General Motors 2015 Annual Report Download - page 25

Table of Contents
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propulsion, urban mobility including ride and car sharing, active safety features and autonomous vehicles; grow our brands, particularly the Cadillac brand
in the U.S. and China and the Chevrolet brand globally; continue our growth in China; continue the growth of GM Financial into our full captive automotive
financing company; and deliver core operating efficiencies.
For the year ending December 31, 2016 we expect to continue to generate strong consolidated financial results including improved EBIT-adjusted and
EBIT-adjusted margins, EPS-diluted-adjusted of between $5.25 and $5.75 and automotive adjusted free cash flow of approximately $6 billion.
Our overall financial targets include expected improvement of forecasted consolidated EBIT-adjusted margins of 9% to 10% by early next decade;
expected total annual operational and functional cost savings of $5.5 billion by 2018 that will more than offset our incremental investments in brand
building, engineering and technology as we launch new products in 2016 and beyond; expected average adjusted automotive free cash flow of
approximately $6 billion to $7 billion from 2016 to 2018; expected consolidated ROIC of 20% plus; and execution of our capital allocation strategy as
described below.
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We analyze the results of our automotive business through our four geographically-based segments:
GMNA
Automotive industry volume continued to grow in North America primarily driven by the U.S. market. In 2015 U.S. industry light vehicle sales were 17.5
million units, up 1.0 million units from 2014. Based on our current cost structure and variable profit margins, we estimate GMNA’s breakeven point at the
U.S. industry level to be in the range of 10.0 - 11.0 million units.
In the year ended December 31, 2015 our U.S. vehicle sales totaled 3.1 million units for a U.S. market share of 17.3%, representing a decrease of 0.1
percentage points compared to 2014. The decrease in our U.S. market share was primarily driven by lower fleet market share, partially offset by higher retail
market share. U.S. retail market share, which is generally more profitable than U.S. fleet market share, increased by 0.4 percentage points, primarily driven by
Chevrolet and GMC.
We achieved EBIT-adjusted margins of 10.3% during 2015. EBIT-adjusted margin improvements were impacted by favorable volumes and mix and
favorable cost performance including materials, logistics and recall-related charges. Refer to the "GM North America" section of the MD&A for additional
information on recall activity. We expect to sustain an EBIT-adjusted margin of 10% in 2016 due to a consistent to slight increase in U.S. industry light
vehicle sales, key product launches, continued cost performance and growth of adjacent businesses.
In November 2015 we entered into a collectively bargained labor agreement with the UAW. The agreement, which has a term of four years, covers the
wages, hours, benefits and other terms and conditions of employment for our UAW represented employees. The key terms and provisions of the agreement
are:
• Lump sum payments to eligible U.S. hourly employees with seniority of $8,000 and eligible temporary employees of $2,000 were paid in December
2015 totaling $0.4 billion.
• Two lump sum payments equivalent to 4% of qualified earnings will be paid to eligible traditional and in-progression employees in September 2016
and 2018 totaling $0.2 billion. Additional lump sum payments of $1,000 will be paid annually to eligible employees with seniority in June 2016
through June 2019 totaling $0.2 billion. All of these lump sum payments are being amortized over the term of the agreement.
• An annual payment of $500 will be paid each December through 2018 to eligible U.S. hourly employees with seniority upon attainment of specific
U.S. vehicle quality targets.
• A $500 payment was made to each retiree in December 2015 totaling $0.1 billion.
• An increase in base wages was made for all eligible employees with seniority as well as temporary employees hired prior to the expiration of the
2011 agreement.
• Amended the Supplemental Unemployment Benefits Program, resulting in a $0.3 billion favorable adjustment in the three months ended December
31, 2015. Refer to Note 17 to our consolidated financial statements for additional details.
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