General Motors 2015 Annual Report Download - page 28

Table of Contents

In March 2015 management announced its plan to return all available free cash flow to stockholders while maintaining an investment-grade balance sheet.
Management's capital allocation framework includes a combined cash and marketable securities balance target of $20 billion and plans to reinvest in the
business at an average target ROIC rate of 20% or more. In connection with this plan we announced that our Board of Directors had authorized a program to
purchase up to $5 billion of our common stock before the end of 2016. In January 2016 we announced that our Board of Directors had authorized the
purchase of up to an additional $4 billion of our common stock (or an aggregate total of $9 billion) before the end of 2017. At February 1, 2016 we had
purchased 102 million shares of our outstanding common stock for $3.5 billion. Also, in January 2016 we announced an increase of our quarterly common
stock dividend to $0.38 per share effective in the first quarter of 2016.
In 2014 we created a compensation program to compensate accident victims as a result of the vehicles recalled under the Ignition Switch Recall. In the year
ended December 31, 2015 we increased our independently administered accrual for the Ignition Switch Recall compensation program by $195 million based
on the program's claims experience. The increase to the accrual was recorded in Automotive selling, general and administrative expense and was treated as an
adjustment for EBIT-adjusted reporting purposes. Total charges recorded since inception of the compensation program were $595 million at December 31,
2015. The Ignition Switch Recall has led to various inquiries, investigations, subpoenas, requests for information and complaints from the U.S. Attorney's
Office for the Southern District of New York, Congress, the SEC, Transport Canada and 50 state attorneys general. In addition these and other recalls have
resulted in a number of claims and lawsuits. We recorded charges of approximately $1.6 billion in Automotive selling, general and administrative expense as
a result of the DPA financial penalty and the settlements of the Shareholder Class Action, the multidistrict litigation and other litigation associated with the
recalls. These charges were treated as adjustments for EBIT-adjusted reporting purposes in the year ended December 31, 2015. Refer to Note 15 to our
consolidated financial statements for additional information. Such lawsuits and investigations could in the future result in the imposition of material
damages, fines, civil consent orders, civil and criminal penalties or other remedies. There can be no assurance as to how the resulting consequences, if any,
may impact our business, reputation, consolidated financial position, results of operations or cash flows. The total amount accrued at December 31, 2015
represents our best estimate with regard to such claims and lawsuits. However we are currently unable to estimate either a high end of the range for these
claims and lawsuits or a range of possible loss for the remaining matters because they involve significant uncertainties. The resolution of these matters could
have a material adverse effect on our financial position, results of operations or cash flows.
In the three months ended December 31, 2015 we concluded it was more likely than not that our future earnings in certain jurisdictions in GME will be
sufficient to realize the deferred tax assets in these jurisdictions so that a full valuation allowance is no longer needed. Accordingly we reversed GME
valuation allowances of $3.9 billion and recorded an income tax benefit. As a result we have a negative effective income tax rate for the year ended December
31, 2015. Refer to Note 16 to our consolidated financial statements for additional information on the reversal of deferred tax asset valuation allowances.
Based on defect information reports filed with NHTSA by Takata, we are currently conducting recalls for certain Takata air bag inflators used in some of
our prior model year vehicles. We are continuing to assess the situation. Further recalls, if any, that may be required to remediate Takata air bag inflators in
our vehicles could have a material impact on our financial position, results of operations or cash flows. Refer to Item 1A. Risk Factors for additional
information.

GM Financial is expanding its leasing, near prime and prime lending programs in North America and anticipates that leasing and prime lending will
become an increasing percentage of the originations and retail portfolio balance over time. In the year ended December 31, 2015 GM Financial's revenue
consisted of 46% retail finance charge income, 6% commercial finance charge income and 43% leased vehicle income. We believe that offering a
comprehensive suite of financing products will generate incremental sales of our vehicles, drive incremental GM Financial earnings and help support our
sales throughout various economic cycles. In the year ended December 31, 2015 GM Financial's retail penetration in North America grew to approximately
30%, up from approximately 10% in 2014.
On January 2, 2015 GM Financial completed its acquisition of an equity interest in SAIC-GMAC in China for $0.9 billion. As a result GM indirectly owns
45% of SAIC-GMAC.
In February 2015 GM Financial became our exclusive U.S. lease provider for Buick-GMC dealers. Our exclusive leasing arrangements with GM Financial
extended to Cadillac dealers in March 2015 and to Chevrolet dealers in April 2015. As a result GM Financial now provides substantially all of the financing
on vehicles leased by our customers. In the three months ended September 30, 2015 GM Financial began accepting deposits from retail banking customers in
Germany.
25