e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
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[X] |
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2006, or |
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[ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to . |
Commission file number: 1-3754
GENERAL MOTORS ACCEPTANCE CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State or other
jurisdiction of
incorporation or organization)
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38-0572512
(I.R.S. Employer
Identification No.)
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200 Renaissance Center
P.O. Box 200 Detroit, Michigan
48265-2000
(Address of principal executive offices)
(Zip Code)
(313) 556-5000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer (as these terms are defined in Rule 12b-2 of the
Exchange Act).
Large accelerated
filer [ ] Accelerated
filer [ ] Non-accelerated
filer [X]
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2 of the
Exchange Act). Yes [ ] No [X]
As of May 8, 2006, there were outstanding 10 shares of the
issuers $.10 par value common stock.
Reduced Disclosure Format
The registrant meets the conditions set forth in General
Instruction H(1)(a) and (b) of Form 10-Q and is
therefore filing this Form with the reduced disclosure format.
INDEX
General Motors Acceptance Corporation
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* |
Item is omitted pursuant to the reduced disclosure format, as
set forth on the cover page of this filing. |
Condensed Consolidated Statement of Income (unaudited)
General Motors Acceptance Corporation
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Three months ended March 31, ($ in millions) |
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2006 |
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2005 |
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Revenue
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Consumer
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$2,566 |
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$2,519 |
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Commercial
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726 |
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623 |
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Loans held for sale
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481 |
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381 |
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Operating leases
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1,929 |
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1,665 |
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Total revenue
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5,702 |
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5,188 |
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Interest and discount expense
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3,562 |
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3,001 |
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Net revenue before provision for
credit losses
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2,140 |
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2,187 |
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Provision for credit losses
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135 |
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329 |
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Net revenue
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2,005 |
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1,858 |
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Insurance premiums and service
revenue earned
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1,010 |
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920 |
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Mortgage banking income
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584 |
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695 |
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Investment income
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258 |
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250 |
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Other income
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1,059 |
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976 |
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Total net revenue
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4,916 |
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4,699 |
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Expense
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Depreciation expense on operating
lease assets
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1,440 |
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1,270 |
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Compensation and benefits expense
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718 |
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811 |
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Insurance losses and loss
adjustment expenses
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597 |
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589 |
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Other operating expenses
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1,173 |
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926 |
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Total noninterest expense
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3,928 |
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3,596 |
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Income before income tax
expense
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988 |
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1,103 |
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Income tax expense
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316 |
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375 |
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Net income
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$672 |
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$728 |
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The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
3
Condensed Consolidated Balance Sheet (unaudited)
General Motors Acceptance Corporation
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March 31, |
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December 31, |
(in millions) |
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2006 |
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2005 |
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Assets
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Cash and cash equivalents
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$17,352 |
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$15,424 |
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Investment securities
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18,269 |
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18,207 |
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Loans held for sale
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18,171 |
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21,865 |
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Reporting segment held for sale
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19,030 |
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Finance receivables and loans, net
of unearned income
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Consumer
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139,395 |
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140,411 |
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Commercial
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44,770 |
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44,574 |
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Allowance for credit losses
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(2,911 |
) |
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(3,116 |
) |
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Total finance receivables and
loans, net
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181,254 |
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181,869 |
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Investment in operating leases, net
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32,567 |
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31,211 |
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Notes receivable from General Motors
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4,785 |
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4,565 |
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Mortgage servicing rights
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4,526 |
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4,015 |
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Premiums and other insurance
receivables
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2,116 |
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1,873 |
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Other assets
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24,765 |
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22,457 |
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Total assets
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$303,805 |
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$320,516 |
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Liabilities
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Debt
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Unsecured
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$121,654 |
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$133,269 |
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Secured
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124,287 |
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121,138 |
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Total debt
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245,941 |
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254,407 |
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Interest payable
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2,829 |
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3,057 |
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Liabilities related to reporting
segment held for sale
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10,941 |
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Unearned insurance premiums and
service revenue
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5,210 |
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5,054 |
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Reserves for insurance losses and
loss adjustment expenses
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2,725 |
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2,534 |
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Accrued expenses and other
liabilities
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20,032 |
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18,381 |
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Deferred income taxes
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4,529 |
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4,364 |
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Total liabilities
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281,266 |
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298,738 |
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Stockholders
equity
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Common stock, $.10 par value
(10,000 shares authorized, 10 shares issued and
outstanding) and paid-in capital
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5,760 |
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5,760 |
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Retained earnings
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15,849 |
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15,190 |
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Accumulated other comprehensive
income
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930 |
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828 |
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Total stockholders equity
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22,539 |
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21,778 |
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Total liabilities and
stockholders equity
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$303,805 |
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$320,516 |
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The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
4
Condensed Consolidated Statement of Changes in
Stockholders Equity (unaudited)
General Motors Acceptance Corporation
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Three months ended March 31, ($ in millions) |
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2006 |
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2005 |
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Common stock and paid-in
capital
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Balance at beginning of year and at
March 31,
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$5,760 |
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$5,760 |
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Retained earnings
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Balance at beginning of year
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15,190 |
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15,491 |
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Net income
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672 |
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728 |
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Cumulative effect of a change in
accounting principle, net of income taxes
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Transfer of unrealized loss for
certain available for sale securities to trading securities
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(17 |
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Recognize mortgage servicing rights
at fair value
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4 |
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Dividends paid
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(500 |
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Balance at March 31,
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15,849 |
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15,719 |
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Accumulated other comprehensive
income (loss)
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Balance at beginning of year
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828 |
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1,166 |
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Other comprehensive income (loss)
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85 |
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(177 |
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Transfer of unrealized loss for
certain available for sale securities to trading securities
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17 |
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Balance at March 31,
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930 |
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989 |
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Total stockholders
equity
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Balance at beginning of year
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21,778 |
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22,417 |
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Net income
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672 |
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728 |
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Recognize mortgage servicing rights
at fair value
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4 |
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Dividends paid
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(500 |
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Other comprehensive income (loss)
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85 |
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(177 |
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Total stockholders equity at
March 31,
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$22,539 |
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$22,468 |
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Comprehensive income
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Net income
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$672 |
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$728 |
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Other comprehensive income (loss)
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85 |
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(177 |
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Recognize mortgage servicing rights
at fair value
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4 |
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Comprehensive income
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$761 |
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$551 |
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The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
5
Condensed Consolidated Statement of Cash Flows (unaudited)
General Motors Acceptance Corporation
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Three months ended March 31, ($ in millions) |
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2006 | |
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2005 | |
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Operating activities
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Net cash used in operating
activities
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($1,978 |
) |
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($6,729 |
) |
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Investing activities
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Purchases of available for sale
securities
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(5,399 |
) |
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(6,041 |
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Proceeds from sales of available
for sale securities
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1,290 |
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1,230 |
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Proceeds from maturities of
available for sale securities
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3,618 |
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1,901 |
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Net increase in finance receivables
and loans
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(24,943 |
) |
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(19,253 |
) |
Proceeds from sales of finance
receivables and loans
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32,782 |
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29,681 |
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Purchases of operating lease assets
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(4,524 |
) |
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(3,672 |
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Disposals of operating lease assets
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1,625 |
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1,395 |
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Change in notes receivable from
General Motors
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(206 |
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1,450 |
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Purchases of mortgage servicing
rights, net
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(56 |
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(104 |
) |
Acquisitions of subsidiaries, net
of cash acquired
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(322 |
) |
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Proceeds from sale of business
units, net (a)
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7,943 |
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Other, net (b)
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(801 |
) |
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(2,061 |
) |
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Net cash provided by investing
activities
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11,007 |
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4,526 |
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Financing activities
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Net change in short-term debt
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(5,567 |
) |
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150 |
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Proceeds from issuance of long-term
debt
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23,766 |
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10,532 |
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Repayments of long-term debt
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(26,749 |
) |
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(16,127 |
) |
Other financing activities
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1,081 |
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1,566 |
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Dividends paid
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(500 |
) |
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Net cash used in financing
activities
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(7,469 |
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(4,379 |
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Effect of exchange rate changes on
cash and cash equivalents
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(3 |
) |
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(76 |
) |
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Net increase (decrease) in cash and
cash equivalents
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1,557 |
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(6,658 |
) |
Cash and cash equivalents at
beginning of year (c)
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15,795 |
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22,718 |
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Cash and cash equivalents at March
31
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$17,352 |
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$16,060 |
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(a) |
Includes proceeds from sale of GMAC Commercial Mortgage of
approximately $1.5 billion, proceeds from repayment of
intercompany loans with GMAC Commercial Mortgage of
approximately $7.3 billion, $250 of which was received in
preferred equity, and net of cash transferred to buyer of
approximately $650. |
(b) |
Includes $558 and $586 for the three months ended March 31,
2006 and 2005, respectively, related to securities lending
transactions where cash collateral is received and a
corresponding liability is recorded, both of which are presented
in investing activities. |
(c) |
Includes $371 of cash and cash equivalents in GMAC Commercial
Mortgage classified as reporting segment held for sale as of
December 31, 2005. |
The Notes to the Condensed Consolidated Financial Statements are
an integral part of these statements.
6
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
General Motors Acceptance Corporation (referred to herein as
GMAC, we, our or us) is a wholly owned subsidiary of General
Motors Corporation (General Motors or GM). The Condensed
Consolidated Financial Statements include our accounts and those
of our majority-owned subsidiaries, after eliminating
intercompany balances and transactions, as well as all variable
interest entities in which we are the primary beneficiary.
The Condensed Consolidated Financial Statements as of
March 31, 2006, and for the three months ended
March 31, 2006 and 2005, are unaudited but, in
managements opinion, include all adjustments, consisting
of normal recurring adjustments, necessary for a fair
presentation of the results for the interim periods presented.
Certain prior period amounts have been reclassified to conform
to the current period presentation.
The interim period consolidated financial statements, including
the related notes, are condensed and are prepared in accordance
with accounting principles generally accepted in the United
States of America (GAAP) for interim reporting. These interim
period Condensed Consolidated Financial Statements should be
read in conjunction with our audited Consolidated Financial
Statements, which are included in our Annual Report on
Form 10-K for the
year ended December 31, 2005, filed with the United States
Securities and Exchange Commission (SEC).
On March 23, 2006, we sold approximately 78% of our equity
in GMAC Commercial Mortgage for approximately
$1.5 billion in cash. At the closing, GMAC Commercial
Mortgage also repaid to us approximately $7.3 billion of
intercompany loans, bringing our total cash proceeds to
$8.8 billion. Prior to March 23, 2006,
GMAC Commercial Mortgages activity and balances were
fully consolidated in the Consolidated Financial Statements.
Subsequent to the sale on March 23, 2006, our remaining
interest in GMAC Commercial Mortgage is reflected under the
equity method investment.
As a result of the sale of GMAC Commercial Mortgage, results of
this entity are now included in Note 10 (Segment
Information) in the Other column to the Condensed
Consolidated Financial Statements. Prior to the sale, GMAC
Commercial Mortgage was identified as a reportable operating
segment under Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS 131). In addition, beginning
January 1, 2006, based on changes in the organizational
structure and management for the mortgage operations, ResCap is
presented as a reportable operating segment. As a result, prior
year financial data has been changed to reflect the current
period presentation.
Change in Accounting Principle
On January 1, 2006, we adopted Statement of Financial
Accounting Standards No. 156, Accounting for Servicing
of Financial Assets (SFAS 156), which provides the
following: (1) revised guidance on when a servicing asset
and servicing liability should be recognized, (2) requires
all separately recognized servicing assets and liabilities to be
initially measured at fair value, if practicable,
(3) permits an entity to elect to measure servicing assets
and liabilities at fair value each reporting date and report
changes in fair value in earnings in the period in which the
changes occur, (4) upon initial adoption, permits a one
time reclassification of
available-for-sale
securities to trading securities for securities which are
identified as offsetting an entitys exposure to changes in
the fair value of servicing assets or liabilities that a
servicer elects to subsequently measure at fair value, and
(5) requires separate presentation of servicing assets and
liabilities subsequently measured at fair value in the balance
sheet and additional disclosures.
We define our classes of servicing rights based on both the
availability of market inputs and the manner in which we manage
the risks of our servicing assets and liabilities. We manage our
servicing rights at the reportable operating segment level. For
all servicing assets and liabilities recorded on our balance
sheet at January 1, 2006, the date of adoption, we
identified three classes of servicing rights; those pertaining
to residential mortgage in our ResCap reporting segment, auto
finance in our North American Operations reporting segment and
commercial mortgages. We have elected to measure our residential
mortgage servicing rights at fair value for each reporting date
and report changes in fair value in earnings during the period
in which the changes occur. At March 31, 2006, these assets
were valued at $4.5 billion and recorded separately on our
Condensed Consolidated Balance Sheet. Refer to Note 6 for
further information.
For our servicing assets and liabilities related to our auto
finance and commercial mortgage classes of servicing rights, we
have elected to continue to use the amortization method of
accounting. As a result of the sale of GMAC Commercial Mortgage
on March 23, 2006, the commercial mortgage servicing rights
are no longer recorded on our balance sheet at March 31,
2006. Our auto finance servicing assets and liabilities at
March 31, 2006, totaled $23 million and
$26 million, respectively, and are recorded in other assets
and other liabilities, respectively, on our Condensed
Consolidated Balance Sheet.
7
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
Recently Issued Accounting Standards
Financial Accounting Standards Board (FASB) Staff Position
(FSP) FAS 115-1
and
124-1
In November 2005 the FASB issued FSP
FAS 115-1 and
124-1 to address the
determination as to when an investment is considered impaired,
whether that impairment is other than temporary and the
measurement of an impaired loss. This FSP nullified certain
requirements of Emerging Issues Task
Force 03-1 The
Meaning of
Other-Than-Temporary
Impairment and Its Application to Certain Investments
(EITF 03-1),
and references existing
other-than-temporary
guidance. Furthermore, this FSP creates a three-step process in
determining when an investment is considered impaired, whether
that impairment is other than temporary and the measurement of
an impairment loss. This FSP is effective for reporting periods
beginning after December 15, 2005. Adoption of this FSP did
not have a material impact on our financial condition or results
of operations.
Statement of Position 05-1 In September 2005
the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 05-1, Accounting by
Insurance Enterprises for Deferred Acquisition Costs in
Connection with Modifications or Exchanges of Insurance
Contracts (SOP 05-1). SOP 05-1 provides guidance on
accounting for deferred acquisition costs on internal
replacements of insurance contracts. SOP 05-1 defines an
internal replacement and specifies the conditions that determine
whether the replacement contract is substantially or
unsubstantially changed from the replaced contract. An internal
replacement determined to result in a substantially changed
contract should be accounted for as an extinguishment of the
replaced contract, and unamortized deferred acquisition costs
and unearned revenue liabilities of the replaced contract should
be no longer be deferred. An internal replacement determined to
result in an unsubstantially changed contract should be
accounted for as a continuation of the replaced asset. SOP 05-01
introduces the terms integrated and non-integrated contract
features and specifies that non-integrated features do not
change the base contract and are to be accounted for in a manner
similar to a separately issued contract. Integrated features are
evaluated in conjunction with the base contract. SOP 05-1 is
effective for internal replacements occurring in fiscal years
beginning after December 15, 2006. Management is assessing
the potential impact on our financial condition or results of
operations.
Statement of Financial Accounting Standards
No. 155 In February 2006 the Financial
Accounting Standards Board issued Statement of Financial
Standards No. 155 Accounting for Certain Hybrid
Financial Instruments an amendment of FASB
Statements No. 133 and 140 (SFAS 155). This
standard permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that
otherwise would require bifurcation. SFAS 155 allows an
entity to make an irrevocable election to measure such a hybrid
financial instrument at fair value on an
instrument-by-instrument basis. The standard eliminates the
prohibition on a QSPE from holding a derivative financial
instrument that pertains to a beneficial interest other than
another derivative financial instrument. SFAS 155 also
clarifies which interest-only and principal-only strips are not
subject to the requirements of SFAS 133 as well as
determines that concentrations of credit risk in the form of
subordination are not embedded derivatives. SFAS 155 is
effective for all financial instruments acquired or issued after
the beginning of the fiscal year that begins after
September 15, 2006. Management is assessing the potential
impact on our financial condition or results of operations.
Statement of Financial Accounting Standards
No. 154 In May 2005, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 154, Accounting Changes and
Error Corrections (SFAS 154), that addresses accounting
for changes in accounting principle, changes in accounting
estimates, changes required by an accounting pronouncement in
the instance that the pronouncement does not include specific
transition provisions and error correction. SFAS 154
requires retrospective application to prior periods
financial statements of changes in accounting principle and
error correction unless impracticable to do so. SFAS 154
states an exception to retrospective application when a change
in accounting principle, or the method of applying it, may be
inseparable from the effect of a change in accounting estimate.
When a change in principle is inseparable from a change in
estimate, such as depreciation, amortization or depletion, the
change to the financial statements is to be presented in a
prospective manner. SFAS 154 and the required disclosures
are effective for accounting changes and error corrections in
fiscal years beginning after December 15, 2005.
8
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
|
|
|
|
|
|
|
2 |
|
|
Mortgage Banking
Income |
The following table presents the components of mortgage banking
income, which includes GMAC Commercial Mortgage activity through
March 23, 2006, the date of sale:
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
Mortgage servicing fees
|
|
|
$413 |
|
|
|
$397 |
|
Amortization and impairment of
mortgage servicing rights (MSRs) (a)
|
|
|
(23 |
) |
|
|
(165 |
) |
Change in fair value (a)
|
|
|
195 |
|
|
|
|
|
Net gains (losses) on
derivatives related to MSRs (b)
|
|
|
(381 |
) |
|
|
(24 |
) |
|
Net loan servicing income
|
|
|
204 |
|
|
|
208 |
|
Gains from sales of loans
|
|
|
310 |
|
|
|
395 |
|
Mortgage processing fees
|
|
|
28 |
|
|
|
30 |
|
Other
|
|
|
42 |
|
|
|
62 |
|
|
Mortgage banking income (c)
|
|
|
$584 |
|
|
|
$695 |
|
|
|
|
|
(a) |
The results for the quarter ended March 31, 2006, reflect
the adoption of the fair value measurement method of accounting
for MSRs for the ResCap class of servicing assets as permitted
by SFAS 156. We have adopted SFAS 156 effective
January 1, 2006, and the retrospective application of
SFAS 156 is not permitted. For the class of MSR assets on
our Condensed Consolidated Balance Sheet during the quarter
relating to GMAC Commercial Mortgage, the amortization method of
accounting was elected and amounts include additions to the
valuation allowance representing impairment considered to be
temporary. |
|
(b) |
Includes SFAS 133 hedge ineffectiveness, amounts excluded
from the hedge effectiveness calculation and the change in value
of derivative financial instruments not qualifying for hedge
accounting. |
|
(c) |
Excludes net gains realized upon the sale of investment
securities used to manage risk associated with mortgage
servicing rights which are reflected as a component of
investment income. |
|
9
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
The following table presents the components of other income,
which includes GMAC Commercial Mortgage activity through
March 23, 2006, the date of sale:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 | |
|
2005 | |
|
Automotive receivable
securitizations and sales
|
|
|
|
|
|
|
|
|
|
Gains (losses) on sales:
|
|
|
|
|
|
|
|
|
|
|
Wholesale securitizations
|
|
|
$149 |
|
|
|
$145 |
|
|
|
Retail automotive whole loan sales
transactions
|
|
|
(41 |
) |
|
|
(29 |
) |
|
|
Retail automotive securitizations
|
|
|
(54 |
) |
|
|
(1 |
) |
|
Interest on cash reserves deposits
|
|
|
28 |
|
|
|
24 |
|
|
Service fees
|
|
|
59 |
|
|
|
23 |
|
|
Other
|
|
|
22 |
|
|
|
22 |
|
|
Total automotive receivable
securitizations and sales
|
|
|
163 |
|
|
|
184 |
|
Real estate services
|
|
|
144 |
|
|
|
131 |
|
Interest and service fees on
transactions with GM (a)
|
|
|
147 |
|
|
|
110 |
|
Other interest revenue
|
|
|
120 |
|
|
|
94 |
|
Interest on cash equivalents
|
|
|
119 |
|
|
|
98 |
|
Full service leasing fees
|
|
|
64 |
|
|
|
44 |
|
Late charges and other
administrative fees
|
|
|
41 |
|
|
|
42 |
|
Insurance service fees
|
|
|
30 |
|
|
|
37 |
|
Factoring commissions
|
|
|
15 |
|
|
|
19 |
|
Specialty lending fees
|
|
|
15 |
|
|
|
14 |
|
Fair value adjustment on certain
derivatives (b)
|
|
|
(8 |
) |
|
|
(8 |
) |
Other
|
|
|
209 |
|
|
|
211 |
|
|
Total other income
|
|
|
$1,059 |
|
|
|
$976 |
|
|
|
|
|
(a) |
Refer to Note 9 to the Condensed Consolidated Financial
Statements for a description of interest and service fees on
transactions with GM. |
|
(b) |
Refer to Note 8 to our Condensed Consolidated Financial
Statements for a description of derivative instruments and
hedging activities. |
|
|
|
|
|
|
|
|
4 |
|
|
Other Operating
Expenses |
The following table presents the components of other operating
expenses, which includes GMAC Commercial Mortgage activity
through March 23, 2006, the date of sale:
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 | |
|
2005 | |
|
Insurance commissions
|
|
|
$243 |
|
|
|
$235 |
|
Technology and communications
expense
|
|
|
130 |
|
|
|
139 |
|
Professional services
|
|
|
105 |
|
|
|
104 |
|
Advertising and marketing
|
|
|
84 |
|
|
|
103 |
|
Premises and equipment depreciation
|
|
|
65 |
|
|
|
73 |
|
Rent and storage
|
|
|
67 |
|
|
|
67 |
|
Full service leasing vehicle
maintenance costs
|
|
|
60 |
|
|
|
61 |
|
Lease and loan administration
|
|
|
54 |
|
|
|
43 |
|
Auto remarketing and repossession
|
|
|
47 |
|
|
|
29 |
|
Amortization of intangible assets
|
|
|
6 |
|
|
|
3 |
|
Operating lease disposal gain
|
|
|
(49 |
) |
|
|
(96 |
) |
Other
|
|
|
361 |
|
|
|
165 |
|
|
Total other operating expenses
|
|
|
$1,173 |
|
|
|
$926 |
|
|
10
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
|
|
|
|
|
|
|
5 |
|
|
Finance
Receivables and Loans |
The composition of finance receivables and loans outstanding,
which excludes GMAC Commercial Mortgage balances, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006 | |
|
December 31, 2005 | |
|
|
| |
|
| |
($ in millions) |
|
Domestic | |
|
Foreign | |
|
Total | |
|
Domestic | |
|
Foreign | |
|
Total | |
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail automotive
|
|
|
$47,563 |
|
|
|
$18,079 |
|
|
|
$65,642 |
|
|
|
$53,789 |
|
|
|
$17,663 |
|
|
|
$71,452 |
|
|
Residential mortgages
|
|
|
69,899 |
|
|
|
3,854 |
|
|
|
73,753 |
|
|
|
65,040 |
|
|
|
3,919 |
|
|
|
68,959 |
|
|
Total consumer
|
|
|
117,462 |
|
|
|
21,933 |
|
|
|
139,395 |
|
|
|
118,829 |
|
|
|
21,582 |
|
|
|
140,411 |
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Automotive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale
|
|
|
14,109 |
|
|
|
7,625 |
|
|
|
21,734 |
|
|
|
13,202 |
|
|
|
7,372 |
|
|
|
20,574 |
|
|
|
Leasing and lease financing
|
|
|
394 |
|
|
|
741 |
|
|
|
1,135 |
|
|
|
461 |
|
|
|
767 |
|
|
|
1,228 |
|
|
|
Term loans to dealers and other
|
|
|
2,840 |
|
|
|
708 |
|
|
|
3,548 |
|
|
|
2,397 |
|
|
|
719 |
|
|
|
3,116 |
|
|
Commercial and industrial
|
|
|
13,541 |
|
|
|
1,916 |
|
|
|
15,457 |
|
|
|
14,908 |
|
|
|
2,028 |
|
|
|
16,936 |
|
|
Real estate construction
|
|
|
2,722 |
|
|
|
131 |
|
|
|
2,853 |
|
|
|
2,558 |
|
|
|
119 |
|
|
|
2,677 |
|
|
Commercial mortgage
|
|
|
43 |
|
|
|
|
|
|
|
43 |
|
|
|
43 |
|
|
|
|
|
|
|
43 |
|
|
Total commercial
|
|
|
33,649 |
|
|
|
11,121 |
|
|
|
44,770 |
|
|
|
33,569 |
|
|
|
11,005 |
|
|
|
44,574 |
|
|
Total finance receivables and
loans (a)
|
|
|
$151,111 |
|
|
|
$33,054 |
|
|
|
$184,165 |
|
|
|
$152,398 |
|
|
|
$32,587 |
|
|
|
$184,985 |
|
|
|
|
(a) |
Net of unearned income of $5,448 and $5,868 as of March 31,
2006 and December 31, 2005, respectively. |
The following table, which excludes GMAC Commercial Mortgage
activity, presents an analysis of the activity in the allowance
for credit losses on finance receivables and loans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
Consumer |
|
Commercial |
|
Total |
|
Consumer |
|
Commercial |
|
Total |
|
Allowance at beginning of period
|
|
|
$2,683 |
|
|
|
$433 |
|
|
|
$3,116 |
|
|
|
$2,951 |
|
|
|
$471 |
|
|
|
$3,422 |
|
|
Provision for credit losses
|
|
|
157 |
|
|
|
(22 |
) |
|
|
135 |
|
|
|
305 |
|
|
|
24 |
|
|
|
329 |
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(321 |
) |
|
|
(46 |
) |
|
|
(367 |
) |
|
|
(346 |
) |
|
|
(7 |
) |
|
|
(353 |
) |
|
|
Foreign
|
|
|
(45 |
) |
|
|
(1 |
) |
|
|
(46 |
) |
|
|
(51 |
) |
|
|
(4 |
) |
|
|
(55 |
) |
|
|
Total charge-offs
|
|
|
(366 |
) |
|
|
(47 |
) |
|
|
(413 |
) |
|
|
(397 |
) |
|
|
(11 |
) |
|
|
(408 |
) |
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
53 |
|
|
|
5 |
|
|
|
58 |
|
|
|
47 |
|
|
|
2 |
|
|
|
49 |
|
|
|
Foreign
|
|
|
13 |
|
|
|
2 |
|
|
|
15 |
|
|
|
14 |
|
|
|
|
|
|
|
14 |
|
|
|
Total recoveries
|
|
|
66 |
|
|
|
7 |
|
|
|
73 |
|
|
|
61 |
|
|
|
2 |
|
|
|
63 |
|
|
|
Net charge-offs
|
|
|
(300 |
) |
|
|
(40 |
) |
|
|
(340 |
) |
|
|
(336 |
) |
|
|
(9 |
) |
|
|
(345 |
) |
|
Impacts of foreign currency
translation
|
|
|
1 |
|
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(9 |
) |
|
|
(3 |
) |
|
|
(12 |
) |
|
Securitization activity
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
|
Allowance at March 31,
|
|
|
$2,542 |
|
|
|
$369 |
|
|
|
$2,911 |
|
|
|
$2,909 |
|
|
|
$481 |
|
|
|
$3,390 |
|
|
11
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
|
|
|
|
|
|
6 |
|
|
Mortgage
Servicing Rights |
The following table summarizes activity and related amortization
related to MSRs carried at fair value.
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
Estimated fair value at
January 1, 2006
|
|
$ |
4,021 |
|
Additions obtained from sales of
financial assets
|
|
|
310 |
|
Changes in fair value:
|
|
|
|
|
|
Due to changes in valuation inputs
or assumptions used in the valuation model
|
|
|
359 |
|
|
Other changes in fair value
|
|
|
(164 |
) |
|
Estimated fair value at
March 31, 2006
|
|
$ |
4,526 |
|
|
Changes in fair value due to changes in valuation inputs or
assumptions used in the valuation models include all changes due
to a revaluation by a model or by a benchmarking exercise. This
line item also includes changes in fair value due to a change in
valuation assumptions and/or model calculations. Other changes
in fair value primarily include the accretion of the present
value of the discount related to forecasted cash flows and any
other factors that impact fair value. Other changes that affect
the balance primarily include foreign currency adjustments and
the extinguishment of mortgage servicing rights related to
clean-up calls of securitization transactions.
At March 31, 2006, we pledged MSRs of $2.6 billion as
collateral for borrowings.
Key assumptions used by us in valuing our MSRs:
|
|
|
|
|
March 31, 2006 |
|
Total |
|
Range of prepayment speeds
|
|
|
7.0-38.4% |
|
Range of discount rate
|
|
|
8.0-14.0% |
|
|
Our servicing rights primary risk is interest rate risk
and the resulting impact on prepayments. A significant decline
in interest rates could lead to higher than expected
prepayments, which could reduce the size of the value of the
mortgage servicing rights. We economically hedge the income
statement impact of these risks with both derivative and
non-derivative financial instruments. These instruments include
interest rate swaps, caps and floors, options to purchase these
items, futures and forward contracts, and/or purchasing or
selling U.S. Treasury and principal-only securities. At
March 31, 2006, the fair value of derivative financial
instruments and non-derivative financial instruments used to
mitigate these risks amounted to $69 million and
$1.9 billion, respectively. The change in the fair value of
the derivative financial instruments amounted to a loss of
$381 million for the three months ended March 31,
2006, and is included in mortgage banking income in the
Condensed Consolidated Statement of Income.
The components of servicing fees were as follows:
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
Contractual servicing fees (net of
guarantee fees and including subservicing)
|
|
$ |
321 |
|
Late fees
|
|
|
30 |
|
Ancillary fees
|
|
|
23 |
|
|
Total
|
|
$ |
374 |
|
|
12
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
The following table, which includes GMAC Commercial Mortgage
activity, summarizes activity and related amortization of MSRs
carried at lower of cost or fair value.
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2005 | |
|
Balance at beginning of period
|
|
|
$4,819 |
|
Originations and purchases, net of
sales
|
|
|
397 |
|
Amortization
|
|
|
(269 |
) |
SFAS 133 hedge valuation
adjustments
|
|
|
125 |
|
Other than temporary impairment
|
|
|
(14 |
) |
|
Balance at March 31,
|
|
|
5,058 |
|
Valuation allowance
|
|
|
(811 |
) |
|
Carrying value at March 31,
|
|
|
$4,247 |
|
|
Estimated fair value at
March 31,
|
|
|
$4,348 |
|
|
The following table summarizes the change in the valuation
allowance for mortgage servicing rights.
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2005 | |
|
Valuation allowance at beginning of
period
|
|
|
$929 |
|
Additions (deductions) (a)
|
|
|
(104 |
) |
Other than temporary impairment
|
|
|
(14 |
) |
|
Valuation allowance at
March 31,
|
|
|
$811 |
|
|
|
|
|
(a) |
Changes to the valuation allowance are reflected as a component
of mortgage banking income. |
|
For a description of MSRs and the related hedging strategy,
refer to Notes 1 and 10 to our 2005 Annual Report on
Form 10-K.
The presentation of debt in the following table, which excludes
GMAC Commercial Mortgage balances, is classified between
domestic and foreign based on the location of the office
recording the transaction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006 | |
|
December 31, 2005 | |
|
|
| |
|
| |
($ in millions) |
|
Domestic | |
|
Foreign | |
|
Total | |
|
Domestic | |
|
Foreign | |
|
Total | |
| |
Short-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper
|
|
|
$162 |
|
|
|
$318 |
|
|
|
$480 |
|
|
|
$227 |
|
|
|
$297 |
|
|
|
$524 |
|
|
Demand notes
|
|
|
5,297 |
|
|
|
100 |
|
|
|
5,397 |
|
|
|
5,928 |
|
|
|
119 |
|
|
|
6,047 |
|
|
Bank loans and overdrafts
|
|
|
1,048 |
|
|
|
4,777 |
|
|
|
5,825 |
|
|
|
1,165 |
|
|
|
5,487 |
|
|
|
6,652 |
|
|
Repurchase agreements and
other (a)
|
|
|
20,172 |
|
|
|
4,803 |
|
|
|
24,975 |
|
|
|
22,330 |
|
|
|
5,954 |
|
|
|
28,284 |
|
|
Total short-term debt
|
|
|
26,679 |
|
|
|
9,998 |
|
|
|
36,677 |
|
|
|
29,650 |
|
|
|
11,857 |
|
|
|
41,507 |
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior indebtedness:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due within one year
|
|
|
29,218 |
|
|
|
11,685 |
|
|
|
40,903 |
|
|
|
31,286 |
|
|
|
10,443 |
|
|
|
41,729 |
|
|
|
Due after one year
|
|
|
146,180 |
|
|
|
22,863 |
|
|
|
169,043 |
|
|
|
147,307 |
|
|
|
23,862 |
|
|
|
171,169 |
|
|
Total long-term debt
|
|
|
175,398 |
|
|
|
34,548 |
|
|
|
209,946 |
|
|
|
178,593 |
|
|
|
34,305 |
|
|
|
212,898 |
|
Fair value adjustment (b)
|
|
|
(668 |
) |
|
|
(14 |
) |
|
|
(682 |
) |
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
Total debt
|
|
|
$201,409 |
|
|
|
$44,532 |
|
|
|
$245,941 |
|
|
|
$208,243 |
|
|
|
$46,164 |
|
|
|
$254,407 |
|
|
|
|
(a) |
Repurchase agreements consist of secured financing arrangements
with third parties at our mortgage operations. Other primarily
includes non-bank secured borrowings, as well as Notes payable
to GM. Refer to Note 9 to the Condensed Consolidated
Financial Statements for further details. |
(b) |
To adjust designated fixed rate debt to fair value in accordance
with SFAS 133. |
13
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
The following summarizes assets that are restricted as
collateral for the payment of the related debt obligation
primarily arising from securitization transactions accounted for
as secured borrowings and repurchase agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2006 |
|
2005 |
|
|
|
|
|
|
|
|
|
Related |
|
|
|
Related |
|
|
|
|
secured |
|
|
|
secured |
($ in millions) |
|
Assets |
|
debt (a) |
|
Assets |
|
debt (a) |
|
Loans held for sale
|
|
|
$14,868 |
|
|
|
$12,223 |
|
|
|
$16,147 |
|
|
|
$12,647 |
|
Mortgage assets held for sale or
held for investment
|
|
|
81,246 |
|
|
|
71,957 |
|
|
|
78,820 |
|
|
|
71,083 |
|
Retail automotive finance
receivables
|
|
|
20,242 |
|
|
|
18,456 |
|
|
|
20,427 |
|
|
|
18,888 |
|
Wholesale automotive finance
receivables
|
|
|
578 |
|
|
|
442 |
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
3,058 |
|
|
|
3,817 |
|
|
|
3,631 |
|
|
|
4,205 |
|
Investment in operating leases, net
|
|
|
16,255 |
|
|
|
14,130 |
|
|
|
13,136 |
|
|
|
11,707 |
|
Real estate investments and other
assets
|
|
|
6,511 |
|
|
|
3,262 |
|
|
|
4,771 |
|
|
|
2,608 |
|
|
|
Total
|
|
|
$142,758 |
|
|
|
$124,287 |
|
|
|
$136,932 |
|
|
|
$121,138 |
|
|
|
|
|
(a) |
Included as part of secured debt are repurchase agreements of
$9,972 and $9,897 where we have pledged assets, reflected as
investment securities, as collateral for approximately the same
amount of debt at March 31, 2006, and
December 31, 2005, respectively. |
|
Liquidity Facilities
Liquidity facilities represent additional funding sources, if
required. The financial institutions providing the uncommitted
facilities are not legally obligated to fund such amounts. The
following table summarizes the liquidity facilities maintained
by us, excluding Commercial Mortgage.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed |
|
Uncommitted |
|
Total liquidity |
|
Unused liquidity |
|
|
facilities |
|
facilities |
|
facilities |
|
facilities |
|
|
|
|
|
|
|
|
|
|
|
Mar 31, |
|
Dec 31, |
|
Mar 31, |
|
Dec 31, |
|
Mar 31, |
|
Dec 31, |
|
Mar 31, |
|
Dec 31, |
($ in billions) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Automotive operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated multi-currency global
credit facility (a)
|
|
|
$7.4 |
|
|
|
$7.4 |
|
|
|
$ |
|
|
|
$ |
|
|
|
$7.4 |
|
|
|
$7.4 |
|
|
|
$7.4 |
|
|
|
$7.4 |
|
Mortgage operations (b)
|
|
|
3.9 |
|
|
|
3.9 |
|
|
|
0.7 |
|
|
|
0.9 |
|
|
|
4.6 |
|
|
|
4.8 |
|
|
|
2.2 |
|
|
|
2.2 |
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. asset-backed commercial paper
liquidity and receivables facilities (c)
|
|
|
21.5 |
|
|
|
21.5 |
|
|
|
|
|
|
|
|
|
|
|
21.5 |
|
|
|
21.5 |
|
|
|
21.5 |
|
|
|
21.5 |
|
|
Other foreign facilities (d)
|
|
|
2.9 |
|
|
|
2.9 |
|
|
|
7.9 |
|
|
|
7.5 |
|
|
|
10.8 |
|
|
|
10.4 |
|
|
|
1.9 |
|
|
|
1.7 |
|
|
Total bank liquidity facilities
|
|
|
35.7 |
|
|
|
35.7 |
|
|
|
8.6 |
|
|
|
8.4 |
|
|
|
44.3 |
|
|
|
44.1 |
|
|
|
33.0 |
|
|
|
32.8 |
|
|
Secured funding facilities (e)
|
|
|
108.0 |
|
|
|
114.9 |
|
|
|
|
|
|
|
|
|
|
|
108.0 |
|
|
|
114.9 |
|
|
|
72.7 |
|
|
|
79.1 |
|
|
Total
|
|
|
$143.7 |
|
|
|
$150.6 |
|
|
|
$8.6 |
|
|
|
$8.4 |
|
|
|
$152.3 |
|
|
|
$159.0 |
|
|
|
$105.7 |
|
|
|
$111.9 |
|
|
|
|
(a) |
The entire $7.4 is available for use in the U.S., $0.8 is
available for use by GMAC (UK) plc and $0.8 is available
for use by GMAC International Finance B.V. in Europe. |
(b) |
In July 2005 ResCap closed a $3.5 syndication of its bank
facilities, consisting of a $1.75 syndication term loan, an
$875 million syndication line of credit committed through
July 2008 and a $875 million syndicated line of credit
committed through July 2006. |
(c) |
Relates to New Center Asset Trust (NCAT) and Mortgage Interest
Networking Trust (MINT), which are special purpose entities
administered by us for the purpose of funding assets as part of
our securitization and mortgage warehouse funding programs.
These entities fund assets primarily through the issuance of
asset-backed commercial paper and represent an important source
of liquidity to us. At March 31, 2006, NCAT had commercial
paper outstanding of $12.1, which is not consolidated in the
Condensed Consolidated Balance Sheet. At March 31, 2006,
MINT had commercial paper outstanding of $2.0, which is
reflected as secured debt in the Condensed Consolidated Balance
Sheet. |
(d) |
Consists primarily of credit facilities supporting operations in
Canada, Europe, Latin America and Asia-Pacific. |
(e) |
Consists of committed secured funding facilities with
third-parties, including commitments with third-party
asset-backed commercial paper conduits, as well as forward flow
sale agreements with third-parties and repurchase facilities.
Amounts include five year commitments that we entered into in
2005 with remaining capacity to sell up to $59 of retail
automotive receivables to a third-party purchaser through June
2010. |
The syndicated multi-currency global credit facility includes a
$4.35 billion five-year facility (expires June 2008) and a
$3.0 billion 364-day facility (expires June 2006). The
364-day facility
includes a term out option, which, if exercised by us prior to
expiration, carries a one-year term. Additionally, a leverage
covenant in the liquidity facilities and certain other funding
facilities restricts the ratio of consolidated
14
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
unsecured debt to total stockholders equity to no greater
than 11.0:1, under certain conditions. More specifically, the
covenant is only applicable on the last day of any fiscal
quarter (other than the fiscal quarter during which a change in
rating occurs) during such times that we have senior unsecured
long-term debt outstanding, without third-party enhancement,
which is rated BBB+ or less (by Standard &
Poors), or Baa1 or less (by Moodys). Our leverage
ratio covenant was 6.6:1 at March 31, 2006, and we are,
therefore, in compliance with this covenant. The leverage
covenant calculation excludes from debt those securitization
transactions accounted for as on-balance sheet secured
financings.
|
|
|
|
|
|
|
8 |
|
|
Derivative
Instruments and Hedging Activities |
We enter into interest rate and foreign currency futures,
forwards, options and swaps in connection with our market risk
management activities. In accordance with SFAS 133, as
amended, we record derivative financial instruments on the
balance sheet as assets or liabilities at fair value. Changes in
fair value are accounted for depending on the use of the
derivative financial instrument and whether it qualifies for
hedge accounting treatment. Refer to our 2005 Annual Report on
Form 10-K for a more detailed description of our use of and
accounting for derivative financial instruments.
The following table, which includes GMAC Commercial Mortgage
activity through March 23, 2006, the date of sale,
summarizes the pre-tax earnings effect for each type of
accounting hedge classification, segregated by the asset or
liability being hedged.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
|
|
|
($ in millions) |
|
2006 |
|
2005 |
|
Income Statement Classification |
|
Fair value hedge ineffectiveness
loss:
|
|
|
|
|
|
|
|
|
|
|
|
Debt obligations
|
|
|
($25 |
) |
|
|
($4 |
) |
|
Interest and discount expense
|
|
Mortgage servicing rights
|
|
|
|
|
|
|
(27 |
) |
|
Mortgage banking income
|
Cash flow hedge ineffectiveness
gain:
|
|
|
|
|
|
|
|
|
|
|
|
Debt obligations
|
|
|
1 |
|
|
|
3 |
|
|
Interest and discount expense
|
Economic hedge change in fair value:
|
|
|
|
|
|
|
|
|
|
|
|
Off-balance sheet securitization
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing operations
|
|
|
(8 |
) |
|
|
(8 |
) |
|
Other income
|
|
|
Mortgage operations
|
|
|
|
|
|
|
1 |
|
|
Mortgage banking income
|
|
Foreign currency debt (a)
|
|
|
52 |
|
|
|
(90 |
) |
|
Interest and discount expense
|
|
Loans held for sale or investment
|
|
|
110 |
|
|
|
54 |
|
|
Mortgage banking income
|
|
Mortgage servicing rights
|
|
|
(381 |
) |
|
|
(36 |
) |
|
Mortgage banking income
|
|
Mortgage related securities
|
|
|
(7 |
) |
|
|
(43 |
) |
|
Investment income
|
|
Other
|
|
|
17 |
|
|
|
10 |
|
|
Other income
|
|
|
|
Total gain (loss)
|
|
|
($241 |
) |
|
|
($140 |
) |
|
|
|
|
|
|
(a) |
Amount represents the difference between the changes in the fair
values of the currency swap, net of the revaluation of the
related foreign denominated debt. |
|
In addition, net gains on fair value hedges excluded from
assessment of effectiveness totaled $0 and $39 million for
the first quarter of 2006 and 2005, respectively.
15
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
|
|
|
|
|
|
|
9 |
|
|
Transactions
with Affiliates |
As a wholly owned subsidiary, we enter into various operating
and financing arrangements with our parent GM. A master
intercompany operating agreement governs the nature of these
transactions to ensure that they are done on an
arms-length basis, in accordance with commercially
reasonable standards and in our best interest as a diversified
financial services company. In addition, GM and we agree that
our total stockholders equity as reflected in our
consolidated financial statements at the end of any quarter will
be maintained at a commercially reasonable level appropriate to
support the amount, quality and mix of our assets.
Balance Sheet
A summary of the balance sheet effect of transactions with GM
and affiliated companies is as follows:
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
March 31, 2006 |
|
December 31, 2005 |
|
Assets:
|
|
|
|
|
|
|
|
|
Finance receivables and loans, net
of unearned income (a)
|
|
|
|
|
|
|
|
|
|
Wholesale auto financing
|
|
|
$964 |
|
|
|
$1,159 |
|
|
Term loans to dealers
|
|
|
169 |
|
|
|
207 |
|
Investment in operating leases,
net (b)
|
|
|
108 |
|
|
|
108 |
|
Notes receivable from GM (c)
|
|
|
4,785 |
|
|
|
4,565 |
|
Other assets
|
|
|
|
|
|
|
|
|
|
Real estate synthetic lease (d)
|
|
|
1,022 |
|
|
|
1,005 |
|
|
Receivable related to taxes (due
from GM) (e)
|
|
|
635 |
|
|
|
690 |
|
Liabilities:
|
|
|
|
|
|
|
|
|
Unsecured debt
|
|
|
|
|
|
|
|
|
|
Notes payable to GM
|
|
|
1,162 |
|
|
|
1,190 |
|
Accrued expenses and
liabilities (f)
|
|
|
|
|
|
|
|
|
|
Wholesale payable
|
|
|
1,013 |
|
|
|
802 |
|
|
Subvention receivables (rate and
residual support)
|
|
|
(298 |
) |
|
|
(133 |
) |
|
Insurance premium and contract
receivable, net
|
|
|
(102 |
) |
|
|
(81 |
) |
|
Lease pull ahead receivable
|
|
|
(102 |
) |
|
|
(189 |
) |
|
Other
|
|
|
(340 |
) |
|
|
(246 |
) |
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
Dividends paid (g)
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
(a) |
Represents wholesale financing and term loans to certain
dealerships wholly owned by GM or in which GM has a controlling
interest. All of these amounts are included in finance
receivables and loans. |
|
(b) |
Includes net balance of buildings and other equipment classified
as operating lease assets that are leased to GM affiliated
entities. |
|
(c) |
Includes borrowing arrangements with GM Opel and GM of Canada
and arrangements related to our funding of GM company-owned
vehicles, rental car vehicles awaiting sale at auction, our
funding of the sale of GM vehicles through the use of overseas
distributors and amounts related to a GM trade supplier finance
program. In addition, we provide wholesale financing to GM for
vehicles in which GM retains title while the vehicles are
consigned to us or dealers in the UK. The financing to GM
remains outstanding until the title is transferred to the
dealers. The amount of financing provided to GM under this
arrangement varies based on inventory levels. |
|
(d) |
During 2000 we entered into a 16-year lease arrangement with GM,
under which we agreed to fund and capitalize improvements to
three Michigan properties leased by GM totaling
$1.2 billion. In 2004 the lease arrangement was increased
to $1.3 billion. The total construction advances as of
March 31, 2006, and December 31, 2005, were $987 and
$971, respectively. |
|
(e) |
In March 2006 GMAC recorded an intercompany tax receivable from
GM of $635. The receivable is comprised of federal net operating
loss carryforward of $556, charitable contributions carryforward
of $12 and foreign tax credit carryforward of $67. We believe
that the intercompany tax receivable is realizable as GM has
determined that it is more likely than not that the tax
attributes will be utilized in the remaining carryforward period. |
|
(f) |
Includes (receivables) payables from GM as follows:
wholesale settlements payable to GM, subvention receivables due
from GM and notes payable due from GM, which are included in
accrued expenses, other liabilities and debt, respectively. |
|
(g) |
The 2005 amount represents dividends of $500 in each of the
first three quarters and $1.0 billion in the fourth quarter. |
|
In October 2005 we repurchased operating lease assets and
related deferred tax liabilities from GM previously sold to them
under a purchase and sale agreement. The leases were repurchased
at fair market value; however, the assets and liabilities were
transferred at their carrying value because this was a
transaction between related parties. The difference between the
net assets acquired and the proceeds remitted to GM was
reflected as a reduction to our stockholders equity in the
fourth quarter of 2005.
16
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
Retail and lease contracts acquired by us that included rate and
residual subvention from GM, payable directly to us or
indirectly to GM dealers as a percent of total new retail and
lease contracts acquired, were as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2006 |
|
2005 |
|
GM and affiliates subvented
contracts acquired:
|
|
|
|
|
|
|
|
|
|
North American operations
|
|
|
89 |
% |
|
|
70 |
% |
|
International operations
|
|
|
58 |
|
|
|
60 |
|
|
In addition to subvention programs, GM provides payment
guarantees on certain commercial assets we have outstanding with
certain third-party customers. As of March 31, 2006, and
December 31, 2005, commercial obligations guaranteed by GM
were $598 million and $934 million, respectively.
Income Statement
A summary of the income statement effect of transactions with GM
and affiliated companies is as follows:
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
Net financing revenue:
|
|
|
|
|
|
|
|
|
|
GM and affiliates lease residual
value support
|
|
|
$167 |
|
|
|
$103 |
|
|
Wholesale subvention and service
fees from GM
|
|
|
43 |
|
|
|
53 |
|
|
Interest paid on loans from GM
|
|
|
(17 |
) |
|
|
(9 |
) |
|
Consumer lease payments (a)
|
|
|
40 |
|
|
|
34 |
|
Insurance premiums earned from GM
|
|
|
72 |
|
|
|
103 |
|
Other income:
|
|
|
|
|
|
|
|
|
|
Interest on notes receivable from
GM and affiliates
|
|
|
69 |
|
|
|
54 |
|
|
Interest on wholesale
settlements (b)
|
|
|
44 |
|
|
|
28 |
|
|
Revenues from GM leased properties
|
|
|
26 |
|
|
|
18 |
|
Service fee income:
|
|
|
|
|
|
|
|
|
|
GMAC of Canada operating lease
administration (c)
|
|
|
|
|
|
|
6 |
|
|
Rental car repurchases held for
resale (d)
|
|
|
8 |
|
|
|
4 |
|
Expense:
|
|
|
|
|
|
|
|
|
|
Employee retirement plan costs
allocated by GM
|
|
|
29 |
|
|
|
46 |
|
|
Off-lease vehicle selling expense
reimbursement (e)
|
|
|
(5 |
) |
|
|
(10 |
) |
|
Payments to GM for services, rent
and marketing expenses
|
|
|
14 |
|
|
|
53 |
|
|
|
|
|
(a) |
GM sponsors lease pull-ahead programs whereby consumers are
encouraged to terminate lease contracts early in conjunction
with the acquisition of a new GM vehicle with the
customers remaining payment obligation waived. For certain
programs, GM compensates us for the waived payments, adjusted
based on the remarketing results associated with the underlying
vehicle. |
|
(b) |
The settlement terms related to the wholesale financing of
certain GM products are at shipment date. To the extent that
wholesale settlements with GM are made prior to the expiration
of transit, we receive interest from GM. |
|
(c) |
GMAC of Canada, Limited administered operating lease receivables
on behalf of GM of Canada Limited (GMCL) and received a
servicing fee, which was included in other income. As of October
2005, GMAC of Canada no longer administers these operating lease
receivables. |
|
(d) |
We receive a servicing fee from GM related to the resale of
rental car repurchases. |
|
(e) |
An agreement with GM provides for the reimbursement of certain
selling expenses incurred by us on off-lease vehicles sold by GM
at auction. |
|
As a marketing incentive GM may sponsor residual support
programs as a way to lower customer monthly payments. Under
residual support programs the contractual residual value is
adjusted above GMACs standard residual rates. GM
reimburses us to the extent that remarketing sales proceeds are
less than the customers contractual residual value. Based
on the March 31, 2006 outstanding U.S. operating lease
portfolio, the amount that we would expect to be paid by GM
under these lease residual support programs would be
$2.5 billion. These projections would be paid over the
remaining life of the lease portfolio at the time of sale of the
related vehicle (on average approximately 2 years) and are
based on the expected remarketing performance of the vehicles.
The maximum amount that could be paid under the residual support
programs is approximately $4.4 billion and would only be
paid in the unlikely event that the proceeds from the entire
portfolio of lease assets would be lower than both the
contractual residual value and GMACs standard residual
rates.
17
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
In addition to residual support programs, GM also participates
in a risk sharing arrangement whereby GM shares equally in
residual losses to the extent that remarketing proceeds are
below GMACs standard residual rates (limited to a floor).
Based on the March 31, 2006 outstanding U.S. operating
lease portfolio, the amount that we would expect to be paid by
GM under the risk sharing program would not be material. The
maximum amount that could be paid under the risk sharing
arrangements is approximately $1.9 billion and would only
be paid in the unlikely event that the proceeds from all
outstanding lease vehicles would be lower than GMACs
standard residual rates. The amounts in the foregoing table
represent the amounts paid in the first quarter of 2006 and 2005
under both the residual support and risk sharing programs.
In addition to the financing arrangements summarized in the
foregoing table, GM has a $4 billion revolving line of
credit from GMAC that expires in September 2006. This credit
line is used for general operating and seasonal working capital
purposes and to reduce external liquidity requirements. As of
March 31, 2006, and December 31, 2005, there were no
amounts outstanding on this line.
Financial results for our reporting segments are summarized
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing operations (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
American |
|
International |
|
|
|
Insurance |
|
|
|
|
($ in millions) |
|
Operations (b) |
|
Operations (b) |
|
ResCap (c) |
|
operations |
|
Other (d) |
|
Consolidated |
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue before provision for
credit losses
|
|
|
$1,218 |
|
|
|
$352 |
|
|
|
$264 |
|
|
|
$ |
|
|
|
$306 |
|
|
|
$2,140 |
|
Provision for credit losses
|
|
|
(14 |
) |
|
|
7 |
|
|
|
(123 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
(135 |
) |
Other revenue
|
|
|
744 |
|
|
|
217 |
|
|
|
800 |
|
|
|
1,141 |
|
|
|
9 |
|
|
|
2,911 |
|
|
Total net revenue
|
|
|
1,948 |
|
|
|
576 |
|
|
|
941 |
|
|
|
1,141 |
|
|
|
310 |
|
|
|
4,916 |
|
Noninterest expense
|
|
|
1,675 |
|
|
|
392 |
|
|
|
602 |
|
|
|
955 |
|
|
|
304 |
|
|
|
3,928 |
|
|
Income before income tax expense
|
|
|
273 |
|
|
|
184 |
|
|
|
339 |
|
|
|
186 |
|
|
|
6 |
|
|
|
988 |
|
Income tax expense (benefit)
|
|
|
100 |
|
|
|
55 |
|
|
|
138 |
|
|
|
57 |
|
|
|
(34 |
) |
|
|
316 |
|
|
Net income
|
|
|
$173 |
|
|
|
$129 |
|
|
|
$201 |
|
|
|
$129 |
|
|
|
$40 |
|
|
|
$672 |
|
|
Total assets
|
|
|
$155,293 |
|
|
|
$30,288 |
|
|
|
$121,914 |
|
|
|
$13,739 |
|
|
|
($17,429 |
) |
|
|
$303,805 |
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue before provision for
credit losses
|
|
|
$1,134 |
|
|
|
$376 |
|
|
|
$420 |
|
|
|
$ |
|
|
|
$257 |
|
|
|
$2,187 |
|
Provision for credit losses
|
|
|
(148 |
) |
|
|
(30 |
) |
|
|
(133 |
) |
|
|
|
|
|
|
(18 |
) |
|
|
(329 |
) |
Other revenue
|
|
|
618 |
|
|
|
195 |
|
|
|
837 |
|
|
|
1,038 |
|
|
|
153 |
|
|
|
2,841 |
|
|
Total net revenue
|
|
|
1,604 |
|
|
|
541 |
|
|
|
1,124 |
|
|
|
1,038 |
|
|
|
392 |
|
|
|
4,699 |
|
Noninterest expense
|
|
|
1,435 |
|
|
|
392 |
|
|
|
595 |
|
|
|
895 |
|
|
|
279 |
|
|
|
3,596 |
|
|
Income before income tax expense
|
|
|
169 |
|
|
|
149 |
|
|
|
529 |
|
|
|
143 |
|
|
|
113 |
|
|
|
1,103 |
|
Income tax expense
|
|
|
41 |
|
|
|
42 |
|
|
|
207 |
|
|
|
48 |
|
|
|
37 |
|
|
|
375 |
|
|
Net income
|
|
|
$128 |
|
|
|
$107 |
|
|
|
$322 |
|
|
|
$95 |
|
|
|
$76 |
|
|
|
$728 |
|
|
Total assets
|
|
|
$182,331 |
|
|
|
$31,189 |
|
|
|
$98,295 |
|
|
|
$11,921 |
|
|
|
($8,508 |
) |
|
|
$315,228 |
|
|
|
|
(a) |
Financing operations in the MD&A also includes the
Commercial Finance Group, which is a separate operating segment
and is included in Other. |
(b) |
North American Operations consist of automotive financing in the
U.S. and Canada. International Operations consists of automotive
financing and full service leasing in all other countries and
Puerto Rico. Beginning April 1, 2006, Puerto Rico is now
included in the North American Operations. |
(c) |
Refer to Note 1 to the Condensed Consolidated Financial
Statements for a discussion on changes to the reportable
operating segments. |
(d) |
Represents our Commercial Finance Group, GMAC Commercial
Mortgage Operations, certain corporate activities related to the
Mortgage Group, reclassifications and eliminations between the
reporting segments. At March 31, 2006, total assets were
$7 billion for the Commercial Finance Group, $500 for the
corporate activities of the Mortgage Group and
($25.0) billion in eliminations. As a result of the sale of
approximately 78% of its equity in GMAC Commercial Mortgage, the
remaining equity method investment is reflected in this segment.
Refer to Note 1 to the Condensed Consolidated Financial
Statements for a discussion on changes to the reportable
operating segments. Net income related to GMAC Commercial
Mortgage was $29 and $63 for the period ended March 31,
2006 and 2005, respectively. Additionally, total assets includes
our investment in Capmark of $682 at March 31, 2006, and
assets related to GMAC Commercial Mortgage of $15.8 billion
at March 31, 2005. |
18
Notes to Condensed Consolidated Financial Statements (unaudited)
General Motors Acceptance Corporation
Sale of a Controlling Interest in GMAC
On April 2, 2006, GM and its wholly owned subsidiaries,
GMAC and GM Finance Co. Holdings Inc., entered into a
definitive agreement pursuant to which GM will sell a 51%
controlling interest in GMAC for a purchase price of
$7.4 billion to FIM Holdings LLC, a consortium of
investors led by Cerberus Capital Management, L.P., a private
investment firm, which also includes Citigroup Inc. and Aozora
Bank Ltd. as consortium members (FIM Holdings). GM will
retain a 49% equity investment interest in GMAC. In addition, GM
and the consortium will invest $1.9 billion of cash in new
GMAC preferred equity, with $1.4 billion to be invested by
GM and $500 million to be invested by FIM Holdings. The
transaction is subject to a number of U.S. and international
regulatory and other approvals. GM and GMAC expect to close the
transaction in the fourth quarter of 2006.
Prior to consummation of the agreement, (i) certain assets
with respect to automotive leases and retail installment sales
contracts owned by us and our affiliates having a net book value
of approximately $4 billion, will be dividended to GM,
(ii) GM will assume certain of our post-employment benefit
obligations, (iii) we will transfer to GM certain entities
which hold a fee interest in certain real properties,
(iv) we will pay dividends to GM in an amount up to the
amount of our net income prior to the Acquisition, (v) GM
will repay certain indebtedness owing to us and specified
intercompany unsecured obligations owing to us shall be no
greater than $1.5 billion and (vi) we will make a
one-time distribution to GM of approximately $2.7 billion
of cash to reflect the increase in our equity value resulting
from the transfer of a portion of our net deferred tax
liabilities arising from our conversion and certain of our
subsidiaries conversion to limited liability company form.
The total value of the cash proceeds and distributions to GM
before they purchase our preferred limited liability company
interests will be approximately $14 billion over three
years, comprised of the $7.4 billion purchase price, the
$4 billion of retained assets and the $2.7 billion
cash dividend.
As part of the transaction, GM and GMAC will enter into a number
of agreements that will require that we continue to allocate
capital to automotive financing consistent with historical
practices, thereby continuing to provide critical financing
support to a significant share of GMs global sales. While
we will retain the right to make individual credit decisions, we
will commit to fund a broad spectrum of customers and dealers
consistent with historical practice in the relevant
jurisdiction. Subject to our fulfillment of certain conditions,
GM will grant us exclusivity for 10 years for U.S.,
Canadian, and international GM-sponsored retail and wholesale
marketing incentives around the world, with the exception of
Saturn branded products.
As part of the agreement, GM will retain an option, for
10 years after the closing of the transaction, to
repurchase certain assets from us related to the automotive
finance business of the North American Operations and
International Operations of GMAC, subject to certain conditions,
including that GMs credit ratings are investment grade or
are higher than our credit ratings.
The agreement is subject to the satisfaction or waiver of
customary and other closing conditions, including, among other
things, (i) reasonable satisfaction by the members of
FIM Holdings, pursuant to an agreement with or other
writing from, the PBGC that, following the closing, we and our
subsidiaries will not have any liability with respect to the
ERISA plans of GM, (ii) receipt of ratings for our senior
unsecured long-term indebtedness and the ratings of Residential
Capital Corporation, our indirect wholly owned subsidiary, after
giving effect to the transactions contemplated by the Agreement,
of at least BB and BBB- (or their respective equivalents),
respectively, and an A.M.Best rating for our significant
insurance subsidiaries of at least B++ (iii) that no
material adverse effect will have occurred with respect to our
business, financial condition or results of operations of GMAC,
which includes any actual downgrading by any of the major rating
agencies of GMs unsecured long-term indebtedness rating
below CCC or its equivalent, and (iv) receipt of required
regulatory approvals and licenses. The agreement may be
terminated upon the occurrence of certain events, including the
failure to complete the transaction by March 31, 2007.
19
Managements Discussion and Analysis
General Motors Acceptance Corporation
We are a leading global financial services firm with
approximately $304 billion of assets and operations in
approximately 40 countries. Founded in 1919 as a wholly owned
subsidiary of General Motors Corporation, GMAC was originally
established to provide GM dealers with the automotive financing
necessary to acquire and maintain vehicle inventories and to
provide retail customers the means by which to finance vehicle
purchases through GM dealers. Our products and services have
expanded beyond automotive financing as we currently operate in
three primary lines of business Financing, Mortgage
and Insurance. Refer to our 2005 Annual Report on
Form 10-K for a
more complete description of our business activities, along with
the products and services offered and the market competition.
Net income for our businesses is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
|
|
Financing (a)
|
|
$ |
313 |
|
|
$ |
248 |
|
|
|
Mortgage
|
|
|
230 |
|
|
|
385 |
|
|
|
Insurance
|
|
|
129 |
|
|
|
95 |
|
|
|
|
Net income
|
|
$ |
672 |
|
|
$ |
728 |
|
|
|
|
Return on average equity
(annualized)
|
|
|
12.1 |
% |
|
|
12.9 |
% |
|
|
|
|
|
|
(a) |
Includes North America and International automotive finance
segments, separately identified in Note 10 to the Condensed
Consolidated Financial Statements, as well as our Commercial
Finance Group operating segment. |
|
We earned $672 million in the first quarter of 2006, down
$56 million from first quarter 2005 earnings of
$728 million. Earnings benefited from increases in the
Financing and Insurance operations largely as a result of
continued strong loss performance. However, these increases were
more than offset by lower mortgage earnings.
Results for Financing operations were $313 million, up
$65 million from $248 million earned in the same
period in the prior year. The increase is largely due to lower
consumer credit provisions primarily as a result of the impact
of automotive whole loan sale activity and favorable
international credit performance.
ResCap earnings were $201 million in the first quarter
2006, down from the $322 million earned in the first
quarter of 2005. While revenues were strong from higher asset
levels, results were negatively impacted by lower net margins
resulting from both pricing pressures and higher funding costs.
In addition, gains on sale of loans were down due to a
significant gain in the first quarter of 2005 realized upon the
sale of a portfolio of distressed mortgage loans. Absent this,
mortgage loan gains were relatively flat as the favorable impact
from higher sales volume was offset by lower margins.
ResCaps credit provision was lower as compared to the
first quarter of 2005 as a result of favorable credit trends.
Mortgage originations were $41.6 billion for the first
quarter of 2006 representing an increase from the
$36.4 billion in the first quarter 2005.
Our Insurance operations generated net income of
$129 million in the first quarter of 2006, up
$34 million from earnings of $95 million in the first
quarter of 2005, primarily reflecting the impact of strong
underwriting results (in particular loss experience). In
addition, first quarter Insurance results also benefited from
the strategic acquisition of MEEMIC Insurance Company, a
personal lines business that offers automobile and homeowners
insurance in the Midwest. Along with increased earnings, GMAC
Insurance maintained a strong investment portfolio, with a
market value of $7.9 billion at March 31, 2006,
including after tax net unrealized capital gains of
$622 million.
In addition, on March 23, 2006, we closed on the sale of
approximately 78 percent of our equity in GMAC Commercial
Mortgage for approximately $1.5 billion in cash. At the
closing, GMAC Commercial Mortgage also repaid to us
approximately $7.3 billion in intercompany loans, bringing
the total cash proceeds from the sale to $8.8 billion. GMAC
Commercial Mortgage has changed its name to Capmark Financial
Group Inc. (Capmark). Our earnings in the first quarter related
to GMAC Commercial Mortgage were $29 million, representing
operating income of $50 million and a loss on the sale of
$21 million, after closing costs.
We continue to maintain adequate liquidity with cash reserve
balances at March 31, 2006, of $22.1 billion,
comprised of $17.3 billion in cash and cash equivalents and
$4.8 billion invested in marketable securities.
On April 3, 2006, GM announced that it agreed to sell a
51 percent controlling interest in us to a consortium led
by Cerberus Capital Management, which is expected to close in
the fourth quarter of this year. In addition to continuing to
enable us to support the sale of GM vehicles, the transaction is
intended to support our strategic goal of a stable investment
grade rating and profitable growth.
20
Managements Discussion and Analysis
General Motors Acceptance Corporation
Our Financing operations offer a wide range of financial
services and products (directly and indirectly) to retail
automotive consumers, automotive dealerships and other
commercial businesses. Our Finance operations are comprised of
two separate reporting segments North American
Automotive Finance Operations and International Automotive
Finance Operations and one operating
segment Commercial Finance Group. The products and
services offered by our Financing operations include the
purchase of retail installment sales contracts and leases,
extension of term loans, dealer floor plan financing and other
lines of credit to dealers, fleet leasing and factoring of
receivables. Refer to
pages 21-31 of our
2005 Annual Report on
Form 10-K for
further discussion of the business profile of our Financing
operations.
Results of Operations
The following table summarizes the operating results of our
Financing operations for the periods indicated. The amounts
presented are before the elimination of balances and
transactions with our other reporting segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
Change |
|
% |
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
|
|
|
$1,425 |
|
|
|
$1,710 |
|
|
|
($285 |
) |
|
|
(17 |
) |
Commercial
|
|
|
461 |
|
|
|
472 |
|
|
|
(11 |
) |
|
|
(2 |
) |
Operating leases
|
|
|
1,930 |
|
|
|
1,666 |
|
|
|
264 |
|
|
|
16 |
|
|
|
|
|
|
|
Total financing revenue
|
|
|
3,816 |
|
|
|
3,848 |
|
|
|
(32 |
) |
|
|
(1 |
) |
Interest and discount expense
|
|
|
(2,124 |
) |
|
|
(2,231 |
) |
|
|
107 |
|
|
|
5 |
|
Provision for credit losses
|
|
|
(9 |
) |
|
|
(182 |
) |
|
|
173 |
|
|
|
95 |
|
|
|
|
|
|
|
Net financing revenue
|
|
|
1,683 |
|
|
|
1,435 |
|
|
|
248 |
|
|
|
17 |
|
Other income
|
|
|
896 |
|
|
|
777 |
|
|
|
119 |
|
|
|
15 |
|
Depreciation expense on operating
leases
|
|
|
(1,440 |
) |
|
|
(1,270 |
) |
|
|
(170 |
) |
|
|
(13 |
) |
Noninterest expense
|
|
|
(665 |
) |
|
|
(602 |
) |
|
|
(63 |
) |
|
|
(10 |
) |
Income tax expense
|
|
|
(161 |
) |
|
|
(92 |
) |
|
|
(69 |
) |
|
|
(75 |
) |
|
|
|
|
|
Net income
|
|
|
$313 |
|
|
|
$248 |
|
|
|
$65 |
|
|
|
26 |
|
|
Total assets
|
|
|
$185,077 |
|
|
|
$212,806 |
|
|
|
($27,729 |
) |
|
|
(13 |
) |
|
Financing operations earned $313 million, an increase of
26% in comparison to 2005 first quarter results of
$248 million with increases in both the North American and
International Automotive operations. The increase in earnings is
largely due to lower consumer credit provisions primarily as a
result of the impact of automotive whole loan activity and
favorable international credit performance. Earnings increases
were realized despite a continued decline in net interest
margins. While net interest margins were down, the decrease was
less than what has been experienced in prior quarters.
Total financing revenue was relatively constant as compared to
2005 with declines in consumer revenue offset by higher
operating lease revenues. The decrease in consumer revenue is
consistent with the reduction in consumer asset levels as a
result of continued whole loan sale activity. Consumer finance
receivables have declined by $24 billion, or approximately
27%, since March 31, 2005. Operating lease revenue (along
with the related depreciation expense) increased year over year
consistent with the increase in the size of the operating lease
portfolio (approximately 24% since March 2005). The increase in
the portfolio is reflective of the shift in our financing volume
mix to more leases in the North American operations.
Interest and discount expense declined 5% as compared to the
prior year, partially due to the decreases in asset levels, as
well as the favorable impact of derivative hedge ineffectiveness
for certain swaps hedging the debt portfolio. Somewhat
offsetting this was the negative impact of higher market
interest rates. Refer to the Funding and Liquidity section of
this MD&A for further discussion.
The provision for credit losses decreased due to a combination
of lower consumer asset levels, primarily due to an increase in
whole loan sales, and improved loss performance on our
international portfolio. Refer to the Credit Risk discussion
within this Financing Operations Section of the MD&A for
further discussion.
Compensation and benefits expense decreased by $31 million
with the most significant impact related to the reduction in the
OPEB (other post-employment benefits) liability allocation from
GM. In addition, other operating expenses increased from
$337 million in the first quarter of 2005 to
$432 million in the first quarter of 2006 primarily due to
a decrease in the gain realized on the disposal of off-lease
vehicles. In
21
Managements Discussion and Analysis
General Motors Acceptance Corporation
addition, the effective tax rate for the Financing operations
was 33.9% for the period ended March 31, 2006, as compared
to 27.0% for the comparable period in 2005. The increase in the
rate is due to the impact of favorable tax items related to
changes in reserve requirements and a lower state and local tax
accrual rate in 2005 in our North American Automotive Finance
Operations.
Financing Volume
The following table summarizes our new vehicle consumer
financing volume, our share of GM retail sales, and our
wholesale financing of new vehicles and related share of GM
sales to dealers in markets where we operate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of |
|
|
GMAC volume |
|
GM sales |
|
|
|
|
|
Three months ended March 31, (units in thousands) |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
New vehicle consumer
financing
|
|
|
|
|
|
|
|
|
GM vehicles
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
|
|
|
|
|
|
|
|
Retail contracts
|
|
188 |
|
312
|
|
26% |
|
38%
|
|
|
Leases
|
|
165 |
|
137
|
|
22% |
|
17%
|
|
|
Total North America
|
|
353 |
|
449
|
|
48% |
|
55%
|
|
International (retail contracts and
leases)
|
|
135 |
|
127
|
|
25% |
|
28%
|
|
|
|
|
|
Total GM units financed
|
|
488 |
|
576
|
|
38% |
|
45%
|
|
|
|
|
|
|
|
Non-GM units financed
|
|
16 |
|
15
|
|
|
|
|
|
|
|
|
|
|
Total consumer automotive financing
volume
|
|
504 |
|
591
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale financing of new
vehicles
|
|
|
|
|
|
|
|
|
GM vehicles
|
|
|
|
|
|
|
|
|
|
North America
|
|
920 |
|
879
|
|
76% |
|
80%
|
|
International
|
|
660 |
|
573
|
|
92% |
|
90%
|
|
|
|
|
|
Total GM units financed
|
|
1,580 |
|
1,452
|
|
82% |
|
84%
|
|
|
|
|
|
|
|
Non-GM units financed
|
|
41 |
|
43
|
|
|
|
|
|
|
|
|
|
|
Total wholesale volume
|
|
1,621 |
|
1,495
|
|
|
|
|
|
|
|
|
|
Our consumer financing volume and penetration levels are
significantly impacted by the nature, timing and extent of
GMs use of rate, residual and other financing incentives
for marketing purposes on consumer retail contracts and leases.
Late in 2004 and through the early part of 2005, GM reduced its
use of special rate financing programs and utilized marketing
programs that provided cash incentives to customers that use us
to finance their purchase of a new GM vehicle. As a result, our
North America penetration levels were positively impacted in the
first quarter of 2005. However, as GM has begun to focus on
value pricing, the use of special rate marketing
incentives was reduced and as a result our share of retail
financing volume has declined since the first quarter of 2005.
In addition, the reduction in retail contracts as compared to
the first quarter of 2005 had the impact of increasing the
percentage of lease contracts relative to the total volume
financed. Lease financing volume in the first quarter of 2006
also benefited from a shift by GM in some vehicle incentive
programs towards more leasing in replacement of retail marketing
activities. In our International Automotive Finance Operations,
financing volume has increased as we continue to expand (most
notably financing in China and providing financing to
Chevrolet-Daewoo). However, in Europe as we continue to enter
into these growing markets, our penetration share is negatively
impacted on a relative basis despite the increased volume. Our
wholesale financing continues to be the primary funding source
for GM dealer inventories, as total penetration levels in the
first quarter of 2006 remained relatively consistent with levels
in the first quarter of 2005, and continue to reflect
traditionally strong levels.
Consumer Credit
The following tables summarize pertinent loss experience in the
consumer managed and on-balance sheet automotive retail contract
portfolio. In general, the credit quality of the off-balance
sheet portfolio is representative of our overall managed
consumer automotive retail contract portfolio. The off-balance
sheet portfolio includes receivables securitized and sold that
we continue to service and in which we retain an interest or
risk of loss, but excludes securitized and sold finance
receivables that we continue to service but in which we retain
no interest or risk of loss. However, the process of creating a
pool of retail finance receivables for securitization or sale
typically excludes accounts that are greater than 30 days
delinquent at such time. In addition, the process involves
selecting from a pool of receivables that
22
Managements Discussion and Analysis
General Motors Acceptance Corporation
are currently outstanding and, therefore, represent seasoned
accounts. A seasoned portfolio that excludes delinquent accounts
historically results in better credit performance in the managed
portfolio than in the on-balance sheet portfolio of retail
finance receivables. In addition, the current off-balance sheet
transactions are comprised mainly of subvented rate retail
finance receivables, which generally attract higher quality
customers (or otherwise cash purchasers) than customers
typically associated with non-subvented receivables.
The managed portfolio includes retail receivables held
on-balance sheet for investment and receivables securitized and
sold that we continue to service and have a continued
involvement in (i.e., in which we retain an interest or risk of
loss in the underlying receivables), but excludes securitized
and sold finance receivables that we continue to service but
have no other continuing involvement (serviced-only portfolio).
We believe that the disclosure of the credit experience of the
managed portfolio presents a more complete presentation of our
credit exposure because the managed basis reflects not only
on-balance sheet receivables but also securitized assets to
which we retain a risk of loss in the underlying assets
(typically in the form of a subordinated retained interest).
Consistent with the presentation in the Condensed Consolidated
Balance Sheet, retail contracts presented in the table represent
the principal balance of the finance receivable discounted for
any unearned rate support received from GM.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Charge-offs, |
|
|
|
|
retail |
|
net of |
|
Annualized net |
|
|
contracts |
|
recoveries |
|
charge-off rate |
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
Managed
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$59,076 |
|
|
$164 |
|
$193
|
|
1.11% |
|
0.96%
|
International
|
|
|
14,772 |
|
|
27 |
|
35
|
|
0.73% |
|
0.93%
|
|
|
|
|
|
Total managed
|
|
|
$73,848 |
|
|
$191 |
|
$228
|
|
1.03% |
|
0.95%
|
|
On-balance sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$53,881 |
|
|
$159 |
|
$190
|
|
1.18% |
|
1.00%
|
International
|
|
|
14,772 |
|
|
27 |
|
35
|
|
0.73% |
|
0.93%
|
|
|
|
|
|
Total on-balance sheet
|
|
|
$68,653 |
|
|
$186 |
|
$225
|
|
1.08% |
|
0.99%
|
|
|
|
The following table summarizes pertinent delinquency experience
in the consumer automotive retail contract portfolio. |
|
|
|
|
|
|
|
|
|
|
|
|
Percent of retail contracts |
|
|
30 days or more past due (a) |
|
|
|
|
|
Managed |
|
On-balance sheet |
|
|
|
|
|
March 31, |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
North America
|
|
2.34% |
|
2.09%
|
|
2.53% |
|
2.24%
|
International
|
|
2.54% |
|
2.67%
|
|
2.54% |
|
2.67%
|
Total
|
|
2.40% |
|
2.24%
|
|
2.53% |
|
2.36%
|
|
|
|
|
(a) |
Past due contracts are calculated on the basis of the average
number of contracts delinquent during a month and exclude
accounts in bankruptcy. |
|
In addition to the preceding loss and delinquency data, the
following table summarizes bankruptcies and repossession
information for the United States consumer automotive retail
contract portfolio (which represents approximately 61% of our
on-balance sheet consumer automotive retail contract portfolio):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed |
|
On-balance sheet |
|
|
|
|
|
Three months ended March 31, |
|
2006 |
|
2005 |
|
2006 |
|
2005 |
|
|
|
Average retail contracts in
bankruptcy (in units)
|
|
|
103,521 |
|
|
|
96,279 |
|
|
|
101,863 |
|
|
|
91,510 |
|
|
|
Bankruptcies as a percent of
average number of contracts outstanding
|
|
|
2.83 |
% |
|
|
1.98 |
% |
|
|
2.93 |
% |
|
|
2.02 |
% |
|
|
Retail contract repossessions (in
units)
|
|
|
25,133 |
|
|
|
27,078 |
|
|
|
24,883 |
|
|
|
25,750 |
|
|
|
Annualized repossessions as a
percent of average number of contracts outstanding
|
|
|
2.73 |
% |
|
|
2.23 |
% |
|
|
2.84 |
% |
|
|
2.28 |
% |
|
|
|
23
Managements Discussion and Analysis
General Motors Acceptance Corporation
The following table summarizes activity related to the consumer
allowance for credit losses for our Financing operations.
|
|
|
|
|
|
|
|
|
|
Period ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
Allowance at beginning of period
|
|
|
$1,618 |
|
|
|
$2,035 |
|
Provision for credit losses
|
|
|
28 |
|
|
|
177 |
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(193 |
) |
|
|
(221 |
) |
|
Foreign
|
|
|
(43 |
) |
|
|
(50 |
) |
|
Total charge-offs
|
|
|
(236 |
) |
|
|
(271 |
) |
|
Recoveries
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
38 |
|
|
|
36 |
|
|
Foreign
|
|
|
13 |
|
|
|
11 |
|
|
Total recoveries
|
|
|
51 |
|
|
|
47 |
|
|
Net charge-offs
|
|
|
(185 |
) |
|
|
(224 |
) |
Impacts of foreign currency
translation
|
|
|
1 |
|
|
|
(10 |
) |
Securitization activity
|
|
|
1 |
|
|
|
|
|
|
Allowance at March 31,
|
|
|
$1,463 |
|
|
|
$1,978 |
|
Allowance coverage (a)
|
|
|
2.23 |
% |
|
|
2.21 |
% |
|
|
|
|
(a) |
Represents the related allowance for credit losses as a
percentage of total on-balance sheet consumer automotive retail
contracts. |
|
Charge-offs in the North American Automotive portfolio decreased
consistent with the decline in the level of overall managed and
on balance sheet receivables as we continue to execute more
whole loan sales. However, similar to securitizations as
described above, the process of creating a pool of retail
finance receivables for whole loan sales typically involves
excluding retail contracts that are greater than 30 days
delinquent at such time and selecting from a pool of receivables
currently outstanding which, therefore represents seasoned
contracts. A seasoned portfolio that excludes delinquent
contracts historically results in better credit performance, and
as a result the increase in whole loan activity over the past
year has impacted the charge-offs as a percentage of the managed
and on-balance sheet portfolio when compared to the comparable
period in the prior year. This impact of whole loan activity is
the primary reason for the increase in charge-offs as a
percentage of retail receivables and delinquencies over the past
year. On an overall servicing portfolio basis (which includes
receivables sold in whole loan transactions but still serviced),
both charge-offs and delinquencies for the first quarter 2006
have been relatively consistent with the first quarter 2005. On
a servicing portfolio basis, charge-offs in the North American
Automotive portfolio were 0.92% and 0.90% for the first three
months of 2006 and 2005, respectively. On a servicing portfolio
basis, delinquencies in the North American Automotive portfolio
increased slightly (2.10% and 2.01% for the quarters ended
March 31, 2006 and 2005, respectively) primarily due to
customers affected by Hurricane Katrina. The increase in the
number of bankruptcies in the U.S. portfolio from the prior
year reflects increased activity as a result of legislation
effective October 17, 2005, which made it more difficult
for U.S. consumers to qualify for bankruptcy protection in
the future. As a result, the increase in bankruptcies
outstanding reflects an acceleration of bankruptcy filings in
the prior year and does not reflect an overall deterioration in
credit quality of the portfolio. Since the time of the effective
date of the legislation, the number of bankruptcy filings has
declined. Credit fundamentals in our International Automotive
operations continue to improve with both delinquencies and
charge-offs lower than prior period levels.
The allowance for credit losses as a percentage of the total
on-balance sheet consumer portfolio remained stable in
comparison to the prior period as the consumer allowance quarter
over quarter decreased along with automotive retail asset levels.
Commercial Credit
Our credit risk on the commercial portfolio is markedly
different than that of our consumer portfolio. Whereas the
consumer portfolio represents a homogenous pool of retail
contracts that exhibit fairly predictable and stable loss
patterns, the commercial portfolio exposures are less
predictable. In general, the credit risk of the commercial
portfolio is tied to overall economic conditions in the
countries in which we operate.
At March 31, 2006, the only commercial receivables that had
been securitized and accounted for as off-balance sheet
transactions represent wholesale lines of credit extended to
automotive dealerships, which historically experience low
charge-offs. Since only wholesale
24
Managements Discussion and Analysis
General Motors Acceptance Corporation
accounts have historically been securitized, the amount of
charge-offs on our managed portfolio is the same as the
on-balance sheet portfolio. As a result, only the on-balance
sheet commercial portfolio credit experience is presented in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
|
Impaired loans (a) |
|
|
|
|
|
|
|
March 31, |
|
March 31, |
|
Dec 31, |
|
March 31, |
($ in millions) |
|
2006 |
|
2006 |
|
2005 |
|
2005 |
|
|
|
Wholesale
|
|
|
$21,734 |
|
|
|
$294 |
|
|
|
$299 |
|
|
|
$599 |
|
|
|
|
|
|
|
|
|
|
1.35 |
% |
|
|
1.45 |
% |
|
|
2.52 |
% |
|
|
Other commercial financing
|
|
|
10,444 |
|
|
|
408 |
|
|
|
475 |
|
|
|
616 |
|
|
|
|
|
|
|
|
|
|
3.91 |
% |
|
|
4.56 |
% |
|
|
5.04 |
% |
|
|
|
Total on-balance sheet
|
|
|
$32,178 |
|
|
|
$702 |
|
|
|
$774 |
|
|
|
$1,215 |
|
|
|
|
|
|
|
|
|
|
2.18 |
% |
|
|
2.50 |
% |
|
|
3.38 |
% |
|
|
|
|
|
|
(a) |
Includes loans where it is probable that we will be unable to
collect all amounts due according to the terms of the loan. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Annualized charge-offs |
|
|
loans |
|
net of recoveries |
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2006 |
|
2005 |
|
|
|
Wholesale
|
|
|
$21,232 |
|
|
|
$ |
|
|
|
$1 |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
0.02 |
% |
|
|
Other commercial financing
|
|
|
10,251 |
|
|
|
40 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
1.56 |
% |
|
|
0.17 |
% |
|
|
|
Total on-balance sheet
|
|
|
$31,483 |
|
|
|
$40 |
|
|
|
$6 |
|
|
|
|
|
|
|
|
|
|
0.51 |
% |
|
|
0.06 |
% |
|
|
|
The following table summarizes the activity related to the
commercial allowance for credit losses for our Financing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
|
|
Allowance at beginning of period
|
|
$ |
245 |
|
|
$ |
322 |
|
|
|
Provision for credit losses
|
|
|
(18 |
) |
|
|
5 |
|
|
|
Charge-offs
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(46 |
) |
|
|
(7 |
) |
|
|
|
Foreign
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
|
Total charge-offs
|
|
|
(47 |
) |
|
|
(8 |
) |
|
|
|
Recoveries
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
5 |
|
|
|
2 |
|
|
|
|
Foreign
|
|
|
2 |
|
|
|
|
|
|
|
|
Total recoveries
|
|
|
7 |
|
|
|
2 |
|
|
|
|
Net charge-offs
|
|
|
(40 |
) |
|
|
(6 |
) |
|
|
Impacts of foreign currency
|
|
|
|
|
|
|
(3 |
) |
|
|
|
Allowance at end of period
|
|
$ |
187 |
|
|
$ |
318 |
|
|
|
|
Net charge-offs in the commercial portfolio remain at
traditionally low levels. Charge-offs in the commercial
portfolio increased as compared to 2005 as a result of an
increase in the amount of charge-offs at our Commercial Finance
Group (included in other commercial financing in the preceding
table) related to a few specific accounts that were previously
provided for.
25
Managements Discussion and Analysis
General Motors Acceptance Corporation
Our Mortgage Operations are comprised of one reporting segment:
ResCap. Additionally, the Mortgage Operations includes an equity
interest in Capmark (formerly GMAC Commercial Mortgage), which
is reflected in Note 10 (Segment Information) in the
Other column. On March 23, 2006, we sold
approximately 78% of our equity in GMAC Commercial Mortgage for
approximately $1.5 billion in cash. Refer to Note 1 to
the Condensed Consolidated Financial Statements for further
details.
The principal activities of ResCap involve the origination,
purchase, servicing, sale and securitization of consumer (i.e.,
residential) and commercial mortgage loans and mortgage related
products (e.g., real estate services). Typically, mortgage loans
are originated and sold to investors in the secondary market,
including securitization transactions in which the assets are
legally sold but are accounted for as secured financings. For
additional information, please refer to ResCaps quarterly
report on
Form 10-Q for the
period ended March 31, 2006, filed separately with the SEC,
which report is not deemed incorporated into any of our filings
under the Securities Act or the Exchange Act.
Results of Operations
Net income for our Mortgage operations is summarized as follows:
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
ResCap
|
|
|
$201 |
|
|
$ |
322 |
|
Other (a)
|
|
|
29 |
|
|
|
63 |
|
|
Net Income
|
|
|
$230 |
|
|
$ |
385 |
|
|
|
|
|
(a) |
Represents GMAC Commercial Mortgage earnings. |
|
Mortgage operations earned $230 million in the first
quarter of 2006, a decrease of 40% from $385 million earned
in the first quarter of 2005. These results reflect decreases in
both ResCap and GMAC Commercial Mortgage. ResCap earned
$201 million for the first quarter of 2006, representing a
decrease from the $322 million earned in the same period of
the prior year. ResCaps earnings were negatively impacted
by lower net margins resulting from both pricing pressures and
higher funding costs. Our earnings related to GMAC Commercial
Mortgage were $29 million, representing operating income of
$50 million prior to the close of the transaction and
equity earnings after the close, and a loss on sale of
$21 million, after closing costs.
26
Managements Discussion and Analysis
General Motors Acceptance Corporation
The following describes the results of operations for ResCap.
ResCap
The following table summarizes the operating results for ResCap
for the periods indicated. The amounts presented are before the
elimination of balances and transactions with our other
reporting segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
|
|
|
|
|
($ in millions) |
|
2006 | |
|
2005 | |
|
Change | |
|
% | |
| |
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing revenue
|
|
|
$1,700 |
|
|
|
$1,185 |
|
|
|
$515 |
|
|
|
43 |
|
Interest and discount expense
|
|
|
(1,436 |
) |
|
|
(765 |
) |
|
|
(671 |
) |
|
|
(88 |
) |
Provision for credit losses
|
|
|
(123 |
) |
|
|
(133 |
) |
|
|
10 |
|
|
|
8 |
|
|
|
|
|
Net financing revenue
|
|
|
141 |
|
|
|
287 |
|
|
|
(146 |
) |
|
|
(51 |
) |
Mortgage servicing fees
|
|
|
375 |
|
|
|
349 |
|
|
|
26 |
|
|
|
8 |
|
MSR amortization and impairment
|
|
|
|
|
|
|
(140 |
) |
|
|
140 |
|
|
|
100 |
|
Change in fair value
|
|
|
195 |
|
|
|
|
|
|
|
195 |
|
|
|
100 |
|
MSR risk management activities
|
|
|
(381 |
) |
|
|
(24 |
) |
|
|
(357 |
) |
|
|
(1,488 |
) |
|
|
|
|
Net loan serving income
|
|
|
189 |
|
|
|
185 |
|
|
|
4 |
|
|
|
2 |
|
Gains on sale of loans
|
|
|
267 |
|
|
|
329 |
|
|
|
(62 |
) |
|
|
(19 |
) |
Other income
|
|
|
344 |
|
|
|
323 |
|
|
|
21 |
|
|
|
7 |
|
Noninterest expense
|
|
|
(602 |
) |
|
|
(595 |
) |
|
|
(7 |
) |
|
|
(1 |
) |
Income tax expense
|
|
|
(138 |
) |
|
|
(207 |
) |
|
|
69 |
|
|
|
33 |
|
|
|
|
|
Net income
|
|
|
$201 |
|
|
|
$322 |
|
|
|
($121 |
) |
|
|
(38 |
) |
|
Investment securities
|
|
|
$4,409 |
|
|
|
$7,144 |
|
|
|
($2,735 |
) |
|
|
(38 |
) |
Loans held for sale
|
|
|
18,171 |
|
|
|
16,312 |
|
|
|
1,859 |
|
|
|
11 |
|
Loans held for investment, net
|
|
|
85,084 |
|
|
|
64,134 |
|
|
|
20,950 |
|
|
|
33 |
|
Mortgage servicing rights
|
|
|
4,526 |
|
|
|
3,672 |
|
|
|
854 |
|
|
|
23 |
|
Other assets
|
|
|
9,724 |
|
|
|
7,033 |
|
|
|
2,691 |
|
|
|
38 |
|
|
|
|
|
Total assets
|
|
|
$121,914 |
|
|
|
$98,295 |
|
|
|
$23,619 |
|
|
|
24 |
|
|
ResCap earned $201 million in the first quarter of 2006, a
decrease of 38% from $322 million earned in the first
quarter of 2005. Net financing revenue was negatively impacted
by higher interest and discount expense driven by an increase in
short-term market interest rates and the resulting flattening of
the yield curve. However, the increase in interest and discount
expense was partially offset by an increase in financing
revenues from higher asset levels due to higher loan production
as well as continued favorable trends in credit loss provisions.
Mortgage loan asset levels increased 32% from $65 billion
in the first quarter of 2005 to $86 billion in the first
quarter of 2006. Our domestic loan production increased despite
the decline in the overall domestic mortgage origination market,
resulting in an increase in our market share.
Net loan servicing income remained relatively flat as the
favorable impact of higher mortgage servicing fees and lower MSR
amortization and impairment was offset by negative hedging
results. The decline in MSR amortization and impairment is due
to the adoption of SFAS 156 on January 1, 2006. As a
result of the adoption, mortgage servicing rights are carried at
estimated fair value, and are no longer amortized.
Gains on sales of loans decreased due to a significant gain in
2005 realized upon the sale of a portfolio of distressed
mortgage loans. Absent this, mortgage loan gains were relatively
consistent with the prior year as the favorable impact from
higher sales volume was offset by lower margins due to
competitive pricing pressures.
In April 2006 we signed a definitive agreement to sell our
equity interest in a regional homebuilder. The agreement
provides that completion of the sale is subject to certain
conditions. We expect to close this cash transaction during the
second quarter of 2006. Upon closing, we expect to record a gain
that is estimated to be material to our results of operations.
We are selling our entire equity investment in this regional
home builder and, under the equity method of accounting, our
share of pretax income recorded from this investment
approximated $20.1 million and $13.4 million for the
three months ended March 31, 2006 and 2005, respectively,
and $95.8 million for the year ended December 31, 2005.
27
Managements Discussion and Analysis
General Motors Acceptance Corporation
Mortgage Loan Production, Sales and Servicing
Our mortgage loan production for the three months ended
March 31, 2006 was $41.6 billion, an increase of 14.0%
compared to $36.5 billion in the same period in 2005. Our
domestic loan production increased 7.5% and international
mortgage loan production almost doubled in 2006 compared to the
same period in 2005. Our loan production increased, while the
overall domestic mortgage origination market declined, resulting
in an increase in our market share. The domestic mortgage
origination market was estimated to be $526 billion for the
three months ended March 31, 2006, a decrease of 12.0%,
compared to an estimated $598 billion for the comparable
period in 2005. The market share growth has been achieved
through effectively changing our product offerings, and pricing
in our markets.
The following summarizes mortgage loan production for the
periods indicated.
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
Consumer:
|
|
|
|
|
|
|
|
|
|
Principal amount by product type:
|
|
|
|
|
|
|
|
|
|
|
Prime conforming
|
|
|
$8,569 |
|
|
|
$14,188 |
|
|
|
Government
|
|
|
861 |
|
|
|
1,197 |
|
|
|
Prime nonconforming
|
|
|
11,727 |
|
|
|
10,068 |
|
|
|
Prime second-lien
|
|
|
5,815 |
|
|
|
2,488 |
|
|
|
Nonprime
|
|
|
9,096 |
|
|
|
5,616 |
|
|
|
|
Total U.S. production
|
|
|
36,068 |
|
|
|
33,557 |
|
|
|
International
|
|
|
5,512 |
|
|
|
2,904 |
|
|
|
|
Total
|
|
|
$41,580 |
|
|
|
$36,461 |
|
|
|
Principal amount by origination
channel:
|
|
|
|
|
|
|
|
|
|
|
Retail and direct channels
|
|
|
$6,678 |
|
|
|
$8,481 |
|
|
|
Correspondent and broker channels
|
|
|
29,390 |
|
|
|
25,076 |
|
|
|
|
Total U.S. production
|
|
|
36,068 |
|
|
|
33,557 |
|
|
|
International
|
|
|
5,512 |
|
|
|
2,904 |
|
|
|
|
Total
|
|
|
$41,580 |
|
|
|
$36,461 |
|
|
Number of loans (in units):
|
|
|
|
|
|
|
|
|
|
Retail and direct channels
|
|
|
60,888 |
|
|
|
66,401 |
|
|
Correspondent and broker channels
|
|
|
190,852 |
|
|
|
153,249 |
|
|
|
Total U.S. production
|
|
|
251,740 |
|
|
|
219,650 |
|
|
International
|
|
|
26,511 |
|
|
|
14,621 |
|
|
|
Total
|
|
|
278,251 |
|
|
|
234,271 |
|
|
28
Managements Discussion and Analysis
General Motors Acceptance Corporation
The following summarizes the residential mortgage servicing
portfolio for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
($ in millions) |
|
2006 |
|
2005 |
|
Consumer:
|
|
|
|
|
|
|
|
|
|
Principal amount by product type:
|
|
|
|
|
|
|
|
|
|
|
Prime conforming
|
|
|
$189,307 |
|
|
|
$186,405 |
|
|
|
Government
|
|
|
18,160 |
|
|
|
18,098 |
|
|
|
Prime nonconforming
|
|
|
83,103 |
|
|
|
76,980 |
|
|
|
Prime second-lien
|
|
|
20,573 |
|
|
|
17,073 |
|
|
|
Nonprime
|
|
|
57,108 |
|
|
|
56,373 |
|
|
|
|
Total U.S.
|
|
|
368,251 |
|
|
|
354,929 |
|
|
|
International
|
|
|
24,865 |
|
|
|
23,711 |
|
|
|
Total
|
|
|
$393,116 |
|
|
|
$378,640 |
|
|
|
Principal amount by investor
composition:
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
46 |
% |
|
|
43 |
% |
|
|
Private investor
|
|
|
47 |
% |
|
|
51 |
% |
|
|
Owned and other
|
|
|
7 |
% |
|
|
6 |
% |
|
Number of loans (in units)
|
|
|
3,045,334 |
|
|
|
2,965,048 |
|
|
Average loan size ($ per loan)
|
|
|
$129,088 |
|
|
|
$129,001 |
|
|
Weighted average service fee (basis
points)
|
|
|
36 |
|
|
|
37 |
|
|
Consumer Credit
The following table summarizes the nonperforming assets in our
Mortgage operations. Nonperforming assets are nonaccrual loans,
foreclosed assets and restructured loans. Mortgage loans and
lending receivables are generally placed on nonaccrual status
when they are 60 days or more past due, or when the timely
collection of the principal of the loan, in whole or in part, is
doubtful. Managements classification of a loan as
nonaccrual does not necessarily indicate that the principal of
the loan is uncollectible in whole or in part.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|
($ in millions) |
|
2006 |
|
2005 |
|
2005 |
|
|
|
Nonperforming loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime conforming
|
|
|
$6 |
|
|
|
$10 |
|
|
|
$13 |
|
|
|
|
Government
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
Prime non-conforming
|
|
|
343 |
|
|
|
361 |
|
|
|
249 |
|
|
|
|
Prime second-lien
|
|
|
190 |
|
|
|
85 |
|
|
|
58 |
|
|
|
|
Nonprime (a)
|
|
|
5,680 |
|
|
|
5,731 |
|
|
|
4,804 |
|
|
|
|
|
Total nonaccrual loans
|
|
|
6,219 |
|
|
|
6,187 |
|
|
|
5,138 |
|
|
|
|
Foreclosed assets
|
|
|
623 |
|
|
|
501 |
|
|
|
562 |
|
|
|
|
Total nonperforming assets
|
|
|
$6,842 |
|
|
|
$6,688 |
|
|
|
$5,700 |
|
|
|
As a % of total loan portfolio
|
|
|
9.46 |
% |
|
|
9.70 |
% |
|
|
10.18 |
% |
|
|
|
|
|
|
(a) |
Includes $242, $374 and $895 at March 31, 2006,
December 31, 2005 and March 31, 2005, respectively, of
loans that were purchased as distressed assets, and as such,
were considered nonperforming at the time of purchase. |
|
29
Managements Discussion and Analysis
General Motors Acceptance Corporation
|
|
The following table summarizes the activity related to the
consumer allowance for credit losses for our Mortgage operations. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
|
|
Allowance at beginning of period
|
|
|
$1,065 |
|
|
|
$916 |
|
|
|
|
Provision for credit losses
|
|
|
129 |
|
|
|
128 |
|
|
|
|
Charge-offs:
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
(128 |
) |
|
|
(125 |
) |
|
|
|
Foreign
|
|
|
(2 |
) |
|
|
(1 |
) |
|
|
|
Total charge-offs
|
|
|
(130 |
) |
|
|
(126 |
) |
|
|
|
Recoveries:
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
15 |
|
|
|
11 |
|
|
|
|
Foreign
|
|
|
|
|
|
|
3 |
|
|
|
|
Total recoveries
|
|
|
15 |
|
|
|
14 |
|
|
|
|
Net charge-offs
|
|
|
(115 |
) |
|
|
(112 |
) |
|
|
Securitization activity
|
|
|
|
|
|
|
(1 |
) |
|
|
|
Allowance at March 31,
|
|
|
$1,079 |
|
|
|
$931 |
|
|
|
Allowance coverage (a)
|
|
|
1.46 |
% |
|
|
1.66 |
% |
|
|
|
|
|
|
(a) |
Represents the related allowance for credit losses as a
percentage of total
on-balance sheet
residential mortgage loans held for investment at the end of the
period. |
|
The decrease in allowance for credit losses as a percentage of
the total on-balance
sheet residential mortgage loan portfolio is due to favorable
severity assumptions driven by home price appreciation and a
reduction in the percentage of nonperforming mortgage loans held
for investment as a percentage of total mortgage loans held for
investment.
Commercial Credit
Our residential mortgage operations have commercial credit
exposure through warehouse and construction lending related
activities. The following table summarizes the nonperforming
assets and net charge-offs in ResCaps on-balance sheet
held for investment lending receivables portfolios for each of
the periods presented. Nonperforming lending receivables are
nonaccrual loans, foreclosed assets and restructured loans.
Lending receivables are generally placed on nonaccrual status
when they are 90 days or more past due or when timely
collection of the principal of the loan, in whole or in part, is
doubtful. Managements classification of a receivable as
nonaccrual does not necessarily indicate that the principal
amount of the loan is uncollectible in whole or in part.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
March 31, |
($ in millions) |
|
2006 |
|
2005 |
|
2005 |
|
Nonperforming lending receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse
|
|
|
$25 |
|
|
|
$42 |
|
|
|
$5 |
|
|
Construction
|
|
|
9 |
|
|
|
8 |
|
|
|
10 |
|
|
Other
|
|
|
17 |
|
|
|
17 |
|
|
|
4 |
|
|
Total nonaccrual lending receivables
|
|
|
51 |
|
|
|
67 |
|
|
|
19 |
|
Foreclosed assets
|
|
|
3 |
|
|
|
5 |
|
|
|
|
|
|
Total nonperforming assets
|
|
|
$54 |
|
|
|
$72 |
|
|
|
$19 |
|
As a % of total lending receivables
portfolio
|
|
|
0.43 |
% |
|
|
0.54 |
% |
|
|
0.21 |
% |
|
GMAC Commercial Mortgage
On March 23, 2006, we closed on the sale of approximately
78 percent of our equity in GMAC Commercial Mortgage for
approximately $1.5 billion in cash. At the closing, GMAC
Commercial Mortgage also repaid to us approximately
$7.3 billion in intercompany loans, bringing the total cash
proceeds from the sale to $8.8 billion. Effective with the
date of the sale, GMAC Commercial Mortgage changed its name to
Capmark Financial Group Inc.
We retained an equity voting interest in Capmark and have
representation on its Board of Directors. We no longer have a
majority ownership or a majority controlling interest in Capmark
but do have the ability to exercise significant influence, and
have accounted for our remaining interest of $432 million
under the equity method of accounting. In addition to our equity
investment, we have an investment of
30
Managements Discussion and Analysis
General Motors Acceptance Corporation
$250 million of subordinated indenture notes issued by
CapMark. Our total investment of $682 million is reflected
in Other assets in the Condensed Consolidated Balance Sheet.
Our net after-tax earnings in the first quarter of 2006 related
to GMAC Commercial Mortgage was $29 million, representing
operating income of $50 million prior to the close of the
transaction and equity earnings after the close, and a loss on
the sale of $21 million, after closing costs. This compares
to operating net income of $63 million recognized in the
first quarter of 2005 when Commercial Mortgage was fully
consolidated in our results.
As Capmark achieved certain credit ratings as a result of the
sale transaction, prior to, or at the time of closing we were
released from all existing financial guarantees related to GMAC
Commercial Mortgage. Certain non-financial guarantees did
survive closing, but we will be indemnified by Capmark for
payments made or liabilities incurred by us in connection with
these guarantees. Our maximum exposure under these non-financial
guarantees is approximately $350 million. As the potential
for loss under these arrangements is remote, no liability for
the fair value of our obligation has been recognized for these
guarantees in our financial statements as of March 31, 2006.
GMAC Insurance insures automobile service contracts and
underwrites personal automobile insurance coverages (ranging
from preferred to non-standard risks) and selected commercial
insurance reinsurance coverages. Refer to
pages 42-45 of our
2005 Annual Report on
Form 10-K for
further discussion of the business profile of our Insurance
operations.
Results of Operations
The following table summarizes the operating results of GMAC
Insurance for the periods indicated. The amounts presented are
before the elimination of balances and transactions with our
other operating segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, ($ in millions) |
|
2006 |
|
2005 |
|
Change |
|
% |
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance premiums and service
revenue earned
|
|
|
$1,004 |
|
|
|
$911 |
|
|
|
$93 |
|
|
|
10 |
|
Investment income
|
|
|
105 |
|
|
|
90 |
|
|
|
15 |
|
|
|
17 |
|
Other income
|
|
|
32 |
|
|
|
37 |
|
|
|
(5 |
) |
|
|
(14 |
) |
|
|
|
|
|
Total revenue
|
|
|
1,141 |
|
|
|
1,038 |
|
|
|
103 |
|
|
|
10 |
|
Insurance losses and loss
adjustment expenses
|
|
|
(597 |
) |
|
|
(589 |
) |
|
|
(8 |
) |
|
|
(1 |
) |
Acquisition and underwriting expense
|
|
|
(330 |
) |
|
|
(284 |
) |
|
|
(46 |
) |
|
|
(16 |
) |
Premium tax and other expense
|
|
|
(28 |
) |
|
|
(22 |
) |
|
|
(6 |
) |
|
|
(27 |
) |
|
|
|
|
|
Income before income taxes
|
|
|
186 |
|
|
|
143 |
|
|
|
43 |
|
|
|
30 |
|
Income tax expense
|
|
|
(57 |
) |
|
|
(48 |
) |
|
|
(9 |
) |
|
|
(19 |
) |
|
|
|
|
|
Net income
|
|
|
$129 |
|
|
|
$95 |
|
|
|
$34 |
|
|
|
36 |
|
|
Total assets
|
|
|
$13,739 |
|
|
|
$11,921 |
|
|
|
$1,818 |
|
|
|
15 |
|
|
Insurance premiums and service
revenue written
|
|
|
$1,070 |
|
|
|
$1,090 |
|
|
|
($20 |
) |
|
|
(2 |
) |
|
|
|
|
|
Combined
Ratio (a)
|
|
|
91.3 |
% |
|
|
93.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Management uses combined ratio as a primary measure of
underwriting profitability, with its components measured using
GAAP. Underwriting profitability is indicated by a combined
ratio under 100% and is calculated as the sum of all reported
losses and expenses (excluding interest and income tax expense)
divided by the total of premiums and service revenues earned and
other income. |
|
Net income from Insurance operations totaled $129 million
in the first quarter of 2006, up $34 million or 36% over
first quarter 2005 earnings of $95 million. The increase in
net income is due to favorable underwriting results, driven by a
lower level of incurred losses, as exhibited by the decrease in
the combined ratio to 91.3% from 93.8% in the first quarter of
2005 and recognized capital gains. In addition, first quarter
2006 results also benefited from the strategic acquisition of
MEEMIC, a personal lines business that offers automobile and
homeowners insurance in the Midwest. The favorable impact of
these items in the first quarter of 2006 was partially offset by
increased acquisition and underwriting expenses commensurate
with increased volumes and returns.
Insurance premiums and service revenue earned increased 10% over
the same period in the prior year, primarily due to the
acquisition of MEEMIC, growth in the extended service contract
and international personal lines operations. The increase was
partially offset by lower
31
Managements Discussion and Analysis
General Motors Acceptance Corporation
insurance premiums in the existing U.S. personal lines
operations, due to competitive pricing pressures, and a decline
in the auto dealer physical damage product due to lower dealer
inventories.
The increase in investment income quarter over quarter was
attributable to higher interest income on a larger fixed income
portfolio, partially mitigated by lower yields. The higher level
of capital gains over the same period in the prior year is in
line with the current business strategy.
|
|
|
Critical Accounting Estimates |
We have identified critical accounting estimates that, as a
result of judgments, uncertainties, uniqueness and complexities
of the underlying accounting standards and operations involved
could result in material changes to our financial condition,
results of operations or cash flows under different conditions
or using different assumptions.
Our most critical accounting estimates are:
|
|
|
|
|
Determination of the allowance for credit losses |
|
|
|
Valuation of automotive lease residuals |
|
|
|
Valuation of mortgage servicing rights |
|
|
|
Valuation of interests in securitized assets |
|
|
|
Determination of reserves for insurance losses and loss
adjustment expenses |
The adoption of SFAS 156 as of January 1, 2006,
requires us to present our servicing rights at fair value for
those classes of servicing rights for which we have elected the
fair value method.
There have been no other significant changes in the
methodologies and processes used in developing these estimates
from what is described in our 2005 Annual Report on
Form 10-K.
Funding Sources and Strategy
Our liquidity and our ongoing profitability is in large part,
dependent upon our timely access to capital and the costs
associated with raising funds in different segments of the
capital markets. Over the past several years, our funding
strategy has focused on the development of diversified funding
sources across a global investor base, both public and private
and, as appropriate, the extension of debt maturities. In
addition, we maintain a large cash reserve ($22 billion at
March 31, 2006) including certain marketable securities
that can be utilized to meet our obligations in the event of any
market disruption. As part of our cash management strategy, from
time to time, we repurchase previously issued debt but do so in
a manner that does not compromise overall liquidity. This
multi-faceted strategy, combined with a continuous prefunding of
requirements, is designed to enhance our ability to meet our
obligations.
The diversity of our funding sources enhances funding
flexibility, limits dependence on any one source of funds and
results in a more cost effective strategy over the longer term.
In developing this approach, management considers market
conditions, prevailing interest rates, liquidity needs and the
desired maturity profile of our liabilities. This strategy has
helped us maintain liquidity during periods of weakness in the
capital markets, changes in our business or changes in our
credit ratings. Despite our diverse funding sources and
strategies, our ability to maintain liquidity may be affected by
certain risk factors.
32
Managements Discussion and Analysis
General Motors Acceptance Corporation
The following table summarizes our outstanding debt by funding
source, excluding Commercial Mortgage balances, for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
|
|
|
March 31, |
|
December 31, |
($ in millions) |
|
2006 |
|
2005 |
|
Commercial paper
|
|
|
$480 |
|
|
|
$524 |
|
Institutional term debt
|
|
|
74,706 |
|
|
|
82,557 |
|
Retail debt programs
|
|
|
32,885 |
|
|
|
34,482 |
|
Secured financings
|
|
|
124,287 |
|
|
|
121,138 |
|
Bank loans, and other
|
|
|
14,265 |
|
|
|
15,704 |
|
|
|
Total debt (a)
|
|
|
246,623 |
|
|
|
254,405 |
|
Customer deposits (b)
|
|
|
8,665 |
|
|
|
6,855 |
|
Off-balance sheet
securitizations (c)
|
|
|
|
|
|
|
|
|
|
Retail finance receivables
|
|
|
5,467 |
|
|
|
3,165 |
|
|
Wholesale loans
|
|
|
20,612 |
|
|
|
20,724 |
|
|
Mortgage loans
|
|
|
86,862 |
|
|
|
77,573 |
|
|
|
Total funding
|
|
|
368,229 |
|
|
|
362,722 |
|
Less: cash reserves (d)
|
|
|
(22,114 |
) |
|
|
(19,605 |
) |
|
|
Net funding
|
|
|
$346,115 |
|
|
|
$343,117 |
|
|
Leverage ratio covenant (e)
|
|
|
6.6:1 |
|
|
|
7.5:1 |
|
|
Funding Commitments
($ in billions)
|
|
|
|
|
|
|
|
|
|
Bank liquidity facilities (f)
|
|
|
$44.3 |
|
|
|
$44.1 |
|
|
Secured funding facilities (g)
|
|
|
$108.0 |
|
|
|
$114.9 |
|
|
|
|
|
(a) |
Excludes fair value adjustment as described in Note 7 to
the Condensed Consolidated Financial Statements. |
|
|
|
(b) |
Includes consumer and commercial bank deposits and dealer
wholesale deposits. Beginning March 2006, includes factored
client deposits. |
(c) |
Represents net funding from securitizations of retail and
wholesale automotive receivables and mortgage loans accounted
for as sales, further described in Note 8 to the
Consolidated Financial Statements in our 2005 Annual Report on
Form 10-K. |
(d) |
Includes $17.3 billion in cash and cash equivalents and
$4.8 billion invested in marketable securities at
March 31, 2006, and $15.4 billion and
$4.2 billion at December 31, 2005, respectively. |
(e) |
As described in Note 7 to the Condensed Consolidated
Financial Statements, our liquidity facilities and certain other
funding facilities contain a leverage ratio covenant of 11.0:1,
which excludes from debt, securitization transactions that are
accounted for on-balance sheet as secured financings (totaling
$98,478 and $94,346 at March 31, 2006, and
December 31, 2005, respectively). Our debt to equity ratio
was 10.9:1 and 11.9:1, at March 31, 2006 and
December 31, 2005, respectively, as determined by
accounting principles generally accepted in the United States of
America, which was the former basis for the leverage ratio
covenant. |
(f) |
Represents both committed and uncommitted bank liquidity
facilities. Refer to Note 7 to the Condensed Consolidated
Financial Statements for details. |
(g) |
Represents both committed and uncommitted secured funding
facilities. Includes commitments with third-party asset-backed
commercial paper conduits as well as forward flow sale
agreements with third parties and repurchase facilities. Refer
to Note 7 to the Condensed Consolidated Financial
Statements for details. |
In the second and third quarters of 2005, our unsecured debt
ratings (excluding ResCap) were lowered to a non-investment
grade rating by three of the four nationally recognized rating
agencies that rate us (refer to the Credit Ratings section of
this MD&A for further information). These downgrades were a
continuation of a series of credit rating actions over the past
few years caused by concerns as to the financial outlook of GM,
including its overall market position in the automotive industry
and its burdensome health care obligations, as well as the
uncertainty surrounding the auto parts supplier Delphi
Corporation and its impact on GMs financial condition. As
a result of these rating actions, our unsecured credit spreads
widened to unprecedented levels in 2005. In anticipation of, and
as a result of, these credit rating actions, we modified our
diversified funding strategy to focus on secured funding and
automotive whole loan sales. These funding sources are generally
not directly affected by ratings on unsecured debt and therefore
offer both stability in spread and access to the market. In the
first quarter of 2006, secured funding and whole loan sales
represented 95% of our U.S. automotive term funding volume. The
increased use of whole loan sales is part of the migration to an
originate and sell model for the U.S. automotive finance
business. In the first quarter of 2006, we executed
$5.7 billion in whole loan sales.
33
Managements Discussion and Analysis
General Motors Acceptance Corporation
In addition, through our banking activities in our mortgage and
automotive operations, bank deposits (certificates of deposits
and brokered deposits) have become an important funding source
for us. We have also been able to diversify our unsecured
funding through the formation of ResCap. ResCap, an indirect
wholly owned subsidiary, was formed as the holding company of
our residential mortgage businesses and in the second quarter of
2005 successfully achieved an investment grade rating (separate
from GMAC). To date, ResCap has issued $10.5 billion in
public and private unsecured debt and closed a $3.5 billion
syndication of its bank facilities. The syndication, which
closed in July 2005, consisted of a $1.75 billion
syndicated term loan; an $875 million syndicated line of
credit committed through July 2008 and an $875 million
syndicated line of credit committed through July 2006. In the
fourth quarter of 2005, ResCap filed a $12 billion shelf
registration statement in order to offer senior and/or
subordinated debt securities and has issued $5.5 billion in
unsecured debt to date from this shelf. In February 2006,
$1.75 billion was issued off of this shelf with a portion
of the proceeds from the notes used to repay a portion of
intercompany borrowings. In April 2006, $2.5 billion was
issued off of this shelf and $1 billion in subordinated
notes was privately placed with the proceeds from these
issuances, used to repay a portion of the remaining
$3.6 billion subordinated note to us, thus providing
additional liquidity.
As previously disclosed, on March 23, 2006, we completed
the sale of 78% of our equity in GMAC Commercial Mortgage.
Under the terms of the transaction, we received
$8.8 billion at closing which is comprised of sale proceeds
and repayment of intercompany debt, thereby increasing our
liquidity position and reducing the amount of funding required.
Please refer to Note 1 of our Condensed Consolidated
Financial Statements for further details.
The change in focus in the funding strategy has allowed us to
maintain adequate access to capital and a sufficient liquidity
position despite reductions in and limited access to traditional
unsecured funding sources (i.e., commercial paper, term
debt, bank loans and lines of credit) due to the deterioration
in our unsecured credit rating. Unsecured sources most impacted
by the reduction in our credit rating have been our commercial
paper programs, the term debt markets, certain bank loan
arrangements primarily in Mortgage and International Automotive
operations, as well as Fannie Mae custodial borrowing
arrangements at ResCap.
A further reduction of our credit rating could increase
borrowing costs and further constrain our access to unsecured
debt markets, including capital markets for retail debt. In
addition, a further reduction of our credit ratings could
increase the possibility of additional terms and conditions in
any new or replacement financing arrangements and impact
elements of certain existing secured borrowing arrangements.
However, our funding strategy has increased our focus on
expanding and developing diversified secured funding sources and
increased use of automotive whole loan sales that are not
directly impacted by ratings on our unsecured debt.
With limited access to traditional unsecured funding sources,
management will continue to diversify and expand our use of
asset-backed funding and we believe that our funding strategy
will provide sufficient access to the capital markets to meet
our short- and medium-term funding needs. Notwithstanding the
foregoing, management believes that the current ratings
situation and outlook increases the level of risk to our
long-term ability to sustain the current level of asset
originations. In an effort to mitigate this risk, on
April 3, 2006, GM announced that it agreed to sell a
51 percent controlling interest in us to a consortium led
by Cerberus Capital Management, which is expected to close in
the fourth quarter of this year. In addition to continuing to
enable us to support the sale of GM vehicles, the
transaction is intended to support our strategic goal of a
stable investment grade rating and profitable growth. In
connection with the targeted fourth quarter sale closing, we
plan to arrange two asset-backed funding facilities that total
$25 billion, which will support our ongoing business and
enhance our liquidity position. A $10 billion facility is
expected to be available before closing and the other facility
is expected to be available on or after closing. Citigroup has
committed $12.5 billion in the aggregate to these two
facilities. The funding facilities are in addition to
Citigroups initial equity investment in us. There can be
no assurance that this transaction will be successful in
achieving a stable investment grade rating and therefore we plan
to maintain the current conservative funding strategy until
risks to closing the transaction are reduced.
Credit Ratings
The cost and availability of unsecured financing is influenced
by credit ratings, which are intended to be an indicator of the
creditworthiness of a particular company, security, or
obligation. Lower ratings generally result in higher borrowing
costs as well as reduced access to capital markets. This is
particularly true for certain term debt institutional investors
whose investment guidelines require investment grade term
ratings and for short-term institutional investors (money
markets in particular) whose investment guidelines require the
two highest rating categories for short-term debt. Substantially
all of our debt has been rated by nationally recognized
statistical rating organizations. Concerns over the competitive
and financial strength of GM, including how it will fund its
burdensome health care liabilities and uncertainties at Delphi
Corporation, have resulted in a series of credit rating actions,
which commenced late in 2001. In the second and third quarters
of 2005, Standard & Poors, Fitch and Moodys
downgraded GMACs (excluding ResCap) senior debt to a
non-investment grade rating with DBRS continuing to maintain an
investment grade rating on our senior debt. As a result of
GMs announcement on October 17, 2005 that it was
exploring the possible sale of a controlling interest in us to a
strategic partner, the
34
Managements Discussion and Analysis
General Motors Acceptance Corporation
four rating agencies changed our review status to either
evolving or developing. Most recently, on March 16, 2006,
Moodys placed our senior unsecured ratings under review
for a possible downgrade following GMs announcement
that it would delay filing its annual report on
Form 10-K with the
SEC. Following the April 3, 2006 announcement by GM that it
agreed to sell a 51 percent controlling interest in us,
Fitch revised our rating watch status to positive from evolving,
indicating that the ratings may be upgraded or maintained at
current levels.
The following summarizes our current ratings, outlook and the
date of last rating action by the respective nationally
recognized rating agencies.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating |
|
Commercial |
|
Senior |
|
|
|
|
Agency |
|
Paper |
|
Debt |
|
Outlook |
|
Date of Last Rating Action |
|
Fitch
|
|
|
B |
|
|
|
BB |
|
|
|
Positive |
|
|
|
September 26, 2005 (a) |
|
|
|
|
|
|
|
|
|
|
|
|
Possible |
|
|
|
|
|
Moodys
|
|
|
Not-Prime |
|
|
|
Ba1 |
|
|
|
downgrade |
|
|
|
August 24, 2005 (b) |
|
S&P
|
|
|
B-1 |
|
|
|
BB |
|
|
|
Developing |
|
|
|
May 5, 2005 (c) |
|
DBRS
|
|
|
R-2 (low) |
|
|
|
BBB (low) |
|
|
|
Developing |
|
|
|
August 2, 2005 (d) |
|
|
|
|
|
(a) |
Fitch downgraded our senior debt to BB from BB+, affirmed the
commercial paper rating of B, and on October 17, 2005,
placed the ratings on Rating Watch Evolving, and on
April 3, 2006, changed the rating watch status to Positive. |
|
(b) |
Moodys lowered our senior debt to Ba1 from Baa2,
downgraded the commercial paper rating to Not-Prime from
Prime-2, and on
October 17, 2005, changed the review status of the
long-term debt ratings to direction uncertain and on
March 16, 2006 changed the review status of the senior debt
ratings to possible downgrade. |
|
(c) |
Standard & Poors downgraded our senior debt to BB
from BBB-, downgraded the commercial paper rating to
B-1 from
A-3, and on
October 10, 2005, changed the outlook to CreditWatch with
developing implications. |
|
(d) |
DBRS downgraded our senior debt to BBB (low) from BBB,
downgraded the commercial paper rating to
R-2 (low) from
R-2 (middle), and on
October 11, 2005, placed the ratings under review with
developing implications and affirmed the review status on
October 17, 2005. |
|
In addition, ResCap, our indirect wholly owned subsidiary, has
investment grade ratings (separate from GMAC) from the
nationally recognized rating agencies. The following table
summarizes ResCaps current ratings, outlook and the date
of the last rating or outlook change by the respective agency.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating |
|
Commercial |
|
Senior |
|
|
|
|
Agency |
|
Paper |
|
Debt |
|
Outlook |
|
Date of Last Rating Action |
|
Fitch
|
|
|
F3 |
|
|
|
BBB- |
|
|
|
Positive |
|
|
|
September 26, 2005 (a) |
|
|
|
|
|
|
|
|
|
|
|
|
Possible |
|
|
|
|
|
Moodys
|
|
|
P3 |
|
|
|
Baa3 |
|
|
|
downgrade |
|
|
|
August 24, 2005 (b) |
|
S&P
|
|
|
A-3 |
|
|
|
BBB- |
|
|
|
Developing |
|
|
|
June 9, 2005 (c) |
|
DBRS
|
|
|
R-2 (middle) |
|
|
|
BBB |
|
|
|
Developing |
|
|
|
June 9, 2005 (d) |
|
|
|
|
|
(a) |
Fitch downgraded the senior debt of ResCap to BBB- from BBB,
downgraded the commercial paper rating to F3 from F2, and on
October 17, 2005, placed the ratings on Rating Watch
Evolving, and on April 3, 2006, changed the rating watch
status to Positive. |
|
(b) |
Moodys downgraded the senior debt of ResCap to Baa3 from
Baa2, downgraded the commercial paper rating to P3 from P2, on
October 17, 2005, changed the review status of the
long-term debt ratings to direction uncertain and on
March 16, 2006, changed the review status of the senior
debt ratings to possible downgrade. |
|
(c) |
Standard & Poors initial ratings for ResCap were
assigned, and on October 10, 2005, S&P changed the
outlook to CreditWatch with developing implications. |
|
(d) |
DBRS initial ratings for ResCap were assigned, and on
October 11, 2005, DBRS placed the ratings under review with
developing implications and affirmed the review status on
October 17, 2005. |
|
35
Managements Discussion and Analysis
General Motors Acceptance Corporation
|
|
|
Off-balance Sheet
Arrangements |
We use off-balance sheet entities as an integral part of our
operating and funding activities. For further discussion of our
use of off-balance sheet entities, refer to the Off-balance
Sheet Arrangements section in our 2005 Annual Report on the
Form 10-K.
The following table, which excludes GMAC Commercial Mortgage
activity, summarizes assets carried off-balance sheet in these
entities.
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
($ in billions) |
|
2006 |
|
2005 |
|
Securitization (a)
|
|
|
|
|
|
|
|
|
|
Retail finance receivables
|
|
|
$8.2 |
|
|
|
$6.0 |
|
|
Wholesale loans
|
|
|
21.3 |
|
|
|
21.4 |
|
|
Mortgage loans
|
|
|
89.4 |
|
|
|
79.4 |
|
|
Total securitization
|
|
|
118.9 |
|
|
|
106.8 |
|
Other off-balance sheet activities
|
|
|
|
|
|
|
|
|
|
Mortgage warehouse
|
|
|
0.6 |
|
|
|
0.6 |
|
|
Other mortgage
|
|
|
0.2 |
|
|
|
0.2 |
|
|
Total off-balance sheet
activities
|
|
|
$119.7 |
|
|
|
$107.6 |
|
|
|
|
|
(a) |
Includes only securitizations accounted for as sales under
SFAS 140, as further described in Note 8 to the
Consolidated Financial Statements to our 2005 Annual Report on
Form 10-K. |
|
|
|
|
Accounting and Reporting
Developments |
FSP FAS 115-1 and
124-1
In November 2005 the FASB issued FSPs
FAS 115-1 and
124-1 to address the
determination as to when an investment is considered impaired,
whether that impairment is other than temporary and the
measurement of an impaired loss. This FSP nullified certain
requirements of Emerging Issues Task
Force 03-1 The
Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments
(EITF 03-1),
and references existing other-than-temporary guidance.
Furthermore, this FSP creates a three-step process in
determining when an investment is considered impaired, whether
that impairment is other than temporary and the measurement of
an impairment loss. This FSP is effective for reporting periods
beginning after December 15, 2005. Adoption of this FSP did
not have a material impact on our financial condition or results
of operations.
Statement of Position
05-1 In
September 2005 the AICPA issued Statement of Position
05-1, Accounting by
Insurance Enterprises for Deferred Acquisition Costs in
Connection with Modifications or Exchanges of Insurance
Contracts
(SOP 05-1).
SOP 05-1 provides
guidance on accounting for deferred acquisition costs on
internal replacements of insurance contracts.
SOP 05-1 defines
an internal replacement, and specifies the conditions that
determine whether the replacement contract is substantially or
unsubstantially changed from the replaced contract. An internal
replacement determined to result in a substantially changed
contract should be accounted for as an extinguishment of the
replaced contract, and unamortized deferred acquisition costs
and unearned revenue liabilities of the replaced contract should
be no longer be deferred. An internal replacement determined to
result in an unsubstantially changed contract should be
accounted for as a continuation of the replaced asset. SOP 05-01
introduces the terms integrated and non-integrated contract
features and specifies that non-integrated features do not
change the base contract and are to be accounted for in a manner
similar to a separately issued contract. Integrated features are
evaluated in conjunction with the base contract.
SOP 05-1 is
effective for internal replacements occurring in fiscal years
beginning after December 15, 2006. Management is assessing
the potential impact on our financial condition or results of
operations.
Statement of Financial Accounting Standards
No. 155 In February 2006 the Financial
Accounting Standards Board issued Statement of Financial
Standards No. 155 Accounting for Certain Hybrid
Financial Instruments an amendment of FASB
Statements No. 133 and 140 (SFAS 155). This
standard permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that
otherwise would require bifurcation. SFAS 155 allows an
entity to make an irrevocable election to measure such a hybrid
financial instrument at fair value on an
instrument-by-instrument basis. The standard eliminates the
prohibition on a QSPE from holding a derivative financial
instrument that pertains to a beneficial interest other than
another derivative financial instrument. SFAS 155 also
clarifies which interest-only and principal-only strips are not
subject to the requirements of SFAS 133 as well as
determines that concentrations of credit risk in the form of
subordination are not embedded derivatives. SFAS 155 is
effective for all financial instruments acquired or issued after
the beginning of the fiscal year that begins after
September 15, 2006. Management is assessing the potential
impact on our financial condition or results of operations.
Statement of Financial Accounting Standards
No. 154 In May 2005, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards No. 154, Accounting Changes and
Error Corrections (SFAS 154), that
addresses accounting for changes in accounting principle,
changes in accounting estimates, changes required by an
accounting pronouncement in the instance that the pronouncement
does not include specific transition provisions and error
correction. SFAS 154 requires retrospective application to
prior
36
Managements Discussion and Analysis
General Motors Acceptance Corporation
periods financial statements of changes in accounting
principle and error correction unless impracticable to do so.
SFAS 154 states an exception to retrospective application
when a change in accounting principle, or the method of applying
it, may be inseparable from the effect of a change in accounting
estimate. When a change in principle is inseparable from a
change in estimate, such as depreciation, amortization or
depletion, the change to the financial statements is to be
presented in a prospective manner. SFAS 154 and the
required disclosures are effective for accounting changes and
error corrections in fiscal years beginning after
December 15, 2005.
|
|
|
Consolidated Operating
Results |
The following section provides a discussion of our consolidated
results of operations as displayed in the Condensed Consolidated
Statement of Income. The individual business segment sections of
this MD&A provide a further discussion of the operating
results.
Revenues
Total revenue increased by $514 million in the first three
months of 2006, compared to the same period of 2005, primarily
due to increases in operating lease income, revenue from
mortgage loans held for sale and mortgage consumer interest
income. These increases were partially offset by a decline in
consumer auto revenue.
Interest and discount expense increased by $561 million in
the first three months of 2006, as compared to the same period
of the prior year. This increase is the result of the negative
impact of higher funding costs due to an increase in overall
market interest rates and wider corporate credit spreads as a
result of our lower credit ratings. The provision for credit
losses decreased by $194 million in the first three months
of 2006 as compared to the same period of 2005. The decrease is
primarily due to lower consumer asset levels as a result of
automotive whole loan sale activity, improved loss performance
in our automotive international portfolio and favorable credit
trends in our Mortgage operations.
Insurance premiums and service revenue earned increased by 10%
in the first three months of 2006 as compared with the same
period in 2005, as a result of the acquisition of MEEMIC, growth
in the extended service contract line and international personal
lines operations. Mortgage banking income decreased by
$111 million in the first three months of 2006 compared
with the same period in the prior year, primarily as a result of
a decrease in the gain on sale of loans due to a significant
gain in 2005 realized upon the sale of a portfolio of distressed
mortgage loans.
Investment and other income increased by $91 million in the
first three months of 2006 as compared to the same period in the
prior year. The increases are primarily due to interest income
from cash and cash reserve balances.
Expenses
Noninterest expense increased by $332 million for the first
three months of 2006 as compared to the same period in the prior
year. Depreciation expense on operating lease assets increased
as a result of higher average operating lease asset levels as
compared to the first quarter of 2005. Compensation and benefits
expense decreased from a reduction in the OPEB liability
allocation from GM. In addition, other operating expenses
increased due to a decrease in the gain realized on the disposal
of off-lease vehicles.
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Forward Looking Statements |
The foregoing Managements Discussion and Analysis of
Financial Condition and Results of Operations and other portions
of this Form 10-Q
contains various forward-looking statements within the meaning
of applicable federal securities laws, including the Private
Securities Litigation Reform Act of 1995, that are based upon
our current expectations and assumptions concerning future
events, which are subject to a number of risks and uncertainties
that could cause actual results to differ materially from those
anticipated.
The words anticipate, estimate,
believe, expect, intend,
may, plan, project,
future and should and any similar
expressions are intended to identify forward-looking statements.
Forward-looking statements involve a number of risks,
uncertainties and other factors, including (but not limited to)
the Risk Factors described in Item 1A of our 2005
Form 10-K, as
updated in this
Form 10-Q and
which may be revised or supplemented in subsequent reports on
SEC forms 10-Q and
8-K. Such factors
include, among others, the following: the ability of GM to
complete the previously announced transaction with a strategic
investor regarding a controlling interest in us while
maintaining a significant stake in us, securing separate credit
ratings and low cost funding to sustain growth for us and ResCap
and maintaining the mutually beneficial relationship between us
and GM; changes in economic conditions, currency exchange rates,
significant terrorist attacks or political instability in the
major markets where we operate; changes in the laws,
regulations, policies or other activities of governments,
agencies and similar organizations where such actions may affect
the production, licensing, distribution or sale of our products,
the cost thereof or applicable tax rates; and the threat of
terrorism, the outbreak or escalation of hostilities between the
United States and any foreign power or territory and changes in
international political conditions may continue to affect both
the United States and the global economy and may increase other
risks.
37
Controls and Procedures
General Motors Acceptance Corporation
We maintain disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934,
as amended (the Exchange Act) designed to ensure
that information required to be disclosed in reports filed under
the Exchange Act is recorded, processed, summarized and reported
within the specified time periods. As of the end of the period
covered by this report, our Principal Executive Officer and our
Principal Financial Officer evaluated, with the participation of
our management, the effectiveness of our disclosure controls and
procedures. Based on managements evaluation, GMACs
Principal Executive and Principal Financial Officer each
concluded that our disclosure controls and procedures were not
effective as of March 31, 2006 solely because of the
material weakness in internal control over financial reporting
with respect to the preparation, review, presentation and
disclosure of the Consolidated Statement of Cash Flows as
disclosed in our report on Form 10-K for year ended
December 31, 2005.
In order to remediate this material weakness in our internal
control over financial reporting, management is in the process
of designing and implementing and continuing to enhance controls
to aid in the correct preparation, review, presentation and
disclosures of our Consolidated Statement of Cash Flows. We are
continuing to monitor, evaluate and test the operating
effectiveness of these controls.
There were no other changes in our internal controls over
financial reporting (as defined in
Rule 13a-15(f)
under the Exchange Act) that occurred during our most recent
fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
38
Other Information
General Motors Acceptance Corporation
We are subject to potential liability under laws and government
regulations and various claims and legal actions that are
pending or may be asserted against it. On February 17,
2006, Alex Mager filed a purported class action alleging certain
violations of the Securities Act of 1933. Please refer to the
Legal Proceedings section in our 2005 Annual Report on
Form 10-K for the
Mager matter and other information regarding pending
governmental proceedings, claims and legal actions.
Other than with respect to the risk factor below, there have
been no material changes to the Risk Factors section of our 2005
Annual Report on Form 10-K. The risk factor below, which
was disclosed on Form 10-K, has been modified to provide
updated disclosure related to the sale of a controlling interest
of GMAC by GM.
Risks Related to Our Controlling Stockholder
GM has agreed to sell a controlling interest in GMAC. There
is a risk that the sale may not occur or, if it does occur, may
not restore our investment grade rating or maintain
ResCaps investment grade ratings.
As previously announced, GM has agreed to sell 51% of the common
liability company interests of GMAC (subsequent to the
conversion of GMAC and most of our U.S. direct and indirect
subsidiaries into limited liability companies) to a consortium
of investors led by Cerberus Capital Management, L.P., a private
investment firm which also includes Citigroup Inc. and Aozora
Bank Ltd. as consortium members. Completion of the sale is
subject to a number of conditions, including regulatory
approvals, and there can be no assurance that the sale will
occur. If the sale does not occur, this will put further
pressure on both GMs and our credit profiles, potentially
resulting in further downgrades with our ratings likely
re-linked to those of GM. Moreover, any reduction in the
automotive finance capacity of GMAC could materially adversely
affect GMs business, to the extent that third party
financing is not available to fund GMs automotive sales.
In the absence of a transaction:
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Our access to capital may be seriously constrained, as most
unsecured funding sources may decline, including bank funding; |
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The cost of funds related to borrowings that are secured by
assets (known as secured funding) may increase and
this could lead to a reduction in liquidity for certain asset
classes; |
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It may be increasingly difficult to securitize assets, resulting
in reduced capacity to support overall automotive originations
as well as reduced advances on future securitizations; |
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Uncompetitive funding costs may result in a lower return on
capital and significantly lower earnings and dividends; and |
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We may need to consider divesting of certain businesses in order
to maintain adequate liquidity to fund new originations or
otherwise preserve the value of our business. |
Other Risk Factors
The following risk factors, which were disclosed in our 2005
Form 10-K, have not materially changed since we filed our
2005 Form 10-K. See our Form 10-K for a complete
discussion of these risk factors.
Risks Related to Our Business
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We have recently experienced a series of credit rating actions,
resulting in the downgrade of our credit ratings to historically
low levels. Any further reduction of our credit ratings or
failure to restore our credit ratings to higher levels could
have a material adverse effect on our business. |
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Our business requires substantial capital, and if we are unable
to maintain adequate financing sources, our profitability and
financial condition will suffer and jeopardize our ability to
continue operations. |
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Our indebtedness and other obligations are significant and could
materially adversely affect our business. |
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The profitability and financial condition of our operations are
dependent upon the operations of our parent, General Motors. |
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We have substantial credit exposure to General Motors. |
39
Other Information
General Motors Acceptance Corporation
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As a wholly owned subsidiary of GM, we are jointly and severally
responsible with GM and its other subsidiaries for funding
obligations under GMs and its subsidiaries qualified
U.S. defined benefit pension plans. Our financial condition and
our ability to repay unsecured debt could be impaired if we were
required to pay significant funding obligations for the GM plans. |
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We are exposed to credit risk which could affect our
profitability and financial condition. |
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Our earnings may decrease because of increases or decreases in
interest rates. |
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Our hedging strategies may not be successful in mitigating our
risks associated with changes in interest rates and could affect
our profitability and financial condition. |
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Our residential mortgage subsidiarys ability to pay
dividends and to prepay subordinated debt obligations to us is
restricted by contractual arrangements. |
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A failure of or interruption in the communications and
information systems on which we rely to conduct our business
could adversely affect our revenues and profitability. |
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We use estimates and assumptions in determining the fair value
of certain of our assets, in determining our allowance for
credit losses, in determining lease residual values and in
determining our reserves for insurance losses and loss
adjustment expenses. If our estimates or assumptions prove to be
incorrect, our cash flow, profitability, financial condition and
business prospects could be materially adversely affected. |
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Our business outside the United States exposes us to additional
risks that may cause our revenues and profitability to decline. |
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Our business could be adversely affected by changes in currency
exchange rates. |
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General business and economic conditions of the industries and
geographic areas in which we operate affect our revenues,
profitability and financial condition. |
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Our profitability and financial condition may be materially
adversely affected by decreases in the residual value of
off-lease vehicles. |
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Fluctuations in valuation of investment securities or
significant fluctuations in investment market prices could
negatively affect revenues. |
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Changes in existing U.S. government-sponsored mortgage programs,
or disruptions in the secondary markets in the United States or
in other countries in which our mortgage subsidiaries operate,
could adversely affect the profitability and financial condition
of our mortgage business. |
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We may be required to repurchase contracts and provide
indemnification if we breach representations and warranties from
our securitization and whole loan transactions, which could harm
our profitability and financial condition. |
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Significant indemnification payments or contract, lease or loan
repurchase activity of retail contracts or leases or mortgage
loans could harm our profitability and financial condition. |
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A loss of contractual servicing rights could have a material
adverse effect on our financial condition, liquidity and results
of operations. |
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The regulatory environment in which we operate could have a
material adverse effect on our business and earnings. |
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The worldwide financial services industry is highly competitive.
If we are unable to compete successfully or if there is
increased competition in the automotive financing, mortgage
and/or insurance markets or generally in the markets for
securitizations or asset sales, our margins could be materially
adversely affected. |
40
Other Information
General Motors Acceptance Corporation
None.
The exhibits listed on the accompanying Index of Exhibits are
filed as a part of this report. Such Index is incorporated
herein by reference.
41
Signatures
General Motors Acceptance Corporation
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, this
8th day of May, 2006.
General Motors Acceptance Corporation
(Registrant)
/s/ Sanjiv Khattri
Sanjiv Khattri
Executive Vice President and
Chief Financial Officer
/s/ Linda K. Zukauckas
Linda K. Zukauckas
Vice President and Corporate Controller
42
Index of Exhibits
General Motors Acceptance Corporation
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Exhibit | |
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Description |
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Method of Filing |
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2.1 |
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Purchase and Sale Agreement by and
among General Motors Corporation, General Motors Acceptance
Corporation, GM Finance Co. Holdings Inc. and FIM Holdings LLC,
dated as of April 2, 2006
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Filed as Exhibit 2.1 to the
Companys Current Report on Form 8-K dated as of
April 2, 2006 (File No. 1-3754); incorporated
herein by reference.
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3.1 |
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Certificate of Incorporation of
GMAC Financial Services Corporation dated February 20, 1997
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Filed as Exhibit 3.1 to the
Companys Quarterly Report on Form 10-Q for the period
ended September 30, 2002 (File No. 1-3754);
incorporated herein by reference.
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3.2 |
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Certificate of Merger of GMAC and
GMAC Financial Services Corporation dated December 17, 1997
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Filed as Exhibit 3.2 to the
Companys Quarterly Report on Form 10-Q for the period
ended September 30, 2002 (File No. 1-3754);
incorporated herein by reference.
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3.3 |
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By-Laws of General Motors
Acceptance Corporation as amended through April 1, 2004
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Filed as Exhibit 3.3 to the
Companys Quarterly Report on Form 10-Q for the period
ended September 30, 2004 (File No. 1-3754);
incorporated herein by reference.
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4.1 |
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Form of Indenture dated as of
July 1, 1982 between the Company and Bank of New York
(Successor Trustee to Morgan Guaranty Trust Company of New
York), relating to Debt Securities
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Filed as Exhibit 4(a) to the
Companys Registration Statement No. 2-75115;
incorporated herein by reference.
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4.1.1 |
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Form of First Supplemental
Indenture dated as of April 1, 1986 supplementing the
Indenture designated as Exhibit 4.1
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Filed as Exhibit 4(g) to the
Companys Registration Statement No. 33-4653;
incorporated herein by reference.
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4.1.2 |
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Form of Second Supplemental
Indenture dated as of September 15, 1987 supplementing the
Indenture designated as Exhibit 4.1
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Filed as Exhibit 4(h) to the
Companys Registration Statement No. 33-15236;
incorporated herein by reference.
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4.1.3 |
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Form of Third Supplemental
Indenture dated as of September 30, 1996 supplementing the
Indenture designated as Exhibit 4.1
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Filed as Exhibit 4(i) to the
Companys Registration Statement No. 333-33183;
incorporated herein by reference.
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4.1.4 |
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Form of Fourth Supplemental
Indenture dated as of January 1, 1998 supplementing
the Indenture designated as Exhibit 4.1
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Filed as Exhibit 4(j) to the
Companys Registration Statement No. 333-48705;
incorporated herein by reference.
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4.1.5 |
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Form of Fifth Supplemental
Indenture dated as of September 30, 1998 supplementing the
Indenture designated as Exhibit 4.1
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Filed as Exhibit 4(k) to the
Companys Registration Statement No. 33-75463;
incorporated herein by reference.
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4.2 |
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Form of Indenture dated as of
September 24, 1996 between the Company and The Chase
Manhattan Bank, Trustee, relating to SmartNotes
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Filed as Exhibit 4 to the
Companys Registration Statement No. 333-12023;
incorporated herein by reference.
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4.2.1 |
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Form of First Supplemental
Indenture dated as of January 1, 1998 supplementing
the Indenture designated as Exhibit 4.2
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Filed as Exhibit 4(a)(1) to
the Companys Registration Statement No. 333-48207;
incorporated herein by reference.
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4.3 |
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Form of Indenture dated as of
October 15, 1985 between the Company and U.S. Bank
Trust (Successor Trustee to Comerica Bank), relating to Demand
Notes
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Filed as Exhibit 4 to the
Companys Registration Statement No. 2-99057;
incorporated herein by reference.
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4.3.1 |
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Form of First Supplemental
Indenture dated as of April 1, 1986 supplementing the
Indenture designated as Exhibit 4.3
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Filed as Exhibit 4(a) to the
Companys Registration Statement No. 33-4661;
incorporated herein by reference.
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4.3.2 |
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Form of Second Supplemental
Indenture dated as of September 24, 1986 supplementing the
Indenture designated as Exhibit 4.3
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Filed as Exhibit 4(b) to the
Companys Registration Statement No. 33-6717;
incorporated herein by reference.
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4.3.3 |
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Form of Third Supplemental
Indenture dated as of February 15, 1987 supplementing the
Indenture designated as Exhibit 4.3
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Filed as Exhibit 4(c) to the
Companys Registration Statement No. 33-12059;
incorporated herein by reference.
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Index of Exhibits
General Motors Acceptance Corporation
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Exhibit | |
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Description |
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Method of Filing |
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4.3.4 |
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Form of Fourth Supplemental
Indenture dated as of December 1, 1988 supplementing the
Indenture designated as Exhibit 4.3
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Filed as Exhibit 4(d) to the
Companys Registration Statement No. 33-26057;
incorporated herein by reference.
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4.3.5 |
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Form of Fifth Supplemental
Indenture dated as of October 2, 1989 supplementing
the Indenture designated as Exhibit 4.3
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Filed as Exhibit 4(e) to the
Companys Registration Statement No. 33-31596;
incorporated herein by reference.
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4.3.6 |
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Form of Ninth Supplemental
Indenture dated as of January 1, 1998 supplementing
the Indenture designated as Exhibit 4.3
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Filed as Exhibit 4(f) to the
Companys Registration Statement No. 333-56431;
incorporated herein by reference.
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4.3.7 |
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Form of Seventh Supplemental
Indenture dated as of September 15, 1998 supplementing the
Indenture designated as Exhibit 4.3
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Filed as Exhibit 4(g) to the
Companys Registration Statement No. 333-56431;
incorporated herein by reference.
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4.4 |
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Form of Indenture dated as of
December 1, 1993 between the Company and Citibank, N.A.,
Trustee, relating to Medium-Term Notes
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Filed as Exhibit 4 to the
Companys Registration Statement No. 33-51381;
incorporated herein by reference.
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4.4.1 |
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Form of First Supplemental
Indenture dated as of January 1, 1998 supplementing
the Indenture designated as Exhibit 4.4
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Filed as Exhibit 4(a)(1) to
the Companys Registration Statement No. 333-59551;
incorporated herein by reference.
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10 |
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Copy of agreement dated as of
October 22, 2001 between General Motors Corporation and
General Motors Acceptance Corporation
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Filed as Exhibit 10 to the
Companys current report on Form 8-K dated as of
October 23, 2001 (File No. 1-3754); incorporated
herein by reference.
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12 |
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Computation of ratio of earnings to
fixed charges
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Filed herewith.
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31.1 |
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Certification of Principal
Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)
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Filed herewith.
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31.2 |
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Certification of Principal
Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
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Filed herewith.
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The following exhibit shall not be
deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the
liability of that Section. In addition Exhibit No. 32
shall not be deemed incorporated into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934.
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32 |
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Certification of Principal
Executive Officer and Principal Financial Officer pursuant to
18 U.S.C. Section 1350
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Filed herewith.
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