General Motors 2010 Annual Report Download - page 227

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Old GM
Derivatives and Hedge Accounting
Derivatives Not Designated for Hedge Accounting
Old GM previously entered into a variety of foreign currency exchange, interest rate and commodity forward contracts and options
to maintain a desired level of exposure arising from market risks resulting from changes in foreign currency exchange rates, interest
rates and certain commodity prices.
In May 2009 Old GM reached agreements with certain of the counterparties to its derivative contracts to terminate the derivative
contracts prior to stated maturity. Commodity, foreign currency exchange and interest rate forward contracts were settled for cash of
$631 million, resulting in a loss of $537 million. The loss was recorded in Automotive sales, Automotive cost of sales and
Automotive interest expense in the amounts of $22 million, $457 million and $58 million.
When an exposure economically hedged with a derivative contract was no longer forecasted to occur, in some cases a new
derivative instrument was entered into to offset the exposure related to the existing derivative instrument. In some cases,
counterparties were unwilling to enter into offsetting derivative instruments and, as such, there was exposure to future changes in the
fair value of these derivatives with no underlying exposure to offset this risk.
The following table summarizes gains and (losses) recorded for derivatives originally entered into to hedge exposures that
subsequently became probable not to occur (dollars in millions):
Predecessor
January 1, 2009
Through
July 9, 2009
Interest income and other non-operating income, net ..................................................... $91
Gains and (Losses) on Derivatives
The following table summarizes derivative gains and (losses) recorded in earnings (dollars in millions):
Predecessor
January 1, 2009
Through
July 9, 2009
Foreign Currency Exchange Derivatives
Automotive sales ................................................................................. $ (688)
Automotive cost of sales ........................................................................... (211)
Interest income and other non-operating income, net ..................................................... 91
Interest Rate Swap Derivatives
Automotive interest expense ........................................................................ (38)
Commodity Derivatives
Automotive cost of sales ........................................................................... (332)
Warrants
Interest income and other non-operating income, net ..................................................... 164
Total gains (losses) recorded in earnings .............................................................. $(1,014)
In connection with the UST Loan Agreement, Old GM granted warrants to the UST for 122 million shares of its common stock
exercisable at $3.57 per share. Old GM recorded the warrants as a liability and recorded gains and losses related to this derivative in
Interest income and other non-operating income, net. In connection with the 363 Sale, the UST returned the warrants and they were
cancelled.
General Motors Company 2010 Annual Report 225