General Motors 2010 Annual Report Download - page 233

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Liability Related to Contingently Issuable Shares
We are obligated to issue Adjustment Shares of our common stock to MLC in the event that allowed general unsecured claims
against MLC, as estimated by the Bankruptcy Court, exceed $35.0 billion. The maximum number of Adjustment Shares issuable is
30 million shares (subject to adjustment to take into account stock dividends, stock splits and other transactions). The number of
Adjustment Shares to be issued is calculated based on the extent to which estimated general unsecured claims exceed $35.0 billion
with the maximum number of Adjustment Shares issued if estimated general unsecured claims total $42.0 billion or more. In the
period July 10, 2009 to December 31, 2009 we determined that it was probable that general unsecured claims allowed against MLC
would ultimately exceed $35.0 billion by at least $2.0 billion. In that circumstance, we would have been required to issue 8.6 million
Adjustment Shares to MLC as an adjustment to the purchase price. At December 31, 2009 we recorded a liability of $162 million
included in Accrued liabilities. In the year ended December 31, 2010 the liability was adjusted quarterly based on available
information. Based on information which became available in the three months ended December 31, 2010, we concluded it was no
longer probable that general unsecured claims would exceed $35.0 billion, and we reversed to income our previously recorded
liability of $231 million for the contingently issuable Adjustment Shares which is recorded in Interest income and other non-operating
income, net. We believe it is reasonably possible that general unsecured claims allowed against MLC will range between $32.5 billion
and $36.0 billion.
Other Litigation-Related Liability and Tax Administrative Matters
Various legal actions, governmental investigations, claims and proceedings are pending against us or MLC including a number of
shareholder class actions, bondholder class actions and class actions under ERISA and other matters arising out of alleged product
defects, including asbestos-related claims; employment-related matters; governmental regulations relating to safety, emissions, and
fuel economy; product warranties; financial services; dealer, supplier and other contractual relationships; tax-related matters not
recorded pursuant to ASC 740 and environmental matters.
With regard to the litigation matters discussed in the previous paragraph, reserves have been established for matters in which it is
believed that losses are probable and can be reasonably estimated, the majority of which are associated with tax-related matters not
recorded pursuant to ASC 740 as well as various non-U.S. labor-related matters. Tax related matters not recorded pursuant to ASC
740 (indirect tax-related matters) are items being litigated globally pertaining to value added taxes, customs, duties, sales, property
taxes and other non-income tax related tax exposures. The various non-U.S. labor-related matters include claims from current and
former employees related to alleged unpaid wage, benefit, severance, and other compensation matters. Certain South American
administrative proceedings are indirect tax-related and may require that we deposit funds in escrow; such escrow deposits may range
from $560 million to $760 million. Some of the matters may involve compensatory, punitive, or other treble damage claims,
environmental remediation programs, or sanctions, that if granted, could require us to pay damages or make other expenditures in
amounts that could not be reasonably estimated at December 31, 2010. We believe that appropriate accruals have been established for
such matters based on information currently available. Reserves for litigation losses are recorded in Accrued liabilities and Other
liabilities and deferred income taxes. These accrued reserves represent the best estimate of amounts believed to be our liability in a
range of expected losses. Litigation is inherently unpredictable, however, and unfavorable resolutions could occur. Accordingly, it is
possible that an adverse outcome from such proceedings could exceed the amounts accrued in an amount that could be material to our
financial condition, results of operations and cash flows in any particular reporting period.
Commencing on or about September 29, 2010, current and former hourly employees of GM Daewoo, our majority-owned affiliate
in the Republic of Korea, filed six separate group actions in the Incheon District Court in Incheon, Korea. The cases allege that GM
Daewoo failed to include certain allowances in its calculation of Ordinary Wages due under the Presidential Decree of the Korean
Labor Standards Act. Similar cases have been brought against other large employers in the Republic of Korea. At December 31, 2010
GM Daewoo accrued 122 billion Korean Won (equivalent to $110 million) in connection with these cases (70% of which was
recorded in Net income attributable to stockholders, based on our ownership interest in GM Daewoo). The current estimate of the
value of plaintiffs’ claim, if allowed in full, exceeds the accrual by 395 billion Korean Won (equivalent to $344 million). GM Daewoo
believes the claims in excess of the accrual are without merit but, given the inherent uncertainties of the litigation process and further
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