Edgar Filing: General Motors Co

Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549-1004

Form 10-Q



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018



¨	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 001-34960

GENERAL MOTORS COMPANY

(Exact name of registrant as specified in its charter)



STATE OF DELAWARE	27-0756180
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

300 Renaissance Center, Detroit, Michigan	48265-3000
(Address of principal executive offices)	(Zip Code)

(313) 667-1500

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of October 12, 2018 the number of shares outstanding of common stock was 1,411,403,633 shares.

INDEX



			Page
PART I
Item 1.	Condensed Consolidated Financial Statements		1
	Condensed Consolidated Income Statements (Unaudited)		1
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)		1
	Condensed Consolidated Balance Sheets (Unaudited)		2
	Condensed Consolidated Statements of Cash Flows (Unaudited)		3
	Condensed Consolidated Statements of Equity (Unaudited)		4
	Notes to Condensed Consolidated Financial Statements		5
	Note 1.	Nature of Operations and Basis of Presentation	5
	Note 2.	Significant Accounting Policies	7
	Note 3.	Revenue	10
	Note 4.	Marketable and Other Securities	10
	Note 5.	GM Financial Receivables and Transactions	12
	Note 6.	Inventories	13
	Note 7.	Equipment on Operating Leases	13
	Note 8.	Equity in Net Assets of Nonconsolidated Affiliates	14
	Note 9.	Variable Interest Entities	14
	Note 10.	Automotive and GM Financial Debt	15
	Note 11.	Derivative Financial Instruments	16
	Note 12.	Product Warranty and Related Liabilities	17
	Note 13.	Pensions and Other Postretirement Benefits	17
	Note 14.	Commitments and Contingencies	18
	Note 15.	Income Taxes	22
	Note 16.	Restructuring and Other Initiatives	23
	Note 17.	Stockholders' Equity and Noncontrolling Interests	24
	Note 18.	Earnings Per Share	26
	Note 19.	Discontinued Operations	26
	Note 20.	Segment Reporting	27
	Note 21.	Subsequent Events	30
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		48
Item 4.	Controls and Procedures		48
PART II
Item 1.	Legal Proceedings		49
Item 1A.	Risk Factors		49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 6.	Exhibits		50
Signature			51

Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

PART I

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED INCOME STATEMENTS

(In millions, except per share amounts) (Unaudited)



	Three Months Ended					Nine Months Ended
	September 30, 2018		September 30, 2017			September 30, 2018		September 30, 2017
Net sales and revenue
Automotive	$	32,276	$	30,466		$	98,242	$	98,983
GM Financial	3,515		3,157			10,408		8,890
Total net sales and revenue (Note 3)	35,791		33,623			108,650		107,873
Costs and expenses
Automotive and other cost of sales	28,533		26,852			88,788		86,148
GM Financial interest, operating and other expenses	3,064		2,892			9,074		8,133
Automotive and other selling, general and administrative expense	2,584		2,303			7,172		7,136
Total costs and expenses	34,181		32,047			105,034		101,417
Operating income	1,610		1,576			3,616		6,456
Automotive interest expense	161		151			470		430
Interest income and other non-operating income, net	651		505			2,130		1,259
Equity income (Note 8)	530		500			1,815		1,585
Income before income taxes	2,630		2,430			7,091		8,870
Income tax expense (Note 15)	100		2,316			1,085		3,637
Income from continuing operations	2,530		114			6,006		5,233
Loss from discontinued operations, net of tax (Note 19)	—		3,096			70		3,935
Net income (loss)	2,530		(2,982		)	5,936		1,298
Net (income) loss attributable to noncontrolling interests	4		1			34		(11		)
Net income (loss) attributable to stockholders	$	2,534	$	(2,981	)	$	5,970	$	1,287

Net income (loss) attributable to common stockholders	$	2,503	$	(2,983	)	$	5,910	$	1,285

Earnings per share (Note 18)
Basic earnings per common share – continuing operations	$	1.77	$	0.08		$	4.24	$	3.52
Basic loss per common share – discontinued operations	$	—	$	2.14		$	0.05	$	2.65

Basic earnings (loss) per common share	$	1.77	$	(2.06	)	$	4.19	$	0.87
Weighted-average common shares outstanding – basic	1,412		1,445			1,410		1,483

Diluted earnings per common share – continuing operations	$	1.75	$	0.08		$	4.18	$	3.46
Diluted loss per common share – discontinued operations	$	—	$	2.11		$	0.05	$	2.61

Diluted earnings (loss) per common share	$	1.75	$	(2.03	)	$	4.13	$	0.85
Weighted-average common shares outstanding – diluted	1,431		1,472			1,431		1,507

Dividends declared per common share	$	0.38	$	0.38		$	1.14	$	1.14

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions) (Unaudited)



	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Net income (loss)	$	2,530		$	(2,982	)	$	5,936		$	1,298
Other comprehensive income (loss), net of tax (Note 17)
Foreign currency translation adjustments and other	(209		)	371			(503		)	572
Defined benefit plans	59			1,213			286			973
Other comprehensive income (loss), net of tax	(150		)	1,584			(217		)	1,545
Comprehensive income (loss)	2,380			(1,398		)	5,719			2,843
Comprehensive (income) loss attributable to noncontrolling interests	4			3			39			(9		)
Comprehensive income (loss) attributable to stockholders	$	2,384		$	(1,395	)	$	5,758		$	2,834

Reference should be made to the notes to condensed consolidated financial statements.

Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share amounts) (Unaudited)



	September 30, 2018			December 31, 2017
ASSETS
Current Assets
Cash and cash equivalents	$	18,435		$	15,512
Marketable securities (Note 4)	5,916			8,313
Accounts and notes receivable, net	10,376			8,164
GM Financial receivables, net (Note 5; Note 9 at VIEs)	23,432			20,521
Inventories (Note 6)	11,334			10,663
Equipment on operating leases, net (Note 7)	474			1,106
Other current assets (Note 4; Note 9 at VIEs)	4,881			4,465
Total current assets	74,848			68,744
Non-current Assets
GM Financial receivables, net (Note 5; Note 9 at VIEs)	24,086			21,208
Equity in net assets of nonconsolidated affiliates (Note 8)	9,155			9,073
Property, net	38,655			36,253
Goodwill and intangible assets, net	5,651			5,849
Equipment on operating leases, net (Note 7; Note 9 at VIEs)	44,128			42,882
Deferred income taxes	23,242			23,544
Other assets (Note 4; Note 9 at VIEs)	5,946			4,929
Total non-current assets	150,863			143,738
Total Assets	$	225,711		$	212,482

LIABILITIES AND EQUITY
Current Liabilities
Accounts payable (principally trade)	$	25,147		$	23,929
Short-term debt and current portion of long-term debt (Note 10)
Automotive	2,915			2,515
GM Financial (Note 9 at VIEs)	27,950			24,450
Accrued liabilities	28,104			25,996
Total current liabilities	84,116			76,890
Non-current Liabilities
Long-term debt (Note 10)
Automotive	13,048			10,987
GM Financial (Note 9 at VIEs)	58,427			56,267
Postretirement benefits other than pensions (Note 13)	5,832			5,998
Pensions (Note 13)	11,119			13,746
Other liabilities	12,261			12,394
Total non-current liabilities	100,687			99,392
Total Liabilities	184,803			176,282
Commitments and contingencies (Note 14)
Equity (Note 17)
Common stock, $0.01 par value	14			14
Additional paid-in capital	25,503			25,371
Retained earnings	20,865			17,627
Accumulated other comprehensive loss	(8,321		)	(8,011		)
Total stockholders’ equity	38,061			35,001
Noncontrolling interests	2,847			1,199
Total Equity	40,908			36,200
Total Liabilities and Equity	$	225,711		$	212,482

Reference should be made to the notes to condensed consolidated financial statements.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) (Unaudited)



	Nine Months Ended
	September 30, 2018			September 30, 2017
Cash flows from operating activities
Income from continuing operations	$	6,006		$	5,233
Depreciation and impairment of Equipment on operating leases, net	5,633			4,947
Depreciation, amortization and impairment charges on Property, net	4,390			4,137
Foreign currency remeasurement and transaction (gains) losses	280			(12		)
Undistributed earnings of nonconsolidated affiliates, net	185			370
Pension contributions and OPEB payments	(1,750		)	(1,109		)
Pension and OPEB income, net	(940		)	(646		)
Provision for deferred taxes	680			3,517
Change in other operating assets and liabilities	(5,258		)	(6,061		)
Net cash provided by operating activities – continuing operations	9,226			10,376
Net cash provided by operating activities – discontinued operations	—			64
Net cash provided by operating activities	9,226			10,440
Cash flows from investing activities
Expenditures for property	(6,562		)	(6,353		)
Available-for-sale marketable securities, acquisitions	(2,313		)	(4,499		)
Available-for-sale marketable securities, liquidations	4,637			7,901
Purchases of finance receivables, net	(17,297		)	(15,134		)
Principal collections and recoveries on finance receivables	11,776			9,363
Purchases of leased vehicles, net	(13,051		)	(14,809		)
Proceeds from termination of leased vehicles	8,094			4,649
Other investing activities	(25		)	93
Net cash used in investing activities – continuing operations	(14,741		)	(18,789		)
Net cash provided by (used in) investing activities – discontinued operations (Note 19)	166			(3,972		)
Net cash used in investing activities	(14,575		)	(22,761		)
Cash flows from financing activities
Net increase (decrease) in short-term debt	1,695			(374		)
Proceeds from issuance of debt (original maturities greater than three months)	32,801			43,048
Payments on debt (original maturities greater than three months)	(25,408		)	(26,034		)
Payments to purchase common stock	(100		)	(2,994		)
Proceeds from issuance of preferred stock (Note 17)	1,753			985
Dividends paid	(1,690		)	(1,701		)
Other financing activities	(439		)	(271		)
Net cash provided by financing activities – continuing operations	8,612			12,659
Net cash provided by financing activities – discontinued operations	—			20
Net cash provided by financing activities	8,612			12,679
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(253		)	362
Net increase in cash, cash equivalents and restricted cash	3,010			720
Cash, cash equivalents and restricted cash at beginning of period	17,848			15,160
Cash, cash equivalents and restricted cash at end of period	$	20,858		$	15,880

Cash, cash equivalents and restricted cash – continuing operations at end of period (Note 4)	$	20,858		$	15,315
Cash, cash equivalents and restricted cash – discontinued operations at end of period	$	—		$	565
Significant Non-cash Investing and Financing Activity
Non-cash property additions – continuing operations	$	4,284		$	3,833
Non-cash proceeds on sale of discontinued operations (Note 19)	$	—		$	808

Reference should be made to the notes to condensed consolidated financial statements.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In millions) (Unaudited)



	Common Stockholders’												Noncontrolling Interests			Total Equity
	Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interests			Total Equity
Balance at January 1, 2017	$	15		$	26,983		$	26,168		$	(9,330	)	$	239		$	44,075
Net income	—			—			1,287			—			11			1,298
Other comprehensive income	—			—			—			1,547			(2		)	1,545
Purchase of common stock	(1		)	(1,476		)	(1,517		)	—			—			(2,994		)
Exercise of common stock warrants	—			42			—			—			—			42
Issuance of preferred stock (Note 17)	—			—			—			—			985			985
Stock based compensation	—			293			(25		)	—			—			268
Cash dividends paid on common stock	—			—			(1,683		)	—			—			(1,683		)
Dividends to noncontrolling interests	—			—			—			—			(18		)	(18		)
Other	—			(60		)	—			—			19			(41		)
Balance at September 30, 2017	$	14		$	25,782		$	24,230		$	(7,783	)	$	1,234		$	43,477

Balance at January 1, 2018	$	14		$	25,371		$	17,627		$	(8,011	)	$	1,199		$	36,200
Adoption of accounting standards (Note 1)	—			—			(1,046		)	(98		)	—			(1,144		)
Net income	—			—			5,970			—			(34		)	5,936
Other comprehensive loss	—			—			—			(212		)	(5		)	(217		)
Issuance of preferred stock (Note 17)	—			—			—			—			1,753			1,753
Purchase of common stock	—			(44		)	(56		)	—			—			(100		)
Exercise of common stock warrants	—			2			—			—			—			2
Cash dividends paid on common stock	—			—			(1,608		)	—			—			(1,608		)
Dividends to noncontrolling interests	—			—			—			—			(106		)	(106		)
Other	—			174			(22		)	—			40			192
Balance at September 30, 2018	$	14		$	25,503		$	20,865		$	(8,321	)	$	2,847		$	40,908

Reference should be made to the notes to condensed consolidated financial statements.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations and Basis of Presentation

General Motors Company (sometimes referred to in this Quarterly Report on Form 10-Q as we, our, us, ourselves, the Company, General Motors or GM) designs, builds and sells cars, trucks, crossovers and automobile parts worldwide. We also provide automotive financing services through General Motors Financial Company, Inc. (GM Financial). We analyze the results of our continuing operations through the following segments: GM North America (GMNA), GM International (GMI), GM Cruise and GM Financial. GM Cruise is our global segment designed to build, grow and invest in our autonomous ride-sharing vehicle business. As a result of the growing importance of our autonomous vehicle operations, we moved these operations from Corporate to GM Cruise and began presenting GM Cruise as a new reportable segment in the three months ended June 30, 2018. All periods presented have been recast to reflect the segment changes. Nonsegment operations and Maven, our ride- and car-sharing business, are classified as Corporate. Corporate includes certain centrally recorded income and costs such as interest, income taxes, corporate expenditures and certain nonsegment specific revenues and expenses.

On July 31, 2017 we closed the sale of the Opel and Vauxhall businesses and certain other assets in Europe (the Opel/Vauxhall Business) to Peugeot, S.A. (PSA Group). On October 31, 2017 we closed the sale of the European financing subsidiaries and branches (the Fincos, and together with the Opel/Vauxhall Business, the European Business) to Banque PSA Finance S.A. and BNP Paribas Personal Finance S.A. The European Business is presented as discontinued operations in our condensed consolidated financial statements for all periods presented. Unless otherwise indicated, information in this report relates to our continuing operations. Refer to Note 19 for additional information on our discontinued operations.

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information. Accordingly they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations, financial position and cash flows. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2017 Form 10-K. Except for per share amounts or as otherwise specified, dollar amounts presented within tables are stated in millions. In the three months ended June 30, 2018 we changed the presentation of our condensed consolidated statements of cash flows to separately classify Depreciation and impairment of Equipment on operating leases, net and Depreciation, amortization and impairment charges on Property, net. We have made corresponding reclassifications to the comparable information for all periods presented.

Principles of Consolidation The Principles of Consolidation supplements information presented in our 2017 Form 10-K for the adoption on January 1, 2018 of Accounting Standards Update (ASU) 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (ASU 2016-01). We consolidate entities that we control due to ownership of a majority voting interest and we consolidate variable interest entities (VIEs) when we have variable interests and are the primary beneficiary. We continually evaluate our involvement with VIEs to determine when these criteria are met. Our share of earnings or losses of nonconsolidated affiliates is included in our consolidated operating results using the equity method of accounting when we are able to exercise significant influence over the operating and financial decisions of the affiliate. Beginning January 1, 2018 we no longer use the cost method of accounting.

Recently Adopted Accounting Standards

Effective January 1, 2018 we adopted ASU 2014-09, "Revenue from Contracts with Customers" as amended (ASU 2014-09), as incorporated into Accounting Standards Codification (ASC) 606, on a modified retrospective basis by recognizing a cumulative effect adjustment to the opening balance of Retained earnings. Under ASU 2014-09 sales incentives will now be recorded at the time of sale rather than at the later of sale or announcement, thereby resulting in the shifting of incentive amounts to an earlier quarter and fixed fee license arrangements will now be recognized when access to intellectual property is granted instead of over the contract period. We currently expect the retiming of quarterly incentive amounts to offset for the year ending December 31, 2018. Actual incentive spending is dependent upon future market conditions.

Beginning January 1, 2018 certain transfers to daily rental companies are accounted for as sales when ownership of the vehicle is not expected to transfer back to us. Such transactions were previously accounted for as operating leases. Transfers that occurred prior to January 2018 continue to be accounted for as operating leases because at the original time of transfer an expectation existed that ownership of the vehicle would transfer back to us.

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

The following table summarizes the financial statement line items within our condensed consolidated income statement and balance sheet significantly impacted by ASU 2014-09:



	Three Months Ended September 30, 2018
	As Reported		Balances without Adoption of ASC 606		Effect of Change
Income Statement
Automotive net sales and revenue	$	32,276	$	32,959	$	(683	)
Income before income taxes	$	2,630	$	3,321	$	(691	)
Net income attributable to stockholders	$	2,534	$	3,071	$	(537	)



	Nine Months Ended September 30, 2018
	As Reported		Balances without Adoption of ASC 606		Effect of Change
Income Statement
Automotive net sales and revenue	$	98,242	$	97,961	$	281
Automotive and other cost of sales	$	88,788	$	87,749	$	1,039
Income before income taxes	$	7,091	$	7,661	$	(570	)
Net income attributable to stockholders	$	5,970	$	6,402	$	(432	)



	September 30, 2018
	As Reported		Balances without Adoption of ASC 606		Effect of Change
Balance Sheet
Equipment on operating leases, net	$	474	$	1,428	$	(954	)
Deferred income taxes	$	23,242	$	22,661	$	581
Accrued liabilities	$	28,104	$	25,963	$	2,141
Other liabilities	$	12,261	$	12,657	$	(396	)
Retained earnings	$	20,865	$	22,633	$	(1,768	)

Effective January 1, 2018 we adopted ASU 2016-01, on a modified retrospective basis, with a $182 million cumulative effect adjustment recorded to the opening balance of Retained earnings to adjust an investment previously carried at cost to its fair value. ASU 2016-01 requires equity investments that are not accounted for under the equity method of accounting to be measured at fair value with changes recognized in Net income.

In the three months ended March 31, 2018 we adopted ASU 2017-12, "Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities" (ASU 2017-12), on a modified retrospective basis and adopted ASU 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02), on a modified retrospective basis. ASU 2018-02 provides the option to reclassify stranded tax effects related to the U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act) in accumulated other comprehensive income to retained earnings. The adjustment relates to the change in the U.S. corporate income tax rate. The cumulative effect of the adjustments to the opening balance of Retained earnings for these adopted standards was $108 million.

The following table summarizes the changes to our condensed consolidated balance sheet for the adoption of ASU 2014-09, ASU 2016-01, ASU 2017-12 and ASU 2018-02:

Table of Contents

GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)



	December 31, 2017			Adjustment due to ASU 2014-09			Adjustment due to ASU 2016-01, ASU 2017-12 and ASU 2018-02			January 1, 2018
Deferred income taxes	$	23,544		$	444		$	(63	)	$	23,925
Other assets	$	4,929		$	195		$	242		$	5,366
GM Financial short-term debt and current portion of long-term debt	$	24,450		$	—		$	(13	)	$	24,437
Accrued liabilities	$	25,996		$	2,328		$	—		$	28,324
Other liabilities	$	12,394		$	(235	)	$	—		$	12,159
Retained earnings	$	17,627		$	(1,336	)	$	290		$	16,581
Accumulated other comprehensive loss	$	(8,011	)	$	—		$	(98	)	$	(8,109	)

Effective January 1, 2018 we adopted ASU 2016-15, "Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Payments" (ASU 2016-15), which clarified guidance on the classification of certain cash receipts and payments in the statement of cash flows. The adoption of ASU 2016-15 did not have a material impact on our condensed consolidated financial statements and prior periods were not restated.

Effective January 1, 2018 we adopted ASU 2017-07, "Compensation - Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" (ASU 2017-07) on a retrospective basis, which requires that the service cost component of net periodic pension and other postretirement benefits (OPEB) (income) expense be presented in the same income statement line item as other employee compensation costs. The remaining components of net periodic pension and OPEB (income) expense are now presented outside operating income. Amounts previously reflected in Operating income were reclassified to Interest income and other non-operating income, net in accordance with the provisions of ASU 2017-07. Refer to Note 13 for amounts that were reclassified.

Accounting Standards Not Yet Adopted

In February 2016 the Financial Accounting Standards Board issued ASU 2016-02, "Leases" (ASU 2016-02), which requires us as the lessee to recognize most leases on the balance sheet thereby resulting in the recognition of right of use assets and lease obligations for those leases currently classified as operating leases. The accounting for leases where we are the lessor remains largely unchanged. We are continuing to assess the accounting and disclosure impact of ASU 2016-02 and refine our processes to permit adoption on January 1, 2019. We plan to elect the optional transition method as well as the package of practical expedients upon adoption. We expect the primary impact to our consolidated financial position upon adoption will be the recognition, on a discounted basis, of our minimum commitments under noncancelable operating leases on our consolidated balance sheets resulting in the recording of right of use assets and lease obligations. Our minimum commitments under noncancelable operating leases are not significantly different than those disclosed in our 2017 Form 10-K.

In June 2016 the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13), which requires entities to use a new impairment model based on Current Expected Credit Losses (CECL) rather than incurred losses. We plan to adopt ASU 2016-13 on January 1, 2020 on a modified retrospective basis, which will result in an increase to our allowance for credit losses and a decrease to Retained earnings as of the adoption date. Estimated credit losses under CECL will consider relevant information about past events, current conditions and reasonable and supportable forecasts, resulting in recognition of lifetime expected credit losses upon loan origination.

Note 2. Significant Accounting Policies

The information presented on Revenue Recognition, Equipment on Operating Leases, Marketable Debt Securities, Equity Investments and Derivative Financial Instruments supplements the Significant Accounting Policies information presented in our 2017 Form 10-K for the adoption of our recently adopted accounting standards which became effective January 1, 2018. See our 2017 Form 10-K for a description of our significant accounting policies in effect prior to the adoption of the new accounting standards.

Revenue Recognition We adopted ASU 2014-09, which requires us to recognize revenue when a customer obtains control rather than when we have transferred substantially all risks and rewards of a good or service. We adopted ASU 2014-09 by applying the modified retrospective method to all noncompleted contracts as of the date of adoption. See Note 1 for additional information

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pertaining to the adoption of ASU 2014-09. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The following accounting policies became effective upon the adoption of ASU 2014-09.

Automotive Automotive net sales and revenue represents the amount of consideration to which we expect to be entitled in exchange for vehicle, parts and accessories and services and other sales. The consideration recognized represents the amount received, typically shortly after the sale to a customer, net of estimated dealer and customer sales incentives we reasonably expect to pay. Significant factors in determining our estimates of incentives include forecasted sales volume, product type, product mix, customer behavior and assumptions concerning market conditions. Historical experience is also considered when establishing our future expectations. Subsequent adjustments to incentive estimates are possible as facts and circumstances change over time. When our customers have a right to return eligible parts and accessories, we consider the returns in our estimation of the transaction price. A portion of the consideration received is deferred for separate performance obligations, such as maintenance and vehicle connectivity, that will be provided to our customers at a future date. Taxes assessed by various government entities, such as sales, use and value-added taxes, collected at the time of the vehicle sale are excluded from Automotive net sales and revenue. Shipping and handling activities that occur after control of the vehicle transfers to the dealer are recognized at the time of sale and presented in Automotive and other cost of sales.

Vehicle, Parts and Accessories For the majority of vehicle and accessories sales our customers obtain control and we recognize revenue when the vehicle transfers to the dealer, which generally occurs when the vehicle is released to the carrier responsible for transporting it to a dealer. Revenue, net of estimated returns, is recognized on the sale of parts upon delivery to the customer.

Certain transfers to daily rental companies are accounted for as sales, with revenue recognized at the time of transfer. Such transactions were previously accounted for as operating leases. At the time of transfer, we defer revenue for remarketing obligations, record a residual value guarantee and reflect a deposit liability for amounts expected to be returned once the remarketing services are complete. Deferred revenue is recognized in earnings upon completion of the remarketing service. Transfers that occurred prior to January 1, 2018 and future transfers containing a substantive purchase obligation continue to be accounted for as operating leases and rental income is recognized over the estimated term of the lease.

Used Vehicles Proceeds from the auction of vehicles returned from daily rental car companies are recognized in Automotive net sales and revenue upon transfer of control of the vehicle to the customer and the related vehicle carrying value is recognized in Automotive and other cost of sales.

Services and Other Services and other revenue primarily consists of revenue from vehicle-related service arrangements and after-sale services such as maintenance, vehicle connectivity and extended service warranties. For those service arrangements that are bundled with a vehicle sale, a portion of the revenue from the sale is allocated to the service component and recognized as deferred revenue within Accrued liabilities or Other liabilities. We recognize revenue for bundled services and services sold separately as services are performed, typically over a period of less than three years.

Automotive Financing - GM Financial Finance charge income earned on receivables is recognized using the effective interest method. Fees and commissions (including incentive payments) received and direct costs of originating loans are deferred and amortized over the term of the related finance receivables using the effective interest method and are removed from the condensed consolidated balance sheets when the related finance receivables are sold, charged off or paid in full. Accrual of finance charge income on retail finance receivables is generally suspended on accounts that are more than 60 days delinquent, accounts in bankruptcy and accounts in repossession. Payments received on nonaccrual loans are first applied to any fees due, then to any interest due and then any remaining amounts are recorded to principal. Interest accrual generally resumes once an account has received payments bringing the delinquency to less than 60 days past due. Accrual of finance charge income on commercial finance receivables is generally suspended on accounts that are more than 90 days delinquent, upon receipt of a bankruptcy notice from a borrower, or where reasonable doubt exists about the full collectability of contractually agreed upon principal and interest. Payments received on nonaccrual loans are first applied to principal. Interest accrual resumes once an account has received payments bringing the account fully current and collection of contractual principal and interest is reasonably assured (including amounts previously charged off).

Income from operating lease assets, which includes lease origination fees, net of lease origination costs and incentives, is recorded as operating lease revenue on a straight-line basis over the term of the lease agreement.

Equipment on Operating Leases Equipment on operating leases, net consists of vehicle leases to retail customers with lease terms of two to five years and vehicle sales to rental car companies that are expected to be repurchased in an average of seven

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months. We are exposed to changes in the residual values of these assets. The residual values represent estimates of the values of the leased vehicles at the end of the lease contracts and are determined based on forecasted auction proceeds when there is a reliable basis to make such a determination. Realization of the residual values is dependent on the future ability to market the vehicles under prevailing market conditions. The adequacy of the estimate of the residual value is evaluated over the life of the arrangement and adjustments may be made to the extent the expected value of the vehicle changes. Adjustments may be in the form of revisions to the depreciation rate or recognition of an impairment charge. Impairment is determined to exist if an impairment indicator exists and the expected future cash flows, which include estimated residual values, are lower than the carrying amount of the vehicle's asset group. If the carrying amount is considered impaired an impairment charge is recorded for the amount by which the carrying amount exceeds fair value of the vehicle's asset group. Fair value is determined primarily using the anticipated cash flows, including estimated residual values. In our automotive finance operations when a leased vehicle is returned or repossessed the asset is recorded in Other assets at the lower of amortized cost or estimated selling price, less costs to sell. Upon disposition a gain or loss is recorded in GM Financial interest, operating and other expenses for any difference between the net book value of the leased asset and the proceeds from the disposition of the asset.

Marketable Debt Securities We classify marketable debt securities as either available-for-sale or trading. Various factors, including turnover of holdings and investment guidelines, are considered in determining the classification of securities. Available-for-sale debt securities are recorded at fair value with unrealized gains and losses recorded net of related income taxes in Accumulated other comprehensive loss until realized. Trading debt securities are recorded at fair value with changes in fair value recorded in Interest income and other non-operating income, net. We determine realized gains and losses for all debt securities using the specific identification method.

We measure the fair value of our marketable debt securities using a market approach where identical or comparable prices are available and an income approach in other cases. If quoted market prices are not available, fair values of securities are determined using prices from a pricing service, pricing models, quoted prices of securities with similar characteristics or discounted cash flow models. These prices represent non-binding quotes. Our pricing service utilizes industry-standard pricing models that consider various inputs. We conduct an annual review of our pricing service and believe the prices received from our pricing service are a reliable representation of exit prices.

An evaluation is made quarterly to determine if unrealized losses related to non-trading investments in debt securities are other-than-temporary. Factors considered include the length of time and extent to which the fair value has been below cost, the financial condition and near-term prospects of the issuer and the intent to sell or likelihood to be forced to sell the debt security before any anticipated recovery.

Equity Investments When events and circumstances warrant, equity investments accounted for under the equity method of accounting are evaluated for impairment. An impairment charge is recorded whenever a decline in value of an equity investment below its carrying amount is determined to be other-than-temporary. Impairment charges related to equity method investments are recorded in Equity income. Equity investments that are not accounted for under the equity method of accounting are measured at fair value with changes in fair value recorded in Interest income and other non-operating income, net.

Derivative Financial Instruments The following changes to our accounting policies became effective upon adoption of ASU 2017-12.

Automotive Certain foreign currency and commodity forward contracts have been designated as cash flow hedges. The risk being hedged is the foreign currency and commodity price risk related to forecasted transactions. If the contract has been designated as a cash flow hedge, the change in the fair value of the cash flow hedge is deferred in Accumulated other comprehensive loss and is recognized in Automotive and other cost of sales along with the earnings effect of the hedged item when the hedged item affects earnings.

Automotive Financing - GM Financial Certain interest rate swap and foreign currency swap agreements have been designated as cash flow hedges. The risk being hedged is the foreign currency and interest rate risk related to forecasted transactions. If the contract has been designated as a cash flow hedge, the change in the fair value of the cash flow hedge is deferred in Accumulated other comprehensive loss and is recognized in GM Financial interest, operating and other expenses along with the earnings effect of the hedged item when the hedged item affects earnings. Changes in the fair value of amounts excluded from the assessment of effectiveness are recorded currently in earnings and are presented in the same income statement line as the earnings effect of the hedged item.

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Note 3. Revenue

The following table disaggregates our revenue by major source for revenue generating segments:



	Three Months Ended September 30, 2018
	GMNA		GMI		Corporate		Total Automotive		GM Financial		Eliminations			Total
Vehicle, parts and accessories	$	26,273	$	4,226	$	2	$	30,501	$	—	$	(11	)	$	30,490
Used vehicles	582		23		—		605		—		(1		)	604
Services and other	795		333		54		1,182		—		—			1,182
Automotive net sales and revenue	27,650		4,582		56		32,288		—		(12		)	32,276
Leased vehicle income	—		—		—		—		2,501		—			2,501
Finance charge income	—		—		—		—		917		(2		)	915
Other income	—		—		—		—		100		(1		)	99
GM Financial net sales and revenue	—		—		—		—		3,518		(3		)	3,515
Net sales and revenue	$	27,650	$	4,582	$	56	$	32,288	$	3,518	$	(15	)	$	35,791



	Nine Months Ended September 30, 2018
	GMNA		GMI		Corporate		Total Automotive		GM Financial		Eliminations			Total
Vehicle, parts and accessories	$	79,029	$	13,320	$	12	$	92,361	$	—	$	(36	)	$	92,325
Used vehicles	2,506		138		—		2,644		—		(34		)	2,610
Services and other	2,434		730		143		3,307		—		—			3,307
Automotive net sales and revenue	83,969		14,188		155		98,312		—		(70		)	98,242
Leased vehicle income	—		—		—		—		7,445		—			7,445
Finance charge income	—		—		—		—		2,667		(5		)	2,662
Other income	—		—		—		—		305		(4		)	301
GM Financial net sales and revenue	—		—		—		—		10,417		(9		)	10,408
Net sales and revenue	$	83,969	$	14,188	$	155	$	98,312	$	10,417	$	(79	)	$	108,650

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Adjustments to sales incentives for previously recognized sales were insignificant in the three and nine months ended September 30, 2018.

Contract liabilities in our Automotive segments consist primarily of maintenance, extended warranty and other service contracts. We recognized revenue of $426 million and $1.2 billion related to contract liabilities during the three and nine months ended September 30, 2018. We expect to recognize revenue of $560 million in the three months ending December 31, 2018 and $1.0 billion, $497 million and $600 million in the years ending December 31, 2019, 2020 and thereafter related to contract liabilities as of September 30, 2018.

Note 4. Marketable and Other Securities

The following table summarizes the fair value of cash equivalents and marketable debt and equity securities which approximates cost:

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	Fair Value Level	September 30, 2018		December 31, 2017
Cash and cash equivalents
Cash and time deposits(a)		$	7,144	$	6,962
Available-for-sale debt securities
U.S. government and agencies	2	1,115		750
Corporate debt	2	2,774		3,032
Sovereign debt	2	2,033		1,954
Total available-for-sale debt securities – cash equivalents		5,922		5,736
Money market funds(b)	1	5,369		2,814
Total cash and cash equivalents		$	18,435	$	15,512
Marketable debt securities
U.S. government and agencies	2	$	1,229	$	3,310
Corporate debt	2	3,416		3,665
Mortgage and asset-backed	2	685		635
Sovereign debt	2	586		703
Total available-for-sale debt securities – marketable securities		$	5,916	$	8,313
Restricted cash
Cash and cash equivalents		$	198	$	219
Money market funds	1	2,225		2,117
Total restricted cash		$	2,423	$	2,336

Available-for-sale debt securities included above with contractual maturities(c)
Due in one year or less		$	6,777
Due between one and five years		4,376
Total available-for-sale debt securities with contractual maturities		$	11,153

__________


(a)	Includes $364 million that is designated exclusively to fund capital expenditures in GM Korea Company (GM Korea) at September 30, 2018. Refer to Note 17 for additional information.


(b)	Includes $1.8 billion in GM Cruise at September 30, 2018. Refer to Note 17 for additional information.


(c)	Excludes mortgage and asset-backed securities.

Proceeds from the sale of investments classified as available-for-sale and sold prior to maturity were $1.7 billion and $3.7 billion in the three months ended September 30, 2018 and 2017 and $3.6 billion and $5.1 billion in the nine months ended September 30, 2018 and 2017. Net unrealized gains and losses on available-for-sale debt securities were insignificant in the three and nine months ended September 30, 2018 and 2017. Cumulative unrealized gains and losses on available-for-sale debt securities were insignificant at September 30, 2018 and December 31, 2017.

Investments in equity securities where market quotations are not available are accounted for at fair value primarily using Level 3 inputs. We recorded an unrealized gain of $142 million in Interest income and other non-operating income, net in the three months ended June 30, 2018 to adjust an investment in an equity security to a fair value of $884 million at June 30, 2018, which remained unchanged at September 30, 2018.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the total shown in the condensed consolidated statement of cash flows:



	September 30, 2018
Cash and cash equivalents	$	18,435
Restricted cash included in Other current assets	1,883
Restricted cash included in Other assets	540
Total	$	20,858

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Note 5. GM Financial Receivables and Transactions



	September 30, 2018									December 31, 2017
	Retail			Commercial			Total			Retail			Commercial			Total
Finance receivables, collectively evaluated for impairment, net of fees	$	35,442		$	10,601		$	46,043		$	30,486		$	9,935		$	40,421
Finance receivables, individually evaluated for impairment, net of fees	2,308			67			2,375			2,228			22			2,250
GM Financial receivables	37,750			10,668			48,418			32,714			9,957			42,671
Less: allowance for loan losses	(839		)	(61		)	(900		)	(889		)	(53		)	(942		)
GM Financial receivables, net	$	36,911		$	10,607		$	47,518		$	31,825		$	9,904		$	41,729

Fair value of GM Financial receivables utilizing Level 2 inputs							$	10,607								$	9,904
Fair value of GM Financial receivables utilizing Level 3 inputs							$	36,551								$	31,831



	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Allowance for loan losses at beginning of period	$	873		$	893		$	942		$	805
Provision for loan losses	180			204			444			573
Charge-offs	(285		)	(287		)	(878		)	(858		)
Recoveries	130			135			398			420
Effect of foreign currency	2			3			(6		)	8
Allowance for loan losses at end of period	$	900		$	948		$	900		$	948

The allowance for loan losses on retail and commercial finance receivables included a collective allowance of $575 million and $611 million and a specific allowance of $325 million and $331 million at September 30, 2018 and December 31, 2017.

Retail Finance Receivables We use proprietary scoring systems in the underwriting process that measure the credit quality of retail finance receivables using several factors, such as credit bureau information, consumer credit risk scores (e.g. FICO score or its equivalent) and contract characteristics. We also consider other factors such as employment history, financial stability and capacity to pay. Subsequent to origination we review the credit quality of retail finance receivables based on customer payment activity. At September 30, 2018 and December 31, 2017, 27% and 33% of retail finance receivables were from consumers with sub-prime credit scores, which are defined as FICO or equivalent scores of less than 620 at the time of loan origination.

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. The accrual of finance charge income had been suspended on delinquent retail finance receivables with contractual amounts due of $847 million and $778 million at September 30, 2018 and December 31, 2017. The following table summarizes the contractual amount of delinquent retail finance receivables, which is not significantly different than the recorded investment of the retail finance receivables:



	September 30, 2018				September 30, 2017
	Amount		Percent of Contractual Amount Due		Amount		Percent of Contractual Amount Due
31-to-60 days delinquent	$	1,302	3.5	%	$	1,176	3.6	%
Greater-than-60 days delinquent	498		1.3	%	521		1.6	%
Total finance receivables more than 30 days delinquent	1,800		4.8	%	1,697		5.2	%
In repossession	53		0.1	%	55		0.2	%
Total finance receivables more than 30 days delinquent or in repossession	$	1,853	4.9	%	$	1,752	5.4	%

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Retail finance receivables classified as troubled debt restructurings and individually evaluated for impairment were $2.3 billion and $2.2 billion and the allowance for loan losses included $317 million and $328 million of specific allowances on these receivables at September 30, 2018 and December 31, 2017.

Commercial Finance Receivables Our commercial finance receivables consist of dealer financings, primarily for inventory purchases. Proprietary models are used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary. Dealers in Group VI are subject to additional restrictions on funding, including suspension of lines of credit and liquidation of assets. The commercial finance receivables on non-accrual status were insignificant at September 30, 2018 and December 31, 2017. The following table summarizes the credit risk profile by dealer risk rating of the commercial finance receivables:



		September 30, 2018		December 31, 2017
Group I	– Dealers with superior financial metrics	$	2,077	$	1,915
Group II	– Dealers with strong financial metrics	3,905		3,465
Group III	– Dealers with fair financial metrics	3,197		3,239
Group IV	– Dealers with weak financial metrics	960		997
Group V	– Dealers warranting special mention due to elevated risks	422		260
Group VI	– Dealers with loans classified as substandard, doubtful or impaired	107		81
		$	10,668	$	9,957

Transactions with GM Financial The following table shows transactions between our Automotive segments and GM Financial. These amounts are shown in GM Financial's condensed consolidated balance sheets and statements of income. All balance sheet amounts in the table below are eliminated. Income statement amounts may not fully eliminate due to timing.



	September 30, 2018		December 31, 2017
Condensed Consolidated Balance Sheets
Commercial finance receivables, net due from GM consolidated dealers	$	437	$	355
Direct-financing lease receivables from GM subsidiaries	$	125	$	88
Subvention receivable(a)	$	735	$	306
Commercial loan funding payable	$	86	$	90



	Three Months Ended				Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Condensed Consolidated Statements of Income
Interest subvention earned on finance receivables	$	142	$	129	$	409	$	361
Leased vehicle subvention earned	$	827	$	786	$	2,438	$	2,246

__________


(a)	Cash paid by Automotive segments to GM Financial for subvention was $1.1 billion for the three months ended September 30, 2018 and 2017 and $2.8 billion and $3.3 billion for the nine months ended September 30, 2018 and 2017.

GM Financial’s Board of Directors declared a $375 million dividend on its common stock on October 26, 2018, which we received on October 30, 2018.

Note 6. Inventories



	September 30, 2018		December 31, 2017
Total productive material, supplies and work in process	$	4,634	$	4,203
Finished product, including service parts	6,700		6,460
Total inventories	$	11,334	$	10,663

Note 7. Equipment on Operating Leases

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Equipment on operating leases consists of leases to retail customers that are recorded as operating leases and vehicle sales to daily rental car companies with an actual or expected repurchase obligation.



	September 30, 2018			December 31, 2017
Equipment on operating leases	$	55,840		$	53,947
Less: accumulated depreciation	(11,238		)	(9,959		)
Equipment on operating leases, net(a)	$	44,602		$	43,988

__________


(a)	Includes $44.1 billion and $42.9 billion of GM Financial Equipment on operating leases, net at September 30, 2018 and December 31, 2017.

Depreciation expense related to Equipment on operating leases, net was $1.9 billion and $1.8 billion in the three months ended September 30, 2018 and 2017 and $5.6 billion and $4.9 billion in the nine months ended September 30, 2018 and 2017.

The following table summarizes minimum rental payments due to GM Financial on leases to retail customers:



	Year Ending December 31,
	2018		2019		2020		2021		2022		Thereafter		Total
Minimum rental receipts under operating leases	$	1,882	$	6,260	$	3,570	$	1,077	$	97	$	6	$	12,892

Note 8. Equity in Net Assets of Nonconsolidated Affiliates



	Three Months Ended				Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Automotive China equity income	$	485	$	459	$	1,674	$	1,472
Other joint ventures equity income	45		41		141		113
Total Equity income	$	530	$	500	$	1,815	$	1,585

There have been no significant ownership changes in our Automotive China joint ventures (Automotive China JVs) since December 31, 2017.



	Three Months Ended				Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Summarized Operating Data of Automotive China JVs
Automotive China JVs' net sales	$	11,461	$	12,161	$	37,781	$	34,177
Automotive China JVs' net income	$	999	$	964	$	3,370	$	2,912

Dividends received from our nonconsolidated affiliates were insignificant and $382 million in the three months ended September 30, 2018 and 2017 and $2.0 billion in the nine months ended September 30, 2018 and 2017. We had undistributed earnings of $2.0 billion and $2.2 billion related to our nonconsolidated affiliates at September 30, 2018 and December 31, 2017.

Note 9. Variable Interest Entities

GM Financial uses special purpose entities (SPEs) that are considered VIEs to issue variable funding notes to third party bank-sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is backed by finance receivables and leasing related assets transferred to the VIEs (Securitized Assets). GM Financial determined that it is the primary beneficiary of the SPEs because the servicing responsibilities for the Securitized Assets give GM Financial the power to direct the activities that most significantly impact the performance of the VIEs and the variable interests in the VIEs give GM Financial the obligation to absorb losses and the right to receive residual returns that could potentially be significant. The assets serve as the sole source of repayment for the debt issued by these entities. Investors in the notes issued by the VIEs do not have recourse to GM Financial or its other assets, with the exception of customary representation and warranty repurchase provisions and indemnities that GM Financial provides as the servicer. GM Financial is not required and does not currently intend to provide additional financial support to these SPEs. While these subsidiaries are included in GM Financial's condensed consolidated financial statements, they are separate legal entities and their assets are legally owned by them and are not available to GM Financial's creditors.

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The following table summarizes the assets and liabilities related to GM Financial's consolidated VIEs:



	September 30, 2018		December 31, 2017
Restricted cash – current	$	1,733	$	1,740
Restricted cash – non-current	$	487	$	527
GM Financial receivables, net of fees – current	$	16,502	$	15,141
GM Financial receivables, net of fees – non-current	$	13,080	$	12,944
GM Financial equipment on operating leases, net	$	21,252	$	22,222
GM Financial short-term debt and current portion of long-term debt	$	19,086	$	18,972
GM Financial long-term debt	$	20,392	$	20,356

GM Financial recognizes finance charge, leased vehicle and fee income on the Securitized Assets and interest expense on the secured debt issued in a securitization transaction and records a provision for loan losses to recognize probable loan losses inherent in the finance receivables.

Note 10. Automotive and GM Financial Debt



	September 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Total automotive debt	$	15,963	$	16,352	$	13,502	$	15,088
Fair value utilizing Level 1 inputs			$	13,971			$	13,202
Fair value utilizing Level 2 inputs			$	2,381			$	1,886

In April 2018 we amended and restated our two existing revolving credit facilities and entered into a third facility, increasing our aggregate borrowing capacity from $14.5 billion to $16.5 billion. These facilities consist of a 364-day, $2.0 billion facility, a three-year, $4.0 billion facility and a five-year, $10.5 billion facility. The facilities are available to us as well as certain wholly- owned subsidiaries, including GM Financial. The three-year, $4.0 billion facility allows for borrowings in U.S. Dollars and other currencies and includes a letter of credit sub-facility of $1.1 billion. The five-year, $10.5 billion facility allows for borrowings in U.S. Dollars and other currencies. The 364-day, $2.0 billion facility allows for borrowing in U.S. Dollars only. We have allocated the 364-day, $2.0 billion facility for exclusive use by GM Financial.

In September 2018 we issued $2.1 billion in aggregate principal amount of senior unsecured notes with an initial weighted average interest rate of 5.03% and maturity dates ranging from 2021 to 2049. The notes are governed by the same indenture that was used in past issuances, which contains terms and covenants customary of these types of securities including limitation on the amount of certain secured debt we may incur. The net proceeds from the issuance of these senior unsecured notes were used to repay $1.5 billion of debt in October 2018 upon maturity, pre-fund $584 million in certain mandatory contributions for our U.K. and Canada pension plans due in 2019 through 2021, and for other general corporate purposes.



	September 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Secured debt	$	39,722	$	39,679	$	39,887	$	39,948
Unsecured debt	46,655		47,062		40,830		41,989
Total GM Financial debt	$	86,377	$	86,741	$	80,717	$	81,937

Fair value utilizing Level 2 inputs			$	84,693			$	79,623
Fair value utilizing Level 3 inputs			$	2,048			$	2,314

Secured debt consists of revolving credit facilities and securitization notes payable. Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged assets. Refer to Note 9 for additional information on GM Financial's involvement with VIEs. In the nine months ended September 30, 2018 GM Financial entered into new or renewed

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GENERAL MOTORS COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)

credit facilities with a total net additional borrowing capacity of $345 million, which had substantially the same terms as existing debt and GM Financial issued $16.3 billion in aggregate principal amount of securitization notes payable with an initial weighted average interest rate of 2.89% and maturity dates ranging from 2022 to 2026.

Unsecured debt consists of senior notes, credit facilities and other unsecured debt. In the nine months ended September 30, 2018 GM Financial issued $7.2 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 3.17% and maturity dates ranging from 2020 to 2028.

During the nine months ended September 30, 2018, GM Financial launched an unsecured commercial paper notes program in the U.S. At September 30, 2018, the principal amount outstanding of GM Financial's commercial paper in the U.S. was $1.5 billion.

Each of the revolving credit facilities and the indentures governing GM Financial's notes contain terms and covenants including limitations on GM Financial's ability to incur certain liens.

Note 11. Derivative Financial Instruments

Automotive The following table presents the notional amounts of derivative financial instruments in our automotive operations:



	Fair Value Level	September 30, 2018		December 31, 2017
Derivatives not designated as hedges(a)
Foreign currency	2	$	2,970	$	4,022
Commodity	2	636		606
PSA warrants(b)	2	46		48
Total derivative financial instruments		$	3,652	$	4,676

__________


(a)	The fair value of these derivative instruments at September 30, 2018 and December 31, 2017 and the gains/losses included in our condensed consolidated income statements for the three and nine months ended September 30, 2018 and 2017 were insignificant, unless otherwise noted.

(b)

The fair value of the PSA warrants located in Other assets was $1.1 billion and $764 million at September 30, 2018 and December 31, 2017. We recorded gains in Interest income and other non-operating income, net of $171 million and an insignificant amount in the three months ended September 30, 2018 and 2017 and $324 million and an insignificant amount in the nine months ended September 30, 2018 and 2017.

We estimate the fair value of the PSA warrants using a Black-Scholes formula. The significant inputs to the model include the PSA stock price and the estimated dividend yield. The estimated dividend yield is adjusted based on the terms of the Master Agreement with PSA Group dated March 5, 2017 (the Agreement). Refer to Exhibit 2.1 of our 2017 Form 10-K for additional details. Under the terms of the Agreement upon exercise of the warrants we are entitled to receive any dividends by PSA between the issuance date and the conversion date.

GM Financial The following table presents the notional amounts of GM Financial's derivative financial instruments:



	Fair Value Level	September 30, 2018		December 31, 2017
Derivatives designated as hedges(a)
Fair value hedges – interest rate contracts(b)(c)	2	$	10,510	$	11,110
Cash flow hedges
Interest rate contracts	2	905		2,177
Foreign currency	2	2,108		1,574
Derivatives not designated as hedges(a)
Interest rate contracts(c)(d)	2	93,162		81,938
Foreign currency	2	1,858		1,201
Total derivative financial instruments		$	108,543	$	98,000

__________


(a)	The fair value of these derivative instruments at September 30, 2018 and December 31, 2017 and the gains/losses included in our condensed consolidated income statements and statements of comprehensive income for the three and nine months ended September 30, 2018 and 2017 were insignificant, unless otherwise noted.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —— (Continued)


(b)	The fair value of these derivative instruments located in Other liabilities was $510 million and $290 million at September 30, 2018 and December 31, 2017. The fair value of these derivative instruments located in Other assets was insignificant at September 30, 2018 and December 31, 2017.


(c)	Amounts accrued for interest payments in a net receivable position are included in Other assets. Amounts accrued for interest payments in a net payable position are included in Other liabilities.


(d)	The fair value of these derivative instruments located in Other assets was $551 million and $329 million at September 30, 2018 and December 31, 2017. The fair value of these derivative instruments located in Other liabilities was $670 million and $207 million at September 30, 2018 and December 31, 2017.

The fair value for Level 2 instruments was derived using the market approach based on observable market inputs including quoted prices of similar instruments and foreign exchange and interest rate forward curves.

The following amounts were recorded in the condensed consolidated balance sheet related to items designated and qualifying as hedged items in fair value hedging relationships:



	September 30, 2018
	Carrying Amount of Hedged Items		Cumulative Amount of Fair Value Hedging Adjustments(a)
GM Financial long-term debt	$	15,363	$	735

__________


(a)	Includes $178 million of adjustments remaining on hedged items for which hedge accounting has been discontinued.

Note 12. Product Warranty and Related Liabilities



	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
Warranty balance at beginning of period	$	7,990		$	8,890		$	8,332		$	9,069
Warranties issued and assumed in period – recall campaigns	101			173			515			527
Warranties issued and assumed in period – product warranty	542			481			1,599			1,586
Payments	(723		)	(787		)	(2,175		)	(2,382		)
Adjustments to pre-existing warranties	(209		)	(317		)	(426		)	(405		)
Effect of foreign currency and other	(8		)	39			(152		)	84
Warranty balance at end of period	$	7,693		$	8,479		$	7,693		$	8,479

We estimate our reasonably possible loss in excess of amounts accrued for recall campaigns to be insignificant at September 30, 2018. Refer to Note 14 for reasonably possible losses on Takata Corporation (Takata) matters.

Note 13. Pensions and Other Postretirement Benefits

Three Months Ended September 30, 2018

Three Months Ended September 30, 2017

Pension Benefits

Global OPEB Plans

Pension Benefits

Global OPEB Plans

U.S.

Non-U.S.

U.S.

Non-U.S.

Service cost