General Motors 2014 Annual Report Download - page 30

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
• Anticipated adjusted automotive free cash flow will be relatively flat in 2015 compared to 2014;
• Forecasted consolidated EBIT-adjusted margins of 9% to 10% by the 2020s;
• Expected EBIT-adjusted margins of 10% in General Motors North America (GMNA) in 2016, which we anticipate will be
driven by product launches, disciplined pricing and a focus on fixed costs;
• An anticipated return to profitability in GME in 2016 driven by investments in our product portfolio, a revised brand strategy
and reducing material, development and production costs assuming Europe does not suffer another recession;
• Expected continued improvement of our results in GMIO (excluding the results of our China joint ventures (China JVs))
through our emerging market product portfolio, improvements in brand strategy and dealer networks, cost structure and
sourcing over the medium term;
• Continued strong net income margins at our China JVs, with plans to invest approximately $14 billion in China through 2018
and increase vehicle sales volumes by nearly 40% by 2018;
• Expected continued improvement of our core operations in General Motors South America (GMSA) through product launches
and material and logistics optimization, with a long-term objective of single digit EBIT-adjusted margins; and
• An anticipated increase of GM Financial’s support of the sale of new GM vehicles around the world through a comprehensive
suite of financing products, including continuing on the path towards full global captive capability.
Automotive Summary and Outlook
Our consolidated Net income decreased from $5.3 billion to $4.0 billion. Notwithstanding this decrease we had strong financial
results in 2014 excluding the impact of recall campaign and courtesy transportation charges. Performance of GMNA met our
expectations, while GME and GMIO outperformed our expectations. However, we experienced weaker performance in GMSA due to
the challenging environment in Venezuela, Brazil and Argentina.
As more fully described in the “GM North America” section of MD&A we recorded charges of approximately $2.9 billion in
Automotive cost of sales relating to recall campaigns and courtesy transportation in the year ended December 31, 2014, of which over
86% was recorded in GMNA.
In the three months ended June 30, 2014 we announced the creation of a compensation program (the Program) to compensate
accident victims who died or suffered physical injury (or their families) as a result of a faulty ignition switch related to the 2.6 million
vehicles recalled under the Ignition Switch Recall. Refer to the “GM North America” section of MD&A for additional information on
the Ignition Switch Recall. It is important to our company that we reach everyone through this Program who has been impacted. The
Program is being administered by an independent program administrator. The independent administrator has established a protocol
that defines the eligibility requirements to participate in the Program. There is no cap on the amount of payments that can be made to
claimants under the Program.
In the three months ended June 30, 2014 we recorded $0.4 billion in Automotive selling, general and administrative expense in
Corporate which represents our best estimate of amounts that may be paid under the Program. The amount was treated as an
adjustment for EBIT-adjusted reporting purposes. However, it is reasonably possible that the liability could exceed our recorded
amount by approximately $0.2 billion. The most significant estimates affecting the amount recorded include the number of
participants that have eligible claims related to death and physical injury, which also contemplates the severity of injury, the length of
hospital stays and related compensation amounts and the number of people who actually elect to participate in the Program. Our
estimate is subject to significant uncertainties, as programs of this nature are highly unusual and each eligible claim will have a unique
underlying fact pattern. While we do not anticipate material changes to our current estimate, it is possible that material changes could
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