10-K 1 gm201510k.htm 10-K 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Form 10-K
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
¨


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             

Commission file number 001-34960
GENERAL MOTORS COMPANY
(Exact name of registrant as specified in its charter)
STATE OF DELAWARE
27-0756180
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
300 Renaissance Center, Detroit, Michigan
48265-3000
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code
(313) 556-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock
New York Stock Exchange/Toronto Stock Exchange
Warrants (expiring July 10, 2016)
New York Stock Exchange
Warrants (expiring July 10, 2019)
New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  þ  No  ¨
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  þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ  No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its company Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ  No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 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 or any amendment to this Form 10-K.  þ
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 definition of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  þ  Accelerated filer  ¨  Non-accelerated filer  ¨  Smaller reporting company  ¨
Do not check if a smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨ No  þ
The aggregate market value of the voting stock held by non-affiliates of the registrant (assuming only for purposes of this computation that directors and executive officers may be affiliates) was approximately $52.4 billion as of June 30, 2015.
As of January 27, 2016 the number of shares outstanding of common stock was 1,544,492,608 shares.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement related to the Annual Stockholders Meeting to be filed subsequently are incorporated by reference into Part III of this Form 10-K.



INDEX
 
 
 
Page
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Financial Statements and Supplementary Data
 
Consolidated Income Statements
 
Consolidated Statements of Comprehensive Income
 
Consolidated Balance Sheets
 
Consolidated Statements of Cash Flows
 
Consolidated Statements of Equity
 
Notes to Consolidated Financial Statements
 
Note 1.
Nature of Operations and Basis of Presentation
 
Note 2.
Significant Accounting Policies
 
Note 3.
Marketable Securities
 
Note 4.
GM Financial Receivables, net
 
Note 5.
Inventories
 
Note 6.
Equipment on Operating Leases, net
 
Note 7.
Equity in Net Assets of Nonconsolidated Affiliates
 
Note 8.
Property, net
 
Note 9.
Goodwill and Intangible Assets, net
 
Note 10.
Variable Interest Entities
 
Note 11.
Accrued Liabilities and Other Liabilities
 
Note 12.
Short-Term and Long-Term Debt
 
Note 13.
Pensions and Other Postretirement Benefits
 
Note 14.
Derivative Financial Instruments
 
Note 15.
Commitments and Contingencies
 
Note 16.
Income Taxes
 
Note 17.
Restructuring and Other Initiatives
 
Note 18.
Interest Income and Other Non-Operating Income, net
 
Note 19.
Stockholders’ Equity and Noncontrolling Interests
 
Note 20.
Earnings Per Share
 
Note 21.
Stock Incentive Plans
 
Note 22.
Supplementary Quarterly Financial Information (Unaudited)
 
Note 23.
Segment Reporting
 
Note 24.
Supplemental Information for the Consolidated Statements of Cash Flows
 
Note 25.
Subsequent Events



 
 
 
Page
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits
Signatures
 





GENERAL MOTORS COMPANY AND SUBSIDIARIES

PART I

Item 1. Business
General Motors Company (sometimes referred to as we, our, us, ourselves, the Company, General Motors, or GM) was incorporated as a Delaware corporation in 2009. We design, build and sell cars, trucks, crossovers and automobile parts worldwide. We also provide automotive financing services through General Motors Financial Company, Inc. (GM Financial).

Automotive

Our automotive operations meet the demands of our customers through our four automotive segments: GM North America (GMNA), GM Europe (GME), GM International Operations (GMIO) and GM South America (GMSA).

GMNA primarily meets the demands of customers in North America with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet and GMC brands. The demands of customers outside North America are primarily met with vehicles developed, manufactured and/or marketed under the Buick, Cadillac, Chevrolet, GMC, Holden, Opel and Vauxhall brands. We also have equity ownership stakes directly or indirectly in entities through various regional subsidiaries, primarily in Asia. These companies design, manufacture and market vehicles under the Baojun, Buick, Cadillac, Chevrolet, Jiefang and Wuling brands.

In addition to the products we sell to our dealers for consumer retail sales, we also sell cars and trucks to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. We sell vehicles to fleet customers directly or through our network of dealers. Our retail and fleet customers can obtain a wide range of aftersale vehicle services and products through our dealer network, such as maintenance, light repairs, collision repairs, vehicle accessories and extended service warranties.

Competitive Position

The global automotive industry is highly competitive. The principal factors that determine consumer vehicle preferences in the markets in which we operate include overall vehicle design, price, quality, available options, safety, reliability, fuel economy and functionality. Market leadership in individual countries in which we compete varies widely.

Vehicle Sales

We present both wholesale and retail vehicle sales data to assist in the analysis of our revenue and our market share. We do not currently export vehicles to Cuba, Iran, North Korea, Sudan or Syria. Accordingly these countries are excluded from industry sales data in the tables below and corresponding calculations of our market share.

Wholesale Vehicle Sales

Wholesale vehicle sales data, which represents sales directly to dealers and others, is the measure that correlates to our revenue from the sale of vehicles, which is the largest component of Automotive net sales and revenue. Wholesale vehicle sales exclude vehicles produced by joint ventures. We estimate our global breakeven point, excluding joint ventures selling automobiles in China (Automotive China JVs), to be approximately 4.5 million annual wholesale vehicle sales. In the year ended December 31, 2015, 48.3% of our wholesale vehicle sales volume was generated outside the U.S. The following table summarizes total wholesale vehicle sales of new vehicles by automotive segment (vehicles in thousands):
 
Years ended December 31,
 
2015
 
2014
 
2013
GMNA
3,558

 
60.5
%
 
3,320

 
55.0
%
 
3,276

 
51.1
%
GME
1,127

 
19.2
%
 
1,172

 
19.4
%
 
1,163

 
18.1
%
GMIO
588

 
10.0
%
 
655

 
10.9
%
 
921

 
14.4
%
GMSA
603

 
10.3
%
 
886

 
14.7
%
 
1,053

 
16.4
%
Worldwide
5,876

 
100.0
%
 
6,033

 
100.0
%
 
6,413

 
100.0
%

Retail Vehicle Sales

1



GENERAL MOTORS COMPANY AND SUBSIDIARIES


Retail vehicle sales data, which represents sales to the end customers based upon the good faith estimates of management, including fleets, does not correlate directly to the revenue we recognize during the period. However retail vehicle sales data is indicative of the underlying demand for our vehicles. Market share information is based primarily on retail vehicle sales volume. In countries where retail vehicle sales data is not readily available other data sources, such as wholesale or forecast volumes, are used to estimate sales to the end customers.

Retail vehicle sales data includes all sales by joint ventures on a total vehicle basis, not based on the percentage of ownership in the joint venture. Certain joint venture agreements in China allow for the contractual right to report vehicle sales of non-GM trademarked vehicles by those joint ventures. Retail vehicle sales data includes vehicles sold through the dealer registration channel (primarily in Europe). This sales channel consists primarily of dealer demonstrator, loaner and self-registered vehicles. These vehicles are not eligible to be sold as new vehicles after being registered by dealers. Certain fleet sales that are accounted for as operating leases are included in retail vehicle sales at the time of delivery to the daily rental car companies. The following table summarizes total industry retail sales, or estimated sales where retail sales volume is not available, of new vehicles and our related competitive position by geographic region (vehicles in thousands):
 
Years Ended December 31,
 
2015
 
2014
 
2013
 
Industry
 
GM
 
Market Share
 
Industry
 
GM
 
Market Share
 
Industry
 
GM
 
Market Share
North America
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
17,852

 
3,082

 
17.3
%
 
16,859

 
2,935

 
17.4
%
 
15,894

 
2,786

 
17.5
%
Other
3,666

 
530

 
14.5
%
 
3,345

 
478

 
14.3
%
 
3,196

 
448

 
14.0
%
Total North America
21,518

 
3,612

 
16.8
%
 
20,204

 
3,413

 
16.9
%
 
19,090

 
3,234

 
16.9
%
Europe
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Germany
3,540

 
244

 
6.9
%
 
3,357

 
237

 
7.1
%
 
3,258

 
242

 
7.4
%
United Kingdom
3,063

 
312

 
10.2
%
 
2,845

 
305

 
10.7
%
 
2,597

 
301

 
11.6
%
Russia
1,622

 
68

 
4.2
%
 
2,540

 
189

 
7.5
%
 
2,834

 
258

 
9.1
%
Other
11,064

 
552

 
5.0
%
 
9,963

 
525

 
5.3
%
 
9,715

 
592

 
6.1
%
Total Europe
19,289

 
1,176

 
6.1
%
 
18,705

 
1,256

 
6.7
%
 
18,404

 
1,393

 
7.6
%
Asia/Pacific, Middle East and Africa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
China(a)
25,054

 
3,730

 
14.9
%
 
24,035

 
3,540

 
14.7
%
 
22,202

 
3,160

 
14.2
%
Other
18,943

 
795

 
4.2
%
 
19,137

 
838

 
4.4
%
 
19,035

 
890

 
4.7
%
Total Asia/Pacific, Middle East and Africa
43,997

 
4,525

 
10.3
%
 
43,172

 
4,378

 
10.1
%
 
41,237

 
4,050

 
9.8
%
South America
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brazil
2,568

 
388

 
15.1
%
 
3,498

 
579

 
16.6
%
 
3,767

 
650

 
17.3
%
Other
1,613

 
257

 
15.9
%
 
1,817

 
299

 
16.5
%
 
2,171

 
387

 
17.8
%
Total South America
4,181

 
645

 
15.4
%
 
5,315

 
878

 
16.5
%
 
5,938

 
1,037

 
17.5
%
Total Worldwide
88,985

 
9,958

 
11.2
%
 
87,396

 
9,925

 
11.4
%
 
84,669

 
9,714

 
11.5
%
United States
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cars
7,566

 
931

 
12.3
%
 
7,688

 
1,085

 
14.1
%
 
7,556

 
1,067

 
14.1
%
Trucks
5,184

 
1,274

 
24.6
%
 
4,754

 
1,113

 
23.4
%
 
4,247

 
998

 
23.5
%
Crossovers
5,102

 
877

 
17.2
%
 
4,417

 
737

 
16.7
%
 
4,091

 
721

 
17.6
%
Total U.S.
17,852

 
3,082

 
17.3
%
 
16,859

 
2,935

 
17.4
%
 
15,894

 
2,786

 
17.5
%
China
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SGMS
 
 
1,711

 
 
 
 
 
1,710

 
 
 
 
 
1,516

 
 
SGMW and FAW-GM
 
 
2,019

 
 
 
 
 
1,830

 
 
 
 
 
1,644

 
 
Total China
25,054

 
3,730

 
14.9
%
 
24,035

 
3,540

 
14.7
%
 
22,202

 
3,160

 
14.2
%

2



GENERAL MOTORS COMPANY AND SUBSIDIARIES

__________
(a)
Our China sales include the Automotive China JVs SAIC General Motors Sales Co., Ltd. (SGMS), SAIC-GM-Wuling Automobile Co., Ltd. (SGMW) and FAW-GM Light Duty Commercial Vehicle Co., Ltd. (FAW-GM). End customer data is not readily available for the industry; therefore, wholesale volumes were used for Industry, GM and Market Share. Our retail sales in China were 3,613; 3,435 and 3,082 in the years ended December 31, 2015, 2014 and 2013.

In the year ended December 31, 2015 we estimate we had the largest market share in North America and South America, the number two market share in the Asia/Pacific, Middle East and Africa region, which included the largest market share in China, and the number seven market share in Europe. In the year ended December 31, 2015 the Asia/Pacific, Middle East and Africa region was our largest region by retail vehicle sales volume and represented 45.4% of our global retail vehicle sales.

Our retail vehicle sales volumes in the year ended December 31, 2015 grew at a slightly slower pace than the overall industry, resulting in a 0.2 percentage point industry share decline. Our market share decreased due primarily to the change of our business model in Russia, our vehicle price increases in Brazil and our planned reduction of fleet sales in the U.S., (refer to the "Overview" section of Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) for detail), partially offset by our market share increase in China driven by strong performance of existing products and successful new launches including new sport utility vehicles (SUVs), Cadillac vehicles and multipurpose vehicles. Our retail vehicle sales volumes in the year ended December 31, 2014 grew at a slightly slower pace than the overall industry, resulting in a 0.1 percentage point industry share decline. Our market share decreased due primarily to the withdrawal of the Chevrolet brand from Europe and economic conditions and competitive environment in Brazil, partially offset by our market share increase in China driven by improved performance of existing products and successful launches of new vehicles.

Fleet Sales and Deliveries

The sales and market share data provided previously includes both retail and fleet vehicle sales. Certain fleet transactions, particularly daily rental, are generally less profitable than retail sales. A significant portion of the sales to daily rental car companies are recorded as operating leases under U.S. GAAP with no recognition of revenue at the date of initial delivery due to guaranteed repurchase obligations. The following table summarizes estimated fleet sales and those sales as a percentage of total retail vehicle sales (vehicles in thousands):
 
Years Ended December 31,
 
2015
 
2014
 
2013
GMNA
795

 
814

 
758

GME
544

 
505

 
490

GMIO
345

 
414

 
415

GMSA
121

 
176

 
184

Total fleet sales
1,805

 
1,909

 
1,847

 
 
 
 
 
 
Fleet sales as a percentage of total retail vehicle sales
18.1
%
 
19.2
%
 
19.0
%

The following table summarizes U.S. fleet sales (vehicles in thousands):
 
Years Ended December 31,
 
2015
 
2014
 
2013
Daily rental sales
400

 
449

 
439

Other fleet sales
278

 
255

 
217

Total fleet sales
678

 
704

 
656

Fleet sales as a percentage of total U.S. retail vehicle sales
 
 
 
 
 
Cars
29.3
%
 
29.5
%
 
26.4
%
Trucks
19.7
%
 
21.8
%
 
24.2
%
Crossovers
17.5
%
 
19.1
%
 
18.6
%
Total vehicles
22.0
%
 
24.0
%
 
23.6
%

Product Pricing


3



GENERAL MOTORS COMPANY AND SUBSIDIARIES

Several methods are used to promote our products, including the use of dealer, retail and fleet incentives such as customer rebates and finance rate support. The level of incentives is dependent in large part upon the level of competition in the markets in which we operate and the level of demand for our products. In 2016 we plan to continue to price vehicles competitively, including offering incentives as required. We believe this strategy, coupled with sound inventory management, will continue to strengthen the reputation of our brands.

Cyclical Nature of Business

Retail sales are cyclical and production varies from month to month. Vehicle model changeovers occur throughout the year as a result of new market entries. The market for vehicles depends on general economic conditions, credit availability and consumer spending.

Relationship with Dealers

We market vehicles worldwide primarily through a network of independent authorized retail dealers. These outlets include distributors, dealers and authorized sales, service and parts outlets.

The following table summarizes the number of authorized dealerships:
 
December 31, 2015
 
December 31, 2014
 
December 31, 2013
GMNA
4,886

 
4,908

 
4,946

GME
6,330

 
6,633

 
7,087

GMIO
7,755

 
7,699

 
7,472

GMSA
1,281

 
1,272

 
1,201

Total worldwide
20,252

 
20,512

 
20,706


We and our joint ventures enter into a contract with each authorized dealer agreeing to sell to the dealer one or more specified product lines at wholesale prices and granting the dealer the right to sell those vehicles to retail customers from an approved location. Our dealers often offer more than one GM brand at a single dealership in a number of our markets in order to enhance dealer profitability. Authorized dealers offer parts, accessories, service and repairs for GM vehicles in the product lines that they sell using GM parts and accessories. Our dealers are authorized to service GM vehicles under our limited warranty program and those repairs are to be made only with GM parts. Our dealers generally provide their customers access to credit or lease financing, vehicle insurance and extended service contracts provided by GM Financial and other financial institutions.

The quality of GM dealerships and our relationship with our dealers and distributors are critical to our success as dealers maintain the primary sales and service interface with the end consumer of our products. In addition to the terms of our contracts with our dealers we are regulated by various country and state franchise laws that may supersede those contractual terms and impose specific regulatory requirements and standards for initiating dealer network changes, pursuing terminations for cause and other contractual matters.

Research, Product and Business Development and Intellectual Property

Costs for research, manufacturing engineering, product engineering and design and development activities relate primarily to developing new products or services or improving existing products or services including activities related to vehicle emissions control, improved fuel economy, the safety of drivers and passengers, urban mobility and autonomous vehicles. In the years ended December 31, 2015, 2014 and 2013 research and development expenses were $7.5 billion, $7.4 billion and $7.2 billion.

Product Development

The Product Development organization is responsible for designing and integrating vehicle and powertrain components to maximize part sharing across multiple vehicle segments. Global teams in Design, Program Management, Component & Subsystem Engineering, Product Integrity, Powertrain and Purchasing & Supply Chain collaborate to meet customer requirements and maximize global economies of scale.

Our global vehicle architecture development has been consolidated and headquartered at our Global Technical Center in Warren, Michigan, to further the standardization of our overall vehicle development process. Cross-segment part sharing is an essential

4



GENERAL MOTORS COMPANY AND SUBSIDIARIES

enabler to our Vehicle Set Strategy, designed to reduce our overall number of global vehicle architectures to four major vehicle sets. As we implement the four vehicle sets, we will continue to leverage our current architecture portfolio to accommodate our customers around the world while achieving our financial goals.

Hybrid, Plug-In, Extended Range and Battery Electric Vehicles

We are investing significantly in multiple technologies offering increasing levels of vehicle electrification including eAssist, plug-in hybrid, full hybrid, extended range and battery electric vehicles. We currently offer five models in the U.S. featuring some form of electrification and continue to develop plug-in hybrid electric vehicle (PHEV) technology and extended range electric vehicles such as the Chevrolet Volt and Cadillac ELR. In 2015 we introduced the second-generation Chevrolet Volt. We also debuted the Chevrolet Bolt EV concept at the 2015 North American International Auto Show in Detroit, Michigan and the Cadillac CT6 PHEV at the 2015 Shanghai Auto Show. The Bolt EV will be an all-electric vehicle when it goes into production at our Orion Assembly plant in late 2016, providing more than 200 miles of range on a full charge.

OnStar, LLC

OnStar, LLC (OnStar) is a wholly-owned subsidiary of GM serving more than 6.6 million subscribers in the U.S., Canada, Mexico, China (through a joint venture) and selected markets in Europe (launched in August 2015). OnStar is a provider of connected safety, security and mobility solutions and advanced information technology and is available on the majority of our 2016 model year vehicles. OnStar's key services include automatic crash response, stolen vehicle assistance, remote door unlock, turn-by-turn navigation, vehicle diagnostics, hands-free calling and 4G LTE wireless connectivity.

OnStar has developed a system based on the findings of a Center for Disease Control and Prevention expert panel which allows OnStar advisors to alert first responders when a vehicle crash is likely to have caused serious injury to the occupants. OnStar also offers a mobile application to provide subscribers with up-to-date vehicle information such as oil level, tire pressure and fuel level as well as remote start, remote door lock and unlock and navigation services from a mobile phone.

Car- and Ride-Sharing

In January 2016 we announced the next step in our strategy to redefine personal mobility with a new car-sharing service called Maven, which combines our multiple car-sharing programs under a single brand and will expand its offerings to multiple cities and communities across the U.S. Maven gives customers access to highly personalized, on-demand mobility services. In January 2016 we purchased a 9% equity ownership interest in Lyft, Inc. (Lyft), a privately held company, for $0.5 billion, which we will leverage to expand our ride-sharing offerings. We also plan to develop with Lyft an integrated network of on-demand autonomous vehicles in the U.S.

Autonomous Technology

We see automation and autonomous technology leading to significant advances in convenience, mobility and safety, since more than 90% of crashes are caused by driver error. We have millions of miles of real-world experience with embedded connectivity through OnStar and advanced safety features that are the building blocks to more advanced automation features and eventually to fully autonomous vehicles. An example of an advanced automation is Super Cruise, a hands-free driving customer convenience feature that we expect to debut in 2017 on the Cadillac CT6 sedan. We are also working on autonomous systems and in 2016 plan to demonstrate the capabilities of a fleet of Chevrolet Volts on our 20,000-employee Global Technical Center campus. These vehicles will be ordered by a mobile phone application to go to the requested location and drive employees to their destination.

Alternative Fuel Vehicles

We believe alternative fuels offer significant potential to reduce petroleum consumption in the transportation sector. By leveraging experience and capability developed around these technologies in our global operations we continue to develop FlexFuel vehicles that can run on gasoline-ethanol blend fuels as well as vehicles that run on compressed natural gas (CNG) and liquefied petroleum gas (LPG).

We currently offer 12 FlexFuel vehicles in the U.S. for the 2016 model year to retail customers plus an additional seven models to fleet and commercial customers capable of operating on gasoline, E85 ethanol or any combination of the two. We continue to study the future role FlexFuel vehicles may play in the U.S. in light of recent regulatory developments and the rate of development

5



GENERAL MOTORS COMPANY AND SUBSIDIARIES

of the refueling infrastructure. In Brazil a substantial majority of vehicles sold were FlexFuel vehicles capable of running on 100% ethanol blends. We also market FlexFuel vehicles in other global markets where biofuels have emerged in the marketplace.

We produce CNG bi-fuel capable vehicles in Europe such as the Opel Zafira and in the U.S. with the Chevrolet Express and GMC Savana full-size vans (fleet and commercial customers) and the Chevrolet Silverado and GMC Sierra 2500 HD pick-up trucks (commercial and retail customers) that are capable of switching between gasoline or diesel and CNG. In addition we offer the CNG bi-fuel Chevrolet Impala full-size sedan to both fleet and retail markets in the U.S. We offer LPG capable vehicles globally in select markets reflecting the infrastructure, regulatory focus and natural resource availability of the markets in which they are sold.

We support the development of biodiesel blend fuels, which are alternative diesel fuels produced from renewable sources, and we provide biodiesel capabilities in other markets reflecting the availability of biodiesel blend fuels.

Hydrogen Fuel Cell Technology

As part of our long-term strategy to reduce petroleum consumption and greenhouse gas emissions we are committed to continuing development of our hydrogen fuel cell technology. Our Chevrolet Equinox fuel cell electric vehicle demonstration programs, such as Project Driveway, have accumulated more than 3 million miles of real-world driving by consumers, celebrities, business partners and government agencies. These programs are helping us identify consumer and infrastructure needs to understand the business case for potential production of vehicles with this technology.

GM and Honda Motor Company entered into a long-term agreement to co-develop a next-generation fuel cell system and hydrogen storage technologies, aiming for the 2020 timeframe. The collaboration expects to succeed by sharing expertise, economies of scale and common sourcing strategies and builds upon GM's and Honda Motor Company's strengths as leaders in hydrogen fuel cell technology.

Fuel Efficiency

We are fully committed to improving fuel efficiency and meeting regulatory standards through a combination of strategies including: (1) extensive technology improvements to conventional powertrains; (2) increased use of smaller displacement engines and improved and advanced automatic transmissions; and (3) vehicle improvements including increased use of lighter, front-wheel drive architectures.

Intellectual Property

We generate and hold a significant number of patents in a number of countries in connection with the operation of our business. While none of these patents are individually material to our business as a whole, these patents are very important to our operations and continued technological development. We hold a number of trademarks and service marks that are very important to our identity and recognition in the marketplace.

Raw Materials, Services and Supplies

We purchase a wide variety of raw materials, parts, supplies, energy, freight, transportation and other services from numerous suppliers for use in the manufacture of our products. The raw materials primarily include steel, aluminum, resins, copper, lead and platinum group metals. We have not experienced any significant shortages of raw materials and normally do not carry substantial inventories of such raw materials in excess of levels reasonably required to meet our production requirements.

In some instances, we purchase systems, components, parts and supplies from a single source and may be at an increased risk for supply disruptions. The inability or unwillingness of these sources to supply us with parts and supplies could have a material adverse effect on our production capacity. Combined purchases from our two largest suppliers have ranged from approximately 10% to 11% of our total purchases in the years ended December 31, 2015, 2014 and 2013.

Environmental and Regulatory Matters

Automotive Emissions Control


6



GENERAL MOTORS COMPANY AND SUBSIDIARIES

We are subject to laws and regulations that require us to control automotive emissions, including vehicle exhaust emission standards, vehicle evaporative emission standards and onboard diagnostic (OBD) system requirements. Advanced OBD systems are used to identify and diagnose problems with emission control systems. Problems detected by the OBD system and in-use compliance monitoring may increase warranty costs and the likelihood of recall. Emission and OBD requirements become more stringent each year as vehicles must meet lower emission standards and new diagnostics are required throughout the world without harmonization of global regulations. Zero emission vehicle (ZEV) requirements have been adopted by some U.S. states and there is the possibility that additional jurisdictions could adopt ZEV requirements in the future. While we believe all our products are designed and manufactured in material compliance with vehicle emissions requirements, regulatory authorities may conduct ongoing evaluations of the emissions compliance of products from all manufacturers. This includes vehicle emissions testing, including CO2 and nitrogen oxide emissions testing in Europe, and review of emission control strategies.

U.S. and Canada

The U.S. federal government imposes stringent emission control requirements on vehicles sold in the U.S. and additional requirements are imposed by various state governments. Canada’s federal government vehicle emission requirements are generally aligned with the U.S. federal requirements. Each model year we must obtain certification for each test group that our vehicles will meet emission requirements from the U.S. Environmental Protection Agency (EPA) before we can sell vehicles in the U.S. and Canada and from the California Air Resources Board (CARB) before we can sell vehicles in California and other states that have adopted the California emissions requirements.

CARB's latest emission requirements include more stringent exhaust emission and evaporative emission standards including an increase in ZEVs offered by the same automaker such as electric and hydrogen fuel cell vehicles. CARB has adopted 2018 model year and later requirements for increasing volumes of ZEVs to achieve greenhouse gas as well as criteria pollutant emission reductions to help achieve the state's long-term greenhouse gas reduction goals. The EPA has adopted similar exhaust emission and evaporative emission standards which phase in with the 2017 model year, but do not include ZEV requirements. These new requirements will also increase the time and mileage periods over which manufacturers are responsible for a vehicle's emission performance.

The Clean Air Act permits states that have areas with air quality compliance issues to adopt the California car and light-duty truck emission standards in lieu of the federal requirements. Thirteen states currently have these standards in effect and 10 of these 13 states have adopted the ZEV requirements. The Province of Quebec has also announced its intention to adopt a ZEV requirement.

European Union

Emissions are regulated by the European Commission (EC) and by governmental authorities in each European Union Member State (EU Member States). The EC imposes emission control requirements on vehicles sold in all 28 EU Member States. We must demonstrate that vehicles will meet emission requirements from an approval authority in one EU Member State before we can sell vehicles in any EU Member States. The regulatory requirements include random testing of newly assembled vehicles and a manufacturer in-use surveillance program. The European Union requirements are equivalent in terms of stringency and implementation to the framework of the United Nations Economic Commission for Europe.

The existing level of exhaust emission standards for cars and light-duty trucks, Euro 6, was effective in 2014 for new vehicle approvals and 2015 for new vehicle registrations. Future European Union emission standards focus particularly on further reducing emissions from diesel vehicles by introducing new testing criteria based on “real world driving” emissions (RDE). RDE tests will become effective in 2017. The new requirements will require additional technologies and further increase the cost of diesel engines, which currently cost more than gasoline engines. To comply with RDE tests we expect that we will need to implement technologies identical to those already in production to meet U.S. emission standards. These technologies will put additional cost pressures on the already challenging European Union market for small and mid-size diesel vehicles. Gasoline engines are also affected by the new requirements. The measures for gasoline vehicles that require technology to reduce exhaust pollutant emissions will have adverse effects on vehicle fuel economy which drives additional technology cost to maintain fuel economy.

In addition, increased scrutiny of compliance with emissions standards following the well-publicized emissions scandal involving an unrelated automotive manufacturer may result in changes to these standards, including the implementation of RDE tests, as well as stricter interpretations of these standards and more rigorous enforcement. This may lead to increased costs, penalties, negative publicity or reputation impact for us. Refer to Item 1A. Risk Factors for further discussion of these risks.


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GENERAL MOTORS COMPANY AND SUBSIDIARIES

In the long-term, we expect that the EC will continue devising regulatory requirements on the emission test cycle, real driving emission, low temperature testing, fuel evaporation and OBD.

China

China has implemented European type China 4 standards nationally with European OBD requirements for all newly registered vehicles. Cities such as Beijing, Shanghai and Guangzhou each currently require China 5 standards for newly registered vehicles. In total 11 eastern municipalities and provinces will require China 5 standards prior to nationwide implementation in 2017. The China 5 standards include more stringent emission requirements and increase the time and mileage periods over which manufacturers are responsible for a vehicle's emission performance. China is considering a unique China 6 emission standard with the potential to combine elements of European and U.S. standards. Local implementation is expected as early as 2019.

Automotive Fuel Economy

U.S. and Canada

Corporate Average Fuel Economy (CAFE) reporting is required for three separate fleets: domestically produced cars, imported cars and light-duty trucks. Both car and light-duty truck standards were established using targets for various vehicle sizes and vehicle model sales volumes. In 2016 our domestic car standard is estimated to be 36.2 mpg, our import car standard is estimated to be 40.0 mpg, and our light-duty truck standard is estimated to be 27.1 mpg. Our current product plan is expected to be compliant with the federal CAFE program through the 2016 model year. In addition to federal CAFE the EPA requires compliance with greenhouse gas requirements that are similar to the CAFE program. Our current product plan is expected to be compliant with the federal greenhouse gas program through the 2016 model year. CARB has agreed that compliance with the federal program is deemed to be compliant with the California program for the 2012 through 2016 model years. Although Canada has no parallel CAFE-style fuel economy regulations there are Canadian greenhouse gas regulations that are aligned with the U.S. EPA regulations and the Canadian fleets are expected to be compliant with the Canadian regulations through the 2016 model year.

Europe

The EU has implemented legislation regulating fleet average CO2 emissions in Europe and has adopted an even more stringent fleet average CO2 target for 2020. Requirements must be met through the introduction of CO2 reducing technologies on conventional gasoline and diesel engines or through ultra-low CO2 vehicles. We are developing a compliance plan by adopting operational CO2 targets for each market entry in Europe. The EC will also devise regulatory requirements on the CO2 emission test cycle as of 2017.

China

China has both an individual vehicle pass-fail type approval requirement based on Phase 2 standards and a fleet fuel consumption requirement based on Phase 3 standards based on vehicle curb weight for the 2012 through 2015 calendar years. Implementation began in 2012 with full compliance to 6.9L/100km required by 2015. China has continued subsidies for fuel efficient vehicles, plug-in hybrid, battery electric and fuel cell vehicles. China is now working on a more aggressive Phase 4 fleet fuel consumption standard that is expected to apply beginning in 2016 with full compliance to 5.0L/100km required by 2020.

Industrial Environmental Control

Our operations are subject to a wide range of environmental protection laws including those regulating air emissions, water discharge, waste management and environmental cleanup. Certain environmental statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Under certain circumstances these laws impose joint and several liability as well as liability for related damages to natural resources. Refer to Note 15 to our consolidated financial statements for additional information on environmental matters including site remediation.

To mitigate the effects our worldwide operations have on the environment and reduce greenhouse gas emissions associated with waste disposal, we are committed to converting as many of our worldwide operations as possible to landfill-free operations. At December 31, 2015, 90 (or approximately 50%) of our manufacturing operations were landfill-free. Additionally we have 41 non-manufacturing operations that are landfill-free. At our landfill-free manufacturing operations approximately 89% of waste materials are reused or recycled and 9% are converted to energy at waste-to-energy facilities. Including construction, demolition and remediation wastes, we estimate that we reused, recycled or composted over 2 million metric tons of waste materials at our global

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

manufacturing operations, converted over 140,000 metric tons of waste materials to energy at waste-to-energy facilities and avoided approximately 9 million metric tons of greenhouse gas emissions in the year ended December 31, 2015.

In addition to minimizing our impact on the environment our landfill-free program and total waste reduction commitments generate revenue from the sale of production by-products, reduce our use of material, reduce our carbon footprint and help to reduce the risks and financial liabilities associated with waste disposal.

We continue to search for ways to increase our use of renewable energy and improve our energy efficiency. At December 31, 2015 we had implemented projects globally that had increased our total renewable energy capacity to over 105 megawatts. In 2015 we also met the EPA Energy Star Challenge for Industry (EPA Challenge) at seven of our sites globally by reducing energy intensity an average of 22% at these sites. To meet the EPA Challenge industrial sites must reduce energy intensity by 10% in five years or fewer. Three of the sites achieved the goal for the first time, bringing the total number of GM-owned sites to have met the EPA Challenge to 73, with many sites achieving the goal multiple times. These efforts minimize our utility expenses and are part of our approach to addressing climate change through setting a greenhouse gas emissions reduction target, collecting accurate data, following our business plan and publicly reporting progress against our target.

Chemical Regulations

We continually monitor the implementation of chemical regulations to maintain compliance and evaluate their effect on our business, suppliers and the automotive industry.

U.S. and Canada

Governmental agencies in both the U.S. and Canada continue to introduce new regulations and legislation related to the selection and use of chemicals or substances of concern by mandating broad prohibitions, green chemistry, life cycle analysis and product stewardship initiatives. These initiatives give broad regulatory authority to ban or restrict the use of certain chemical substances and potentially affect automobile manufacturers' responsibilities for vehicle components at the end of a vehicle's life, as well as chemical selection for product development and manufacturing. Chemical restrictions in Canada are progressing more rapidly than in the U.S. as a result of Environment Canada’s Chemical Management Plan to assess existing substances and implement risk management controls on any chemical deemed toxic. These emerging regulations will potentially lead to increases in costs and supply chain complexity. We believe that we are materially in compliance with these requirements or expect to be materially in compliance by the required date.

The U.S. Congress is currently pursuing an update of the Toxic Substances Control Act to grant the EPA more authority to regulate and ban chemicals from use in the U.S. which, if passed, is expected to greatly increase the level of regulation of chemicals in vehicles.

Europe

In 2007 the EU implemented its regulatory requirements, the EU REACH regulation among others, to register, evaluate, authorize and restrict the use of chemical substances. This regulation requires chemical substances manufactured in or imported into the EU to be registered with the European Chemicals Agency before 2018. Under this regulation, “substances of very high concern” may either require authorization for further use or may be restricted in the future. This could potentially increase the cost of certain alternative substances that are used to manufacture vehicles and parts, or result in a supply chain disruption when a substance is no longer available to meet production timelines. Our research and development initiatives may be diverted to address future requirements. We believe that we are materially in compliance with these requirements or expect to be materially in compliance by the required date.

Safety

In the U.S. the National Traffic and Motor Vehicle Safety Act of 1966 prohibits the sale of any new vehicle or equipment in the U.S. that does not conform to applicable vehicle safety standards established by the National Highway Traffic Safety Administration (NHTSA). If we or NHTSA determine that either a vehicle or vehicle equipment does not comply with a safety standard or if a vehicle defect creates an unreasonable safety risk the manufacturer is required to notify owners and provide a remedy. We are required to report certain information relating to certain customer complaints, warranty claims, field reports and notices and claims involving property damage, injuries and fatalities in the U.S. and claims involving fatalities outside the U.S. We are also required to report certain information concerning safety recalls and other safety campaigns outside the U.S.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES


Outside the U.S. safety standards and recall regulations often have the same purpose as the U.S. standards but may differ in their requirements and test procedures, adding complexity to regulatory compliance. Refer to Note 11 to our consolidated financial statements for additional information on significant recall activities in 2014.

Automotive Financing - GM Financial

GM Financial is our global captive automotive finance company and our global provider of automobile finance solutions. GM Financial conducts its business in North America, Europe, South America and, as a result of the 2015 acquisition of Ally Financial, Inc.'s (Ally Financial) equity interest in SAIC-GMAC Automotive Finance Company Limited (SAIC-GMAC), in China.

GM Financial provides retail lending, both loan and lease, across the credit spectrum. Additionally GM Financial offers commercial products to dealer customers that include new and used vehicle inventory financing, inventory insurance, working capital, capital improvement loans, and storage center financing.

In North America GM Financial's retail automobile finance programs include prime and sub-prime lending and full credit spectrum leasing. The sub-prime lending program is primarily offered to consumers with FICO scores less than 620 who have limited access to automobile financing through banks and credit unions and is expected to sustain a higher level of credit losses than prime lending. The leasing product is offered through our franchised dealers and primarily targets prime consumers leasing new vehicles. GM Financial is expanding its leasing, near prime and prime lending programs through our franchised dealers and anticipates that leasing and prime lending will become an increasing percentage of originations and the retail portfolio balance over time.

Internationally GM Financial’s retail automobile finance programs focus on prime quality financing through loan and lease products.

GM Financial seeks to fund its operations in each country through local sources of funding to minimize currency and country risk. GM Financial primarily finances its loan, lease and commercial origination volume through the use of secured and unsecured credit facilities, through securitization transactions where such markets are developed and through the issuance of unsecured debt. In the three months ended September 30, 2015 GM Financial began accepting deposits from retail banking customers in Germany.

Employees

At December 31, 2015 we employed 130,000 (61%) hourly employees and 85,000 (39%) salaried employees. At December 31, 2015 52,000 (54%) of our U.S. employees were represented by unions, a majority of which were represented by the International Union, United Automobile, Aerospace and Agriculture Implement Workers of America (UAW). The following table summarizes worldwide employment (in thousands):
 
December 31, 2015
 
December 31, 2014
 
December 31, 2013
GMNA
115

 
110

 
109

GME
36

 
37

 
37

GMIO
32

 
33

 
36

GMSA
24

 
29

 
31

GM Financial
8

 
7

 
6

Total Worldwide
215

 
216

 
219

 
 
 
 
 
 
U.S. - Salaried
45

 
40

 
36

U.S. - Hourly
52

 
51

 
51


Executive Officers of the Registrant
As of February 3, 2016 the names and ages of our executive officers and their positions with GM are as follows:

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

Name (Age)
 
Present GM Position (Effective Date)
 
Positions Held During the Past Five Years (Effective Date)
Mary T. Barra (54)
 
Chairman & Chief Executive Officer (2016)
 
Chief Executive Officer and Member of the Board of Directors (2014) Executive Vice President, Global Product Development, Purchasing & Supply Chain (2013)
Senior Vice President, Global Product Development (2011) Vice President, Global Human Resources (2009)
Daniel Ammann (43)
 
President (2014)
 
Executive Vice President & Chief Financial Officer (2013)
Senior Vice President & Chief Financial Officer (2011)
GM Vice President, Finance & Treasurer (2010)
Jaime Ardila (60)(a)
 
Executive Vice President & President, South America (2013)
 
Vice President & President, South America (2010)
Alan S. Batey (52)
 
Executive Vice President & President, North America (2014)
 
Senior Vice President, Global Chevrolet and Brand Chief and U.S. Sales and Marketing (2013)
GM Vice President, U.S. Sales and Service, and Interim GM Chief Marketing Officer (2012)
Vice President, U.S. Chevrolet Sales and Service (2010)
James B. DeLuca (54)
 
Executive Vice President, Global Manufacturing (2014)
 
Vice President, Manufacturing, GM International Operations (2013)
Vice President, Quality, GM International Operations (2009)
Carel Johannes de Nysschen (55)
 
Executive Vice President & President, Cadillac (2014)
 
Infiniti Motor Company, President (2012)
Audi of America, Inc., President (2004)
Barry L. Engle (52)
 
Executive Vice President & President, South America (2015)
 
Agility Fuel Systems, CEO (2011)
THINK Holdings, CEO (2010)
Stefan Jacoby (57)
 
Executive Vice President & President, GM International (2013)
 
Volvo Car Corporation - Global Chief Executive Officer and President (2010)
Craig B. Glidden (58)
 
Executive Vice President & General Counsel (2015)
 
LyondellBasell, Executive Vice President and Chief Legal Officer (2009)
Karl-Thomas Neumann (54)
 
Executive Vice President & President, Europe and Chairman of the Management Board of Opel Group GmbH (2013)
 
CEO, Opel Group GmbH & President, GM Europe (2013)
Volkswagen Group China - Chief Executive Officer and President (2010)
John J. Quattrone (63)
 
Senior Vice President, Global Human Resources (2014)
 
VP of Human Resources, Global Product Development & Global Purchasing & Supply Chain / Corporate Strategy, Business Development & Global Planning & Program organizations (2009)
Mark L. Reuss (52)
 
Executive Vice President, Global Product Development, Purchasing & Supply Chain (2014)
 
Executive Vice President & President, North America (2013)
GM Vice President & President, North America (2009) GM Vice President, Global Vehicle Engineering (2009)
Charles K. Stevens, III (56)
 
Executive Vice President & Chief Financial Officer (2014)
 
Chief Financial Officer, GM North America (2010)
Interim Chief Financial Officer, GM South America (2011)
Matthew Tsien (55)
 
Executive Vice President & President, GM China (2014)
 
GM Consolidated International Operations Vice President, Planning, Program Management, & Strategic Alliances China (2012)
Executive Vice President, SAIC GM Wuling (2009)
Thomas S. Timko (47)
 
Vice President, Controller & Chief Accounting Officer (2013)
 
Applied Materials Inc. - Corporate Vice President, Chief Accounting Officer, and Corporate Controller (2010)
__________
(a) Retiring effective early 2016.    

There are no family relationships between any of the officers named above and there is no arrangement or understanding between any of the officers named above and any other person pursuant to which he or she was selected as an officer. Each of the officers named above was elected by the Board of Directors or a committee of the Board of Directors to hold office until the next annual election of officers and until his or her successor is elected and qualified or until his or her earlier resignation or removal. The Board of Directors elects the officers immediately following each annual meeting of the stockholders and may appoint other officers between annual meetings.

Segment Reporting Data

Operating segment data and principal geographic area data for the years ended December 31, 2015, 2014 and 2013 are summarized in Note 23 to our consolidated financial statements.

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Website Access to Our Reports

Our internet website address is www.gm.com. In addition to the information about us and our subsidiaries contained in this 2015 Form 10-K information about us can be found on our website including information on our corporate governance principles and practices. Our website and information included in or linked to our website are not part of this 2015 Form 10-K.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (Exchange Act) are available free of charge through our website as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (SEC). The public may read and copy the materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally the SEC maintains an internet site that contains reports, proxy and information statements and other information. The address of the SEC's website is www.sec.gov.

*  *  *  *  *  *  *

Item 1A. Risk Factors

We face a number of significant risks and uncertainties in connection with our operations. Our business, results of operations and financial condition could be materially adversely affected by the factors described below. While we describe each risk separately, some of these risks are interrelated and certain risks could trigger the applicability of other risks described below.

Our ability to maintain profitability over the long-term is dependent upon our ability to fund and introduce new and improved vehicle models that are able to attract a sufficient number of consumers.

We operate in a very competitive industry with market participants routinely introducing new and improved vehicle models designed to meet rapidly evolving consumer expectations. Producing new and improved vehicle models competitively and preserving our reputation for designing, building and selling high quality cars and trucks is critical to our long-term profitability. We will launch a substantial number of new vehicles in 2016. Successful launches of our new vehicles are critical to our short-term profitability. In addition, our growth strategies require us to make significant investment in our brands to appeal to new markets.

Our long-term profitability depends upon our successfully creating and funding technological innovations in design, engineering and manufacturing, which requires extensive capital investment and the ability to retain and recruit talent. In some cases the technologies that we plan to employ are not yet commercially practical and depend on significant future technological advances by us and by our suppliers. Although we will seek to obtain intellectual property protection for our innovations to protect our competitive position, it is possible we may not be able to protect some of these innovations. There can be no assurance that advances in technology will occur in a timely or feasible way, or that others will not acquire similar or superior technologies sooner than we do or that we will acquire technologies on an exclusive basis or at a significant price advantage.
It generally takes two years or more to design and develop a new vehicle, and a number of factors may lengthen that time period. Because of this product development cycle and the various elements that may contribute to consumers’ acceptance of new vehicle designs, including competitors’ product introductions, technological innovations, fuel prices, general economic conditions and changes in styling preferences, an initial product concept or design may not result in a vehicle that generates sales in sufficient quantities and at high enough prices to be profitable. Our high proportion of fixed costs, both due to our significant investment in property, plant and equipment as well as other requirements of our collective bargaining agreements, which limit our flexibility to adjust personnel costs to changes in demands for our products, may further exacerbate the risks associated with incorrectly assessing demand for our vehicles.
Our profitability is dependent upon the success of full-size pick-up trucks and SUVs.

While we offer a balanced and complete portfolio of small, mid-size and large cars, crossovers, SUVs and trucks, we generally recognize higher profit margins on our full-size pick-up trucks and SUVs. Our success is dependent upon consumer preferences and our ability to sell higher margin vehicles in sufficient volumes. Any increases in the price of oil or any sustained shortage of

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oil, including as a result of global political instability, could cause a shift in consumer demand towards smaller, more fuel efficient vehicles, and weaken the demand for our higher margin full-size pick-up trucks and SUVs.

Our business is highly dependent upon the global automobile market sales volume, which can be volatile.

Our business and financial results are highly sensitive to sales volume, changes to which can have a disproportionately large effect on our profitability. A number of economic and market conditions drive changes in vehicle sales, including real estate values, levels of unemployment, availability of affordable financing, fluctuations in the cost of fuel, consumer confidence, political unrest and global economic conditions. We cannot predict future economic and market conditions with certainty.

Our business in China is subject to aggressive competition and is sensitive to economic and market conditions.

Maintaining a strong position in the Chinese market is a key component of our global growth strategy. The automotive market in China is highly competitive, with competition from many of the largest global manufacturers and numerous smaller domestic manufacturers. 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 price reductions, reduced margins and our inability to gain or hold market share. In addition our business in China is sensitive to economic and market conditions that drive sales volume in China.

A significant amount of our operations are conducted by joint ventures that we cannot operate solely for our benefit.

Many of our operations, primarily in China, are carried out by joint ventures. 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 foster our relationships with our co-owners as well as promote the overall success of 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; therefore, we do not receive all the benefits from our successful joint ventures. In addition, because we share ownership and management with one or more parties, we may have limited control over the actions of a joint venture, particularly when we own a minority interest. As a result, we may be unable to prevent misconduct or other violations of applicable laws by a joint venture. Moreover, a joint venture may not follow the same requirements regarding internal controls and internal control over financial reporting that we follow. To the extent another party makes decisions that negatively impact the joint venture or internal control issues arise within the joint venture, we may have to take responsive or other action or we may be subject to penalties, fines or other related actions for these activities that could have a material adverse impact on our business, financial condition and results of operations.

Our businesses outside the U.S. expose us to additional risks.

The majority of our vehicles are sold outside the U.S. We are pursuing growth opportunities for our business in a variety of business environments outside the U.S. Operating in a large number of different regions and countries exposes us to political, economic and other risks as well as multiple foreign regulatory requirements that are subject to change, including:

Changes in foreign currency exchange rates and interest rates;
Economic downturns in foreign countries or geographic regions where we have significant operations, such as China;
Economic tensions between governments and changes in international trade and investment policies, including imposing restrictions on the repatriation of dividends, especially between the U.S. and China, more detailed inspections, higher tariffs or new barriers to entry;
Changes in foreign regulations impacting our overall business model restricting our ability to buy and sell our products in those countries, especially China;
Differing local product preferences and product requirements, including fuel economy, vehicle emissions and safety;
Impact of compliance with U.S. and other foreign countries’ export controls and economic sanctions;
Liabilities resulting from U.S. and foreign laws and regulations, including those related to the Foreign Corrupt Practices Act and certain other anti-corruption laws;

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

Differing labor regulations and union relationships;
Consequences from changes in tax laws; and
Difficulties in obtaining financing in foreign countries for local operations.

We are subject to extensive laws, governmental regulations and policies, including those regarding fuel economy and emissions control, the enforcement of which or changes to existing ones, could cause us to incur increased costs or to face regulatory enforcement action and may have a significant effect on how we do business.

We are significantly affected by governmental regulations that can increase costs related to the production of our vehicles and affect our product portfolio. Meeting or exceeding many of these regulations is costly and often technologically challenging, especially where standards may not be harmonized across jurisdictions, a notable challenge with respect to mandated emissions and fuel economy standards. We anticipate that the number and extent of these regulations, and the related costs and changes to our product lineup, may increase significantly in the future. These government regulatory requirements could significantly affect our plans for global product development and given the uncertainty surrounding enforcement and regulatory definitions, may result in substantial costs, including civil or criminal penalties. In addition, an evolving but un-harmonized regulatory framework may limit or dictate the types of vehicles we sell and where we sell them, which can affect revenue. Refer to the "Environmental and Regulatory Matters" section of Item 1. Business for a discussion of these regulatory requirements. We also expect that manufacturers will be subject to increased scrutiny from regulators globally as a result of the well-publicized emissions scandal involving an unrelated automotive manufacturer in 2015. For example, government agencies in several countries have asked us for information; one of these, the German Ministry of Transportation, is requesting the participation of a number of automotive manufacturers, including our German subsidiary, in discussions on emissions control issues and has requested a written response from our subsidiary on the subject. This scrutiny, regulatory changes and increased enforcement may lead to increased testing and re-testing of our vehicles and analysis of their emissions control systems, which could lead to increased costs, penalties, negative publicity or reputational impact, and recall activity if regulators determine that emission levels and required regulatory compliance should be based on either a wider spectrum of driving conditions for future testing parameters or stricter or novel interpretations and consequent enforcement of existing requirements. No assurance can be given that the ultimate outcome of any potential investigations or increased testing resulting from this scrutiny would not materially and adversely affect us.

We are committed to meeting or exceeding fuel economy and emission control requirements. We expect that to comply with these requirements we will be required to sell a significant volume of hybrid electric vehicles, as well as implement new technologies for conventional internal combustion engines, all at increased cost levels. There is no assurance that we will be able to produce and sell vehicles that use such technologies on a profitable basis or that our customers will purchase such vehicles in the quantities necessary for us to comply with these regulatory programs. Alternative compliance measures may not be sufficiently available in the marketplace to meet volume driven compliance requirements.

Environmental liabilities for which we may be responsible are not reasonably estimable and could be substantial. Violations of safety or emissions standards could result in the recall of one or more of our products, negotiated remedial actions, possible fines, restricted product offerings or a combination of any of those items. Any of these actions could have substantial adverse effects on our operations including facility idling, reduced employment, increased costs and loss of revenue.

We could be materially adversely affected by a negative outcome in unusual or significant litigation, governmental investigations or other legal proceedings.

We are subject to legal proceedings involving various issues, including product liability lawsuits, stockholder litigation and governmental investigations, such as the legal proceedings related to the Ignition Switch Recall. Refer to the "GM North America" section of MD&A for additional information on the Ignition Switch Recall. Such legal proceedings could in the future result in the imposition of damages, including punitive damages, substantial fines, civil lawsuits and criminal penalties, interruptions of business, modification of business practices, equitable remedies and other sanctions against us or our personnel as well as significant legal and other costs. For a further discussion of these matters refer to Note 15 to our consolidated financial statements.

If, in the discretion of the U.S. Attorney’s Office for the Southern District of New York (the Office), we do not comply with the terms of the Deferred Prosecution Agreement (the DPA), the Office may prosecute us for charges alleged by the Office including those relating to faulty ignition switches.
On September 17, 2015 we announced that we entered into the DPA with the Office regarding its investigation of the events leading up to certain recalls announced in February and March 2014 relating to faulty ignition switches. Under the DPA, we

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

consented to, among other things, the filing of a two-count information (the Information) in the U.S. District Court for the Southern District of New York charging GM with a scheme to conceal material facts from a government regulator and wire fraud. We pled not guilty to the charges alleged in the Information. The DPA further provides that, in the event the Office determines during the period of deferral of prosecution (or any extensions thereof) that we have violated any provision of the DPA, including violating any U.S. federal law or our obligation to cooperate with and assist the independent monitor, the Office may, in its discretion, either prosecute us on the charges alleged in the Information or impose an extension of the period of deferral of prosecution of up to one additional year. Under such circumstance, the Office would be permitted to rely upon the admissions we made in the DPA and would benefit from our waiver of certain procedural and evidentiary defenses. Such a criminal prosecution could subject us to penalties that could have material adverse effect on our business, financial position, results of operations or cash flows.
The costs and effect on our reputation of product safety recalls could materially adversely affect our business.

Government safety standards require manufacturers to remedy certain product safety defects through recall campaigns. Under these standards, we could be subject to civil or criminal penalties or may incur various costs, including significant costs for free repairs. At present, the costs we incur in connection with these recalls typically include the cost of the part being replaced and labor to remove and replace the defective part. We currently source a variety of systems, components, raw materials and parts, including but not limited to air bag inflators, from third parties. From time to time these items may have performance or quality issues that could harm our reputation and cause us to incur significant costs. For example, based on defect information reports filed with NHTSA by TK Holdings Inc. (Takata), we are currently conducting recalls for certain Takata air bag inflators used in some of our prior model year vehicles. We are continuing to assess the situation. Further recalls, if any, that may be required to remediate Takata air bag inflators in our vehicles could have a material impact on our financial position, results of operations or cash flows. In addition product recalls can harm our reputation and cause us to lose customers, particularly if those recalls cause consumers to question the safety or reliability of our products. Conversely not issuing a recall or not issuing a recall on a timely basis can harm our reputation, potentially expose us to significant monetary penalties, and cause us to lose customers for the same reasons as expressed above.

Any disruption in our suppliers' operations could disrupt our production schedule.

Our automotive operations are dependent upon the continued ability of our suppliers to deliver the systems, components, raw materials and parts that we need to manufacture our products. Our use of “just-in-time” manufacturing processes allows us to maintain minimal inventory quantities of systems, components, raw materials and parts. As a result our ability to maintain production is dependent upon our suppliers delivering sufficient quantities of systems, components, raw materials and parts on time to meet our production schedules. In some instances we purchase systems, components, raw materials and parts from a single source and may be at an increased risk for supply disruptions. Financial difficulties or solvency problems with our suppliers, which may be exacerbated by the cost of remediating quality issues with these items, could lead to uncertainty in our supply chain or cause supply disruptions for us which could, in turn, disrupt our operations, including production of certain of our higher margin vehicles. Where we experience supply disruptions, we may not be able to develop alternate sourcing quickly. Any disruption of our production schedule caused by an unexpected shortage of systems, components, raw materials or parts even for a relatively short period of time could cause us to alter production schedules or suspend production entirely.

We are dependent on our manufacturing facilities around the world.
We assemble vehicles at various facilities around the world. These facilities are typically designed to produce particular models for particular geographic markets. No single facility is designed to manufacture our full range of vehicles. In some cases certain facilities produce products that disproportionately contribute a greater degree of profit to the Company than others. Should these or other facilities become unavailable either temporarily or permanently for any number of reasons, including labor disruptions, the inability to manufacture vehicles there may result in harm to our reputation, increased costs, lower revenues and the loss of customers. We may not be able to easily shift production of vehicles at an inoperable facility to other facilities or to make up for lost production. Any new facility needed to replace an inoperable manufacturing facility would need to comply with the necessary regulatory requirements, need to satisfy our specialized manufacturing requirements and require specialized equipment. Even though we carry business interruption insurance policies, we may suffer losses as a result of business interruptions that exceed the coverage available or any losses which may be excluded under our insurance policies.
If we do not deliver new products, services and customer experiences in response to new participants in the automotive industry, our business could suffer.

15



GENERAL MOTORS COMPANY AND SUBSIDIARIES

We believe that the automotive industry will experience more change in the next five years than it has in the previous 50 years. In addition to our traditional competitors, we must also be responsive to the entrance of non-traditional participants in the automotive industry. These non-traditional participants may seek to disrupt the historic business model of the industry through the introduction of new technologies, new products or services, new business models or new methods of travel. It is strategically significant that we lead the technological disruption occurring in our industry. As our business evolves, the pressure to innovate will encompass a wider range of products and services, including products and services that may be outside of our historically core business. If we do not accurately predict, prepare for and respond to new kinds of technological innovations, market developments and changing customer needs, our sales, profitability and long-term competitiveness may be harmed.
We operate in a highly competitive industry that has excess manufacturing capacity and attempts by our competitors to sell more vehicles could have a significant negative effect on our vehicle pricing, market share and operating results.

The global automotive industry is highly competitive and overall manufacturing capacity in the industry exceeds demand. Many manufacturers have relatively high fixed labor costs as well as significant limitations on their ability to close facilities and reduce fixed costs. Our competitors may respond to these relatively high fixed costs by providing subsidized financing or leasing programs, offering marketing incentives or reducing vehicle prices. Our competitors may also seek to benefit from economies of scale by consolidating or entering into other strategic agreements such as alliances intended to enhance their competitiveness.

Manufacturers in lower cost countries, such as China and India, have become competitors in key emerging markets and announced their intention of exporting their products to established markets as a low cost alternative to established entry-level automobiles. These actions have had, and are expected to continue to have, a significant negative effect on our vehicle pricing, market share and operating results, and present a significant risk to our ability to enhance our revenue per vehicle.
We may continue to restructure our operations in various countries, but we may not succeed in doing so.

We face difficult market and operating conditions in certain parts of the world that may require us to restructure, impair or rationalize these operations. In many countries across our regions we have experienced challenges in our operations and continue to strategically assess the manner in which we operate in certain countries. As we continue to assess our performance throughout the regions, additional restructuring, impairment and rationalization actions may be required and may be material.

Our future competitiveness and ability to achieve long-term profitability depends on our ability to control our costs, which requires us to successfully implement operating effectiveness initiatives throughout our automotive operations.

We are continuing to implement a number of operating effectiveness initiatives to improve productivity and reduce costs. Our future competitiveness depends upon our continued success in implementing these initiatives throughout our automotive operations. While some of the elements of cost reduction are within our control, others, such as interest rates or return on investments, which influence our expense for pensions, depend more on external factors, and there can be no assurance that such external factors will not materially adversely affect our ability to reduce our costs. Reducing costs may prove difficult due to our focus on increasing advertising and our belief that engineering expenses necessary to improve the performance, safety and customer satisfaction of our vehicles are likely to increase.

Security breaches and other disruptions to our vehicles, information technology networks and systems could interfere with the safety of our customers or our operations and could compromise the confidentiality of private customer data or our proprietary information.

We rely upon information technology networks and systems, including in-vehicle systems and mobile devices, some of which are managed by third-parties, to process, transmit and store electronic information, and to manage or support a variety of vehicle or business processes and activities. Additionally we collect and store sensitive data, including intellectual property, proprietary business information, propriety business information of our dealers and suppliers, as well as personally identifiable information of our customers and employees, in data centers and on information technology networks. The secure operation of these information technology networks and in-vehicle systems, and the processing and maintenance of this information, is critical to our business operations and strategy. Despite security measures and business continuity plans, our information technology networks and systems and in-vehicle systems may be vulnerable to damage, disruptions or shutdowns due to attacks by hackers or breaches due to errors or malfeasance by employees, contractors and others who have access to our networks and systems or computer viruses. The occurrence of any of these events could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. These occurrences could also impact vehicle safety. We have been the target of these types of attacks in the past with no known material impacts and future attacks are likely to occur. If successful, these types of attacks on our network

16



GENERAL MOTORS COMPANY AND SUBSIDIARIES

or systems, including in-vehicle systems and mobile devices, or service failures could have a material adverse effect on our business and results of operations, due to, among other things, the loss of proprietary data, interruptions or delays in our business operations and damage to our reputation. In addition any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations and reduce the competitive advantage we hope to derive from our investment in advanced technologies. Our insurance coverage may not be adequate to cover all the costs related to significant security attacks or disruptions resulting from such attacks.

We rely on GM Financial to provide financial services to our dealers and customers in a majority of the markets in which we sell vehicles. GM Financial faces a number of business, economic and financial risks that could impair its access to capital and negatively affect its business and operations and its ability to provide leasing and financing to retail consumers and commercial lending to our dealers to support additional sales of our vehicles.

We rely on GM Financial in North America, Europe, South America and China to support leasing and sales of our vehicles to consumers requiring vehicle financing and also to provide commercial lending to our dealers. Any reduction of GM Financial's ability to provide such financial services would negatively affect our efforts to support additional sales of our vehicles and expand our market penetration among consumers and dealers.

As an entity operating in the financial services sector, GM Financial is required to comply with a wide variety of laws and regulations that may be costly to adhere to and may affect our consolidated operating results. Compliance with these laws and regulations requires that GM Financial maintain forms, processes, procedures, controls and the infrastructure to support these requirements and these laws and regulations often create operational constraints both on GM Financial’s ability to implement servicing procedures and on pricing. Laws in the financial services industry are designed primarily for the protection of consumers. The failure to comply with these laws 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 primary factors that could adversely affect GM Financial's business and operations and reduce its ability to provide financing services at competitive rates include:

The availability of borrowings under its credit facilities to fund its retail and dealer finance activities;
Its ability to access a variety of financing sources including the asset-backed securities market and other secured and unsecured debt markets;
The performance of loans and leases in its portfolio, which could be materially affected by delinquencies, defaults or prepayments;
Wholesale auction values of used vehicles;
Higher than expected vehicle return rates and the residual value performance on vehicles GM Financial leases to customers;
Fluctuations in interest rates and currencies; and
Changes to regulation, supervision and licensing across various jurisdictions, including new regulations or sanctions imposed in the U.S. by the Department of Justice, SEC and Consumer Financial Protection Bureau.

Our defined benefit pension plans are currently underfunded and our pension funding requirements could increase significantly due to a reduction in funded status as a result of a variety of factors, including weak performance of financial markets, declining interest rates, changes in laws or regulations, changes in assumptions or investments that do not achieve adequate returns.

Our employee benefit plans currently hold a significant amount of equity and fixed income securities. A detailed description of the investment funds and strategies is disclosed in Note 13 to our consolidated financial statements, which also describes significant concentrations of risk to the plan investments.

There are additional risks due to the complexity and magnitude of our investments. Examples include implementation of significant changes in investment policy, insufficient market liquidity in particular asset classes and the inability to quickly rebalance illiquid and long-term investments.

Our future funding requirements for our U.S. defined benefit pension plans depend upon the future performance of assets placed in trusts for these plans, the level of interest rates used to determine funding levels, the level of benefits provided for by the plans

17



GENERAL MOTORS COMPANY AND SUBSIDIARIES

and any changes in government laws and regulations. Future funding requirements generally increase if the discount rate decreases or if actual asset returns are lower than expected asset returns, assuming other factors are held constant. Our potential funding requirements are described in Note 13 to our consolidated financial statements.

Factors which affect future funding requirements for our U.S. defined benefit plans generally affect the required funding for non-U.S. plans. Certain plans outside the U.S. do not have assets and therefore the obligation is funded as benefits are paid. If local legal authorities increase the minimum funding requirements for our non-U.S. plans, we could be required to contribute more funds.

*  *  *  *  *  *  *

Item 1B. Unresolved Staff Comments

None

*  *  *  *  *  *  *

Item 2. Properties

At December 31, 2015 we had over 100 locations in the U.S., excluding our automotive financing operations and dealerships, which are primarily for manufacturing, assembly, distribution, warehousing, engineering and testing. Leased properties are primarily composed of warehouses and administration, engineering and sales offices.

We have assembly, manufacturing, distribution, office or warehousing operations in 59 countries, including equity interests in associated companies which perform assembly, manufacturing or distribution operations. The major facilities outside the U.S., which are principally vehicle manufacturing and assembly operations, are located in:
 
•      Argentina
•      China
•      India
•      South Africa
•      Uzbekistan
•      Australia
•      Colombia
•      Kenya
•      South Korea
•      Venezuela
•      Brazil
•      Ecuador
•      Mexico
•      Spain
•      Vietnam
•      Canada
•      Egypt
•      Poland
•      Thailand
 
•      Chile
•      Germany
•      Russia
•      United Kingdom
 

GM Financial leases facilities for administration and regional credit centers. GM Financial has 50 facilities, of which 22 are located in the U.S. The major facilities outside the U.S. are located in Brazil, Canada, China, Germany, Mexico and the United Kingdom.

We, our subsidiaries, or associated companies in which we own an equity interest, own most of the above facilities.

*  *  *  *  *  *  *

Item 3. Legal Proceedings

Refer to Note 15 to our consolidated financial statements for information relating to legal proceedings.
 
*  *  *  *  *  *  *

Item 4. Mine Safety Disclosures

Not applicable

*  *  *  *  *  *  *

18



GENERAL MOTORS COMPANY AND SUBSIDIARIES

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Shares of our common stock have been publicly traded since November 18, 2010 when our common stock was listed and began trading on the New York Stock Exchange and the Toronto Stock Exchange. The following table summarizes the quarterly price ranges of our common stock based on high and low prices from intraday trades on the New York Stock Exchange, the principal market on which the stock is traded:
 
Years Ended December 31,
 
2015
 
2014
 
High
 
Low
 
High
 
Low
First quarter
$
38.99

 
$
32.36

 
$
41.06

 
$
33.57

Second quarter
$
37.45

 
$
33.06

 
$
37.18

 
$
31.70

Third quarter
$
33.61

 
$
24.62

 
$
38.15

 
$
31.67

Fourth quarter
$
36.88

 
$
29.98

 
$
35.45

 
$
28.82


Holders

At January 27, 2016 we had 1.5 billion issued and outstanding shares of common stock held by 447 holders of record.

Dividends

Our Board of Directors began declaring quarterly dividends on our common stock in the three months ended March 31, 2014. It is anticipated that dividends on our common stock will continue to be declared and paid quarterly. However the declaration of any dividend on our common stock is a matter to be acted upon by our Board of Directors in its sole discretion. Any dividend will be paid out of funds legally available for that purpose. Our payment of dividends in the future will depend on business conditions, our financial condition, earnings, liquidity and capital requirements and other factors. Refer to Item 6. Selected Financial Data for cash dividends declared on our common stock for the years ended December 31, 2015 and 2014.

Purchases of Equity Securities

 
Total Number of Shares Purchased(a)
 
Average Price Paid per Share
 
Total Number of Shares Purchased Under Announced Programs(b)
 
Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Programs
October 1, 2015 through October 31, 2015
2,453,596

 
$
33.51

 
2,394,261
 
$2.0 billion
November 1, 2015 through November 30, 2015
7,611,839

 
$
35.90

 
7,579,511
 
$1.8 billion
December 1, 2015 through December 31, 2015
10,083,782

 
$
35.46

 
7,886,056
 
$1.5 billion
Total
20,149,217

 
$
35.39

 
17,859,828
 
 
__________
(a)
Shares purchased consist of: (1) shares purchased under our previously announced common stock repurchase program; (2) shares retained by us for the payment of the exercise price upon the exercise of warrants; and (3) shares delivered by employees or directors back to us for the payment of taxes resulting from issuance of common stock upon the vesting of Restricted Stock Units (RSUs) and Restricted Stock Awards relating to compensation plans. Refer to Note 21 to our consolidated financial statements for additional details on employee stock incentive plans and Note 19 to our consolidated financial statements for additional details on warrants issued.
(b)
In March 2015 our Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock by the end of 2016. Effective January 2016 our Board of Directors increased the authorization to repurchase up to an additional $4.0 billion of our common stock (or an aggregate total of $9.0 billion) by the end of 2017.

*  *  *  *  *  *  *

Item 6. Selected Financial Data

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GENERAL MOTORS COMPANY AND SUBSIDIARIES


Selected financial data is summarized in the following table (dollars in millions except per share amounts):
 
At and for the Years Ended December 31,
2015
 
2014
 
2013
 
2012
 
2011
Income Statement Data:
 
 
 
 
 
 
 
 
 
Total net sales and revenue
$
152,356

 
$
155,929

 
$
155,427

 
$
152,256

 
$
150,276

Net income(a)
$
9,615

 
$
4,018

 
$
5,331

 
$
6,136

 
$
9,287

Net income attributable to stockholders
$
9,687

 
$
3,949

 
$
5,346

 
$
6,188

 
$
9,190

Net income attributable to common stockholders(b)
$
9,687

 
$
2,804

 
$
3,770

 
$
4,859

 
$
7,585

Basic earnings per common share(a)(b)(c)
$
6.11

 
$
1.75

 
$
2.71

 
$
3.10

 
$
4.94

Diluted earnings per common share(a)(b)(c)
$
5.91

 
$
1.65

 
$
2.38

 
$
2.92

 
$
4.58

Dividends declared per common share
$
1.38

 
$
1.20

 
$

 
$

 
$

Balance Sheet Data:
 
 
 
 
 
 
 
 
 
Total assets(d)
$
194,520

 
$
177,501

 
$
166,231

 
$
149,422

 
$
144,603

Automotive notes and loans payable
$
8,765

 
$
9,350

 
$
7,098

 
$
5,172

 
$
5,295

GM Financial notes and loans payable(d)
$
54,346

 
$
37,315

 
$
28,972

 
$
10,878

 
$
8,538

Series A Preferred Stock(b)
 
 
$

 
$
3,109

 
$
5,536

 
$
5,536

Series B Preferred Stock(e)
 
 
 
 
$

 
$
4,855

 
$
4,855

Total equity
$
40,323

 
$
36,024

 
$
43,174

 
$
37,000

 
$
38,991

_________
(a)
In the year ended December 31, 2015 we recorded the reversal of deferred tax asset valuation allowances of $3.9 billion in GME and recorded charges related to the Ignition Switch Recall for various legal matters of approximately $1.6 billion. In the year ended December 31, 2014 we recorded charges of approximately $2.9 billion in Automotive cost of sales related to recall campaigns and courtesy transportation, a catch-up adjustment of $0.9 billion recorded related to the change in estimate for recall campaigns and a charge of $0.4 billion related to the Ignition Switch Recall compensation program. In the year ended December 31, 2012 we recorded Goodwill impairment charges of $27.1 billion, the reversal of deferred tax asset valuation allowances of $36.3 billion in the U.S. and Canada, pension settlement charges of $2.7 billion and GME long-lived asset impairment charges of $5.5 billion.
(b)
In December 2014 we redeemed all of the remaining shares of our Series A Preferred Stock for $3.9 billion, which reduced Net income attributable to common stockholders by $0.8 billion. In September 2013 we purchased 120 million shares of our Series A Preferred Stock held by the UAW Retiree Medical Benefits Trust (New VEBA) for $3.2 billion, which reduced Net income attributable to common stockholders by $0.8 billion.
(c)
In the year ended December 31, 2012 we used the two-class method for calculating earnings per share as the Series B Preferred Stock was a participating security. Refer to Note 20 to our consolidated financial statements for additional detail.
(d)
In the year ended December 31, 2013 GM Financial acquired Ally Financial's international operations in Europe and Latin America.
(e)
In December 2013 all of our Series B Preferred Stock automatically converted into 137 million shares of our common stock.

*  *  *  *  *  *  *

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This MD&A should be read in conjunction with the accompanying consolidated financial statements.

Non-GAAP Measures

Management uses earnings before interest and taxes (EBIT)-adjusted to review the operating results of our automotive segments because it excludes interest income, interest expense and income taxes as well as certain additional adjustments. GM Financial uses income before income taxes-adjusted because management believes interest income and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment. Examples of adjustments to EBIT and GM Financial's income before income taxes include certain impairment charges related to goodwill, other long-lived assets and investments; certain gains or losses on the settlement/extinguishment of obligations; and gains or losses on the sale of non-core investments. Refer to Note 23 to our consolidated financial statements for our reconciliation of these non-GAAP measures to the most directly comparable financial measure under U.S. GAAP, Net income attributable to stockholders.

Management uses earnings per share (EPS)-diluted-adjusted to review our consolidated diluted earnings per share results on a consistent basis. EPS-diluted-adjusted is calculated as net income attributable to common stockholders less certain adjustments

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

noted above for EBIT-adjusted on an after-tax basis as well as certain income tax adjustments divided by weighted-average common shares outstanding – diluted.

Management uses return on invested capital (ROIC) to review investment and capital allocation decisions. We define ROIC as EBIT-adjusted for the trailing four quarters divided by average net assets, which is considered to be the average equity balances adjusted for certain assets and liabilities during the same period.

Management uses adjusted free cash flow to review the liquidity of our automotive operations. We measure adjusted free cash flow as cash flow from operations less capital expenditures adjusted for management actions, primarily related to strengthening our balance sheet, such as accrued interest on prepayments of debt and voluntary contributions to employee benefit plans. Refer to the “Liquidity and Capital Resources” section of MD&A for our reconciliation of this non-GAAP measure to the most directly comparable financial measure under U.S. GAAP, Net cash provided by operating activities.

Management uses these non-GAAP measures in its financial and operational decision making processes, for internal reporting and as part of its forecasting and budgeting processes as they provide additional transparency of our core operations. These measures allow management and investors to view operating trends, perform analytical comparisons and benchmark performance between periods and among geographic regions.

Our calculation of these non-GAAP measures may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a result the use of these non-GAAP measures has limitations and should not be considered superior to, in isolation from, or as a substitute for, related U.S. GAAP measures.

The following table reconciles EPS-diluted-adjusted to its most comparable financial measure under U.S. GAAP diluted earnings per common share:
 
Years Ended December 31,
 
2015
 
2014
 
2013
Diluted earnings per common share
$
5.91

 
$
1.65

 
$
2.38

Net impact of adjustments(a)
(0.89
)
 
1.40

 
0.80

EPS-diluted-adjusted
$
5.02

 
$
3.05

 
$
3.18

________
(a)
Includes the adjustments disclosed in Note 23 to our consolidated financial statements on an after-tax basis for all periods presented, income tax benefit of $3.9 billion related to the reversals of deferred tax asset valuation allowances primarily at GME in the year ended December 31, 2015 and income tax benefit of $0.5 billion related to income tax settlements in the year ended December 31, 2013.

The following table summarizes the calculation of ROIC (dollars in billions):
 
Years Ended December 31,
 
2015
 
2014
 
2013
EBIT-adjusted
$
10.8

 
$
6.5

 
$
8.6

Average equity
$
37.0

 
$
41.3

 
$
39.5

Add: Average automotive debt and interest liabilities (excluding capital leases)
8.1

 
6.8

 
5.0

Add: Average automotive net pension & OPEB liability
28.3

 
26.6

 
32.6

Less: Average fresh start accounting goodwill

 
(0.1
)
 
(0.5
)
Less: Average automotive net income tax asset
(33.6
)
 
(32.4
)
 
(34.1
)
ROIC average net assets
$
39.8

 
$
42.2

 
$
42.5

ROIC
27.2
%
 
15.4
%
 
20.2
%

Overview

Our strategic plan includes several major initiatives that we anticipate will help us achieve 9% to 10% margins on an EBIT-adjusted basis (EBIT-adjusted margins, calculated as EBIT-adjusted divided by Net sales and revenue) by early next decade: earn customers for life by delivering great products to our customers, leading the industry in quality and safety and improving the customer ownership experience; lead in technology and innovation, including OnStar 4G LTE and connected car, alternative

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

propulsion, urban mobility including ride and car sharing, active safety features and autonomous vehicles; grow our brands, particularly the Cadillac brand in the U.S. and China and the Chevrolet brand globally; continue our growth in China; continue the growth of GM Financial into our full captive automotive financing company; and deliver core operating efficiencies.

For the year ending December 31, 2016 we expect to continue to generate strong consolidated financial results including improved EBIT-adjusted and EBIT-adjusted margins, EPS-diluted-adjusted of between $5.25 and $5.75 and automotive adjusted free cash flow of approximately $6 billion.

Our overall financial targets include expected improvement of forecasted consolidated EBIT-adjusted margins of 9% to 10% by early next decade; expected total annual operational and functional cost savings of $5.5 billion by 2018 that will more than offset our incremental investments in brand building, engineering and technology as we launch new products in 2016 and beyond; expected average adjusted automotive free cash flow of approximately $6 billion to $7 billion from 2016 to 2018; expected consolidated ROIC of 20% plus; and execution of our capital allocation strategy as described below.

Automotive Summary and Outlook

We analyze the results of our automotive business through our four geographically-based segments:

GMNA

Automotive industry volume continued to grow in North America primarily driven by the U.S. market. In 2015 U.S. industry light vehicle sales were 17.5 million units, up 1.0 million units from 2014. Based on our current cost structure and variable profit margins, we estimate GMNA’s breakeven point at the U.S. industry level to be in the range of 10.0 - 11.0 million units.

In the year ended December 31, 2015 our U.S. vehicle sales totaled 3.1 million units for a U.S. market share of 17.3%, representing a decrease of 0.1 percentage points compared to 2014. The decrease in our U.S. market share was primarily driven by lower fleet market share, partially offset by higher retail market share. U.S. retail market share, which is generally more profitable than U.S. fleet market share, increased by 0.4 percentage points, primarily driven by Chevrolet and GMC.

We achieved EBIT-adjusted margins of 10.3% during 2015. EBIT-adjusted margin improvements were impacted by favorable volumes and mix and favorable cost performance including materials, logistics and recall-related charges. Refer to the "GM North America" section of the MD&A for additional information on recall activity. We expect to sustain an EBIT-adjusted margin of 10% in 2016 due to a consistent to slight increase in U.S. industry light vehicle sales, key product launches, continued cost performance and growth of adjacent businesses.

In November 2015 we entered into a collectively bargained labor agreement with the UAW. The agreement, which has a term of four years, covers the wages, hours, benefits and other terms and conditions of employment for our UAW represented employees. The key terms and provisions of the agreement are:

Lump sum payments to eligible U.S. hourly employees with seniority of $8,000 and eligible temporary employees of $2,000 were paid in December 2015 totaling $0.4 billion.
Two lump sum payments equivalent to 4% of qualified earnings will be paid to eligible traditional and in-progression employees in September 2016 and 2018 totaling $0.2 billion. Additional lump sum payments of $1,000 will be paid annually to eligible employees with seniority in June 2016 through June 2019 totaling $0.2 billion. All of these lump sum payments are being amortized over the term of the agreement.
An annual payment of $500 will be paid each December through 2018 to eligible U.S. hourly employees with seniority upon attainment of specific U.S. vehicle quality targets.
A $500 payment was made to each retiree in December 2015 totaling $0.1 billion.
An increase in base wages was made for all eligible employees with seniority as well as temporary employees hired prior to the expiration of the 2011 agreement.
Amended the Supplemental Unemployment Benefits Program, resulting in a $0.3 billion favorable adjustment in the three months ended December 31, 2015. Refer to Note 17 to our consolidated financial statements for additional details.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

Cash severance incentive programs to qualified U.S. hourly production employees of approximately $0.3 billion based on employee interest, eligibility and management approval. The restructuring charges will be recorded in 2016 upon acceptance.

GME

Automotive industry sales to retail and fleet customers began to improve in late 2013. As a result of moderate economic growth across Europe (excluding Russia) this trend continued in the year ended December 31, 2015 with industry sales to retail and fleet customers of 17.7 million vehicles representing a 9.3% increase compared to 2014. In Russia industry sales to retail and fleet customers decreased 36.1% to 1.6 million vehicles compared to the corresponding period in 2014.

Our European operations are benefiting from this trend and, despite seasonally weak vehicle sales in the second half of 2015 compared to the first half of 2015, continue to show signs of improvement underscored by further improvement in our Opel and Vauxhall market share in the year ended December 31, 2015, which builds on our market share increases in 2013 and 2014.

We continue to implement various strategic actions to strengthen our operations and increase our competitiveness. The key actions include investments in our product portfolio including the recently launched next generation Opel Astra and Corsa, a revised brand strategy and reducing material, development and production costs, including restructuring activities. The success of these actions will depend on a combination of our ability to execute and external factors which are outside of our control.

Economic and market conditions in Russia remain and are expected to continue to be very challenging for the foreseeable future. In addition we do not have appropriate localization levels for key vehicles built in Russia and we would need to make significant future capital investments in order to improve our localization levels so that our products are competitive in the Russian market. As a result of these conditions we determined that our Russia business model was not sustainable over the long term. In 2015 we ceased manufacturing, eliminated Opel brand distribution and minimized Chevrolet brand distribution in Russia. Refer to Note 17 to our consolidated financial statements for additional information related to the impact of the change in our business model in Russia.

In addition to the impact of the restructuring of our Russia business model, we anticipate headwinds from aggressive industry pricing along with increased costs associated with depreciation, amortization, marketing, adverse foreign currency impact and increased costs associated with our new product launches. We anticipate these headwinds will be offset by continued industry recovery, the full benefits of our recent launches of the Astra and Corsa and material cost optimization. As a result we intend to break even in GME in 2016.

The German Ministry of Transportation is requesting the participation of a number of automotive manufacturers, including our German subsidiary, in discussions on emission controls issues and has requested a written response from our subsidiary on the subject. This request may lead to increased testing and re-testing of our vehicles and analysis of their emissions control systems, which could lead to increased costs, penalties, negative publicity or reputational impact, and additional vehicles may be subject to recall activity if regulators determine that emission levels and required regulatory compliance should be based on either a wider spectrum of driving conditions for future testing parameters or stricter or novel interpretations and consequent enforcement of existing requirements. No assurance can be given that the ultimate outcome of any potential investigations or increased testing resulting from this scrutiny would not materially and adversely affect us. Refer to Item 1A. Risk Factors for additional information.
GMIO

In the year ended December 31, 2015 GMIO operated in a volatile and challenging economic environment.

In China we are experiencing a moderation of industry growth and pricing pressures higher than we initially anticipated due primarily to macroeconomic volatility, softening consumer demand particularly in the commercial vehicle segment, increasing competition and a complex regulatory environment. This has resulted in 4.2% growth in industry sales to 25.1 million units in 2015. Despite these pressures, we achieved record wholesale volumes of 3.7 million units with market share of 14.9% in the year ended December 31, 2015, up 0.2 percentage points compared to 2014. The increase in our market share was primarily driven by our successful launches in our key growth segments of SUVs, multipurpose vehicles and luxury vehicles including the Buick Envision and Baojun 560 and 730. Baojun 560 became the second best-selling SUV in China two months after its launch and the Baojun 730 has been the market leader in its segment since launching in August 2014. We opened two new facilities in 2015 and will be adding a third Jinqiao Shanghai plant in 2016 consistent with our localization strategy.


23



GENERAL MOTORS COMPANY AND SUBSIDIARIES

In the year ended December 31, 2015 our Automotive China JVs generated equity income of $2.1 billion and sustained strong margins, despite higher than anticipated pricing pressures with carryover price reductions of approximately 5% for SAIC General Motors Corp., Ltd. (SGM) and moderation of industry growth. This was largely attributed to proactive management of challenges by optimizing vehicle mix and inventory levels and aggressively reducing costs. In 2016 we expect continuation of moderate industry growth, macroeconomic volatility and carryover pricing pressures in the range of 3% to 5%. Despite the challenging macroeconomic environment, we continue to expect an increase in vehicle sales driven by new launches and expect to sustain strong China equity income and margins by focusing on vehicle mix improvement and cost efficiency.

Lack of political stability, decreasing prices of natural resources and foreign exchange volatility, among other factors, negatively impacted the overall automotive industry in the rest of Asia Pacific, Africa and the Middle East and led to a decrease of 0.2 million units, or 1.0%, in the year ended December 31, 2015 compared to 2014. This continued the recent trend of a relatively flat industry of approximately 19 million units sold in each of the last several years. In the year ended December 31, 2015 our sales volume decreased by 5.2% compared to 2014, leading to a decline in market share of 0.2 percentage points to 4.2%.

In 2016 we expect the macroeconomic environment to remain challenging. We continue to refresh our product portfolio and are addressing many of the challenges in these markets while continuing to strategically assess the manner in which we operate in certain countries. To address the significant industry, market share, pricing and foreign exchange pressures in the region, we continue to focus on product portfolio enhancements, manufacturing footprint rationalization, increased local sourcing of parts, cost structure reductions, as well as brand and dealer network improvements which we expect to favorably impact the region over the medium term. The impact of these strategic actions combined with the significant reduction in wholesale volumes, forward pricing pressures and foreign exchange volatility in the region may result in deteriorating cash flows in certain markets.
 
In 2013 we announced the withdrawal of the Chevrolet brand from Western and Central Europe and the ceasing of manufacturing and significant reduction of engineering operations in Australia by 2017 and incurred related impairment and other charges in the years ended December 31, 2013, 2014 and 2015. We continue to work on a Southeast Asia transformation plan including the transition of our Indonesian operations to a national sales company and ceased vehicle production in Indonesia in the three months ended June 30, 2015. We are restructuring our Thailand operations to focus on our competitive strengths in trucks and SUVs given continued challenges in Thailand and several export markets. As a result of these strategic actions related to Thailand, we recorded impairment charges of $0.3 billion in Automotive cost of sales in the three months ended June 30, 2015, which were treated as an adjustment for EBIT-adjusted reporting purposes.

We continue to execute our plans and within the financial impact that we projected. As we continue to assess our performance throughout the region, additional restructuring and rationalization actions may be required and may have a material impact on our results of operations.

GMSA

Economic conditions in South America were negatively impacted by falling commodity prices and political uncertainty during 2015. As a result Brazil, our largest market in South America, contracted during 2015 and continues to be negatively impacted by foreign currency deflation, high interest rates and increasing levels of unemployment. Automotive industry sales in Brazil decreased by 0.9 million vehicles, or 26.6%, in the year ended December 31, 2015 compared to the corresponding period in 2014.

In the year ended December 31, 2015 we recorded currency devaluation charges of $0.6 billion and asset impairment charges of $0.1 billion in Venezuela, which is experiencing a severe economic recession. The devaluation and asset impairment charges were recorded in Automotive cost of sales and were treated as adjustments for EBIT-adjusted reporting purposes. We continue to monitor developments in Venezuela to assess whether market restrictions and exchange rate controls when considered with the economic and political environment in Venezuela evolve such that we no longer maintain a controlling financial interest.

In the year ended December 31, 2015 we recorded a net gain on extinguishment of debt of $0.4 billion related to prepayment of unsecured debt in Brazil, which is not a component of EBIT-adjusted. 

We continue to monitor economic conditions in South America and believe that adverse economic conditions and their effects on the automotive industry will continue in the near term. While we continue to take actions to address these challenges, no assurance can be provided that such efforts will prevent material future losses, asset impairments or other charges.

Corporate


24



GENERAL MOTORS COMPANY AND SUBSIDIARIES

In March 2015 management announced its plan to return all available free cash flow to stockholders while maintaining an investment-grade balance sheet. Management's capital allocation framework includes a combined cash and marketable securities balance target of $20 billion and plans to reinvest in the business at an average target ROIC rate of 20% or more. In connection with this plan we announced that our Board of Directors had authorized a program to purchase up to $5 billion of our common stock before the end of 2016. In January 2016 we announced that our Board of Directors had authorized the purchase of up to an additional $4 billion of our common stock (or an aggregate total of $9 billion) before the end of 2017. At February 1, 2016 we had purchased 102 million shares of our outstanding common stock for $3.5 billion. Also, in January 2016 we announced an increase of our quarterly common stock dividend to $0.38 per share effective in the first quarter of 2016.

In 2014 we created a compensation program to compensate accident victims as a result of the vehicles recalled under the Ignition Switch Recall. In the year ended December 31, 2015 we increased our independently administered accrual for the Ignition Switch Recall compensation program by $195 million based on the program's claims experience. The increase to the accrual was recorded in Automotive selling, general and administrative expense and was treated as an adjustment for EBIT-adjusted reporting purposes. Total charges recorded since inception of the compensation program were $595 million at December 31, 2015. The Ignition Switch Recall has led to various inquiries, investigations, subpoenas, requests for information and complaints from the U.S. Attorney's Office for the Southern District of New York, Congress, the SEC, Transport Canada and 50 state attorneys general. In addition these and other recalls have resulted in a number of claims and lawsuits. We recorded charges of approximately $1.6 billion in Automotive selling, general and administrative expense as a result of the DPA financial penalty and the settlements of the Shareholder Class Action, the multidistrict litigation and other litigation associated with the recalls. These charges were treated as adjustments for EBIT-adjusted reporting purposes in the year ended December 31, 2015. Refer to Note 15 to our consolidated financial statements for additional information. Such lawsuits and investigations could in the future result in the imposition of material damages, fines, civil consent orders, civil and criminal penalties or other remedies. There can be no assurance as to how the resulting consequences, if any, may impact our business, reputation, consolidated financial position, results of operations or cash flows. The total amount accrued at December 31, 2015 represents our best estimate with regard to such claims and lawsuits. However we are currently unable to estimate either a high end of the range for these claims and lawsuits or a range of possible loss for the remaining matters because they involve significant uncertainties. The resolution of these matters could have a material adverse effect on our financial position, results of operations or cash flows.

In the three months ended December 31, 2015 we concluded it was more likely than not that our future earnings in certain jurisdictions in GME will be sufficient to realize the deferred tax assets in these jurisdictions so that a full valuation allowance is no longer needed. Accordingly we reversed GME valuation allowances of $3.9 billion and recorded an income tax benefit. As a result we have a negative effective income tax rate for the year ended December 31, 2015. Refer to Note 16 to our consolidated financial statements for additional information on the reversal of deferred tax asset valuation allowances.

Based on defect information reports filed with NHTSA by Takata, we are currently conducting recalls for certain Takata air bag inflators used in some of our prior model year vehicles. We are continuing to assess the situation. Further recalls, if any, that may be required to remediate Takata air bag inflators in our vehicles could have a material impact on our financial position, results of operations or cash flows. Refer to Item 1A. Risk Factors for additional information.
Automotive Financing - GM Financial Summary and Outlook

GM Financial is expanding its leasing, near prime and prime lending programs in North America and anticipates that leasing and prime lending will become an increasing percentage of the originations and retail portfolio balance over time. In the year ended December 31, 2015 GM Financial's revenue consisted of 46% retail finance charge income, 6% commercial finance charge income and 43% leased vehicle income. We believe that offering a comprehensive suite of financing products will generate incremental sales of our vehicles, drive incremental GM Financial earnings and help support our sales throughout various economic cycles. In the year ended December 31, 2015 GM Financial's retail penetration in North America grew to approximately 30%, up from approximately 10% in 2014.

On January 2, 2015 GM Financial completed its acquisition of an equity interest in SAIC-GMAC in China for $0.9 billion. As a result GM indirectly owns 45% of SAIC-GMAC.

In February 2015 GM Financial became our exclusive U.S. lease provider for Buick-GMC dealers. Our exclusive leasing arrangements with GM Financial extended to Cadillac dealers in March 2015 and to Chevrolet dealers in April 2015. As a result GM Financial now provides substantially all of the financing on vehicles leased by our customers. In the three months ended September 30, 2015 GM Financial began accepting deposits from retail banking customers in Germany.


25



GENERAL MOTORS COMPANY AND SUBSIDIARIES

Consolidated Results

We review changes in our results of operations under four categories: volume, mix, price and other. Volume measures the impact of changes in wholesale vehicle volumes driven by industry volume, market share and changes in dealer stock levels. Mix measures the impact of changes to the regional portfolio due to product, model, trim, country and option penetration in current year wholesale vehicle volumes. Price measures the impact of changes related to Manufacturer’s Suggested Retail Price and various sales allowances. Other includes primarily: (1) material and freight; (2) costs including manufacturing, engineering, advertising, administrative and selling and policy and warranty expense; (3) foreign exchange; and (4) non-vehicle related automotive revenues and costs as well as equity income or loss from our nonconsolidated affiliates.

Total Net Sales and Revenue
 
Years Ended December 31,
 
Favorable/ (Unfavorable)
 
 
 
 
Variance Due To
2015
 
2014
 
 
%
 
 
Volume
 
Mix
 
Price
 
Other
 
(Dollars in millions)
 
 
 
 
(Dollars in billions)
GMNA
$
106,622

 
$
101,199

 
$
5,423

 
5.4
 %
 
 
$
6.8

 
$
1.0

 
$
(1.1
)
 
$
(1.2
)
GME
18,704

 
22,235

 
(3,531
)
 
(15.9
)%
 
 
$
(0.7
)
 
$
(0.1
)
 
$
0.6

 
$
(3.3
)
GMIO
12,626

 
14,392

 
(1,766
)
 
(12.3
)%
 
 
$
(1.2
)
 
$
0.7

 
$
0.1

 
$
(1.4
)
GMSA
7,820

 
13,115

 
(5,295
)
 
(40.4
)%
 
 
$
(3.9
)
 
$
0.6

 
$
0.9

 
$
(2.9
)
Corporate and eliminations
150

 
151

 
(1
)
 
(0.7
)%
 
 
 
 
 
 
 
 
$

Automotive
145,922

 
151,092

 
(5,170
)
 
(3.4
)%
 
 
$
1.0

 
$
2.1

 
$
0.6

 
$
(8.8
)
GM Financial
6,434

 
4,837

 
1,597

 
33.0
 %
 
 
 
 
 
 
 
 
$
1.6

Total net sales and revenue
$
152,356

 
$
155,929

 
$
(3,573
)
 
(2.3
)%
 
 
$
1.0

 
$
2.1

 
$
0.6

 
$
(7.2
)
 
Years Ended December 31,
 
Favorable/ (Unfavorable)
 
 
 
 
Variance Due To
2014
 
2013
 
 
%
 
 
Volume
 
Mix
 
Price
 
Other
 
(Dollars in millions)
 
 
 
 
(Dollars in billions)
GMNA
$
101,199

 
$
95,099

 
$
6,100

 
6.4
 %
 
 
$
1.3

 
$
1.2

 
$
3.4

 
$
0.3

GME
22,235

 
21,962

 
273

 
1.2
 %
 
 
$
0.2

 
$
0.7

 
$

 
$
(0.5
)
GMIO
14,392

 
18,411

 
(4,019
)
 
(21.8
)%
 
 
$
(4.6
)
 
$
0.4

 
$
0.7

 
$
(0.4
)
GMSA
13,115

 
16,478

 
(3,363
)
 
(20.4
)%
 
 
$
(2.4
)
 
$
0.1

 
$
1.1

 
$
(2.1
)
Corporate and eliminations
151

 
142

 
9

 
6.3
 %
 
 
 
 
 
 
 
 
$

Automotive
151,092

 
152,092

 
(1,000
)
 
(0.7
)%
 
 
$
(5.6
)
 
$
2.3

 
$
5.1

 
$
(2.8
)
GM Financial
4,837

 
3,335

 
1,502

 
45.0
 %
 
 
 
 
 
 
 
 
$
1.5

Total net sales and revenue
$
155,929

 
$
155,427

 
$
502

 
0.3
 %
 
 
$
(5.6
)
 
$
2.3

 
$
5.1

 
$
(1.3
)

Refer to the regional sections of the MD&A for additional information.

Automotive Cost of Sales and Inventories
 
Years Ended December 31,
 
Favorable/ (Unfavorable)
 
 
 
 
Variance Due To
 
2015
 
2014
 
 
%
 
 
Volume
 
Mix
 
Other
 
(Dollars in millions)
 
 
 
 
(Dollars in billions)
GMNA
$
89,173

 
$
89,371

 
$
198

 
0.2
%
 
 
$
(4.7
)
 
$
(0.5
)
 
$
5.4

GME
18,062

 
21,712

 
3,650

 
16.8
%
 
 
$
0.6

 
$

 
$
3.1

GMIO
12,506

 
14,009

 
1,503

 
10.7
%
 
 
$
1.0

 
$
(0.6
)
 
$
1.1

GMSA
8,416

 
12,736

 
4,320

 
33.9
%
 
 
$
3.2

 
$
(0.5
)
 
$
1.6

Corporate and eliminations
164

 
254

 
90

 
35.4
%
 
 
 
 
 
 
$
0.1

Total automotive cost of sales
$
128,321

 
$
138,082

 
$
9,761

 
7.1
%
 
 
$

 
$
(1.5
)
 
$
11.3



26



GENERAL MOTORS COMPANY AND SUBSIDIARIES

 
Years Ended December 31,
 
Favorable/ (Unfavorable)
 
 
 
 
Variance Due To
 
2014
 
2013
 
 
%
 
 
Volume
 
Mix
 
Other
 
(Dollars in millions)
 
 
 
 
(Dollars in billions)
GMNA
$
89,371

 
$
81,404

 
$
(7,967
)
 
(9.8
)%
 
 
$
(0.8
)
 
$
(0.9
)
 
$
(6.2
)
GME
21,712

 
20,824

 
(888
)
 
(4.3
)%
 
 
$
(0.1
)
 
$
(0.5
)
 
$
(0.3
)
GMIO
14,009

 
17,599

 
3,590

 
20.4
 %
 
 
$
3.7

 
$
(0.5
)
 
$
0.4

GMSA
12,736

 
15,221

 
2,485

 
16.3
 %
 
 
$
1.9

 
$
(0.2
)
 
$
0.8

Corporate and eliminations
254

 
(123
)
 
(377
)
 
n.m.

 
 
 
 
 
 
$
(0.4
)
Total automotive cost of sales
$
138,082

 
$
134,925

 
$
(3,157
)
 
(2.3
)%
 
 
$
4.7

 
$
(2.0
)
 
$
(5.8
)
________
n.m. = not meaningful

The most significant element of our Automotive cost of sales is material cost which makes up approximately two-thirds of the total amount. The remaining portion includes labor costs, depreciation and amortization, engineering, and policy, product warranty and recall campaigns.

The most significant factors which influence a region's profitability are industry volume and market share. While not as significant as industry volume and market share, another factor affecting profitability is the relative mix of vehicles (cars, trucks, crossovers) sold. Variable profit is a key indicator of product profitability. Variable profit is defined as revenue less material cost, freight, the variable component of manufacturing expense and policy, warranty and recall-related costs. Vehicles with higher selling prices generally have higher variable profit.

Refer to the regional sections of the MD&A for additional information on volume and mix.

In the year ended December 31, 2015 favorable Other was due primarily to: (1) favorable net foreign currency effect of $6.9 billion due primarily to the weakening of the Euro, Brazilian Real, Canadian Dollar (CAD), British Pound and Mexican Peso against the U.S. Dollar, partially offset by further Venezuela Bolivar Fuerte (BsF) devaluation; (2) a decrease in recall campaign and courtesy transportation charges of $2.8 billion, including the $0.9 billion catch-up adjustment; (3) decreased material and freight costs of $2.2 billion; (4) a net decrease in separation charges of $0.4 billion primarily related to the Bochum plant closing in GME in 2014; (5) favorable intangible asset amortization of $0.3 billion; and (6) decreased costs of $0.3 billion related to parts and accessories sales; partially offset by (7) an increase in engineering expense of $0.4 billion; (8) an increase in warranty and policy costs of $0.3 billion; and (9) costs related to the change in our business model in Russia of $0.2 billion.

In the year ended December 31, 2014 unfavorable Other was due primarily to: (1) increased recall campaign and courtesy transportation charges of $3.5 billion, including the $0.9 billion catch-up adjustment; (2) increased material and freight cost including new launches of $2.7 billion; (3) unfavorable effect resulting from the reversal of the Korea wage litigation accrual in 2013 in GMIO of $0.7 billion; (4) restructuring charges related to the Bochum plant closing in GME of $0.5 billion; (5) increased depreciation on equipment on operating lease related to daily rental vehicles of $0.3 billion; and (6) charges related to flood damage of $0.1 billion; partially offset by (7) favorable net foreign currency effect of $1.0 billion due primarily to the weakening of the Brazilian Real, Russian Ruble, Euro and CAD against the U.S. Dollar, partially offset by the BsF devaluation; and (8) favorable intangible asset amortization of $0.6 billion.

 
Inventories
 
 
Days on Hand
 
December 31, 2015
 
December 31, 2014
 
Increase/ (Decrease)
 
 
December 31, 2015
 
December 31, 2014
 
Increase/ (Decrease)
 
(Dollars in millions)
 
 
 
 
 
 
 
GMNA
$
7,589

 
$
6,912

 
$
677

 
 
31

 
28

 
3

GME
2,879

 
3,172

 
(293
)
 
 
57

 
53

 
4

GMIO
2,067

 
2,242

 
(175
)
 
 
60

 
58

 
2

GMSA
1,229

 
1,316

 
(87
)
 
 
53

 
37

 
16

Total
$
13,764

 
$
13,642

 
$
122

 
 
39

 
36

 
3


Days on hand is calculated as Inventories divided by Automotive cost of sales for the years ended December 31, 2015 and 2014 multiplied by 360.

27



GENERAL MOTORS COMPANY AND SUBSIDIARIES


Automotive Selling, General and Administrative Expense
(Dollars in Millions)
 
Years Ended December 31,
 
Year Ended 2015 vs. 2014 Change
 
Year Ended 2014 vs. 2013 Change
 
 
 
 
2015
 
2014
 
2013
 
Favorable/ (Unfavorable)
 
%
 
Favorable/ (Unfavorable)
 
%
Automotive selling, general and administrative expense
$
13,405

 
$
12,158

 
$
12,382

 
$
(1,247
)
 
(10.3
)%
 
$
224

 
1.8
%

In the year ended December 31, 2015 Automotive selling, general and administrative expense increased due primarily to: (1) charges for various settlements and legal matters related to the Ignition Switch Recall of $1.6 billion; (2) increased advertising expense of $0.2 billion; (3) an increase in employee related costs of $0.1 billion; and (4) costs related to the change in our business model in Russia of $0.1 billion; partially offset by (5) favorable net foreign currency effect of $0.7 billion due primarily to the weakening of the Euro and Brazilian Real against the U.S. Dollar; and (6) decreased expense related to the Ignition Switch Recall compensation program of $0.2 billion.

In the year ended December 31, 2014 Automotive selling, general and administrative expense decreased due primarily to: (1) decreased expenses of $0.7 billion related to the withdrawal of the Chevrolet brand from Europe, including dealer restructuring costs and intangible asset impairment charges in 2013, coupled with cost reductions in 2014; and (2) favorable advertising expense in GMNA due primarily to reduced media spend of $0.2 billion; partially offset by (3) expense related to the Ignition Switch Recall compensation program of $0.4 billion; and (4) legal and other costs related to the Ignition Switch Recall of $0.4 billion.

Income Tax Expense (Benefit)
(Dollars in Millions)
 
Years Ended December 31,
 
Year Ended 2015 vs. 2014 Change
 
Year Ended 2014 vs. 2013 Change
 
 
 
 
2015
 
2014
 
2013
 
Favorable/ (Unfavorable)
 
%
 
Favorable/ (Unfavorable)
 
%
Income tax expense (benefit)
$
(1,897
)
 
$
228

 
$
2,127

 
$
2,125

 
n.m.
 
$
1,899

 
89.3
%
________
n.m. = not meaningful

In the year ended December 31, 2015 Income tax expense decreased due primarily to: (1) the income tax benefit from the release of GME's valuation allowances of $3.9 billion; partially offset by (2) an increase in income tax expense of $1.8 billion due primarily to an increase in pre-tax income.

In the year ended December 31, 2014 Income tax expense decreased due primarily to: (1) a decrease in pre-tax income; (2) a reduction in pre-tax losses in jurisdictions with full valuation allowances; and (3) other tax expense favorable items.

Refer to Note 16 to our consolidated financial statements for additional information related to our income tax expense (benefit).

GM North America

GMNA Total Net Sales and Revenue and EBIT-Adjusted
 
Years Ended December 31,
 
Favorable/ (Unfavorable)
 
 
 
 
Variance Due To
 
2015
 
2014
 
 
%
 
 
Volume
 
Mix
 
Price
 
Other
 
(Dollars in millions)
 
 
 
 
(Dollars in billions)
Total net sales and revenue
$
106,622

 
$
101,199

 
$
5,423

 
5.4
%
 
 
$
6.8

 
$
1.0

 
$
(1.1
)
 
$
(1.2
)
EBIT-adjusted
$
11,026

 
$
6,603

 
$
4,423

 
67.0
%
 
 
$
2.1

 
$
0.5

 
$
(1.1
)
 
$
3.0

 
(Vehicles in thousands)
 
 
 
 
 
 
 
 
 
 
 
Wholesale vehicle sales
3,558

 
3,320

 
238

 
7.2
%
 
 
 
 
 
 
 
 
 

28



GENERAL MOTORS COMPANY AND SUBSIDIARIES

 
Years Ended December 31,
 
Favorable/ (Unfavorable)
 
 
 
 
Variance Due To
 
2014
 
2013
 
 
%
 
 
Volume
 
Mix
 
Price
 
Other
 
(Dollars in millions)
 
 
 
 
(Dollars in billions)
Total net sales and revenue
$
101,199

 
$
95,099

 
$
6,100

 
6.4
 %
 
 
$
1.3

 
$
1.2

 
$
3.4

 
$
0.3

EBIT-adjusted
$
6,603

 
$
7,461

 
$
(858
)
 
(11.5
)%
 
 
$
0.4

 
$
0.3

 
$
3.4

 
$
(5.0
)
 
(Vehicles in thousands)
 
 
 
 
 
 
 
 
 
 
 
Wholesale vehicle sales
3,320

 
3,276

 
44

 
1.3
 %
 
 
 
 
 
 
 
 
 

GMNA Total Net Sales and Revenue

In the year ended December 31, 2015 Total net sales and revenue increased due primarily to: (1) increased net wholesale volumes associated with full-size SUVs, mid-size pick-ups and the Chevrolet Trax, Impala and Cruze, partially offset by decreases in the Chevrolet Malibu; and (2) favorable mix due to full-size SUVs and full-size pick-ups partially offset by an increase in rental cars sold at auction and the Chevrolet Trax; partially offset by (3) unfavorable pricing primarily related to carryovers including passenger cars and compact SUVs; and (4) unfavorable Other of $1.2 billion due primarily to unfavorable foreign currency effect related to the weakening of the CAD and the Mexican Peso against the U.S. dollar of $1.7 billion partially offset by increased revenue related to OnStar of $0.2 billion.

In the year ended December 31, 2014 Total net sales and revenue increased due primarily to: (1) favorable pricing related to full-size pick-ups and full-size SUVs; (2) increased net wholesale volumes due to full-size pick-ups, full-size SUVs, and the Chevrolet Colorado, Corvette and Malibu, partially offset by decreases of the Chevrolet Impala, Captiva and Cruze; (3) favorable mix due to full-size pick-ups, full-size SUVs and the Chevrolet Corvette and Impala; and (4) favorable Other of $0.3 billion due primarily to increased operating lease revenue related to daily rental vehicles sold with guaranteed repurchase obligations and increased parts and accessories sales, partially offset by unfavorable foreign currency effect related primarily to the weakening of the CAD and Mexican Peso against the U.S. Dollar.

GMNA EBIT-Adjusted

The most significant factors which influence a region's profitability are industry volume and market share. While not as significant as industry volume and market share, another factor affecting profitability is the relative mix of vehicles (cars, trucks, crossovers) sold. Variable profit is a key indicator of product profitability. Variable profit is defined as revenue less material cost, freight, the variable component of manufacturing expense and policy, warranty and recall-related costs. Vehicles with higher selling prices generally have higher variable profit. Trucks, crossovers and cars sold currently have a variable profit of approximately 170%, 80% and 30% of our portfolio on a weighted-average basis.

In the year ended December 31, 2015 EBIT-adjusted increased due primarily to: (1) increased net wholesale volumes; (2) favorable mix; and (3) favorable Other of $3.0 billion including decreased material and freight costs of $2.2 billion and a decrease in recall-related charges of $1.9 billion, partially offset by policy and warranty of $0.3 billion, engineering of $0.3 billion, General Motors of Canada Company (GM Canada) pension curtailment and restructuring charges of $0.2 billion and advertising of $0.2 billion; partially offset by (4) unfavorable pricing.

In the year ended December 31, 2014 EBIT-adjusted decreased due primarily to: (1) unfavorable Other of $5.0 billion due primarily to an increase in recall campaign actions and recall-related charges of $2.3 billion, increased material and freight costs including new launches of $2.8 billion and increased engineering expense of $0.5 billion, partially offset by increased daily rental vehicles sold with guaranteed repurchase obligations and reduced advertising expenses; partially offset by (2) favorable pricing; (3) increased net wholesale volumes; and (4) favorable mix.

Recall Campaigns

In connection with ongoing comprehensive safety reviews, engineering analysis and our overall commitment to customer satisfaction we have incurred incremental charges for the estimated costs of parts and labor to repair vehicles and provide courtesy transportation for customers with vehicles subject to recalls.

The following table summarizes the impact of recall-related activities including customer satisfaction campaigns, safety recalls, non-compliance recalls, special coverage, and courtesy transportation (dollars in millions):

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