General Motors 2012 Annual Report Download - page 105

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
SGMS is a joint venture established in November 2011 by SAIC (51%) and us (49%) to engage in the sales of the imported Buick,
Chevrolet and Cadillac brands and the sales of automobiles manufactured by SGM.
In February 2010 we sold a 1% ownership interest in SGM to SAIC-HK, reducing our ownership interest to 49%. The sale of the
1% ownership interest to SAIC was predicated on our ability to work with SAIC to obtain a $400 million line of credit from a
commercial bank to us. We also received a call option to repurchase the 1% which was contingently exercisable based on events
which we did not unilaterally control. As part of the loan arrangement SAIC provided a commitment whereby, in the event of default,
SAIC would purchase the ownership interest in SGM that we pledged as collateral for the loan. We recorded an insignificant gain on
the transaction.
In September 2012 we repurchased the 1% interest in SGM for a total consideration of $119 million, increasing our ownership
interest in SGM to 50%. The transaction was accounted for by applying the equity method of accounting. The consideration exceeded
our proportionate share of the 1% interest in SGM net assets by $82 million, which consists of plant, property and equipment,
intangible assets and goodwill of $8 million, $36 million and $38 million.
In November 2010 we purchased an additional 10% interest in SGMW from the Liuzhou Wuling Motors Co., Ltd. and Liuzhou
Mini Vehicles Factory, collectively the Wuling Group, for cash of $52 million plus an agreement to provide technical services to the
Wuling Group for a period of three years. As a result of this transaction we own 44%, SAIC owns 50.1% and certain Liuzhou
investors own 5.9% of the outstanding stock of SGMW.
Sale of New Delphi
In March 2011 we sold our Class A Membership Interests in Delphi Automotive LLP (New Delphi) to New Delphi for $3.8 billion.
The Class A Membership Interests sold represented 100% of our direct and indirect interests in New Delphi and 100% of New
Delphi’s Class A Membership Interests issued and outstanding. The sale terminated any direct and indirect obligation to loan New
Delphi up to $500 million under a term loan facility established in October 2009 when New Delphi was created and the Class A
Membership Interests were issued. New Delphi had not borrowed under this loan facility. In March 2011 we recorded a gain of $1.6
billion related to the sale in Equity income, net of tax and gain on investments. Our existing supply contracts with New Delphi were
not affected by this transaction.
Investment in HKJV
In March 2011 the fair value of our investment in HKJV was determined to be less than its carrying amount. The loss in value was
determined to be other-than-temporary; therefore, we recorded an impairment charge of $39 million in the three months ended
March 31, 2011. In addition we recorded other charges totaling $67 million related to our investment in the HKJV.
We provided SAIC-HK, a 50% equity holder in HKJV through September 1, 2012, an option to not participate in future capital
injections, which would otherwise be required under certain circumstances. The related option liability was $88 million and total
unrealized losses were $64 million at December 31, 2011. A Monte Carlo option-pricing model was used to estimate the fair value of
the option liability which is a Level 3 measure. The key inputs into the option pricing model were the expected volatility, risk-free
rate, expected term, fair value of HKJV and expected amounts of the future funding requirement. The fair value estimate of the option
was most sensitive to the fair value of HKJV, which was unobservable. A discounted cash flow methodology was utilized to estimate
the fair value of HKJV.
In September 2012 SAIC-HK exercised its option to not participate in future capital injections to HKJV. As a consequence of the
decision to not participate in the capital injections and our settlement of a promissory note, SAIC-HK’s interest in HKJV was diluted
from 50% to 14% and we obtained control of HKJV with an 86% interest. We consolidated the assets and liabilities and the results of
operations of HKJV beginning on September 1, 2012. Refer to Note 4 for further detail regarding the acquisition.
General Motors Company 2012 ANNUAL REPORT102