General Motors 2012 Annual Report Download - page 66

GENERAL MOTORS COMPANY AND SUBSIDIARIES
• Significant changes in the competitive environment, including the effect of competition and excess manufacturing capacity in
our markets, on our pricing policies or use of incentives and the introduction of new and improved vehicle models by our
competitors;
• Significant changes in economic, political and market conditions in China, including the effect of competition from new
market entrants, on our vehicle sales and market position in China;
• Changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and
similar organizations, including where such actions may affect the production, licensing, distribution or sale of our products,
the cost thereof or applicable tax rates;
• Costs and risks associated with litigation;
• Significant increases in our pension expense or projected pension contributions resulting from changes in the value of plan
assets, the discount rate applied to value the pension liabilities or other assumption changes; and
• Changes in accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions
underlying the estimates, which could have an effect on earnings.
We caution readers not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly or
otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors that affect the
subject of these statements, except where we are expressly required to do so by law.
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Quantitative and Qualitative Disclosures About Market Risk
Automotive
We enter into a variety of foreign currency exchange and commodity forward contracts and options to manage exposures arising
from market risks resulting from changes in certain foreign currency exchange rates and commodity prices. We do not enter into
derivative transactions for speculative purposes.
The overall financial risk management program is under the responsibility of the Risk Management Committee which reviews and,
where appropriate, approves strategies to be pursued to mitigate these risks. The Risk Management Committee comprises members of
our management and functions under the oversight of the Audit Committee, a committee of the Board of Directors. The Audit
Committee assists and guides the Board of Directors in its oversight of our financial and risk management strategies. A risk
management control framework is utilized to monitor the strategies, risks and related hedge positions in accordance with the policies
and procedures approved by the Risk Management Committee. Our risk management policy intends to protect against risk arising
from extreme adverse market movements on our key exposures.
Further information on our exposure to market risk is included in Note 19 to our consolidated financial statements.
The following analyses provide quantitative information regarding exposure to foreign currency exchange rate risk, interest rate
risk and equity price risk. Sensitivity analysis is used to measure the potential loss in the fair value of financial instruments with
exposure to market risk. The models used assume instantaneous, parallel shifts in exchange rates and interest rate yield curves. For
options and other instruments with nonlinear returns, models appropriate to these types of instruments are utilized to determine the
effect of market shifts. There are certain shortcomings inherent in the sensitivity analyses presented, due primarily to the assumption
that interest rates change in a parallel fashion and that spot exchange rates change instantaneously. In addition the analyses are unable
to reflect the complex market reactions that normally would arise from the market shifts modeled and do not contemplate the effects
General Motors Company 2012 ANNUAL REPORT 63