General Motors 2011 Annual Report Download - page 156

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Product Liability
With respect to product liability claims involving our and Old GM’s products, we believe that any judgment against us for actual
damages will be adequately covered by our recorded accruals and, where applicable, excess liability insurance coverage. Although
punitive damages are claimed in some of these lawsuits, and such claims are inherently unpredictable, accruals incorporate historic
experience with these types of claims. Liabilities have been recorded for the expected cost of all known product liability claims plus
an estimate of the expected cost for product liability claims that have already been incurred and are expected to be filed in the future
for which we are self-insured. These amounts were recorded in Accrued liabilities.
We indemnify dealers for certain product liability related claims including products sold by Old GM. We monitor actual claims
experience and make periodic adjustments to our estimates. Based on both management’s judgment concerning the projected number
and value of both dealer indemnification obligations and product liability claims, we have applied actuarial methodologies and
estimated the liability. We expect our product liability reserve to rise in future periods as new claims arise from incidents subsequent
to July 9, 2009.
Other Litigation-Related Liability and Tax Administrative Matters
Various legal actions, governmental investigations, claims and proceedings are pending against us including matters arising out of
alleged product defects; 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, “Income Taxes” (indirect tax-related matters) and environmental matters.
With regard to the litigation matters discussed in the previous paragraph, reserves have been established for matters in which we
believe that losses are probable and can be reasonably estimated, the majority of which are associated with indirect tax-related matters
as well as various non-U.S. labor-related matters. Indirect tax-related matters are 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 $530 million to $730 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, 2011. 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. 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 Korea, our non-wholly owned
consolidated subsidiary, filed six separate group actions in the Incheon District Court in Incheon, Korea. The cases allege that GM
Korea failed to include certain allowances in its calculation of Ordinary Wages due under the Presidential Decree of the Korean Labor
Standards Act. Although GM Korea intends to vigorously defend the claims asserted, at December 31, 2011 we have an accrual of
130 billion Korean Won (equivalent to $113 million) in connection with these cases. The current estimate of the value of plaintiffs’
claims, if allowed in full, exceeds the accrual by 604 billion Korean Won (equivalent to $523 million) which represents the reasonably
possible liability exposure. Both the scope of claims asserted and GM Korea’s assessment of any or all of individual claim elements
may change.
On February 12, 2010 a claim was filed in the Ontario Superior Court of Justice against GMCL on behalf of a purported class of
over 200 former GMCL dealers (the Plaintiff Dealers) which had entered into wind-down agreements with GMCL. In May 2009, in
the context of the global restructuring of the business and the possibility that GMCL might be required to initiate insolvency
proceedings, GMCL offered the Plaintiff Dealers the wind-down agreements to assist with their exit from the GMCL dealer network
154 General Motors Company 2011 Annual Report