General Motors 2015 Annual Report Download - page 26

Table of Contents
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• Cash severance incentive programs to qualified U.S. hourly production employees of approximately $0.3 billion based on employee interest,
eligibility and management approval. The restructuring charges will be recorded in 2016 upon acceptance.
GME
Automotive industry sales to retail and fleet customers began to improve in late 2013. As a result of moderate economic growth across Europe (excluding
Russia) this trend continued in the year ended December 31, 2015 with industry sales to retail and fleet customers of 17.7 million vehicles representing a
9.3% increase compared to 2014. In Russia industry sales to retail and fleet customers decreased 36.1% to 1.6 million vehicles compared to the
corresponding period in 2014.
Our European operations are benefiting from this trend and, despite seasonally weak vehicle sales in the second half of 2015 compared to the first half of
2015, continue to show signs of improvement underscored by further improvement in our Opel and Vauxhall market share in the year ended December 31,
2015, which builds on our market share increases in 2013 and 2014.
We continue to implement various strategic actions to strengthen our operations and increase our competitiveness. The key actions include investments in
our product portfolio including the recently launched next generation Opel Astra and Corsa, a revised brand strategy and reducing material, development and
production costs, including restructuring activities. The success of these actions will depend on a combination of our ability to execute and external factors
which are outside of our control.
Economic and market conditions in Russia remain and are expected to continue to be very challenging for the foreseeable future. In addition we do not
have appropriate localization levels for key vehicles built in Russia and we would need to make significant future capital investments in order to improve our
localization levels so that our products are competitive in the Russian market. As a result of these conditions we determined that our Russia business model
was not sustainable over the long term. In 2015 we ceased manufacturing, eliminated Opel brand distribution and minimized Chevrolet brand distribution in
Russia. Refer to Note 17 to our consolidated financial statements for additional information related to the impact of the change in our business model in
Russia.
In addition to the impact of the restructuring of our Russia business model, we anticipate headwinds from aggressive industry pricing along with increased
costs associated with depreciation, amortization, marketing, adverse foreign currency impact and increased costs associated with our new product launches.
We anticipate these headwinds will be offset by continued industry recovery, the full benefits of our recent launches of the Astra and Corsa and material cost
optimization. As a result we intend to break even in GME in 2016.
The German Ministry of Transportation is requesting the participation of a number of automotive manufacturers, including our German subsidiary, in
discussions on emission controls issues and has requested a written response from our subsidiary on the subject. This request may lead to increased testing
and re-testing of our vehicles and analysis of their emissions control systems, which could lead to increased costs, penalties, negative publicity or
reputational impact, and additional vehicles may be subject to recall activity if regulators determine that emission levels and required regulatory compliance
should be based on either a wider spectrum of driving conditions for future testing parameters or stricter or novel interpretations and consequent enforcement
of existing requirements. No assurance can be given that the ultimate outcome of any potential investigations or increased testing resulting from this scrutiny
would not materially and adversely affect us. Refer to Item 1A. Risk Factors for additional information.
GMIO
In the year ended December 31, 2015 GMIO operated in a volatile and challenging economic environment.
In China we are experiencing a moderation of industry growth and pricing pressures higher than we initially anticipated due primarily to macroeconomic
volatility, softening consumer demand particularly in the commercial vehicle segment, increasing competition and a complex regulatory environment. This
has resulted in 4.2% growth in industry sales to 25.1 million units in 2015. Despite these pressures, we achieved record wholesale volumes of 3.7 million
units with market share of 14.9% in the year ended December 31, 2015, up 0.2 percentage points compared to 2014. The increase in our market share was
primarily driven by our successful launches in our key growth segments of SUVs, multipurpose vehicles and luxury vehicles including the Buick Envision
and Baojun 560 and 730. Baojun 560 became the second best-selling SUV in China two months after its launch and the Baojun 730 has been the market
leader in its segment since launching in August 2014. We opened two new facilities in 2015 and will be adding a third Jinqiao Shanghai plant in 2016
consistent with our localization strategy.
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