General Motors 2013 Annual Report Download - page 52

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
At December 31, 2013 and 2012 we had marketable securities of $7.2 billion and $3.8 billion classified as available-for sale and
$1.7 billion and $5.2 billion classified as trading. The potential decrease in fair value from a 50 basis point increase in interest rates
would be insignificant at December 31, 2013 and 2012.
Automotive Financing — GM Financial
Fluctuations in market interest rates can affect GM Financial’s secured and unsecured debt. GM Financial’s gross interest rate
spread, which is the difference between: (1) interest earned on finance receivables, other income and lease contracts; and (2) interest
paid, is affected by changes in interest rates as a result of GM Financial’s dependence upon the issuance of variable rate securities and
the incurrence of variable rate debt to fund purchases of finance receivables and leased vehicles.
Credit Facilities
Fixed interest rate receivables purchased by GM Financial are pledged to secure borrowings under its credit facilities. Amounts
borrowed under these credit facilities bear interest at variable rates that are subject to frequent adjustments to reflect prevailing market
interest rates. To protect the interest rate spread within each credit facility, GM Financial is contractually required to enter into interest
rate cap agreements in connection with borrowings under its credit facilities.
Securitizations
In GM Financial’s securitization transactions it can transfer fixed rate finance receivables to securitization trusts that, in turn, sell
either fixed rate or floating rate securities to investors. Derivative financial instruments, such as interest rate swaps and caps, are used
to manage the gross interest rate spread on the floating rate transactions.
GM Financial had interest rate swaps and caps in asset positions with notional amounts of $3.8 billion and $0.8 billion at
December 31, 2013 and 2012. GM Financial had interest rate swaps and caps in liability positions with notional amounts of $5.5
billion and $0.8 billion at December 31, 2013 and 2012. The fair value of these derivative financial instruments was insignificant.
Foreign Currency Exchange Rate Risk
GM Financial is exposed to foreign currency risk due to the translation and remeasurement of the results of certain international
operations, primarily those acquired from Ally Financial at various dates in 2013, into U.S. Dollars as part of the consolidation
process. Fluctuations in foreign currency exchange rates can therefore create volatility in the results of operations and may adversely
affect GM Financial’s financial condition.
In connection with the closing of certain acquisitions of Ally Financial’s international operations, GM Financial provided loans
denominated in foreign currencies (Euro, British Pound and Swedish Krona) to acquired entities that had an equivalent balance of
$1.7 billion at December 31, 2013. GM Financial purchased foreign exchange swaps to offset any valuation change in the loans due to
changes in foreign exchange rates. The fair value of these foreign exchange swaps was insignificant.
50
2013 ANNUAL REPORT