General Motors 2010 Annual Report Download - page 270

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 32. Transactions with Ally Financial
Automotive
Old GM entered into various operating and financing arrangements with Ally Financial, a related party, and in connection with the
363 Sale we assumed the terms and conditions of these arrangements. The following tables describe the financial statement effects of
and maximum obligations under these agreements (dollars in millions):
Successor
December 31,
2010
December 31,
2009
Operating lease residuals
Residual support (a)
Liabilities (receivables) recorded ........................................................ $ (24) $ 369
Maximum obligation .................................................................. $ 523 $ 1,159
Risk sharing (a)
Liabilities recorded ................................................................... $ 269 $ 366
Maximum obligation .................................................................. $ 692 $ 1,392
Note payable to Ally Financial ............................................................ $ — $ 35
Vehicle repurchase obligations
Maximum obligations ................................................................. $18,807 $14,249
Fair value of guarantee ................................................................ $ 21 $ 46
(a) Represents liabilities (receivables) recorded and maximum obligations for agreements entered into prior to December 31, 2008.
Agreements entered into in 2010 and 2009 do not include residual support or risk sharing programs. In the year ended
December 31, 2010 favorable adjustments to our residual support and risk sharing liabilities of $0.6 billion were recorded in the
U.S. due to increases in estimated residual values.
Successor Predecessor
Year Ended
December 31,
2010
July 10, 2009
Through
December 31, 2009
January 1, 2009
Through
July 9, 2009
Year Ended
December 31,
2008
Marketing incentives and operating lease residual payments (a) ....... $1,111 $695 $601 $3,400
Exclusivity fee revenue ....................................... $ 99 $ 47 $ 52 $ 105
Royalty income ............................................. $ 15 $ 7 $ 8 $ 16
(a) Payments to Ally Financial related to U.S. marketing incentive and operating lease residual programs. Excludes payments to Ally
Financial related to the contractual exposure limit, as subsequently discussed.
Marketing Incentives and Operating Lease Residuals
As a marketing incentive, interest rate support, residual support, risk sharing, capitalized cost reduction and lease pull-ahead
programs are initiated as a way to lower customers’ monthly lease and retail contractual payments.
Under an interest rate support program, Ally Financial is paid an amount at the time of lease or retail contract origination to adjust
the interest rate in the retail contract or implicit in the lease below Ally Financial’s standard interest rate. Such marketing incentives
are referred to as rate support or subvention and the amount paid at contract origination represents the present value of the difference
between the customer’s contractual rate and Ally Financial’s standard rate for a given program.
Under a residual support program, a customer’s contract residual value is adjusted above Ally Financial’s standard residual value.
Ally Financial is reimbursed to the extent that sales proceeds are less than the customer’s contract residual value, limited to Ally
268 General Motors Company 2010 Annual Report