General Motors 2014 Annual Report Download - page 33

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GENERAL MOTORS COMPANY AND SUBSIDIARIES
We expect the European automotive industry to continue to moderately improve and we expect to be profitable in GME in 2016.
In the year ending December 31, 2015 we expect an increase in EBIT-adjusted and EBIT-adjusted margins due primarily to:
(1) lower restructuring costs; partially offset by (2) higher engineering, marketing and depreciation and amortization cost.
GMIO
We are addressing many of the challenges in our GMIO operations and continue to strategically assess the manner in which we
operate in certain countries within GMIO. In 2013 we announced the withdrawal of the Chevrolet brand from Western and Central
Europe and the ceasing of manufacturing and significant reduction of engineering operations in Australia by 2017 and incurred
impairment and other charges in 2013 and 2014. We continue to execute these plans and within the financial impact that we projected.
As we continue to assess our performance throughout the region, additional restructuring and rationalization actions may be required
and may be material.
In the three months ended December 31, 2014 due to a significant decrease in domestic sales driven by political unrest and a lack of
consumer confidence domestically as well as ongoing weakness and trade challenges in several export markets we performed a
recoverability test of our real and personal property assets in our Thailand operations. As a result we recorded impairment charges of
$0.2 billion in Automotive cost of sales which was treated as an adjustment for EBIT-adjusted reporting purposes.
To address the significant industry, market share, pricing and foreign exchange pressures in the region, we continue to focus on
product portfolio enhancements, manufacturing footprint rationalization, increased local sourcing of parts, cost structure reductions, as
well as brand and dealer network improvements which we expect to favorably impact the region over the medium term. However,
with the significant reduction in wholesale volumes and forward pricing pressures, we tested certain long-lived assets for impairment
and additional testing may occur in the near term. Determining whether long-lived assets need to be tested for impairment, whether
recorded amounts are recoverable and the estimate of impairment and other charges, if any, is subject to significant uncertainty and
highly dependent on finalization of our strategic assessments.
In the year ending December 31, 2015 we expect an increase in EBIT-adjusted and EBIT-adjusted margins due primarily to:
(1) improved profitability at our China JVs; (2) a flat to slight increase in industry vehicle sales; (3) improved product mix in the
Middle East; and (4) improved cost performance; partially offset by (5) higher restructuring costs.
In China we are expecting an increase in industry vehicle sales with a modest increase in market share coupled with new vehicle
launches and a full year of the 2014 launches.
GMSA
In the three months ended March 31, 2014 we recorded devaluation charges of $0.4 billion related to a change in the exchange rate
we use for remeasuring our Venezuelan subsidiaries’ non-U.S. Dollar denominated monetary assets and liabilities from the Venezuela
official exchange rate to the rate determined by an auction process conducted by Venezuela’s Complementary System of Foreign
Currency Administration (SICAD I). In addition to currency controls already in place the Venezuelan government announced pricing
controls that, taken with other initiatives, require us to closely monitor and consider our ability to maintain a controlling financial
interest in our Venezuelan subsidiaries. Refer to the “GM South America” section of MD&A for additional information.
In the year ended December 31, 2014 we recorded a net gain on extinguishment of debt of $0.2 billion primarily related to
prepayment of unsecured debt in Brazil.
Based on the results of our annual goodwill impairment tests we recorded goodwill impairment charges of $0.1 billion in the year
ended December 31, 2014 which was treated as an adjustment for EBIT-adjusted reporting purposes.
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