GE 2011 Annual Report Download - page 132

130 GE 2011 ANNUAL REPORT
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Investments in Unconsolidated Variable Interest Entities
Our involvement with unconsolidated VIEs consists of the following
activities: assisting in the formation and fi nancing of the entity,
providing recourse and/or liquidity support, servicing the assets
and receiving variable fees for services provided. We are not
required to consolidate these entities because the nature of our
involvement with the activities of the VIEs does not give us power
over decisions that signifi cantly affect their economic performance.
The largest unconsolidated VIE with which we are involved is
Penske Truck Leasing (PTL), a joint venture and limited partnership
formed in 1988 between Penske Truck Leasing Corporation (PTLC)
and GE. PTLC is the sole general partner of PTL and an indirect
wholly-owned subsidiary of Penske Corporation. PTL is engaged
in truck leasing and support services, including full-service
leasing, dedicated logistics support and contract maintenance
programs, as well as rental operations serving commercial and
consumer customers. At December 31, 2011, our investment of
$7,038 million primarily comprised a 49.9% partnership interest
of $889 million and loans and advances of $6,113 million. GECC
continues to provide loans under long-term revolving credit and
letter of credit facilities to PTL.
Other signifi cant exposures to unconsolidated VIEs at
December 31, 2011 include an investment in asset-backed
securities issued by a senior secured loan fund ($4,009 million);
investments in real estate entities ($2,515 million), which generally
consist of passive limited partnership investments in tax-
advantaged, multi-family real estate and investments in various
European real estate entities; and exposures to joint ventures that
purchase factored receivables ($1,823 million). The vast majority
of our other unconsolidated entities consist of passive invest-
ments in various asset-backed fi nancing entities.
The classifi cation of our variable interests in these entities in
our fi nancial statements is based on the nature of the entity and
the type of investment we hold. Variable interests in partnerships
and corporate entities are classifi ed as either equity method or
cost method investments. In the ordinary course of business,
we also make investments in entities in which we are not the pri-
mary benefi ciary but may hold a variable interest such as limited
partner interests or mezzanine debt investments. These invest-
ments are classifi ed in two captions in our fi nancial statements:
“All other assets” for investments accounted for under the equity
method, and “Financing receivables—net” for debt fi nancing pro-
vided to these entities. Our investments in unconsolidated VIEs at
December 31, 2011 and December 31, 2010 follow.
December 31 (In millions) PTL All other Total
2011
Other assets and investment
securities $7,038 $ 6,954 $13,992
Financing receivables—net — 2,507 2,507
Total investments 7,038 9,461 16,499
Contractual obligations to
fund investments or
guarantees 600 2,253 2,853
Revolving lines of credit 1,356 92 1,448
Total $8,994 $11,806 $20,800
2010
Other assets and investment
securities $5,790 $ 4,585 $10,375
Financing receivables—net — 2,240 2,240
Total investments 5,790 6,825 12,615
Contractual obligations to
fund investments or
guarantees 600 1,990 2,590
Revolving lines of credit 2,431 — 2,431
Total $8,821 $ 8,815 $17,636
In addition to the entities included in the table above, we also hold
passive investments in RMBS, CMBS and ABS issued by VIEs. Such
investments were, by design, investment grade at issuance and
held by a diverse group of investors. Further information about
such investments is provided in Note 3.
Note 25.
Commitments and Guarantees
Commitments
In our Aviation segment, we had committed to provide fi nancing
assistance on $2,059 million of future customer acquisitions of
aircraft equipped with our engines, including commitments made
to airlines in 2011 for future sales under our GE90 and GEnx
engine campaigns. The GECAS business of GE Capital had placed
multiple-year orders for various Boeing, Airbus and other aircraft
with list prices approximating $20,577 million and secondary
orders with airlines for used aircraft of approximately $1,621 mil-
lion at December 31, 2011.
Product Warranties
We provide for estimated product warranty expenses when we
sell the related products. Because warranty estimates are fore-
casts that are based on the best available information—mostly
historical claims experience—claims costs may differ from
amounts provided. An analysis of changes in the liability for prod-
uct warranties follows.
(In millions) 2011 2010 2009
Balance at January 1 $1,451 $1,641 $1,675
Current-year provisions 935 537 780
Expenditures (881) (710) (794)
Other changes 117 (17) (20)
Balance at December 31 $1,622 $1,451 $1,641