General Motors 2012 Annual Report Download - page 168

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Under a capitalized cost reduction program, we pay an amount at the time of lease or retail contract origination to reduce the
principal amount implicit in the lease or retail contract below the standard manufacturers’ suggested retail price.
Under a lease pull-ahead program, a customer is encouraged to terminate their lease early and buy or lease a new GM vehicle. Ally
Financial waives the customer’s remaining payment obligation under their current lease and Ally Financial is compensated for any
foregone revenue from the waived payments. Since these programs generally accelerate the resale of the vehicle, the proceeds are
typically higher than if the vehicle had been sold at contract maturity. The reimbursement to Ally Financial for the foregone payments
is reduced by the amount of this benefit.
Exclusivity Arrangements
We have entered into exclusivity agreements with Ally Financial whereby: (1) for a two-year period, retail financing incentive
programs can be offered through a third-party financing source under certain specified circumstances, and after such two-year period
beginning in January 2011 through December 2013 any such incentive programs can be offered on a graduated basis through third-
parties on a non-exclusive basis, or if Ally Financial matches the rates offered by such third-party on a side-by-side basis with Ally
Financial; (2) Ally Financial has no obligation to provide financing; and (3) Ally Financial has no targets against which it could be
assessed penalties. After December 31, 2013 we will no longer have any restrictions or limitations on our ability to offer retail
financing incentive programs through any third-party financing source as a result of agreements with Ally Financial.
Contractual Exposure Limit
We have an agreement with Ally Financial that limits certain unsecured obligations arising from service agreements to Ally
Financial to $1.5 billion and limits the sum of maximum unsecured exposure and maximum secured exposure to the greater of $3.0
billion or 15% of Ally Financial’s capital from and after December 30, 2010.
Vehicle Repurchase Obligations
Our agreement with Ally Financial requires the repurchase of Ally Financial financed inventory invoiced to dealers with limited
exclusions, in the event of a qualifying voluntary or involuntary termination of the dealer’s sales and service agreement. The
repurchase obligation ended in August 2010 for vehicles invoiced through August 2009, ended in August 2011 for vehicles invoiced
through August 2010, ended in August 2012 for vehicles invoiced through August 2011, ends in August 2013 for vehicles invoiced
through August 2012 and ends in August 2014 for vehicles invoiced through August 2013.
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.
General Motors Company 2012 ANNUAL REPORT 165