General Motors 2010 Annual Report Download - page 272

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Beginning in 2009 under the Amended Financing Agreement, Old GM agreed to pro-rate the exclusivity fee in the U.S. and Canada
under certain circumstances if incentives were offered through a third party financing source. The international exclusivity fee
arrangement remains unchanged and the dealer exclusivity fee was terminated.
In December 2008 Old GM and FIM Holdings entered into the Ally Financial Exchange Agreement with Ally Financial. Pursuant
to the Ally Financial Exchange Agreement, Old GM and FIM Holdings exchanged their respective amounts funded under the Ally
Financial Participation Agreement for 79,368 Class B Common Membership Interests and 82,608 Class A Common Membership
Interests. As the carrying amount of the amount funded under the Ally Financial Participation Agreement approximated fair value,
Old GM did not recognize a gain or loss on the exchange.
Contractual Exposure Limit
An agreement between Ally Financial and Old GM limited certain unsecured obligations arising from service agreements to Ally
Financial in the U.S. to $1.5 billion. In accordance with the Amended Financing Agreement, Old GM and Ally Financial agreed to
increase the probable potential unsecured exposure limit from $1.5 billion in the United States to $2.1 billion globally. Ally
Financial’s maximum potential unsecured exposure to us cannot exceed $4.1 billion globally. Old GM and Ally Financial also agreed
to reduce the global unsecured obligation limit from $2.1 billion to $1.5 billion at December 31, 2010. Old GM and Ally Financial
agreed that the sum of the maximum unsecured and committed secured exposures at December 31, 2010 will not exceed the greater of
$3.0 billion or 15% of Ally Financial’s capital.
Vehicle Repurchase Obligations
In May 2009 Old GM and Ally Financial agreed to expand Old GM’s repurchase obligations for Ally Financial financed inventory
at certain dealers in Europe, Asia, Brazil and Mexico. In November 2008 Old GM and Ally Financial agreed to expand repurchase
obligations for Ally Financial financed inventory at certain dealers in the United States and Canada. The current agreement with Ally
Financial requires the repurchase of Ally Financial financed inventory invoiced to dealers after September 1, 2008, with limited
exclusions, in the event of a qualifying voluntary or involuntary termination of the dealer’s sales and service agreement. Repurchase
obligations exclude vehicles which are damaged, have excessive mileage or have been altered. The repurchase obligation ended in
August 2010 for vehicles invoiced through August 2009, ends in August 2011 for vehicles invoiced through August 2010 and ends
August 2012 for vehicles invoiced through August 2011.
The maximum potential amount of future payments required to be made to Ally Financial under this guarantee is based on the
repurchase value of total eligible vehicles financed by Ally Financial in dealer stock. If vehicles are required to be repurchased under
this arrangement, the total exposure would be reduced to the extent vehicles are able to be resold to another dealer. The fair value of
the guarantee, which considers the likelihood of dealers terminating and estimated loss exposure for ultimate disposition of vehicles,
was recorded as a reduction of revenue.
Automotive Retail Leases
In November 2006 Ally Financial transferred automotive retail leases to Old GM, along with related debt and other assets. Ally
Financial retained an investment in a note, which is secured by the automotive retail leases. Ally Financial continues to service the
portfolio of automotive retail leases and related debt and receives a servicing fee. Ally Financial is obligated, as servicer, to
repurchase any equipment on operating leases that are in breach of any of the covenants in the securitization agreements. In addition,
in a number of the transactions securitizing the equipment on operating leases, the trusts issued one or more series of floating rate debt
obligations and entered into derivative transactions to eliminate the market risk associated with funding the fixed payment lease assets
with floating interest rate debt. To facilitate these securitization transactions, Ally Financial entered into secondary derivative
transactions with the primary derivative counterparties, essentially offsetting the primary derivatives. As part of the transfer, Old GM
assumed the rights and obligations of the primary derivative while Ally Financial retained the secondary, leaving both companies
270 General Motors Company 2010 Annual Report