General Motors 2012 Annual Report Download - page 25

GENERAL MOTORS COMPANY AND SUBSIDIARIES
factors which are outside of our control. We believe it is likely that adverse economic conditions, and their effect on the European
automotive industry will not improve significantly in the short-term and we expect to continue to incur losses in the region as a result. During
the fourth quarter of 2012, notwithstanding the above described actions, GME performed below expectations relative to the key operating
metrics of forecasted revenues, market share, and variable profit established in mid-2012. Further, our industry outlook deteriorated, and our
forecast of 2013 cash flows declined. This triggered a long-lived asset impairment analysis.
We performed a recoverability test of the GME asset group by weighting various undiscounted cash flow scenarios. The weighting
of the projected cash flows considers the uncertainty in our ability to execute the actions contemplated in our plan, which, in part, are
dependent upon actions and factors outside our control. Our test concluded that the GME asset group was not recoverable as the
resulting undiscounted cash flows were less than their carrying amount. Accordingly, we estimated the fair value of the GME long-
lived assets and adjusted the carrying amounts and recorded impairment charges of $5.5 billion. As we have reduced the carrying
amount of these assets by $5.5 billion, depreciation and amortization expense will be reduced in future periods, including
approximately $0.6 billion in the year ending December 31, 2013, which may result in an increase in our reported EBIT-adjusted in
GME in subsequent periods. Refer to Notes 11 and 13 to our consolidated financial statements for additional information on our real
and personal property and intangible asset impairment charges.
Alliance with PSA
In February 2012 we entered into an agreement with PSA to create a long-term and broad-scale global strategic alliance that is
expected to leverage the combined strengths and capabilities of the two companies, contribute to our profitability and improve our
competitiveness in Europe. In March 2012 we acquired a seven percent equity stake in PSA for $0.4 billion; against which we
recorded impairment charges of $0.2 billion in the three months ended December 31, 2012. In June 2012 we entered into a long-term
exclusive service agreement with Gefco, a wholly-owned subsidiary of PSA, to provide logistics services in Europe beginning in
2013. In December 2012 PSA sold its controlling interest in Gefco to an unrelated third-party, however the sale has no impact to the
long-term exclusive service agreement. In December 2012 we entered into a product development agreement to jointly develop and
share certain vehicle platforms, components and modules; and we also signed a definitive agreement to create a joint purchasing
organization in Europe supported by a purchasing joint venture for the sourcing of commodities, components and other goods and
services based on the combined purchasing reach of both companies to realize purchasing synergies.
Purchase of Common Stock
In December 2012 we purchased 200 million shares of our common stock from the UST for total consideration of $5.5 billion. We
recorded a charge of $0.4 billion in Other automotive expenses, net, which represents a premium to the prior day’s closing price. The
UST agreed to irrevocably waive certain of its rights under the stockholders agreement by and among us and certain other
stockholders and covenants under the UST Credit Agreement as part of the transaction to purchase our common stock. These rights
and covenants included, among other items, a reduction in certain reporting requirements and a release from the vitality commitment
which contained certain manufacturing volume requirements. Additionally, the UST publicly announced its intention to sell the
remainder of its holdings of our common stock within 12 to 15 months after the execution of this transaction subject to market
conditions.
UST Invested Capital
UST invested capital totaled $49.5 billion, representing the cumulative amount of cash received by Old GM from the UST under
the UST Loan Agreement and the debtor-in-possession credit agreement, excluding $0.4 billion which the UST loaned to Old GM
under the warranty program and which was repaid on July 10, 2009. This balance also did not include amounts advanced under the
UST Ally Financial Loan as the UST exercised its option to convert this loan into Ally Financial preferred membership interests
previously held by Old GM in May 2009. At December 31, 2012 the UST had received cumulative proceeds of $28.6 billion from
debt repayments, interest payments, Series A Preferred Stock dividends, sales of our common stock and Series A Preferred Stock
redemption. The UST’s invested capital less proceeds received totals $20.9 billion at December 31, 2012.
General Motors Company 2012 ANNUAL REPORT22