General Motors 2011 Annual Report Download - page 152

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 and revenue, 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. In the period January 1, 2009 through July 9, 2009, Old
GM recorded gains of $91 million related to derivatives originally entered into to hedge exposures that subsequently became probable
not to occur. These gains were recorded to Interest income and other non-operating income, net.
Gains (Losses) on Derivatives
The following table summarizes derivative gains (losses) recorded in earnings (dollars in millions):
Predecessor
January 1, 2009
Through
July 9, 2009
Foreign Currency
Automotive sales ................................................................................. $ (688)
Automotive cost of sales ........................................................................... (211)
Interestincomeandothernon-operatingincome,net..................................................... 91
Interest Rate Swap
Automotive interest expense ........................................................................ (38)
Commodity
Automotive cost of sales ........................................................................... (332)
Warrants
Interestincomeandothernon-operatingincome,net..................................................... 164
Net 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
canceled.
Cash Flow Hedges
Old GM previously designated certain financial instruments as cash flow hedges to manage its exposure to certain foreign currency
exchange risks.
150 General Motors Company 2011 Annual Report