing system is utilized to make phone calls to customers whose payments are past due. The predictive dialer is a computer-controlled telephone dialing system that simultaneously dials phone numbers of multiple customers from a file of records extracted from our database. Once a connection is made to the automated dialer's call, the system automatically transfers the call to a collector and the relevant account information to the collector's computer screen. Accounts that the system has been unable to reach within a specified number of days are flagged, thereby promptly identifying for management all customers who cannot be reached by telephone. By eliminating the time spent on attempting to reach customers, the system gives a single collector the ability to contact a larger number of customers daily.
Once an account reaches a certain level of delinquency, the account moves to one of the advanced collection units. The objective of these collectors is to resolve the delinquent account. We may repossess a financed vehicle if an account is deemed uncollectible, the financed vehicle is deemed by collection personnel to be in danger of being damaged, destroyed or hidden, the customer deals in bad faith or the customer voluntarily surrenders the financed vehicle.
In many countries, statistically-based behavioral assessment models are used in the loan servicing activities to project the relative probability that an individual account will default. The behavioral assessment models are used to help develop servicing strategies for the portfolio or for targeted account groups within the portfolio.
Repossessions are subject to prescribed legal procedures, which include peaceful repossession, one or more customer notifications, a prescribed waiting period prior to disposition of the repossessed automobile and return of personal items to the customer. Some jurisdictions provide the customer with reinstatement or redemption rights. Legal requirements, particularly in the event of customer bankruptcy, may restrict the ability to dispose of the repossessed vehicle. We engage independent repossession firms to handle repossessions. All repossessions, other than bankruptcy or previously charged-off accounts, must be approved by a collections officer. Upon repossession and after any prescribed waiting period, the repossessed automobile is sold at auction. We do not sell any vehicles on a retail basis. The proceeds from the sale of the automobile at auction, and any other recoveries, are credited against the balance of the contract. Auction proceeds from sale of the repossessed vehicle and other recoveries are usually not sufficient to cover the outstanding balance of the contract. We pursue collection of deficiencies when such action is deemed to be appropriate.
Commercial
Target Market. The international operations have a long history of providing a full range of financial products to automotive dealers and have had a relationship with most of the GM-franchised dealerships in the countries where it operates since the inception of the dealership. We have a dealer-centric "high-touch" model designed to promote one-stop shopping, ease of use and dealer loyalty. Commercial products offered to dealer customers include new and used vehicle inventory financing, inventory insurance, working capital and capital improvement loans, fleet financing and storage center financing. In addition, we provide training to dealer employees to help them maximize the value of these finance and insurance products.

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Floor Plan Financing. The largest portion of our commercial finance business is floor plan financing, which supports dealership inventory purchases of new and used vehicles. Financing is provided through lines of credit extended to individual dealerships. In general, each floor plan line is secured by all financed vehicles and by other dealership assets, as well as the continuing personal guarantee of the dealership's owner. Additionally, to minimize risk, under certain circumstances, such as dealership default, manufacturers, including GM, are bound by a repurchase obligation that requires the manufacturer to repurchase the new vehicle inventory according to applicable manufacturer or regulatory parameters. The amount advanced to dealerships for new vehicles purchased through the manufacturer is equal to 100% of the wholesale invoice price of new vehicles, which includes destination and other miscellaneous charges, and a price rebate, known as a holdback, from the manufacturer to the dealer in varying amounts stated as a percentage of the invoice price. The loan proceeds are advanced directly to the manufacturer. The manufacturer frequently pays all of the interest for a set period of time so that the dealer does not initially pay to hold the vehicle. To support the dealers' used car inventory needs, the international operations advance funds to the dealer or auction to purchase used vehicles for inventory based on the appropriate wholesale book value for the region in which the dealer is located. Typically, the international operations advance 80% of wholesale book value for used vehicles.
Floor plan lending is structured to yield interest at a floating rate indexed to a short-term market interest rate, except in Germany where fixed rate financing is also offered. The floating rate for a particular dealer is based on, among other things, the dealer's creditworthiness, the amount of the credit line, the risk rating and whether or not the dealer is in default. Interest on floor plan loans is payable monthly.
Dealer Loans. We also make loans to primarily GM-franchised dealerships to finance improvements to dealership facilities, to provide working capital and to purchase and finance dealership real estate. These loans are typically secured by mortgages or deeds of trust on dealership land and buildings, a priority security interest in other dealership assets and typically the continuing personal guarantees from the owners of the dealerships. Dealer loans are structured to yield interest at fixed or floating rates. Interest on dealer loans is generally payable monthly.
Underwriting. We utilize a proprietary underwriting system for commercial financing that has been refined through decades of experience in managing economic cycles. The process involves due diligence of various factors, including, but not limited to, collateral analysis, capital sufficiency, operating performance, financial outlook and credit and payment history. The credit risk rating system is two-dimensional with the borrower risk rating reflecting probability of default over the next 12 months, and the facility risk rating reflecting the loss given default. The design of the credit risk rating system and the assignment of credit risk ratings ensure that there is sufficient granularity to differentiate between the credit worthiness among borrowers, and the differing levels of collateral and other credit enhancements. The credit risk rating for each commercial borrower is completed at least once per annum, typically in tandem with the underwriting or credit decision, with deteriorating credits rated more frequently. In general, riskier loans (as defined by both exposure and credit risk ratings) escalate up the credit approval chain consistent with the delegated lending authority. Credit risk ratings are not expected to be static and are updated contemporaneously when facts and circumstances of the borrower, business climate and other material factors are known so that the credit risk rating remains a current reflection of the credit risk associated with a borrower's loans. The underwriting processes are performed in commercial lending centers located in Mexico, Brazil and Germany. These centers are managed by the commercial risk management team, which operates independently of in-country sales and servicing operations. Each credit proposal is underwritten by an underwriter with expertise commensurate with the size and complexity of the transaction and authority approved within the delegated lending authority parameters.
Servicing. The commercial loan servicing operations are conducted in-country, usually co-located with the consumer lending and servicing centers. Commercial servicing staff monitor daily the level of borrowing under each dealer's account. When a dealer's outstanding balance exceeds the availability on any given credit line with that dealer, we may reallocate balances across existing lines, temporarily suspend the granting of additional credit, increase the dealer's credit line, either temporarily or for an extended period of time, or take other actions following an evaluation and analysis of the dealer's financial condition and the cause of the excess or overline. Under the terms of the credit agreement with the dealer, we may demand payment of interest and principal on wholesale credit lines at any time.
We generally require payment of the principal amount of a floor plan financed vehicle upon its sale or lease by the dealership to the retail customer. Upon the sale of the collateral, the dealership must repay the advance on the sold vehicle according to the repayment terms. Typically the dealer has two to ten business days to repay an advance on a sold vehicle, depending on the timing of the receipt of the sale proceeds. These repayment terms can vary based on the risk rating. We periodically inspect and verify that the financed vehicles are on the dealership lot and available for sale. The frequency and timing of the verifications varies based on the dealership risk rating determined by commercial lending center, and no advance notice is given to the dealer. Among other things, verifications are intended to determine dealer compliance with the master loan agreement as to repayment terms and to determine the status of our collateral.

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Financing
We primarily finance our international operations through the use of secured and unsecured bank lines, through public and private securitization transactions where such markets are developed and, to a lesser extent in Latin America, through public financing programs like the issuance of commercial paper. Additionally, in Europe a portion of our international operations are funded through intercompany loans. The diversity of these funding sources enhances funding flexibility, limits dependence on any one source, and results in a more cost-effective funding strategy over the long term.
We seek to fund each country through local sources of funding to minimize currency and country risk. As such, the mix of funding sources varies from country to country, depending on the characteristics of the receivables and the relative development of debt capital and securitization markets in each country. The Latin American operations have been entirely funded by local sources since 2010 or earlier. While the European operations obtain most of their funding from local sources, they also borrow funds from affiliated companies in other European countries and have an intercompany line of credit. Over time, we expect the European operations to replace the affiliated borrowings, including borrowings on the intercompany line of credit, with local funding.
Secured Credit Facilities.  Loans, leases and floorplan receivables are typically funded using credit facilities with participating banks providing financing either directly or through institutionally-managed commercial paper conduits. Under these funding agreements, we transfer contracts to special purpose finance subsidiaries. These subsidiaries, in turn, issue notes to the bank participants or agents, collateralized by such contracts and cash. The bank participants or agents provide funding under the notes to the subsidiaries pursuant to an advance formula, and the subsidiaries forward the funds to us in consideration for the transfer of contracts. These subsidiaries are separate legal entities and the finance receivables, lease-related assets and other assets held by these subsidiaries are legally owned by them and are not available to our creditors or creditors of our other subsidiaries. Advances under our funding agreements bear interest at commercial paper, London Interbank Offered Rates ("LIBOR"), Euro Interbank Offer Rates ("EURIBOR") or other market specific rates plus a credit spread and specified fees, depending upon the source of funds provided by the bank participants or agents.  In some instances there may be recourse associated with non-performing assets.
Unsecured Credit Facilities. Generally, the international operations use bank credit facilities as a source of funding. Both committed and uncommitted credit facilities are utilized. The financial institutions providing the uncommitted facilities are not obligated to advance funds under them.
Securitizations. In the UK and Germany we pursue a financing strategy of securitizing our consumer loans via the public asset-backed securities market to diversify our funding sources and free up capacity on our credit facilities for the purchase of additional automobile loans. Proceeds from securitizations are primarily used to pay down borrowings under our credit facilities, thereby increasing availability thereunder for further contract purchases.
Other Unsecured Debt. From time-to-time we may have a variety of other unsecured funding sources with a number of different lenders in multiple jurisdictions. Although the international operations have historically had active capital markets unsecured funding programs, such programs are not currently a significant source of funding. These programs have included, and may include in the future depending on market conditions and our credit profile, commercial paper and medium term note programs. 
Trade Names
We and GM have obtained federal trademark protection for the "AmeriCredit," "GM Financial" and "GMAC" names and the logos that incorporate those names. Certain other names, logos and phrases we use in our business operations have also been trademarked.
Regulation
Our operations are subject to regulation, supervision and licensing under various statutes, ordinances and regulations.
In most jurisdictions in which we operate, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance companies like us. These rules and regulations generally provide for licensing as a sales finance company or consumer lender or lessor, limitations on the amount, duration and charges, including interest rates, for various categories of loans, requirements as to the form and content of finance contracts and other documentation, and restrictions on collection practices and creditors' rights. In certain jurisdictions, we are subject to periodic examination by regulatory authorities.
In certain countries, the international operations include stand-alone entities that operate in local markets as either banks or regulated finance companies and are subject to regulatory restrictions. These regulatory restrictions, among other things, require that these entities meet certain minimum capital requirements and may restrict dividend distributions and ownership of certain assets.

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In the U.S., we are also subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require us to provide certain disclosures to prospective borrowers and lessees and protect against discriminatory lending and leasing practices and unfair credit practices. The principal disclosures required of creditors under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each contract or loan, and the lease terms to lessees of personal property. The Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, age or marital status. According to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring system we use must comply with the requirements for such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires us to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency, and to respond to consumers who inquire regarding any adverse reporting we submit to the consumer reporting agencies. Additionally, we are subject to the Gramm-Leach-Bliley Act, which requires us to maintain the privacy of certain consumer data in our possession and to periodically communicate with consumers on privacy matters. We are also subject to the Servicemembers Civil Relief Act, which requires us, in most circumstances, to reduce the interest rate charged to customers who have subsequently joined, enlisted, or have been inducted or called to active military duty.
In the near future, the financial services industry is likely to see increased disclosure obligations, restrictions on pricing and fees and enforcement proceedings. In July 2010 the Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") was signed into law. The Dodd-Frank Act is extensive and significant legislation that, among other things:
created a liquidation framework under which the Federal Deposit Insurance Corporation ("FDIC") may be appointed as receiver following a "systemic risk determination" by the Secretary of Treasury (in consultation with the President) for the resolution of certain nonbank financial companies and other entities, defined as "covered financial companies," and commonly referred to as "systemically important entities," in the event such a company is in default or in danger of default and the resolution of such a company under other applicable law would have serious adverse effects on financial stability in the U.S., and also for the resolution of certain of their subsidiaries;
created a new framework for the regulation of over-the-counter derivatives activities;
strengthened the regulatory oversight of securities and capital markets activities by the SEC;
created the Consumer Financial Protection Bureau ("CFPB"), a new agency responsible for administering and enforcing the laws and regulations for consumer financial products and services; and
increased the regulation of the securitization markets through, among other things, a mandated risk retention requirement for securitizers and a direction to the SEC to regulate credit rating agencies and adopt regulations governing these organizations and their activities.
The various requirements of the Dodd-Frank Act, including the many implementing regulations which have yet to be released, may substantially impact our origination, servicing and securitization activities. With respect to the new liquidation framework for systemically important entities in the United States, no assurances can be given that such framework would not apply to us, although the expectation embedded in the Dodd-Frank Act is that the framework will rarely be invoked. Guidance from the FDIC indicates that such new framework will largely be exercised in a manner consistent with the existing bankruptcy laws, which is the insolvency regime which would otherwise apply to us. The SEC has proposed significant changes to the rules applicable to issuers and sponsors of asset-backed securities under the Securities Act and the Exchange Act. With the proposed changes we could potentially see an adverse impact in our access to the asset-backed securities capital markets and lessened effectiveness of our financing programs.
The European Market Infrastructure Regulation ("EMIR") came into force in August 2012. In common with the Dodd-Frank Act in the U.S., these rules are intended, among other things, to reduce counterparty risk by requiring that all standardized over-the-counter derivatives are cleared through a central counterparty. We are reviewing EMIR and the related technical standards published by the European Securities and Markets Authority to assess the impact on us.
Additionally, in the U.S., the CFPB and the Federal Trade Commission ("FTC") have recently become more active in investigating the products, services and operations of credit providers, including banks and other finance companies engaged in auto finance activities. The CFPB has recently indicated an intention to review the actions of indirect auto finance companies with regard to pricing activities and issued a bulletin to such lenders on how to limit fair lending risk under the Equal Credit Opportunity Act. Additionally, there have been recent news reports indicating that the CFPB is investigating banks and finance companies over the sale and financing of extended warranties and other add-on products. Both the FTC and CFPB have announced various enforcement actions against lenders in 2012 involving significant penalties, cease and desist orders and similar remedies that, if applicable to auto finance providers and the nature of products, services and operations offered by GM Financial, may require us

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to cease or alter certain business practices, which could have a material effect on our financial condition, liquidity and results of operations.
The Internal Revenue Service's ("IRS") implementation of Foreign Account Tax Compliance Act ("FATCA") was enacted in 2010 and is intended to address tax compliance issues associated with U.S. taxpayers with foreign accounts. FATCA requires foreign financial institutions to report to the IRS information about financial accounts held by U.S. taxpayers and imposes withholding, documentation and reporting requirements on foreign financial institutions. Final regulations were issued by the IRS on January 17, 2013, with the earliest effective dates beginning in January 1, 2014. In many instances, however, the precise nature of what needs to be implemented will be governed by bilateral Intergovernmental Agreements ("IGAs") between the U.S. and the countries in which we do business.
Competition
The automobile finance market is highly fragmented and is served by a variety of financial entities including the captive finance affiliates of other major automotive manufacturers, banks, thrifts, credit unions and independent finance companies. Many of these competitors have substantially greater financial resources and lower costs of funds than ours. In addition, due to improving economic and favorable funding conditions over the past two to three years, there have been several new entrants in the automobile finance market. Capital inflows from investors to support the growth of these new entrants as well as growth initiatives from more established market participants has resulted in generally increasing competitive conditions. Our competitors often provide financing on terms more favorable to automobile purchasers or dealers than we may offer. Many of these competitors also have long standing relationships with automobile dealerships and may offer the dealerships or their customers other products and services, which may not be currently provided by us. Providers of automobile financing have traditionally competed on the basis of rates charged, the quality of credit accepted, the flexibility of terms offered and the quality of service provided to dealers and customers. In seeking to establish ourselves as one of the principal financing sources for the dealers we serve, we compete predominantly on the basis of our high level of dealer service, strong dealer relationships and by offering flexible contract terms. There can be no assurance that we will be able to compete successfully in this market or against these competitors.
Employees
At December 31, 2013, we employed 4,260 people in North America and 1,528 internationally. In North American, none of our employees are a part of a collective bargaining agreement, and our relationships with employees are satisfactory.
Internationally, we participate in mandatory national collective bargaining agreements where required and maintain satisfactory working relationships with works councils and trade union representatives where they exist. Notwithstanding formal national and local arrangements, relationships with employees in general are good.
Executive Officers
The following sets forth certain data concerning our executive officers. 
Name
 
Age
 
Position
Daniel E. Berce
 
60
 
President and Chief Executive Officer
Kyle R. Birch
 
53
 
Executive Vice President, Chief Operating Officer for North America
Mark F. Bole
 
50
 
President, International Operations
Steven P. Bowman
 
46
 
Executive Vice President, Chief Credit and Risk Officer
Chris A. Choate
 
51
 
Executive Vice President, Chief Financial Officer and Treasurer
DANIEL E. BERCE has been President since April 2003 and Chief Executive Officer since August 2005. Mr. Berce was Vice Chairman and Chief Financial Officer from November 1996 until April 2003. Mr. Berce joined us in 1990.
KYLE R. BIRCH has been Executive Vice President, Chief Operating Officer for North America since October 2013. Prior to that he was Executive Vice President of Dealer Services since May 2003 and Senior Vice President of Dealer Services from July 1999 to April 2003. Mr. Birch joined us in 1997.
MARK F. BOLE has been President, International Operations since April 2013. Prior to that, he was Executive Vice President, International Operations for Ally Financial from April 2005 to March 2013. Mr. Bole joined Ally Financial in 1985.
STEVEN P. BOWMAN has been Executive Vice President, Chief Credit and Risk Officer since January 2005. Prior to that, he was Executive Vice President, Chief Credit Officer from March 2000 to January 2005. Mr. Bowman joined us in 1996.

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CHRIS A. CHOATE has been Executive Vice President, Chief Financial Officer and Treasurer since January 2005. Prior to that, he was Executive Vice President, Chief Legal Officer and Secretary from November 1999 to January 2005. Mr. Choate joined us in 1991.
ITEM 1A.
RISK FACTORS
The profitability and financial condition of our operations are dependent upon the operations of our parent, GM.
A material portion of our North American business, approximately 64% of our total consumer originations and substantially all our commercial lending activities for 2013, consists of financing or leasing associated with the sale of new GM vehicles and our relationship with GM-franchised dealerships. The international operations are similarly highly dependent on GM production and sales volume. In 2013, 96% of the new vehicle dealer inventory financing and 87% of the new vehicle consumer financing originations in the international operations were for GM-franchised dealerships and customers. If there were significant changes in GM's liquidity and capital position and access to the capital markets, the production or sales of GM vehicles to retail customers, the quality or resale value of GM vehicles, or other factors impacting GM or its products, such changes could significantly affect our profitability and financial condition. In addition, GM sponsors special-rate financing programs available through us. Under these programs, GM makes interest supplements or other support payments to us. These programs increase our financing volume and our share of financing the sales of GM vehicles. If GM were to adopt marketing strategies in the future that de-emphasized such programs in favor of other incentives, our financing volume could be reduced.
There is no assurance that the global automotive market or GM's share of that market will not suffer downturns in the future, and any negative impact could in turn have a material adverse effect on our financial position, liquidity and results of operations.
Our ability to continue to fund our business is dependent on a number of financing sources.
Dependence on Credit Facilities. We depend on various credit facilities to initially finance our loan and lease originations and commercial lending business.
We cannot guarantee that our credit facilities will continue to be available beyond the current maturity dates on reasonable terms or at all. Additionally, as our volume of loan and lease originations increase, and as our commercial lending business grows in North America, we will require the expansion of our borrowing capacity on our existing credit facilities or the addition of new credit facilities. Some of our credit facilities in Europe and Latin America are uncommitted, meaning that the lenders under these facilities are not obligated to fund borrowing requests and may terminate the facilities at any time and for any reason. The availability of these financing sources depend, in part, on factors outside of our control, including regulatory capital treatment for unfunded bank lines of credit, the financial strength and strategic objectives of the banks that participate in our credit facilities and the availability of bank liquidity in general. If we are unable to extend or replace these facilities or arrange new credit facilities or other types of interim financing, we will have to curtail or suspend origination and funding activities, which would have a material adverse effect on our financial position, liquidity and results of operations.
Most of our credit facilities, other than our unsecured $600 million credit facility with GM ("GM Related Party Credit Facility") contain borrowing bases or advance formulas which require us to pledge finance and lease assets in excess of the amounts which we can borrow under those facilities. We are also required to hold certain funds in restricted cash accounts to provide additional collateral for borrowings under most credit facilities. In addition, the finance and lease assets pledged as collateral must be less than 31 days delinquent at periodic measurement dates. Accordingly, increases in delinquencies or defaults on pledged collateral resulting from weakened economic conditions, or due to our inability to execute securitization transactions or any other factor, would require us to pledge additional finance and lease assets to support the same borrowing levels and to replace delinquent or defaulted collateral. The pledge of additional finance and lease assets to support our credit facilities would adversely impact our financial position, liquidity, and results of operations.
Additionally, the credit facilities, other than the GM Related Party Credit Facility, generally contain various covenants requiring certain minimum financial ratios, asset quality, and portfolio performance ratios (portfolio net loss and delinquency ratios, and pool level cumulative net loss ratios) as well as limits on deferment levels. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements or restrict our ability to obtain additional borrowings under these facilities.
Dependence on Securitization Programs.
General. In North America and Europe, we rely upon our ability to transfer finance and leased assets to newly formed securitization Trusts and sell securities in the asset-backed securities market to generate cash proceeds for repayment of credit facilities and to purchase additional assets. Accordingly, adverse changes in our asset-backed securities program or in the asset-

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backed securities market in general have in the past, and could in the future, materially adversely affect our ability to originate and securitize loans and leases on a timely basis and upon terms acceptable to us. Any adverse change or delay would have a material adverse effect on our financial position, liquidity and results of operations.
We will continue to require the execution of securitization transactions in order to fund our future liquidity needs. Additionally, we will require the expansion of our securitization program, or the development of other long-term funding solutions, to fund our North American lease originations and our commercial lending receivables. There can be no assurance that funding will be available to us through these sources or, if available, that it will be on terms acceptable to us. If these sources of funding are not available to us on a regular basis for any reason, including the occurrence of events of default, deterioration in loss experience on the collateral, breach of financial covenants or portfolio and pool performance measures, disruption of the asset-backed market or otherwise, we will be required to revise the scale of our business, including the possible discontinuation of origination activities, which would have a material adverse effect on our financial position, liquidity, and results of operations.
There can be no assurance that we will continue to be successful in selling securities in the North American or European asset-backed securities markets. Since we are highly dependent on the availability of the asset-backed securities market to finance our operations, disruptions in this market or adverse changes or delays in our ability to access this market would have a material adverse effect on our financial position, liquidity, and results of operations. Reduced investor demand for asset-backed securities could result in our having to hold assets until investor demand improves, but our capacity to hold assets is not unlimited. A reduced demand for our asset-backed securities could require us to reduce our origination levels. Adverse market conditions could also result in increased costs and reduced margins in connection with our securitization transactions.
Securitization Structures. We utilize senior subordinated securitization structures which involve the public and private sale of subordinated asset-backed securities to provide credit enhancement for the senior, or highest rated, asset-backed securities. Sizes of the senior and subordinated classes depend upon rating agency loss assumptions and loss coverage requirements. The market environment for subordinated securities is traditionally smaller than for senior securities and, therefore, can be more challenging than the market for triple-A securities.
There can be no assurance that we will be able to sell the subordinated securities in a senior subordinated securitization, or that the pricing and terms demanded by investors for such securities will be acceptable to us. If we were unable for any reason to sell the subordinated securities in a senior subordinated securitization, we would be required to hold such securities, or find other sources of debt financing which could have a material adverse effect on our financial position, liquidity and results of operations and could force us to curtail or suspend origination activities.
The amount of the initial credit enhancement on future senior subordinated securitizations will be dependent upon the amount of subordinated securities sold and the desired ratings on the securities being sold. The required initial and targeted credit enhancement levels depend, in part, on the net interest margin expected over the life of a securitization, the collateral characteristics of the pool of assets securitized, credit performance trends of our entire portfolio and the structure of the securitization transaction. Credit enhancement levels may also be impacted by our financial condition and the economic environment. In periods of economic weakness and associated deterioration of credit performance trends, required credit enhancement levels generally increase, particularly for securitizations of higher-risk finance receivables such as our sub-prime loan portfolio. Higher levels of credit enhancement require significantly greater use of liquidity to execute a securitization transaction. The level of credit enhancement requirements in the future could adversely impact our ability to execute securitization transactions and may affect the timing of such securitizations given the increased amount of liquidity necessary to fund credit enhancement requirements. This, in turn, may adversely impact our ability to opportunistically access the capital markets when conditions are favorable.
To service our debt, we will require a significant amount of cash. Our ability to generate cash depends on many factors.
Our ability to make payments on or to refinance our indebtedness and to fund our operations depends on our ability to generate cash and our access to the capital markets in the future. These, to a certain extent, are subject to general economic, financial, competitive, legislative, regulatory, capital market conditions and other factors that are beyond our control.
We expect to continue to require substantial amounts of cash. Our primary cash requirements include the funding of:
loan and lease purchases and commercial finance receivables funding, pending their securitization;
acquisitions;
credit enhancement requirements in connection with securitization and credit facilities;
interest and principal payments under our credit facilities and other indebtedness;
fees and expenses incurred in connection with the securitization and servicing of loans and leases and credit facilities;
ongoing operating expenses; and
capital expenditures.

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We require substantial amounts of cash to fund our origination and securitization activities. Additionally, our dealer wholesale and commercial lending business includes loans to dealers for real estate acquisition and development, capital loans and loans for parts and supplies that may not be eligible for pledging under a credit facility or funding in a securitization transaction. Accordingly, our commercial lending business requires substantial amounts of cash to support and grow.
Our primary sources of future liquidity are expected to be:
payments on loans, leases and commercial lending receivables not yet securitized;
distributions received from Trusts;
servicing fees;
borrowings under our credit facilities or proceeds from securitization transactions; and
further issuances of other debt securities, both secured and unsecured.
Because we expect to continue to require substantial amounts of cash for the foreseeable future, we anticipate that we will need additional credit facilities and will require the execution of additional securitization transactions and additional debt financings including unsecured note offerings. The type, timing and terms of financing selected by us will be dependent upon our cash needs, the availability of other financing sources and the prevailing conditions in the capital markets. There can be no assurance that funding will be available to us through these sources or, if available, that the funding will be on acceptable terms. If we are unable to execute securitization transactions on a regular basis, we would not have sufficient funds to finance new originations and, in such event, we would be required to revise the scale of our business, which would have a material adverse effect on our ability to achieve our business and financial objectives.
Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our obligations under existing indebtedness.
We currently have a substantial amount of outstanding indebtedness. In addition, we are required to guarantee a substantial amount of indebtedness incurred by the entities we have acquired. We have also entered into intercompany loan agreements with several of the companies that we acquired, providing these companies with access to our liquidity to support originations and other activities. As of December 31, 2013, we have guaranteed $1.2 billion in indebtedness and entered into $3.2 billion in intercompany loan agreements with our subsidiaries in Europe and Latin America. Our ability to make payments of principal or interest on, or to refinance, our indebtedness will depend on our future operating performance, and our ability to enter into additional credit facilities and securitization transactions as well as other debt financings, which, to a certain extent, are subject to economic, financial, competitive, regulatory, capital markets and other factors beyond our control.
As our existing debt nears maturity, we will likely seek to refinance all or a portion of it or to obtain additional financing. There can be no assurance that any refinancings will be possible or that any additional financing could be obtained on acceptable terms. The inability to service or refinance our existing debt or to obtain additional financing would have a material adverse effect on our financial position, liquidity, and results of operations.
The degree to which we are leveraged creates risks, including:
we may be unable to satisfy our obligations under our outstanding indebtedness;
we may find it more difficult to fund future credit enhancement requirements, operating costs, tax payments, capital expenditures, or general corporate expenditures;
we may have to dedicate a substantial portion of our cash resources to payments on our outstanding indebtedness, thereby reducing the funds available for operations and future business opportunities; and
we may be vulnerable to adverse general economic, capital markets and industry conditions.
Our credit facilities, other than the GM Related Party Credit Facility, typically require us to comply with certain financial ratios and covenants, including minimum asset quality maintenance requirements. These restrictions may interfere with our ability to obtain financing or to engage in other necessary or desirable business activities.
If we cannot comply with the requirements in our credit facilities, then the lenders may increase our borrowing costs, remove us as servicer or declare the outstanding debt immediately due and payable. If our debt payments were accelerated, the assets pledged on these facilities might not be sufficient to fully repay the debt. These lenders may foreclose upon their collateral, including the restricted cash in these credit facilities. These events may also result in a default under our senior note indentures. We may not be able to obtain a waiver of these provisions or refinance our debt, if needed. In such case, our financial condition, liquidity, and results of operations would materially suffer.
Defaults and prepayments on contracts and commercial receivables purchased or originated by us could adversely affect our operations.

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Our financial condition, liquidity and results of operations depend, to a material extent, on the performance of loans and leases in our portfolio. Obligors under contracts acquired or originated by us, including dealer obligors in our commercial lending portfolio, may default during the term of their loan or lease. Generally, we bear the full risk of losses resulting from defaults. In the event of a default, the collateral value of the financed vehicle or, in the case of a commercial obligor, the value of the inventory and other commercial assets we finance, usually does not cover the outstanding amount due to us, including the costs of recovery and asset disposition.
The amounts owed to us by any given dealership or dealership group in our commercial lending portfolio can be significant. The amount of potential loss resulting from the default of a dealer in our commercial lending portfolio can, therefore, be material even after disposing of the inventory and other assets to offset the defaulted obligation. Additionally, because the receivables in our commercial lending portfolio may include complex arrangements including guarantees, inter-creditor agreements, mortgage and other liens, our ability to recover and dispose of the underlying inventory and other collateral may be time consuming and expensive, thereby increasing our potential loss.
We maintain either an allowance for loan losses or a carrying value adjustment on our finance receivables which reflects management's estimates of inherent losses for these receivables. An allowance for loan losses applies to receivables originated subsequent to an acquisition, while a carrying value adjustment applies to receivables originated prior to an acquisition. If the allowance or carrying value adjustment is inadequate, we would recognize the losses in excess of that allowance or carrying value adjustment as an expense and results of operations would be adversely affected. A material adjustment to our allowance for loan losses or carrying value adjustment and the corresponding decrease in earnings could limit our ability to enter into future securitizations and other financings, thus impairing our ability to finance our business.
An increase in defaults would reduce the cash flows generated by us, and distributions of cash to us from our securitizations would be delayed and the ultimate amount of cash distributable to us would be less, which would have an adverse effect on our liquidity.
Consumer prepayments and dealer repayments on commercial obligations, which are generally revolving in nature, affect the amount of finance charge income we receive over the life of the loans. If prepayment levels increase for any reason and we are not able to replace the prepaid receivables with newly-originated loans, we will receive less finance charge income and our results of operations may be adversely affected.
Failure to implement our business strategy could adversely affect our operations.
Our financial position, liquidity and results of operations depend on management's ability to execute our business strategy. Key factors involved in the execution of the business strategy include achieving the desired origination volume, continued and successful use of proprietary scoring models for credit risk assessment and risk-based pricing, the use of effective credit risk management techniques and servicing strategies, implementation of effective servicing and collection practices, continued investment in technology to support operating efficiency, integration of the international operations we have acquired and will acquire, enhancement and expansion of our product offerings in North America, Europe and Latin America, and continued access to funding and liquidity sources. Our failure or inability to execute any element of our business strategy could materially adversely affect our financial position, liquidity and results of operations.
The automobile finance market is highly fragmented and is served by a variety of financial entities including the captive finance affiliates of other major automotive manufacturers, banks, thrifts, credit unions and independent finance companies.
Many of our competitors have substantially greater financial resources and lower costs of funds than we do. In addition, due to improving economic and favorable funding conditions over the past two to three years, there have been several new entrants in the automobile finance market. Capital inflows from investors to support the growth of these new entrants as well as growth initiatives from more established market participants has resulted in generally increasing competitive conditions. Our competitors often provide financing on terms more favorable to automobile purchasers or dealers than we may offer. Many of these competitors also have long standing relationships with automobile dealerships and may offer the dealerships or their customers other products and services, which may not be currently provided by us. Providers of automobile financing have traditionally competed on the basis of rates charged, the quality of credit accepted, the flexibility of terms offered and the quality of service provided to dealers and customers. In seeking to establish ourselves as one of the principal financing sources for the dealers we serve, we compete predominantly on the basis of our high level of dealer service, strong dealer relationships and by offering flexible contract terms.
Our operations are subject to regulation, supervision and licensing under various statutes, ordinances and regulations.
We believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable local, state, federal and foreign regulations. There can be no assurance, however, that we will be

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able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could have a material adverse effect on our operations. Further, the adoption of additional, or the revision of existing, rules and regulations could have a material adverse effect on our business.
Compliance with applicable law is costly and can affect operating results. Compliance also requires forms, processes, procedures, controls and the infrastructure to support these requirements, and may create operational constraints. Laws in the financial services industry are designed primarily for the protection of consumers. The failure to comply could result in significant statutory civil and criminal penalties, monetary damages, attorneys' fees and costs, possible revocation of licenses and damage to reputation, brand and valued customer relationships.
The dealers who originate our auto finance contracts and leases also must comply with both state and federal credit and trade practice statutes and regulations. Failure of the dealers to comply with these statutes and regulations could result in consumers having rights of rescission and other remedies that could have an adverse effect on us.
The various requirements of the Dodd-Frank Act, including the many implementing regulations which have yet to be released, may substantially impact our origination, servicing and securitization activities. With respect to the new liquidation framework for systemically important entities, no assurances can be given that such framework would not apply to us, although the expectation embedded in the Dodd-Frank Act is that the framework will rarely be invoked. Guidance from the FDIC indicates that such new framework will largely be exercised in a manner consistent with the existing bankruptcy laws, which is the insolvency regime which would otherwise apply to us. The SEC has proposed significant changes to the rules applicable to issuers and sponsors of asset-backed securities under the Securities Act of 1933, as amended, and the Exchange Act. With the proposed changes we could potentially see an adverse impact in our access to the asset-backed securities capital markets and lessened effectiveness of our financing programs.
Additionally, the CFPB and the Federal Trade Commission ("FTC") have recently become more active in investigating the products, services and operations of credit providers, including banks and other finance companies engaged in auto finance activities. The CFPB has recently indicated an intention to review the actions of indirect auto finance companies with regard to pricing activities and issued a bulletin to such lenders on how to limit fair lending risk under the Equal Credit Opportunity Act. Additionally, there have been recent news reports indicating that the CFPB is investigating banks and finance companies over the sale and financing of extended warranties and other add-on products. Both the FTC and CFPB announced various enforcement actions against lenders involving significant penalties, cease and desist orders and similar remedies that, if applicable to auto finance providers and the nature of the products, services and operations offered by us, may require us to cease or alter certain business practices, which could have a material effect on our financial condition, liquidity and results of operations.
In certain countries, the international operations include stand-alone entities that operate in local markets as either banks or regulated finance companies and are subject to regulatory restrictions. These regulatory restrictions, among other things, require that these entities meet certain minimum capital requirements and may restrict dividend distributions and ownership of certain assets.
There is a high degree of risk associated with sub-prime borrowers.
The majority of our origination and servicing activities in North America involve sub-prime automobile receivables. Sub-prime borrowers are associated with higher-than-average delinquency and default rates. While we believe that we effectively manage these risks with our proprietary credit scoring system, risk-based pricing and other underwriting policies, and our servicing and collection methods, no assurance can be given that these criteria or methods will be effective in the future. In the event that we underestimate the default risk or underprice contracts that we purchase, our financial position, liquidity and results of operations would be adversely affected, possibly to a material degree.
Our profitability is dependent upon consumer demand for automobiles and related automobile financing and the ability of consumers to repay loans and leases, and our business may be negatively affected during times of low automobile sales, fluctuating wholesale prices and lease residual values, rising interest rates, volatility in exchange rates and high unemployment.
General. We are subject to changes in general economic conditions that are beyond our control. During periods of economic slowdown or recession, delinquencies, defaults, repossessions and losses generally increase. These periods also may be accompanied by increased unemployment rates, decreased consumer demand for automobiles and declining values of automobiles securing outstanding loans, which weakens collateral coverage and increases the amount of a loss in the event of default. Additionally, higher gasoline prices, declining stock market values, unstable real estate values, increasing unemployment levels, general availability of consumer credit or other factors that impact consumer confidence or disposable income could increase loss frequency and decrease consumer demand for automobiles as well as weaken collateral values on certain types of automobiles. Because we focus predominantly on sub-prime borrowers in North America, the actual rates of delinquencies, defaults,

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repossessions and losses with respect to those borrowers are higher than those experienced in the general automobile finance industry and could be more dramatically affected by a general economic downturn. In addition, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in our finance charge income. While we seek to manage these risks, including the higher risk inherent in financing sub-prime borrowers, through the underwriting criteria and collection methods we employ, no assurance can be given that these criteria or methods will afford adequate protection against these risks. Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing costs could adversely affect our financial position, liquidity, results of operations and our ability to enter into future securitizations and future credit facilities.
Wholesale Auction Values. We sell repossessed automobiles at wholesale auction markets located throughout the countries where we have operations. Auction proceeds from the sale of repossessed vehicles and other recoveries are usually not sufficient to cover the outstanding balance of the contract, and the resulting deficiency is charged-off. We also sell automobiles returned to us at the end of lease terms. Decreased auction proceeds resulting from the depressed prices at which used automobiles may be sold during periods of economic slowdown or slack consumer demand will result in higher credit losses for us. Furthermore, depressed wholesale prices for used automobiles may result from significant liquidations of rental or fleet inventories, financial difficulties of new vehicle manufacturers, discontinuance of vehicle brands and models and from increased volume of trade-ins due to promotional programs offered by new vehicle manufacturers. Additionally, higher gasoline prices may decrease the wholesale auction values of certain types of vehicles.
Leased Vehicle Residual Values and Return Rates. We project expected residual values and return volumes of the vehicles we lease. Actual proceeds realized by us upon the sale of returned leased vehicles at lease termination may be lower than the amount projected, which reduces the profitability of the lease transaction to us. Among the factors that can affect the value of returned lease vehicles are the volume of vehicles returned, economic conditions and the quality or perceived quality, safety or reliability of the vehicles. Actual return volumes may be higher than expected and can be influenced by contractual lease-end values relative to then-existing values, marketing programs for new vehicles and general economic conditions. All of these, alone or in combination, have the potential to adversely affect the profitability of our lease program and financial results.
Interest Rates. Our profitability may be directly affected by the level of and fluctuations in interest rates, which affects the gross interest rate spread we earn on our portfolio. As the level of interest rates change, our net interest margin on new originations either increases or decreases since the rates charged on the contracts purchased from dealers are generally fixed rate and are limited by market and competitive conditions, restricting our opportunity to pass on increased interest costs to the consumer. We believe that our financial position, liquidity and results of operations could be adversely affected during any period of higher interest rates, possibly to a material degree.
Foreign Currency Exchange Rates. We are exposed to the effects of changes in foreign currency exchange rates. Changes in currency exchange rates cannot always be predicted or hedged. As a result, unfavorable changes in exchange rates could have an effect on our financial condition, liquidity and results of operations.
Labor Market Conditions. Competition to hire and retain personnel possessing the skills and experience required by us could contribute to an increase in our employee turnover rate. High turnover or an inability to attract and retain qualified personnel could have an adverse effect on our delinquency, default and net loss rates, our ability to grow and, ultimately, our financial condition, liquidity and results of operations.
We depend on the financial condition of GM dealers.
Our profitability is also dependent on the financial condition of the GM-franchised dealerships in our commercial lending portfolio, including the levels of inventory dealers carry in response to consumer demand for new GM vehicles and used vehicles, and the level of wholesale borrowing required by dealers for inventory acquisitions, construction projects to dealership facilities and working capital. Our business may be negatively affected if, during periods of economic slowdown or recession, dealers reduce borrowing for inventory purchases or for other purposes, or are unable to sell or otherwise liquidate vehicle inventories and repay their wholesale, real estate and other loans to us. Decreased consumer demand for GM vehicles can also adversely impact the overall financial condition of GM-franchised dealerships, possibly increasing defaults and net loss rates in our commercial lending portfolio and adversely impacting our ability to grow and, ultimately, our financial condition, liquidity and results of operations.
A security breach or a cyber-attack could adversely affect our business.
A security breach or cyber-attack of our computer systems could interrupt or damage our operations or harm our reputation. If third parties or our employees are able to penetrate our network security or otherwise misappropriate our customers' personal information or contract information, or if we give third parties or our employees improper access to our customers' personal information or contract information, we could be subject to liability. This liability could include identity theft or other similar fraud-related claims. This liability could also include claims for other misuses or losses of personal information, including for

24


unauthorized marketing purposes. Other liabilities could include claims alleging misrepresentation of our privacy and data security practices. We could also be subject to regulatory action in certain jurisdictions, particularly in North America and Europe.
We rely on encryption and authentication technology licensed from third parties to provide the security and authentication necessary to effect secure online transmission of confidential consumer information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments may result in a compromise or breach of the algorithms that we use to protect sensitive customer transaction data. A party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend capital and other resources to protect against such security breaches or cyber-attacks or to alleviate problems caused by such breaches or attacks and our insurance coverage may not be adequate to cover all the costs related to such breaches or attacks. Our security measures are designed to protect against security breaches and cyber-attacks, but our failure to prevent such security breaches and cyber-attacks could subject us to liability, decrease our profitability and damage our reputation.
Additional Risks Related to the International Operations
Because the international operations are located outside North America they are exposed to additional risks.
The international operations that we have and will acquire are subject to many of the same risks as our North American business. In addition to those risks, the international operations are subject to certain additional risks, such as the following:
multiple foreign regulatory requirements that are subject to change;
difficulty in establishing, staffing and managing foreign operations;
differing labor regulations;
consequences from changes in tax laws;
restrictions on the ability to repatriate profits or transfer cash into or out of foreign countries and the tax consequences of such repatriations and transfers;
devaluations in currencies;
political and economic instability, natural calamities, war, and terrorism; and
compliance with laws and regulations applicable to international operations, including anti-corruption laws such as the Foreign Corrupt Practices Act and international trade and economic sanctions laws.
The effects of these risks may, individually or in the aggregate, adversely affect the international operations.
Hedging strategies may not be successful in mitigating risks associated with changes in foreign-currency exchange rates.
We are exposed to risks related to the effects of changes in foreign-currency exchange rates. While we may attempt to manage exposure to fluctuations in foreign-currency exchange rates through hedging activities, there can be no assurances that these hedging activities will be effective.
The acquisition of the equity interest in GMAC-SAIC may not be completed within the expected timeframe, or at all.
Completion of the acquisition of the 40% non-controlling equity interest in GMAC-SAIC is subject to the satisfaction (or waiver) of a number of conditions, many of which are beyond our control and may prevent, delay or otherwise negatively affect completion of this acquisition. These conditions include, without limitation, the completion of negotiations to amend the joint venture agreement with the counterparties, and the receipt of various approvals from Chinese governmental authorities. The negotiations to amend the joint venture agreement in a manner acceptable to us may not be successful, or governmental authorities may refuse to provide their approval or seek to make their approval subject to compliance with unanticipated or onerous conditions. These conditions could have the effect, among other things, of imposing significant additional costs, limiting revenues, adversely affecting joint venture governance provisions, requiring divestitures of material assets or imposing other operating restrictions, any of which may reduce the anticipated benefits of the acquisition of the equity interest in GMAC-SAIC. We cannot predict whether and when these other conditions will be satisfied or waived, if at all, and if these conditions are not satisfied or waived, we will not be able to complete the acquisition of the 40% non-controlling equity interest in GMAC-SAIC. Failure to complete the acquisition of the equity interest in GMAC-SAIC would, and any delay in completing this acquisition could, prevent us from realizing the overall benefits that we expect from the acquisition of the 40% non-controlling equity interest in GMAC-SAIC.
We may experience difficulties and other challenges integrating the international operations.
The process of integrating the international operations with our business may be complex, costly and time-consuming. The potential difficulties of integrating the international operations include, among others:
failure to implement our business plan for the combined business;

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potential disruption of our present business while we seek to integrate the acquired operations and distraction of management;
unanticipated issues in integrating the international operations, including the integration of information, communications and other systems;
unanticipated changes in applicable laws and regulations;
exposure of our business to unknown, contingent or other liabilities;
changes in our business profile in ways that could have unintended negative consequences to us;
our inexperience in managing international operations that could expose us to unforeseen consequences or subject us to risks that we are not presently subject to and may not be able to manage effectively, including tax and regulatory risks, risks associated with the conduct of business in new and foreign markets, including differences in laws and local customs and other risks associated with international operations;
the impact on our internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002;
related accounting charges that may adversely affect our financial condition and results of operations; and
other unanticipated issues, expenses or liabilities.
In addition, we expect to incur significant one-time costs in connection with the acquisition of the international operations and their related integration estimated to be between $60 and $70 million. The costs and liabilities actually incurred in connection with the acquisition and subsequent integration process may exceed those anticipated. We may not accomplish the integration of the international operations smoothly, successfully or within the anticipated costs or timeframe. The diversion of the attention of management from its current operations to the integration effort and any difficulties encountered in combining operations could prevent us from realizing the full benefits anticipated to result from the acquisition of the international operations and could adversely affect our business.
We will not control the operations of GMAC-SAIC and, upon the expected closing of the acquisition of the equity interest in GMAC-SAIC, we will be subject to the risks of operating in China.
If we acquire GMAC-SAIC, we will not control the operations of GMAC-SAIC, as it is a joint venture, and we will not have a majority interest in the joint venture. In joint ventures, we share ownership and management of a company with one or more parties who may not have the same goals, strategies, priorities, or resources as we do and may compete with us outside the joint venture. Joint ventures are intended to be operated for the equal benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions. In joint ventures, we are required to pay more attention to our relationship with our co-owners as well as with the joint venture, and if a co-owner changes or relationships deteriorate, our success in the joint venture may be materially adversely affected. The benefits from a successful joint venture are shared among the co-owners, so that we do not receive all the benefits from our successful joint ventures. In addition, upon the expected closing of the acquisition of the equity interest in GMAC-SAIC, we will be subject to the risks of operating in China. The automotive finance market in China is highly competitive. As the size of the Chinese market continues to increase, we anticipate that additional competitors, both international and domestic, will seek to enter the Chinese market and that existing market participants will act aggressively to increase their market share. Increased competition may result in reduced margins and our inability to gain or hold market share. In addition, business in China is sensitive to economic and market conditions that drive sales volume in China. If GMAC-SAIC is unable to maintain its position in the Chinese market or if vehicle sales in China decrease or do not continue to increase, our business and financial results could be materially adversely affected.
We could be materially adversely affected by changes or imbalances in foreign currency exchange rates and interest rates.
With the recent global spread of our business, we have significant exposures to risks related to changes in foreign currency exchange rates and interest rates, which can have material adverse effects on our business. In preparing the consolidated financial statements we translate our revenues and expenses outside the U.S. into U.S. Dollars using the average foreign currency exchange rate for the period and the assets and liabilities using the foreign currency exchange rate at the balance sheet date. As a result foreign currency fluctuations and the associated translations could have a material adverse effect on our results of operations and financial condition.
ITEM 2.
PROPERTIES
Our executive offices are located in Fort Worth, Texas. At December 31, 2013 we had 20 locations in 14 states and 20 cities or towns in the U.S. Of these locations, three are collection centers, 14 are regional credit centers and the remaining locations are administrative offices. We generally enter into office space leases with initial term of 5 to 10 years. We have three locations in

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Canada, including one collection center, and 26 locations in 12 European and Latin American countries. Leases for office space outside of the U.S. generally provide for an initial term of 1 to 7 years based upon prevailing market conditions and may contain renewal options. Locations outside the U.S. have remaining terms of 1 to 7 years. The major facilities outside the U.S. and Canada are located in Brazil, Germany and the U.K.
ITEM 3.
LEGAL PROCEEDINGS
None.
ITEM 4.
MINE SAFETY DISCLOSURE
Not applicable.
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
All of our issued and outstanding equity securities are owned by a single holder and there is not an established public trading market for our common stock. We have never paid cash dividends on our common stock. We presently intend to retain future earnings, if any, for use in the operation of the business and do not anticipate paying any cash dividends in the foreseeable future; provided, however, that we may reexamine this policy with our sole shareholder at any time.
ITEM 6.
SELECTED FINANCIAL DATA
The table below summarizes selected financial information (dollars in millions, except per share data). For additional information, refer to the audited consolidated financial statements and notes thereto in Item 8. "Financial Statements and Supplementary Data." After the Merger, AmeriCredit Corp. ("Predecessor") was renamed General Motors Financial Company, Inc. ('Successor") and the "Selected Financial Data" for periods preceding and succeeding the Merger have been derived from the consolidated financial statements of the Predecessor and the Successor. The consolidated financial statements of the Predecessor have been prepared on the same basis as the audited financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2010. The consolidated financial statements of the Successor reflect the application of purchase accounting.
 
Successor
 
 
Predecessor
 
Years Ended December 31,
 
Period From October 1, 2010 Through December 31, 2010
 
 
Period From July 1, 2010 Through September 30, 2010
 
 Years Ended June 30,
 
2013
 
2012
 
2011
 
 
 
 
2010
 
2009
Operating Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Finance charge income
$
2,563

 
$
1,594

 
$
1,247

 
$
264

 
 
$
342

 
$
1,432

 
$
1,903

Leased vehicle income
595

 
289

 
98

 
5

 
 
16

 
44

 
47

Other revenue
186

 
77

 
65

 
12

 
 
14

 
47

 
118

Total revenue
$
3,344

 
$
1,960

 
$
1,410

 
$
281

 
 
$
372

 
$
1,523

 
$
2,068

Net income (loss)
$
566

 
$
463

 
$
386

 
$
74

 
 
$
51

 
$
221

 
$
(11
)
Basic earnings (loss) per share
(a)
 
(a)
 
(a)
 
(a)
 
 
$
0.38

 
$
1.65

 
$
(0.09
)
Diluted earnings (loss) per share
(a)
 
(a)
 
(a)
 
(a)
 
 
$
0.37

 
$
1.60

 
$
(0.09
)
Diluted weighted average shares
(a)
 
(a)
 
(a)
 
(a)
 
 
140,302,755

 
138,179,945

 
125,239,241

Other Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer origination volume(b)
$
12,427

 
$
6,922

 
$
6,072

 
$
945

 
 
$
959

 
$
2,138

 
$
1,285

 

27


 
Successor
 
 
Predecessor
 
December 31, 2013
 
December 31, 2012
 
December 31, 2011
 
December 31, 2010
 
 
June 30, 2010
 
June 30, 2009
Balance Sheet Data
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,074

 
$
1,289

 
$
572

 
$
195

 
 
$
282

 
$
193

Finance receivables, net
$
29,282

 
$
10,998

 
$
9,162

 
$
8,197

 
 
$
8,160

 
$
10,037

Leased vehicles, net
$
3,383

 
$
1,703

 
$
809

 
$
47

 
 
$
95

 
$
156

Total assets
$
37,990

 
$
16,197

 
$
13,043

 
$
10,919

 
 
$
9,881

 
$
11,958

Secured debt
$
22,073

 
$
9,378

 
$
8,037

 
$
6,960

 
 
$
6,708

 
$
9,057

Unsecured debt
$
6,973

 
$
1,500

 
$
501

 
$
72

 
 
$
485

 
$
484

Total liabilities
$
31,705

 
$
11,818

 
$
9,120

 
$
7,389

 
 
$
7,481

 
$
9,851

Shareholder's equity
$
6,285

 
$
4,379

 
$
3,923

 
$
3,530

 
 
$
2,400

 
$
2,107

_________________ 
(a)
As a result of the Merger, our common stock is owned by a single holder and is no longer publicly traded and earnings per share is no longer required.
(b)
Amounts for years ended December 31, 2013, 2012 and 2011 and the period from October 1, 2010 through December 31, 2010 include $2.8 billion, $1.3 billion, $1.0 billion and $0.01 billion of contracts purchased through our leasing programs in U.S. and Canada.


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Item 7.
MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
We are a global provider of automobile finance solutions, and we operate in the market as the wholly-owned captive finance subsidiary of our parent, GM. As a result of the acquisition of our international operations, we conduct our business generally in two segments, in North America and internationally in Europe and Latin America. The North America Segment includes operations in the U.S. and Canada. The International Segment includes operations in Austria, Belgium, Brazil, Chile, Colombia, France, Germany, Greece, Italy, Mexico, the Netherlands, Portugal, Spain, Sweden, Switzerland and the U.K. Upon the expected closing of the acquisition of the equity interest in GMAC-SAIC, we will conduct business in China, which will be included in our International Segment.
North America Operations
Consumer
Our automobile finance programs in the North America Segment include sub-prime lending and full credit spectrum leasing. Our sub-prime lending program is designed to serve customers who have limited access to automobile financing through banks and credit unions. Our typical borrowers have experienced prior credit difficulties or have limited credit histories and generally have credit bureau scores ranging from 500 to 700. We generally charge higher rates than those charged by banks and credit unions and we also expect to sustain a higher level of defaults than these other automobile financing sources.
Our leasing product is offered through GM-franchised dealers and targets prime and non-prime consumers leasing new GM vehicles. We seek to provide competitive alternatives to existing marketplace lease offerings in GM-franchised dealers.
We focus our marketing activities on automobile dealerships. We are selective in choosing the dealers with whom we conduct business and primarily pursue GM and non-GM manufacturer-franchised dealerships with new and used car operations; however, we also conduct business with a limited number of independent dealerships. We generally finance new GM vehicles, moderately-priced new vehicles from other manufacturers, and later-model, low-mileage used vehicles.
Our origination platform provides specialized focus on marketing our financing programs and underwriting loans and leases. Responsibilities are segregated so that the sales group markets our programs and products to our dealer customers, while the underwriting group focuses on underwriting, negotiating and closing loans and leases. In the U.S. our sales and underwriting groups are further segregated with separate teams servicing GM dealers and non-GM dealers, allowing us to continue efficient service for our non-GM dealers under the "AmeriCredit" brand while providing GM-franchised dealers the broader loan, lease and commercial lending products we offer under the "GM Financial" brand.
We utilize a proprietary credit scoring system to support the credit approval process. The credit scoring system was developed through statistical analysis of our consumer demographic and portfolio databases consisting of data which we have collected in more than 20 years of operating history. Credit scoring is used to differentiate credit applications and to statistically rank-order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval and tailor contract pricing and structure. In addition to our proprietary credit scoring system, we utilize other underwriting guidelines in our underwriting process to help us further evaluate the credit risk of our consumer financing activities.
Our servicing activities include collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent, maintaining the security interests in the financed vehicles, monitoring physical damage insurance coverage of the financed vehicles, and arranging for the repossession of financed vehicles, liquidation of collateral and pursuit of deficiencies when appropriate. Our activities also include managing an end-of-term process for consumers purchasing or returning leased vehicles.
Commercial
In April 2012 and March 2013, we launched our U.S. and Canadian commercial lending platforms to further support our GM-franchised dealerships and their affiliates. Our commercial lending offerings consist of loans to finance the purchase of vehicle inventory, also known as wholesale or floor plan 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.
Each dealer is assigned a risk rating based on various factors, including, but not limited to, collateral analysis, capital sufficiency, operating performance, financial outlook and credit and payment history, if available. The risk rating indicates the pricing for and guides the management of the account. We monitor the level of borrowing under each dealer's account daily. Our commercial loan

29


servicing activities include dealership customer service, account maintenance, exception processing, credit line monitoring and adjustment and insurance monitoring.
International Operations
Consumer
We primarily employ an indirect-to-consumer model similar to the one we use in the North America Segment. Our consumer lending programs focus on financing prime quality consumers purchasing new GM vehicles. In many of the countries in which we operate, we also offer financial leases and a lease/retail hybrid product that includes a balloon payment at expiration, at which time the consumer may elect to make the payment, refinance or return the vehicle. We also offer finance-related insurance products through third parties, such as credit life, gap and extended warranty coverage. We finance primarily new automobiles, although we also finance used automobiles. In most of the countries in which we operate, similar to our underwriting process in the North America Segment, we utilize a proprietary credit scoring system to differentiate consumer credit applications and to statistically rank-order credit risk in terms of expected default rates, which enables us to evaluate credit applications for approval and tailor loan and lease pricing and structure.
Our servicing activities include collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent, maintaining the security interest in the financed vehicle, monitoring physical damage insurance coverage of the financed vehicle, and arranging for the repossession of financed vehicles, liquidation of collateral and pursuit of deficiencies when appropriate.
Commercial
Commercial products offered to dealer customers include new and used vehicle inventory financing, inventory insurance, working capital and capital improvement loans. Other commercial products include fleet financing and storage center financing. In addition, we provide training to dealer employees to help them maximize the value of these finance and insurance products. We utilize a proprietary underwriting system for commercial lending that has been refined through decades of experience in managing economic cycles. This process involves assigning a risk rating to each dealer based on our due diligence of various factors, including, but not limited to, collateral analysis, capital sufficiency, operating performance, financial outlook and credit and payment history, if available. The underwriting processes are performed in commercial lending centers located in Mexico and Germany, the management of which operates independently of in-country sales and servicing operations. Our commercial loan servicing activities include dealership customer service, account maintenance and monitoring, exception processing, credit line monitoring and adjustment and insurance monitoring.
Financing
We primarily finance our loan, lease and commercial origination volume through the use of our secured and unsecured bank lines, through public and private securitization transactions where such markets are developed, through the issuance of senior notes and, to a lesser extent in Latin America, through public financing programs including the issuance of commercial paper and other financing programs. Additionally, a portion of our operations in Europe are funded through intercompany loans.
We seek to fund our international operations through local sources of funding to minimize currency and country risk. As such, the mix of funding sources varies from country to country, based on the characteristics of our receivables and the relative development of debt capital and securitization markets in each country. Our Latin American operations are entirely funded locally. Our European operations obtain most of their funding from local sources, but also borrow funds from affiliated companies.
In addition to our bank lines and securitization programs, GM provides us with financial resources through a tax sharing agreement, which effectively defers up to $1.0 billion in taxes that we would otherwise be required to pay to GM over time, and through the $600 million GM Related Party Credit Facility.
Additionally, we have a sub-limit of $4.0 billion available to borrow under GM's three-year $5.5 billion secured revolving credit facility. Our borrowings under this facility are limited by GM's ability to also borrow under the facility. If we borrow under this facility, we expect such borrowings would be short-term in nature and, except in extraordinary circumstances, would not be used to fund our operating activities in the ordinary course of business.

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CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the amount of revenue and costs and expenses during the reporting periods. Actual results could differ from those estimates and those differences may be material. The accounting estimates that we believe are the most critical to understanding and evaluating our reported financial results include the following:
Consumer Finance Receivables and the Allowance for Loan Losses
Our finance receivables are reported in two portfolios: pre-acquisition and post-acquisition. The pre-acquisition finance receivables portfolio is comprised of (i) finance receivables originated in North America prior to the Merger, all of which were considered to have had deterioration in credit quality, and (ii) finance receivables that were considered to have had deterioration in credit quality that were acquired with the international operations. The pre-acquisition portfolio will decrease over time with the amortization of the acquired receivables.
The post-acquisition finance receivables portfolio is comprised of (i) finance receivables originated in North America since the Merger, (ii) finance receivables originated in the international operations since the applicable acquisition dates and (iii) finance receivables that were considered to have had no deterioration in credit quality that were acquired with the international operations. The post-acquisition portfolio is expected to grow over time as we originate new receivables.
Pre-Acquisition Finance Receivables
Following the Merger and the acquisition of the international operations, we further divided the pre-acquisition finance receivables into multiple pools based on common risk characteristics. Through acquisition accounting adjustments, the allowance for loan losses that existed at the Merger and the acquisition dates was eliminated and the receivables were adjusted to fair value. The pre-acquisition finance receivables were acquired at a discount, which contains two components: a non-accretable difference and an accretable yield. A non-accretable difference is the excess of contractually required payments (undiscounted amount of all uncollected contractual principal and interest payments, both past due and scheduled for the future) over the amount of cash flows, considering the impact of defaults and prepayments, expected to be collected. An accretable yield is the excess of the cash flows, considering the impact of defaults and prepayments, expected to be collected over the initial investment in the loans, which at the Merger and acquisition dates was fair value. The accretable yield is recorded as finance charge income over the life of the acquired receivables.
Any deterioration in the performance of the pre-acquisition finance receivables from their expected performance will result in an incremental provision for loan losses. Improvements in the performance of the pre-acquisition finance receivables which results in a significant increase in actual or expected cash flows will result first in the reversal of any incremental related allowance for loan losses and then in a transfer of the excess from the non-accretable difference to accretable yield, which will be recorded as finance charge income over the remaining life of the receivables.
Once a pool of loans is assembled, the integrity of the pool is maintained. A loan is removed from a pool only if it is sold (other than to a consolidated VIE), paid in full, or written off. Our policy is to remove a loan individually from a pool based on comparing any amount received upon disposition of the loan or underlying collateral with the contractual amount remaining due. The excess of the contractual amount remaining due over the amount received upon its disposition is absorbed by the non-accretable difference. This removal method assumes that the amount received approximates pool performance expectations. The remaining accretable yield balance is unaffected and any material change in remaining effective yield caused by this removal method is addressed by our quarterly cash flow evaluation process for each pool. For loans that are resolved by payment in full, there is no reduction in the amount of non-accretable difference for the pool because there is no difference between the amount received and the contractual amount of the loan.
Post-Acquisition Finance Receivables and Allowance for Loan Losses
Our consumer finance receivables portfolio consists of smaller-balance, homogeneous loans, divided into two primary portfolio segments: finance receivables originated in the North America Segment and finance receivables originated or acquired in the International Segment, and are carried at amortized cost, net of allowance for loan losses. Each of these portfolios is further divided into pools based on common risk characteristics, such as origination year, contract type, and geography. These pools are collectively evaluated for impairment based on a statistical calculation, which is supplemented by management judgment. The allowance is aggregated for each of the portfolio segments. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at levels considered adequate to cover probable losses inherent in our finance receivables.
We use a combination of forecasting methodologies to determine the allowance for loan losses, including roll rate modeling

31


and static pool modeling techniques. A roll rate model is generally used to project near term losses and static pool models are generally used to project losses over the remaining life. Probable losses are estimated for groups of accounts aggregated by past-due status and origination month. Generally, loss experience over the last 10 years is evaluated. Recent performance is more heavily weighted when determining the allowance to result in an estimate that is more reflective of the current internal and external environments. Factors that are considered when estimating the allowance include historical delinquency migration to loss, probability of default ('PD") and loss given default ("LGD"). PD and LGD are specifically estimated for each monthly vintage (i.e., group of originations) in cases where vintage models are used. PD is estimated based on expectations that are aligned with internal credit scores. LGD is projected based on historical trends experienced over the last 10 years, weighted toward more recent performance in order to consider recent market supply and demand factors that impact wholesale used vehicle pricing. While forecasted probable losses are quantitatively derived, we assess the recent internal operating and external environments and may qualitatively adjust certain assumptions to result in an allowance that is more reflective of losses that are expected to occur in the current environment.
We also use historical charge-off experience to determine a loss confirmation period ("LCP"). The LCP is a key assumption within our models and represents the average amount of time between when a loss event first occurs to when the receivable is charged-off. This LCP is the basis of our allowance and is applied to the forecasted probable credit losses to determine the amount of losses we believe exist at the balance sheet date.
We believe these factors are relevant in estimating incurred losses and also consider an evaluation of overall portfolio credit quality based on indicators such as changes in our credit evaluation, underwriting and collection management policies, changes in the legal and regulatory environment, general economic conditions and business trends and uncertainties in forecasting and modeling techniques used in estimating our allowance. We update our consumer loss forecast models and portfolio indicators on a quarterly basis to incorporate information reflective of the current economic environment.
Assumptions regarding credit losses and loss confirmation periods are reviewed periodically and may be impacted by actual performance of finance receivables and changes in any of the factors discussed above. Should the credit loss assumption or loss confirmation period increase, there would be an increase in the amount of allowance for loan losses required, which would decrease the net carrying value of finance receivables and increase the amount of provision for loan losses.
Finance receivables that are considered impaired, including troubled debt restructurings ("TDRs"), are individually evaluated for impairment. In assessing the risk of individually impaired loans such as TDRs, among the factors we consider are the financial condition of the borrower, geography, collateral performance, historical loss experience, and industry-specific information that management believes is relevant in determining the occurrence of a loss event and measuring impairment. These factors are based on an evaluation of historical and current information, and involve subjective assessment and interpretation.
The finance receivables acquired with the international operations that were considered to have no deterioration in credit quality at the time of acquisition were recorded at fair value, resulting in a small discount. The purchase discount will accrete to income over the life of the receivables, based on contractual cash flows, using the effective interest method. Provisions for loan losses are charged to operations in amounts equal to net credit losses for the period. Any subsequent deterioration in the performance of the acquired receivables will result in an incremental provision for loan losses.
We believe that the allowance for loan losses on consumer finance receivables is adequate to cover probable losses inherent in our post-acquisition consumer 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. A 10% and 20% increase in cumulative charge-offs on the post-acquisition portfolio over the loss confirmation period would increase the allowance for loan losses as of December 31, 2013 by $47 million and $94 million. 
Net credit losses, which is the sum of the write-offs of contractual amounts on the pre-acquisition portfolio and the charge-offs on the post-acquisition portfolio, is a non-U.S. Generally Accepted Accounting Principle ("U.S. GAAP") measure. See "Credit Quality - Credit Losses - non-U.S. GAAP measure" for a reconciliation of charge-offs to total credit losses on the combined portfolio.

32


Commercial Finance Receivables and Allowance for Loan Losses
Commercial finance receivables are carried at amortized cost, net of allowance for loan losses. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at levels considered adequate to cover probable credit losses inherent in the commercial finance receivables. We reviewed the loss confirmation period as well as performed an analysis of the experience of comparable commercial lenders in order to estimate probable credit losses inherent in our portfolio. The commercial finance receivables are aggregated into loan-risk pools, which are determined based on our internally-developed risk rating system since we have limited loss experience of our own. Based on our risk ratings, we also determine if any specific dealer loan is considered impaired. If impaired loans are identified, specific reserves are established, as appropriate, and the loan is segregated for separate monitoring.
We generally require payment of the principal amount financed for a vehicle upon its sale or lease by the dealer to the retail customer. Upon the sale of the collateral, the dealer must repay the advance on the sold vehicle according to the repayment terms. Typically, the dealer has two to ten business days to repay an advance on a sold vehicle, depending on the timing of the receipt of the sale proceeds. These repayment terms can vary based on the dealer's risk rating. As a result, funds advanced may be repaid in a short time period, depending on the length of time the dealer holds the vehicle until its sale.
We believe that the allowance for loan losses for commercial finance receivables is adequate to cover probable losses inherent in our portfolio; 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. A 10% and 20% increase in cumulative charge-offs on the commercial finance receivable portfolio over the loss confirmation period would increase the allowance for loan losses as of December 31, 2013 by $5 million and $10 million.
Expected losses on our commercial loans are lower than expected losses on our consumer loans because the consumer loan portfolio in North America is primarily sub-prime, and the commercial loans both in the North America and International segments, are to dealer customers and are generally high quality. Additionally, the commercial loan is secured not only by the financed vehicles, but also other dealership assets and typically the continuing personal guarantee of the dealership's ownership. In addition, to minimize our risk upon a dealer default, the manufacturers are generally obligated to repurchase new vehicle inventory according to manufacturer or state parameters, thus minimizing any loss due to dealer default.
Valuation of Automobile Lease Assets and Residuals
We have investments in leased vehicles recorded as operating leases. In accounting for operating leases, we must make a determination at the beginning of the lease contract of the estimated realizable value (i.e., residual value) of the vehicle at the end of the lease term, which typically ranges from two to five years. We establish residual values by using independently published residual values. The customer is obligated to make payments during the term of the lease for the difference between the purchase price and the contract residual value plus a money factor. However, since the customer is not obligated to purchase the vehicle at the end of the contract, we are exposed to a risk of loss to the extent the value of the vehicle at the end of the lease term is below the residual value estimated at contract inception. We periodically perform a detailed review of the estimated realizable value of leased vehicles to assess the appropriateness of the carrying value of lease assets.
To account for residual risk, we depreciate automobile operating lease assets to estimated realizable value on a straight-line basis over the lease term. The estimated realizable value is initially based on the lower of the contracted residual value or the current market estimate of residual value based on independent lease guides. Over the life of the lease, we evaluate the adequacy of the estimate of the realizable value and may make adjustments to the extent the expected value of the vehicle at lease termination changes. Any adjustments would result in a change in the depreciation rate of the lease asset.
In addition to estimating the residual value at lease termination, we must also evaluate the carrying value of the operating lease assets, check for indicators of impairment and test for impairment to the extent necessary in accordance with applicable accounting standards. Impairment is determined to exist if the undiscounted expected future cash flows (including the expected residual value) are lower than the carrying value of the asset.
Our depreciation methodology on operating lease assets considers our expectation of the value of the vehicles upon lease termination, which is based on numerous assumptions and factors influencing used vehicle values. The critical assumptions underlying the estimated carrying value of automobile lease assets include: (i) estimated market value information obtained and used by management in estimating residual values, (ii) proper identification and estimation of business conditions, (iii) our remarketing abilities and (iv) vehicle and marketing programs of our parent company. Changes in these assumptions could have a significant impact on the value of the lease residuals.

33


Goodwill
During 2013, we performed our annual goodwill impairment testing as of October 1 for all reporting units, which are North America, Europe and Latin America. During 2012 and 2011, we performed our annual goodwill impairment testing as of October 1 for our single reporting unit, North America. Refer to Note 3 - "Goodwill," of the consolidated financial statements included in this Form 10-K for additional information.
The excess of the purchase price of the Merger over the fair value of the net assets acquired was recorded as goodwill, and was attributed to the North America reporting unit, which was our only reporting unit. With the acquisition of the international operations, we added two additional reporting units: Latin America and Europe. The excess of the purchase price of the acquisition of the international operations over the fair value of the net assets acquired was all attributed to the Latin America reporting unit. We performed our annual goodwill impairment testing as of October 1 for all reporting units. If the fair value of any reporting unit is less than the carrying amount reflected in the balance sheet, an indication exists that the amount of goodwill attributed to a reporting unit may be impaired, and we perform a second step of the impairment test. In the second step, we compare the goodwill amount reflected in the balance sheet to the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets and liabilities in a manner similar to a purchase price allocation.
We completed the first step of the impairment testing of the goodwill attributed to the Latin America reporting unit, and the fair value exceeded the carrying value by 30%. Due to the relatively small amount of the goodwill attributed (11% of total goodwill), as well as the recent determination of the fair value of the international operations for the allocation of the purchase price, the following discussion relates only to the impairment testing of the goodwill attributed to the North America reporting unit.
In the first step of our goodwill impairment test, we determined the fair value of the North America reporting unit with consideration to valuations under the market approach and the income approach.
The income approach evaluates the cash flow of the reporting unit over a specified time, discounted at an appropriate market rate to arrive at an indication of the most probable selling price. Factors contributing to the determination of the reporting unit's operating performance were historical performance and management's estimates of future performance.
The following table reflects certain key estimates and assumptions used in our 2013 impairment testing:
Market approach assumptions:
 
 
   Trailing-twelve months' earnings multiple
  
9.9x
   Forward earnings multiple
 
10.0x
   Weighting applied
 
25%
Income approach assumptions:
 
 
   Cost of equity
  
10.5%
   Targeted equity-to-earning assets ratio
  
12.5% declining to 7.5%
   Weighting applied
 
75%
The results of the first step of the impairment test indicated that the fair value exceeded the carrying value of the North America reporting unit by 29%. It was therefore not necessary to perform the second step analysis, and no impairment loss was recorded during the fourth quarter 2013. With a cost of equity assumption of as high as 12%, the resulting fair value would exceed the carrying value by 13%. With an equity-to-earning assets ratio declining to no less than 10%, the resulting fair value would exceed the carrying value by 14%.
If actual market conditions are less favorable than those projected by the industry or us, or if events occur or circumstances change that would reduce the fair value of our goodwill below the amount reflected in the balance sheet, we may be required to conduct an interim test and possibly recognize impairment charges, which could be material, in future periods. 
Income Taxes
On our stand-alone financial statements, we account for income taxes on a separate return basis using an asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between financial statements' carrying amounts of existing assets and liabilities and their respective tax basis, net operating loss and tax credit carryforwards.
We are subject to income tax in the United States and various other state and foreign jurisdictions. As of October 1, 2010, we are included in GM's consolidated U.S. federal income tax returns. For taxable income recognized by us in any period beginning on or after October 1, 2010, we are obligated to pay GM for our share of the consolidated U.S. federal and certain state tax liabilities.

34


Amounts owed to GM for income taxes are accrued and recorded as an intercompany payable. Under our tax sharing arrangement with GM, for our U.S. operations payments for the tax years 2010 through 2014 are deferred for four years from their original due date. Any difference between the amounts paid under our tax sharing arrangement with GM and our separate return basis used for financial reporting purposes is reported in our consolidated financial statements as additional paid-in capital.
In the ordinary course of business, there may be transactions, calculations, structures and filing positions where the ultimate tax outcome is uncertain. At any point in time, multiple tax years are subject to audit by various taxing jurisdictions and we record liabilities for estimated tax results based on the requirements of the accounting for uncertainty in income taxes. Management believes that the estimates it records are reasonable. However, due to expiring statutes of limitations, audits, settlements, changes in tax law or new authoritative rulings, no assurance can be given that the final outcome of these matters will be comparable to what was reflected in the historical income tax provisions and accruals. We may need to adjust our accrued tax assets or liabilities if actual results differ from estimated results or if we adjust the assumptions used in the computation of the estimated tax results in the future. These adjustments could materially impact the effective tax rate, earnings, accrued tax balances and cash.
We evaluate the need for deferred tax asset valuation allowances based on a more likely than not standard. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. We consider the following possible sources of taxable income when assessing the realization of deferred tax assets: future reversals of existing taxable temporary differences; future taxable income exclusive of reversing temporary differences and carryforwards; taxable income in prior carryback years; and tax-planning strategies.
The assessment regarding whether a valuation allowance is required or should be adjusted also considers all available positive and negative evidence factors, including but not limited to: nature, frequency, and severity of recent losses; duration of statutory carryforward periods; historical experience with tax attributes expiring unused; and near- and medium-term financial outlook.
It is difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. We utilize a rolling three years of actual and current year anticipated results as the primary measure of cumulative losses in recent years.
We have recorded gross deferred tax assets reflecting the expected tax benefits of operating loss carry forwards, tax credits and reversing temporary differences as disclosed in Note 14 - "Income Taxes." Realization of this deferred tax asset is dependent, in part, on generating sufficient taxable income in certain jurisdictions in future tax periods. If we continue to generate sufficient pretax income in future periods the deferred tax asset, net of the existing valuation allowance, should be realizable in the future. This judgment could be significantly impacted in the near term if estimates of future taxable income are reduced due to unforeseen events or changes in market conditions. If changes were to occur in future periods, it is possible that management could conclude that an additional valuation allowance might be necessary.
As of December 31, 2013, we retained valuation allowances against deferred tax assets of $28 million in the U.S. and $76 million in non-U.S. jurisdictions. We realized a one-time cash dividend from a foreign subsidiary. We provided a $28 million valuation allowance on the portion of such foreign tax credits that our judgment will not be utilized during the ten year carry forward period. We have reflected in our financial statements $73 million of non-U.S. valuation allowances related to the acquisition of the international acquisitions.
We have not recognized a deferred tax liability on the undistributed earnings of foreign subsidiaries as allowed under the indefinite reversal criterion of Accounting Standards Codification ("ASC") 740. Due to our strategy of funding locally, these amounts are considered to be indefinitely invested based on specific plans for reinvestment of these earnings. Should we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the U.S.

35


RESULTS OF OPERATIONS
As a result of our acquisition of the international operations, the results of our operations for the periods presented are not comparable and, therefore, there is no narrative discussion with respect to the International Segment included below. We have presented the quantitative information regarding the results of our operations in a tabular format in order to clearly show the impact of the international operations acquisition during 2013. Narrative discussion is included below to address the results of our operations attributable only to our North America Segment for the comparable periods presented. This narrative discussion is not, however, reflective of our entire business. The remainder of the difference between our total results in each category of our results of operations for 2013 and 2012 is solely resulting from our acquisition of the international operations.
Year Ended December 31, 2013 as compared to
Year Ended December 31, 2012
Average Earning Assets:
Average earning assets were as follows (dollars in millions):
 
Years Ended December 31,
 
2013 vs. 2012 Change
 
2013
 
2012
 
Amount
%
 
North America
 
International
 
Total
 
North America
 
North
America
Average consumer finance receivables
$
11,335

 
$
6,459

 
$
17,794

 
$
10,421

 
$
914

8.8
%
Average commercial finance receivables
1,164

 
2,997

 
4,161

 
178

 
986

553.9
%
Average finance receivables
12,499

 
9,456

 
21,955

 
10,599

 
1,900

17.9
%
Average leased vehicles, net
2,599

 
3

 
2,602

 
1,324

 
1,275

96.3
%
Average earning assets
$
15,098

 
$
9,459

 
$
24,557

 
$
11,923

 
$
3,175

26.6
%
Average consumer finance receivables increased $914 million from 2012 to 2013, primarily because loan originations for the past twelve months exceeded portfolio liquidation through payments and defaults. We purchased $5.1 billion and $5.6 billion of consumer finance receivables in the North America Segment during 2013 and 2012. The average new consumer loan size increased to $21,494 for 2013 from $21,270 for 2012. The average annual percentage rate for consumer finance receivables purchased during 2013 decreased to 13.4% from 14.1% during 2012, primarily due to pricing adjustments driven by lower cost of funds.
Average commercial finance receivables increased $1.0 billion from 2012 to 2013, primarily due to the introduction of our commercial lending platform in April 2012 and dealer conquests and related origination growth in that business since that time.
Average leased vehicles, net, increased $1.3 billion from 2012 to 2013. We purchased $2.8 billion and $1.3 billion of leased vehicles during 2013 and 2012. The increase in leased vehicles purchased was a result of GM's overall increased market penetration in leases and the success of our lease product offering to achieve and maintain a significant minority share of GM's business.
Revenue:
Revenues were as follows (dollars in millions):
 
Years Ended December 31,
 
2013 vs. 2012 Change
 
2013
 
2012
 
Amount
%
 
North America
 
International
 
Total
 
North America
 
North
America
Finance charge income:
 
 
 
 
 
 
 
 
 

Consumer finance receivables
$
1,680

 
$
612

 
$
2,292

 
$
1,594

 
$
86

5.4
 %
Commercial finance receivables
$
37

 
$
234

 
$
271

 
$
6

 
$
31

516.7
 %
Leased vehicle income
$
591

 
$
4

 
$
595

 
$
289

 
$
302

104.5
 %
Other income
$
68

 
$
118

 
$
186

 
$
71

 
$
(3
)
(4.2
)%
Finance charge income on consumer finance receivables increased by 5.4% to $1.7 billion for 2013, from $1.6 billion for 2012, primarily due to the 8.8% increase in average consumer finance receivables offset by a decrease in effective yield. The effective yield on our consumer finance receivables decreased to 14.8% for 2013, from 15.3% for 2012. The effective yield represents finance charges and fees recorded in earnings during the period as a percentage of average consumer finance receivables.

36


The effective yield, as a percentage of average consumer finance receivables, is higher than the contractual rates of our auto finance contracts because the effective yield includes, in addition to the contractual rates and fees, the impact of excess cash flows transferred from non-accretable difference to accretable yield, which impact has decreased over time with the amortization of the pre-acquisition portfolio. The difference between the effective yield and the contractual rates will continue to decrease as the pre-acquisition portfolio amortizes.
Leased vehicle income increased by 104.5% to $591 million for 2013 from $289 million for 2012, due to the increased size of the leased asset portfolio.
Costs and Expenses:
Costs and expenses were as follows (dollars in millions):
 
Years Ended December 31,
 
2013 vs. 2012 Change
 
2013
 
2012
 
Amount
%
 
North America
 
International
 
Total
 
North America
 
North
America
Operating expenses
$
442

 
$
328

 
$
770

 
$
398

 
$
44

11.1
 %
Leased vehicle expenses
$
451

 
$
2

 
$
453

 
$
211

 
$
240

113.7
 %
Provision for loan losses
$
393

 
$
82

 
$
475

 
$
304

 
$
89

29.3
 %
Interest expense(a)
$
421

 
$
300

 
$
721

 
$
283

 
$
138

48.8
 %
Acquisition and integration expenses
$

 
$
42

 
$
42

 
$
20

 
$
(20
)
(100.0
)%
_________________ 
(a)
2013 amounts do not reflect allocation of senior note interest expense, and therefore do not agree with amounts presented in Note 17 - "Segment Reporting and Geographic Information" in our consolidated financial statements in this Form 10-K
Operating Expenses
Operating expenses were $442 million for 2013, compared to $398 million for 2012. Our operating expenses are predominantly related to personnel costs that include base salary and wages, performance incentives and benefits as well as related employment taxes. These expenses represented 73.4% and 74.9% of total operating expenses for 2013 and 2012.
Operating expenses as an annualized percentage of average earning assets decreased to 2.9% for 2013 from 3.3% for 2012, due to efficiency gains resulting from the increase in average earning assets.
Leased Vehicle Expenses
Leased vehicle expenses increased by 113.7% to $451 million for 2013, from $211 million for 2012, due to the increased size of the leased asset portfolio. Our leased vehicle expenses are predominantly related to depreciation of leased assets.
Provision for Loan losses
Provisions for consumer finance receivable loan losses are charged to income to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the consumer finance receivables portfolio. The provision for loan losses recorded for 2013 and 2012 reflects inherent losses on receivables originated during these periods and changes in the amount of inherent losses on post-acquisition finance receivables originated in prior periods. The provision for consumer loan losses increased to $380 million for 2013 from $298 million for 2012, as a result of the increase in the size of the consumer finance receivables portfolio. As an annualized percentage of average post-acquisition consumer finance receivables, the provision for loan losses was 3.6% for 2013 and 4.1% for 2012.
The provision for loan losses on commercial finance receivables was $13 million for 2013 and $6 million for 2012 due to the increased size of the commercial loan portfolio.
Interest Expense
Interest expense increased to $421 million for 2013, from $283 million for 2012. The increase was primarily as a result of an increase in average debt outstanding to $14.3 billion for 2013, from $9.5 billion for 2012. The increase in debt was due to funding requirements for growth in the loan and lease portfolio, as well as for the acquisition of the international operations. Our effective rate of interest on our debt was 3.0% for both 2013 and 2012.

37


Acquisition and Integration Expenses
The acquisition and integration expenses in 2012 represent advisory, legal and professional fees and other costs related to the acquisition of the international operations.
Taxes
Our consolidated effective income tax rate was 35.9% and 37.8% for 2013 and 2012. The decrease in the effective income tax rate is primarily related to the settlement of an IRS audit as well as the acquisition of the international operations, which resulted in income in jurisdictions with lower tax rates and other permanent differences.
Other Comprehensive Income
Foreign Currency Translation Adjustment
Consolidated foreign currency translation adjustments of $11 million and $6 million for 2013 and 2012, were included in other comprehensive income. Most of the entities acquired with the international operations acquisition use functional currencies other than the U.S. dollar. The translation adjustment is due to the change in the values of our international currency-denominated assets and liabilities resulting from changes in the value of the U.S. dollar in relation to international currencies during 2013 and 2012.
Year Ended December 31, 2012 as compared to
Year Ended December 31, 2011
Average Earning Assets
Average earning assets are as follows (dollars in millions):
 
North America
 
Years Ended December 31,
 
2012 vs. 2011 Change
 
2012
 
2011
 
Amount
 
%
Average consumer finance receivables
$
10,421

 
$
9,112

 
$
1,309

 
14.4
%
Average commercial finance receivables
178

 

 
178

 
n.m.
Average finance receivables
10,599

 
9,112

 
1,487

 
16.3
%
Average leased vehicles, net
1,324

 
428

 
896

 
209.3
%
Average earning assets
$
11,923

 
$
9,540

 
$
2,383

 
25.0
%
_________________ 
n.m. = not meaningful
Average consumer finance receivables increased $1.3 billion from 2011 to 2012, primarily because of an increase in new car loans financed under the GM subvention program. We purchased $5.6 billion and $5.1 billion of consumer finance receivables in the North America Segment during 2012 and 2011. The average new consumer loan size increased to $21,270 for 2012 from $20,697 for 2011. The average annual percentage rate for consumer finance receivables purchased during 2012 decreased to 14.1% from 14.6% during 2011, as a result of an increase in new car loans financed under the GM subvention program, which are typically financed at lower annual percentage rates.
Average commercial finance receivables increased $178 million from 2011 to 2012, primarily due to the introduction of our commercial lending platform in April 2012 and dealer conquests and related origination growth in that business since that time.
Average leased vehicles, net, increased $896 million from 2011 to 2012. We purchased $1.3 billion and $1.0 billion of leased vehicles during 2012 and 2011. The increase in leased vehicles purchased was a result of GM's overall increased market penetration in leases and the success of our lease product offering to achieve and maintain a significant minority share of GM's business.

38


Revenue
Revenues were as follows (dollars in millions):
 
North America
 
Years Ended December 31,
 
2012 vs. 2011 Change
 
2012
 
2011
 
Amount
%
Finance charge income:
 
 
 
 
 
 
Consumer finance receivables
$
1,594

 
$
1,247

 
$
347

27.8
%
Commercial finance receivables
$
6

 
$

 
$
6

n.m.
Leased vehicle income
$
289

 
$
98

 
$
191

194.9
%
Other income
$
71

 
$
65

 
$
6

9.2
%
_________________ 
n.m. = not meaningful
Finance charge income increased to $1.6 billion for 2012 from $1.2 billion for 2011 primarily due to a 14.4% increase in average consumer finance receivables combined with an increased yield on the pre-acquisition portfolio due to the transfer of excess cash flows from non-accretable difference to accretable yield. The effective yield on our consumer finance receivables was 15.3% for 2012 compared to 13.7% for 2011. The effective yield represents finance charges and fees recorded in earnings during the period as a percentage of average consumer finance receivables. The effective yield, as a percentage of average consumer finance receivables, is higher than the contractual rates of our auto finance contracts because the effective yield includes, in addition to the contractual rates and fees, the impact of excess cash flows transferred from non-accretable difference to accretable yield.
Leased vehicle income increased by 194.9% to $289 million for 2012 from $98 million for 2011, due to the increased size of the leased asset portfolio.
Costs and Expenses
Costs and expenses were as follows (dollars in millions):
 
North America
 
Years Ended December 31,
 
2012 vs. 2011 Change
 
2012
 
2011
 
Amount
 
%
Operating expenses
$
398

 
$
339

 
$
59

 
17.4
%
Leased vehicle expenses
$
211

 
$
67

 
$
144

 
214.9
%
Provision for loan losses
$
298

 
$
178

 
$
120

 
67.4
%
Interest expense
$
283

 
$
204

 
$
79

 
38.7
%
Acquisition and integration expenses
$
20

 
$

 
$
20

 
n.m.
_________________ 
n.m. = not meaningful
Operating Expenses
Operating expenses were $398 million for 2012 compared to $339 million for 2011. Our operating expenses are predominantly related to personnel costs that include base salary and wages, performance incentives and benefits as well as related employment taxes. Due to increased headcount to support origination structure and new lending programs, our personnel costs increased by $44 million for 2012 and represented 74.9% and 75.0% of total operating expenses for 2012 and 2011.
Operating expenses as a percentage of average earning assets decreased to 3.3% in 2012 from 3.5% in 2011, due to efficiency gains resulting from the increase in average earning assets.
Leased Vehicle Expenses
Leased vehicle expenses increased by 214.9% to $211 million for 2012 from $67 million for 2011 due to increased size of the leased asset portfolio. Our leased vehicle expenses are composed primarily of depreciation of leased assets as well as the gain or loss on the disposition of the leased assets.

39


Provision for Loan Losses
Provisions for consumer finance receivable loan losses are charged to income to bring our allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of post-acquisition consumer finance receivables. The provision for loan losses recorded for 2012 and 2011 reflect inherent losses on receivables originated during the periods and changes in the amount of inherent losses on post-acquisition receivables originated in prior periods. The provision for consumer loan losses increased to $298 million for 2012 from $178 million for 2011 as a result of the increase in the size of the post-acquisition consumer finance receivables portfolio. As a percentage of average post-acquisition consumer finance receivables, the provision for loan losses was 4.1% for 2012 compared to 5.6% for 2011.
An allowance for loan losses on commercial finance receivables was established during 2012 with a provision of $6 million.
Interest Expense
Interest expense increased by $79 million to $283 million for 2012 from $204 million for 2011. The increase was primarily as a result of an increase in average debt outstanding to $9.5 billion for 2012, from $7.6 billion for 2011. Our effective rate of interest expense on our debt was 3.0% for 2012 compared to 2.7% for 2011. The effective rate increased as a result of the 4.75% senior notes issued in August 2012 and 6.75% senior notes issued in June 2011.
Acquisition and Integration Expenses
The acquisition and integration expenses in 2012 represent advisory, legal and professional fees and other costs related to the pending acquisition of the international operations.
Taxes
Our effective income tax rate was 37.8% and 38.0% for 2012 and 2011.
Foreign Currency Translation Adjustment
Foreign currency translation adjustment gains (losses) of $6 million and $(11) million for 2012 and 2011, were included in other comprehensive income (loss). The translation adjustment is due to the change in the value of our Canadian dollar-denominated assets related to the change in the U.S. dollar to Canadian dollar conversion rates during the year.

40


CREDIT QUALITY
Consumer Finance Receivables
In the North America Segment, we primarily provide financing in relatively high-risk markets, and therefore anticipate a corresponding high level of delinquencies and charge-offs. In the International Segment, the consumer financing we provide is generally prime in nature and considered lower-risk; therefore we expect correspondingly lower levels of delinquencies and charge-offs than in our North America Segment.
The following tables present certain data related to the consumer finance receivables portfolio (dollars in millions, except where noted):
 
December 31, 2013
 
December 31, 2012
 
North America
 
International
 
Total
 
North America
Pre-acquisition consumer finance receivables - outstanding balance
$
931

 
$
363

 
$
1,294

 
$
2,162

Pre-acquisition consumer finance receivables - carrying value
$
826

 
$
348

 
$
1,174

 
$
1,958

Post-acquisition consumer finance receivables, net of fees
10,562

 
11,394

 
21,956

 
8,831

 
11,388

 
11,742

 
23,130

 
10,789

Less: allowance for loan losses
(468
)
 
(29
)
 
(497
)
 
(345
)
Total consumer finance receivables, net
$
10,920

 
$
11,713

 
$
22,633

 
$
10,444

Number of outstanding contracts
725,797

 
1,224,845

 
1,950,642

 
740,814

Average amount of outstanding contract (in dollars)(a)
$
15,835

 
$
9,599

 
$
11,919

 
$
14,839

Allowance for loan losses as a percentage of post-acquisition consumer finance receivables, net of fees
4.4
%
 
0.3
%
 
2.3
%
 
3.9
%
_________________ 
(a)
Average amount of outstanding contract consists of pre-acquisition consumer finance receivables - outstanding balance and post-acquisition consumer finance receivables, net of fees, divided by number of outstanding contracts.
The allowance for loan losses for the North America Segment as a percentage of post-acquisition consumer finance receivables, net of fees has increased due to normalizing credit trends with moderately higher defaults and delinquencies. The allowance for the acquired international receivables was eliminated in acquisition accounting at the acquisition dates. As a result, the allowance at December 31, 2013 for the International Segment represents an estimate of losses inherent in only the receivables originated since the acquisition dates. The allowance for losses for the International Segment will grow over time as the post-acquisition loan balance grows. However, the allowance for losses for the International Segment is expected to be much less than that for the North America Segment due to the higher credit quality of its originations.
Delinquency
The following is a summary of the contractual amounts of consumer finance receivables, which is not materially different than recorded investment, that are (i) more than 30 days delinquent, not yet in repossession, and (ii) in repossession, but not yet charged off (dollars in millions):
 
December, 31, 2013
 
December 31, 2012
 
North America
 
International
 
Total
 
North America
 
Amount
 
Percent of Contractual Amount Due
 
Amount
 
Amount
 
Percent of Contractual Amount Due
 
Amount
 
Percent of Contractual Amount Due
31 - 60 days
$
858

 
7.5
%
 
$
94

 
$
952

 
4.1
%
 
$
672

 
6.1
%
Greater - than 60 days
296

 
2.5

 
112

 
408

 
1.7

 
230

 
2.1

 
1,154

 
10.0

 
206

 
1,360

 
5.8

 
902

 
8.2

In repossession
38

 
0.3

 
3

 
41

 
0.2

 
31

 
0.3

 
$
1,192

 
10.3
%
 
$
209

 
$
1,401

 
6.0
%
 
$
933

 
8.5
%
An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date such payment was contractually due. Delinquencies may vary from period to period based upon the average credit scores in the portfolio

41


which reflects our underwriting strategies and risk tolerance, the average age or seasoning of the portfolio, seasonality within the calendar year and economic factors. Our target customer base in the North America Segment is predominantly sub-prime; therefore, a relatively high percentage of accounts become delinquent at some point in the life of a loan and there is a high rate of account movement between current and delinquent status in the portfolio.
Delinquencies in the North America Segment increased from 8.2% at December 31, 2012 to 10.0% at December 31, 2013, consistent with a greater concentration of loans with lower average credit scores at December 31, 2013 and normalizing credit trends. Our customer base in the International Segment is primarily prime; therefore, delinquency levels are much lower.
Deferrals
Due to the lower-risk nature of the consumer base in the International Segment, it is unnecessary to offer deferrals as frequently as in the North America Segment, which leads to an immaterial overall level of deferrals in the International Segment. Therefore, the following information regarding deferrals is presented for consumer finance receivables in the North America Segment only.
In accordance with our policies and guidelines, we, at times, offer payment deferrals to consumers, whereby the consumer is allowed to move up to two delinquent payments to the end of the loan generally by paying a fee (approximately the interest portion of the payment deferred, except where state law provides for a lesser amount). Our policies and guidelines limit the number and frequency of deferments that may be granted. Additionally, we generally limit the granting of deferments on new accounts until a requisite number of payments have been received.
Due to the nature of our consumer base in the North America Segment and policies and guidelines of the deferral program, which policies and guidelines have not changed materially in several years, approximately 50% to 60% of accounts historically comprising the consumer finance receivables in the North America Segment receive a deferral at some point in the life of the account.
An account for which all delinquent payments are deferred or paid in a deferment transaction is classified as current at the time the deferment is granted and therefore is not included as a delinquent account. Thereafter, such account is aged based on the timely payment of future installments in the same manner as any other account.
Contracts receiving a payment deferral as an average quarterly percentage of average consumer finance receivables outstanding were 6.4% and 5.7% for 2013 and 2012. The increase in deferrals correlates to the increase in delinquent consumer finance receivables in North America Segment (i.e., more accounts are eligible for deferment), as discussed above.
The following is a summary of deferrals in the North America Segment as a percentage of consumer finance receivables outstanding:
 
December 31, 2013

December 31, 2012
Never deferred
74.7
%
 
77.8
%
Deferred:
 
 
 
1-2 times
21.6

 
18.1

3-4 times
3.7

 
4.1

Total deferred
25.3

 
22.2

Total
100.0
%
 
100.0
%
We evaluate the results of our deferment strategies based upon the amount of cash installments that are collected on accounts after they have been deferred versus the extent to which the collateral underlying the deferred accounts has depreciated over the same period of time. Based on this evaluation, we believe that payment deferrals granted according to our policies and guidelines are an effective portfolio management technique and result in higher ultimate cash collections from the portfolio.
Changes in deferment levels do not have a direct impact on the ultimate amount of consumer finance receivables charged off by us. However, the timing of a charge-off may be affected if the previously deferred account ultimately results in a charge-off. To the extent that deferrals impact the ultimate timing of when an account is charged off, historical charge-off ratios, loss confirmation periods and cash flow forecasts for loans classified as TDRs used in the determination of the adequacy of our allowance for loan losses are also impacted. Increased use of deferrals may result in a lengthening of the loss confirmation period, which would increase expectations of credit losses inherent in the portfolio and therefore increase the allowance for loan losses and related provision for loan losses. Changes in these ratios and periods are considered in determining the appropriate level of allowance for loan losses and related provision for loan losses.

42


Troubled Debt Restructurings
See Note 4 - "Finance Receivables" to our consolidated financial statements in this Form 10-K for further discussion of TDRs.
Credit Losses - non-U.S. GAAP measure
We analyze portfolio performance of both the pre- and post-acquisition finance receivables portfolios on a combined basis. This information allows us and investors the ability to analyze credit loss trends in the combined portfolio. Additionally, information on credit losses, on a combined basis, facilitates comparisons of current and historical results.
The following is a reconciliation of charge-offs on the post-acquisition portfolio to credit losses on the combined portfolio (in millions):
 
Years Ended December 31,
 
2013
 
2012
 
2011
 
North America(a)
 
International
 
Total
 
North America(a)
 
North America(a)
Charge-offs
$
584

 
$
54

 
$
638

 
$
304

 
$
66

Adjustments to reflect write-offs of the contractual amounts on the pre-acquisition portfolio
154

 
13

 
167

 
305

 
569

Total credit losses
$
738

 
$
67

 
$
805

 
$
609

 
$
635

_________________ 
(a)
Total credit losses in the North America Segment is comprised of the sum of repossession credit losses and mandatory credit losses.
The following table presents credit loss data (which includes charge-offs on the post-acquisition portfolio and write-offs of contractual amounts on the pre-acquisition portfolios) with respect to our consumer finance receivables portfolio (dollars in millions): 
 
Years Ended December 31,
 
2013
 
2012
 
2011
 
North America
 
International(a)
 
Total
 
North America
 
North America
Repossession credit losses
$
720

 
$
67

 
$
787

 
$
590

 
$
639

Less: recoveries
(427
)
 
(35
)
 
(462
)
 
(353
)
 
(346
)
Mandatory credit losses(b)
18

 


 
18

 
19

 
(4
)
Net credit losses
$
311

 
$
32

 
$
343

 
$
256

 
$
289

Net annualized credit losses as a percentage of average consumer finance receivables(c)
2.7
%
 
0.5
%
 
1.9
%
 
2.5
%
 
3.2
%
Recoveries as a percentage of gross repossession credit losses
59.3
%
 
 
 
 
 
59.8
%
 
54.1
%
_________________ 
(a)
Repossession credit losses for the International Segment represent the write-down of receivables to net realizable value, net of any recovery payments received. As a result, a calculation of recoveries as a percentage of gross repossession credit losses is not meaningful. Recoveries to date are primarily on credit losses that occurred prior to our acquisition of the international operations.
(b)
Mandatory credit losses represent accounts 120 days delinquent in the post-acquisition portfolio that are charged off in full, with no recovery amounts realized at time of charge-off, net of any subsequent recoveries as well as the net write-down of consumer finance receivables in repossession to the net realizable value of the repossessed vehicle when the repossessed vehicle is legally available for sale.
(c)
Average consumer finance receivables are defined as the average receivable balance excluding the carrying value adjustment.
Net credit losses as a percentage of average consumer finance receivables outstanding may vary from period to period based upon the average credit scores in the portfolio which reflects our underwriting strategies and risk tolerance, the average age or seasoning of the portfolio and economic conditions.

43


Commercial Finance Receivables
The following table presents certain data related to the commercial finance receivables portfolio (dollars in millions):
 
December 31, 2013
 
December 31, 2012
 
North America
 
International
 
Total
 
North America
Commercial finance receivables, net of fees
$
1,975

 
$
4,725

 
$
6,700

 
$
560

Less: allowance for loan losses
(17
)
 
(34
)
 
(51
)
 
(6
)
Total commercial finance receivables, net
$
1,958

 
$
4,691

 
$
6,649

 
$
554

Number of dealers
309

 
2,646

 
2,955

 
101

Average carrying amount per dealer
$
6

 
$
2

 
$
2

 
$
5

Commercial finance receivables are assessed for impairment and any required allowance for credit losses is recorded based on the present value of the expected future cash flows of the receivable discounted at the loan's original effective interest rate. For receivables where foreclosure is probable, the fair value of the collateral is used to estimate the specific impairment. At December 31, 2013, there were no outstanding commercial finance receivables classified as TDRs.
There were charge-offs of $5 million of commercial finance receivables during 2013 and no charge-offs during 2012.
At December 31, 2013, 99.9% of our commercial finance receivables were current with respect to payment status.
Leased Vehicles
At December 31, 2013 and 2012, 98.4% and 99.3% of our leases were current with respect to payment status. Leased vehicles returned as a result of a default increased to $28 million for 2013 from $8 million for 2012, mainly due to the seasoning of the lease portfolio.
LIQUIDITY AND CAPITAL RESOURCES
General
Our primary sources of cash are finance charge income, leasing income, servicing fees, net distributions from secured debt facilities, including securitizations, collections and recoveries on finance receivables, secured and unsecured borrowings and net proceeds from senior notes transactions. Our primary uses of cash are purchases of consumer finance receivables and leased vehicles, the funding of commercial finance receivables, acquisitions, funding credit enhancement requirements in connection with securitizations and secured facilities, repayment of secured and unsecured debt, operating expenses, interest costs and capital expenditures.
We used cash of $9.6 billion and $5.6 billion for the purchase of consumer finance receivables during 2013 and 2012. We used cash of $2.3 billion and $1.1 billion for the purchase of leased vehicles during 2013 and 2012. We used cash of $1.1 billion and $557 million for funding of commercial finance receivables, net of collections, for 2013 and 2012. These purchases and fundings were financed initially utilizing cash and borrowings on our secured and unsecured credit facilities. Subsequently, our strategy is to obtain long-term financing for consumer and commercial finance receivables and leased vehicles through securitization transactions, most notably in the U.S. and Canada, but also in certain other countries where the debt capital and securitization markets are sufficiently developed, such as in Germany and the U.K.
Liquidity
Our available liquidity consists of the following (in millions): 
 
December 31, 2013
 
December 31, 2012
Cash and cash equivalents(a)
$
1,074

 
$
1,289

Borrowing capacity on unpledged eligible assets
1,650

 
1,349

Borrowing capacity on committed unsecured lines of credit
615

 
 
Borrowing capacity on GM Related Party Credit Facility
600

 
300

Available liquidity
$
3,939

 
$
2,938

_________________
(a)
Includes $623 million in unrestricted cash outside of the U.S. This cash is considered to be indefinitely invested based on specific plans for reinvestment of these earnings.

44


The increase in liquidity is due primarily to the following: (i) the issuance of $2.5 billion in senior notes, (ii) a capital contribution from GM of $1.3 billion, (iii) the addition of $1.7 billion in cash and borrowing capacity available to the international operations, and (iv) a $300 million increase in the capacity of our GM Related Party Credit Facility, offset by (i) the payment of $3.3 billion in consideration for the international operations acquisition and (ii) the repayment of $1.4 billion of debt that was assumed as part of the international operations acquisition. Our current level of liquidity is considered sufficient to meet our obligations.
We have the ability to borrow up to $4.0 billion against GM's three-year $5.5 billion secured revolving credit facility. Our borrowings under the facility are limited by GM's ability to borrow the entire amount available under the facility. Therefore we may be able to borrow up to $4.0 billion or may be unable to borrow depending on GM's borrowing activity. If we do borrow under the facility we expect such borrowings would be short-term in nature and, except in extraordinary circumstances, would not be used to fund our operating activities in the ordinary course of business. Neither we, nor any of our subsidiaries, guarantee any obligations under this facility and none of our subsidiaries' assets secure this facility.
Credit Facilities
In the normal course of business, in addition to using our available cash, we utilize borrowings under our credit facilities, which may be secured or structured as securitizations, or may be unsecured, and we repay these borrowings as appropriate under our cash management strategy.
As of December 31, 2013, credit facilities consist of the following (in millions):
Facility Type
 
Facility Amount
 
Advances Outstanding
Revolving consumer asset-secured facilities(a)
 
$
11,987

 
$
6,143

Revolving commercial asset-secured facilities(b)
 
3,609

 
2,891

Total secured
 
$
15,596

 
$
9,034

Unsecured committed facilities
 
1,123

 
508

Unsecured uncommitted facilities and other debt(c)
 

 
2,472

Total unsecured
 
$
1,123

 
$
2,980

GM Related Party Credit Facility
 
600

 

Total
 
$
17,319

 
$
12,014

Acquisition accounting discount
 
 
 
(41
)
 
 
 
 
$
11,973

_________________
(a)
Includes revolving credit facilities backed by consumer finance receivables and leases.
(b)
Includes revolving credit facilities backed by loans to dealers, primarily for floor plan financing.
(c)
The financial institutions providing the uncommitted facilities are not contractually obligated to advance funds under them; therefore, we do not include available capacity on these facilities in our liquidity. We had $372 million in unused borrowing capacity on these facilities as of December 31, 2013.
See Note 6 - "Debt" to our consolidated financial statements in this Form 10-K for further discussion of the terms of our revolving credit facilities.
We are required to hold certain funds in restricted cash accounts to provide additional collateral for borrowings under certain of our secured credit facilities. Additionally, our secured credit facilities contain various covenants requiring minimum financial ratios, asset quality and portfolio performance ratios (portfolio net loss and delinquency ratios, and pool level cumulative net loss ratios) as well as limits on deferment levels. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements, restrict our ability to obtain additional borrowings under these agreements and/or remove us as servicer. As of December 31, 2013, we were in compliance with all covenants related to our credit facilities.
Securitization Notes Payable
We seek to finance our consumer and commercial finance receivables and leases through public and private term securitization transactions, where the debt capital and securitization markets are sufficiently developed, such as in the U.S., Germany and the U.K. The proceeds from the transactions were primarily used to repay borrowings outstanding under our revolving credit facilities.

45


A summary of securitization notes payable is as follows (in millions):
Year of Transaction
 
Maturity Date (a)
 
Original Issuance Amounts
 
Note Balance At
December 31, 2013
2007
 
June 2018
 
 
 
$
76

 
$
 
$
69

2010
 
July 2017
-
April 2018
 
$
200

-
$
850

 
632

2011
 
July 2018
-
December 2019
 
$
551

-
$
1,000

 
1,831

2012
 
June 2019
-
July 2020
 
$
800

-
$
1,300

 
4,138

2013
 
May 2018
-
December 2021
 
$
400

-
$
1,107

 
6,414

Total active securitizations
 
 
 
 
 
 
 
 
 
13,084

Acquisition accounting discount
 
 
 
 
 
 
 
 
 
(11
)
 
 
 
 
 
 
 
 
 
 
$
13,073

_________________ 
(a)
Maturity dates represent legal final maturity of issued notes. The notes are expected to be paid based on amortization of the finance receivables pledged.
Our securitizations utilize special purpose entities which are also VIE's that meet the requirements to be consolidated in our financial statements. See Note 8 - "Variable Interest Entities" to our consolidated financial statements in this Form 10-K for further discussion.
Contractual Obligations
The following table presents the expected scheduled principal and interest payments under our contractual debt obligations (in millions):
 
Years Ending December 31,
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Operating leases
$
22

 
$
20

 
$
16

 
$
14

 
$
9

 
$
8

 
$
89

Secured debt
11,492

 
5,768

 
3,109

 
1,337

 
367

 

 
22,073

Unsecured debt
2,102

 
705

 
1,090

 
1,000

 
1,326

 
750

 
6,973

Total expected interest payments
766

 
540

 
293

 
168

 
64

 
141

 
1,972

 
$
14,382

 
$
7,033

 
$
4,508

 
$
2,519

 
$
1,766

 
$
899

 
$
31,107

As of December 31, 2013, we had liabilities associated with uncertain tax positions of $279 million. The amount of judicial deposits that reduce our uncertain tax positions liability in the consolidated balance sheet is $154 million as of December 31, 2013. The table above does not include these liabilities since it is impracticable to estimate the future cash flows associated with these amounts.
Under our tax sharing arrangement with GM, we are responsible for our tax liabilities as if we filed separate returns. Payments for the tax years 2010 through 2014 are deferred for four years from their original due date. The total amount of deferral is not to exceed $1.0 billion. As of December 31, 2013, we have an accrued liability of $643 million to GM. Expected payments are $30 million in 2014, $266 million in 2015, $258 million in 2016, and $89 million in 2017.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Overview
We are exposed to a variety of risks in the normal course of our business. Our financial condition depends on the extent to which we effectively identify, assess, monitor and manage these risks. The principal types of risk to our business include:
Market risk - the possibility that changes in interest and currency exchange rates will adversely affect our cash flow and economic value;
Counterparty risk - the possibility that a counterparty may default on a derivative contract or cash deposit or will fail to meet its lending commitments to us;
Credit risk - the possibility of loss from a customer's failure to make payments according to contract terms;
Residual risk - the possibility that the actual proceeds we receive at lease termination will be lower than our projections or return volumes will be higher than our projections;

46


Liquidity risk - the possibility that we may be unable to meet all of our current and future obligations in a timely manner; and
Operating risk - the possibility of errors relating to transaction processing and systems, actions that could result in compliance deficiencies with regulatory standards or contractual obligations and the possibility of fraud by our employees or outside persons.
We manage each of these types of risk in the context of its contribution to our overall global risks. We make business decisions on a risk-adjusted basis and price our services consistent with these risks.
Credit, residual and liquidity risks are discussed in Items 1 and 7. A discussion of market risk (including currency and interest rate risk), counterparty risk, and operating risk follows.
Market Risk
Interest Rate Risk
Fluctuations in market interest rates impact our secured and unsecured debt. Our gross interest rate spread, which is the difference between interest and other income earned on finance receivables and lease contracts and interest paid, is affected by changes in interest rates as a result of our dependence upon the issuance of variable rate securities and the incurrence of variable rate debt to fund purchases of finance receivables and leased vehicles. To protect the interest rate spread, our special purpose finance subsidiaries are typically required to purchase interest rate cap or swap agreements in connection with outstanding amounts on our secured debt.
Cap Agreements. The purchaser of the interest rate cap agreement pays a premium in return for the right to receive the difference in the interest cost at any time a specified index of market interest rates rises above the stipulated "cap" or "strike" rate. The purchaser of the interest rate cap agreement bears no obligation or liability if interest rates fall below the "cap" or "strike" rate. As part of our interest rate risk management strategy and when economically feasible, we may simultaneously sell a corresponding interest rate cap agreement in order to offset the premium paid by our special purpose finance subsidiary to purchase the interest rate cap agreement and thus retain the interest rate risk. The fair value of the interest rate cap agreement purchased by the special purpose finance subsidiary is included in other assets and the fair value of the interest rate cap agreement sold by us is included in other liabilities on our consolidated balance sheets.
Swap Agreements. We use interest rate swap agreements to convert the variable rate exposures to a fixed rate ("pay rate") and receive a floating or variable rate ("receive rate"), thereby locking in the gross interest rate spread we earn. We utilize such arrangements to modify our net interest sensitivity to levels deemed appropriate based on our risk tolerance. In circumstances where the interest rate risk is deemed to be tolerable, usually if the risk is less than one year in term at inception, we may choose not to hedge potential fluctuations in cash flows due to changes in interest rates. Interest rate swap agreements that are not designated as hedges are included in other assets on the consolidated balance sheets. We currently do not have any interest rate swap agreements designated as hedges.

47


The following table provides information about our interest rate-sensitive financial instruments by expected maturity date as of December 31, 2013 (dollars in millions): 
Years Ending December 31,
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Fair Value
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer finance receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
9,576

 
$
6,642

 
$
4,162

 
$
2,050

 
$
820

 
$
290

 
$
22,652

Weighted average annual percentage rate
 
10.76
%
 
10.97
%
 
11.17
%
 
11.73
%
 
12.28
%
 
12.80
%
 
 
Commercial finance receivables
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
6,381

 
$
22

 
$
25

 
$
94

 
$
117

 
$
6

 
$
6,649

Weighted average annual percentage rate
 
6.71
%
 
4.73
%
 
4.59
%
 
4.50
%
 
7.40
%
 
5.69
%
 
 
Interest rate swaps
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notional amounts
 
$
1,079

 
$
683

 
$
373

 
$
231

 
$
56

 
 
 
$
11

Average pay rate
 
1.79
%
 
1.62
%
 
1.44
%
 
1.12
%
 
0.48
%
 
 
 
 
Average receive rate
 
1.43
%
 
1.88
%
 
2.61
%
 
2.84
%
 
0.98
%
 
 
 
 
Interest rate caps purchased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notional amounts
 
$
401

 
$
294

 
$
245

 
$
199

 
$
114

 
$
145

 
$
7

Average strike rate
 
3.32
%
 
3.28
%
 
3.22
%
 
3.12
%
 
3.20
%
 
3.00
%
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revolving credit facilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
6,297

 
$
1,699

 
$
796

 
$
224

 
$
19

 
 
 
$
8,995

Weighted average effective interest rate
 
4.95
%
 
6.39
%
 
6.39
%
 
8.17
%
 
8.34
%
 
 
 
 
Securitization notes payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal amounts
 
$
5,218

 
$
4,084

 
$
2,321

 
$
1,114

 
$
348

 
 
 
$
13,175

Weighted average effective interest rate
 
1.91
%
 
2.12
%
 
2.40
%
 
2.71
%
 
2.88
%
 
 
 
 
Unsecured Debt: