General Motors 2015 Annual Report Download - page 49

Table of Contents
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The overall financial risk management program is under the responsibility of the Chief Financial Officer with support from the Financial Risk Council
which reviews and, where appropriate, approves strategies to be pursued to mitigate these risks. The Financial Risk Council comprises members of our
management and functions under the oversight of the Audit Committee and Finance Committee, committees of the Board of Directors. The Audit Committee
and Finance Committee assist and guide the Board of Directors in its oversight of our financial and risk management strategies. A risk management control
framework is utilized to monitor the strategies, risks and related hedge positions in accordance with the policies and procedures approved by the Financial
Risk Council. Our financial risk management policy is designed to protect against risk arising from extreme adverse market movements on our key exposures.
The following analyses provide quantitative information regarding exposure to foreign currency exchange rate risk and interest rate risk. Sensitivity
analysis is used to measure the potential loss in the fair value of financial instruments with exposure to market risk. The models used assume instantaneous,
parallel shifts in exchange rates and interest rate yield curves. For options and other instruments with nonlinear returns, models appropriate to these types of
instruments are utilized to determine the effect of market shifts. There are certain shortcomings inherent in the sensitivity analyses presented, due primarily to
the assumption that interest rates change in a parallel fashion and that spot exchange rates change instantaneously. In addition the analyses are unable to
reflect the complex market reactions that normally would arise from the market shifts modeled and do not contemplate the effects of correlations between
foreign currency pairs or offsetting long-short positions in currency pairs which may significantly reduce the potential loss in value.
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We have foreign currency exposures related to buying, selling and financing in currencies other than the functional currencies of our operations. At
December 31, 2015 our most significant foreign currency exposures were the Euro/British Pound, Euro/U.S. Dollar, U.S. Dollar/Mexican Peso, Euro/South
Korean Won, U.S. Dollar/South Korean Won and U.S. Dollar/CAD. Derivative instruments such as foreign currency forwards, swaps and options are used
primarily to hedge exposures with respect to forecasted revenues, costs and commitments denominated in foreign currencies. At December 31, 2015 such
contracts had remaining maturities of up to 20 months.
At December 31, 2015 and 2014 the net fair value liability of financial instruments with exposure to foreign currency risk was $0.8 billion and $0.9 billion.
These amounts are calculated utilizing a population of foreign currency exchange derivatives, embedded derivatives and foreign currency denominated debt
and exclude the offsetting effect of foreign currency cash, cash equivalents and other assets. The potential loss in fair value for such financial instruments
from a 10% adverse change in all quoted foreign currency exchange rates would have been $0.3 billion and $0.2 billion at December 31, 2015 and 2014.
We are exposed to foreign currency risk due to the translation and remeasurement of the results of certain international operations into U.S. Dollars as part
of the consolidation process. Fluctuations in foreign currency exchange rates can therefore create volatility in the results of operations and may adversely
affect our financial condition.
The following table summarizes the amounts of automotive foreign currency translation and transaction and remeasurement losses (dollars in millions):
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

Translation losses recorded in Accumulated other comprehensive loss $ 302
$ 19
Transaction and remeasurement losses recorded in earnings $ 813
$ 430
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We are subject to market risk from exposure to changes in interest rates related to certain financial instruments, primarily debt, capital lease obligations and
certain marketable securities. At December 31, 2015 and 2014 we did not have any interest rate swap positions to manage interest rate exposures in our
automotive operations. At December 31, 2015 and 2014 the fair value liability of debt and capital leases was $9.1 billion and $9.8 billion. The potential
increase in fair value resulting from a 10% decrease in quoted interest rates would have been $0.4 billion at December 31, 2015 and 2014.
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