General Motors 2013 Annual Report Download - page 30

GENERAL MOTORS COMPANY AND SUBSIDIARIES
demand and successful recent vehicle launches such as the Buick Encore, Cadillac ATS, Chevrolet Silverado, Chevrolet Spark, and
GMC Sierra; and (3) favorable vehicle mix related to improving market segments containing higher revenue vehicles including
crossovers and trucks.
In the year ended December 31, 2012 Total net sales and revenue increased due primarily to: (1) increased wholesale volumes due
to increased industry demand and successful recent vehicle launches such as the Buick Verano, Cadillac ATS, Cadillac XTS,
Chevrolet Sonic and Chevrolet Spark; (2) favorable vehicle mix due to increases in Cadillac ATS, Cadillac XTS, Chevrolet Silverado
and GMC Sierra; and (3) favorable vehicle pricing related to recent vehicle launches such as Chevrolet Malibu, Chevrolet Traverse,
GMC Acadia and Buick Enclave; partially offset by (4) Other of $1.1 billion due primarily to reduction in favorable lease residual
adjustments of $0.5 billion; and unfavorable net foreign currency effect of $0.2 billion due to the weakening of the Canadian Dollar
(CAD) and Mexican Peso against the U.S. Dollar.
GMNA EBIT-Adjusted
The most significant factors which influence GMNA’s profitability are industry volume (primarily U.S. seasonally adjusted annual
rate) and market share. While not as significant as industry volume and market share, another factor affecting profitability is the
relative mix of vehicles (cars, trucks, crossovers) sold. Variable profit is a key indicator of product profitability. Variable profit is
defined as revenue less material cost, freight, the variable component of manufacturing expense, and policy and warranty expense.
Vehicles with higher selling prices generally have higher variable profit. Trucks sold in the U.S. currently have a variable profit of
approximately 160% of our portfolio on a weighted-average basis. Crossover vehicles’ variable profits are in line with the overall
portfolio on a weighted-average basis, and cars are approximately 50% of the portfolio on a weighted-average basis.
In the year ended December 31, 2013 EBIT-adjusted increased due primarily to: (1) favorable vehicle pricing; and (2) increased
wholesale volumes; partially offset by (3) unfavorable Other of $1.4 billion primarily due to increased material and freight costs
including new launches of $1.1 billion; increased manufacturing expense, including new launches, of $0.3 billion; increased
engineering expense of $0.3 billion; and increased depreciation and amortization expense of $0.2 billion, partially offset by a
reduction in unfavorable warranty and policy adjustments of $0.6 billion.
In the year ended December 31, 2012 EBIT-adjusted decreased due primarily to: (1) unfavorable vehicle mix due to increase in
lower margin vehicles; and (2) Other of $1.3 billion due primarily to decreased U.S. pension income of $0.8 billion due to
December 31, 2011 plan remeasurements; increased manufacturing expense, including new launches, of $0.6 billion; reduction in
favorable lease residual adjustments of $0.5 billion; and unfavorable policy and warranty adjustments of $0.2 billion; partially offset
by decreased engineering expense and other technology fees of $0.5 billion; and decreased material and freight costs of $0.4 billion.
These were partially offset by: (3) increased net wholesale volumes; and (4) favorable vehicle pricing effect.
GM Europe
During the second half of 2011 and continuing into 2013, the European automotive industry has been severely affected by high
unemployment and a lack of consumer confidence coupled with manufacturing overcapacity. European automotive industry sales to
retail and fleet customers were 19 million vehicles in the year ended December 31, 2013, representing a 1.1% decrease compared to
the corresponding period in 2012.
Outlook
We have formulated a plan and are implementing various actions to strengthen our operations and increase our competitiveness.
The key areas include investments in our product portfolio, a revised brand strategy, significant management changes, reducing
material, development and production costs, including restructuring activities. The success of our plan will depend on a combination
of our ability to execute the actions contemplated, as well as external 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 near-term;
however, we expect to break even in GME by mid-decade.
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2013 ANNUAL REPORT