40730--3/5/2009--GENERAL_MOTORS

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES Risks Related to us and our Automotive Business There is substantial doubt about our ability to continue as a going concern. Our business, the success of our Viability Plan and our ability to continue as a going concern are highly dependent on sales volume. In 2008, global vehicle sales declined rapidly and there is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn. The success of our Viability Plan and our ability to continue as a going concern depends on our compliance with the terms of the UST Loan Agreement, and on the availability of additional financing from the United States and certain foreign governments. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Our Viability Plan relies in large part upon assumptions and analyses developed by us. If these assumptions and analyses prove to be incorrect, our Viability Plan may be unsuccessful and we may be unable to continue as a going concern. GENERAL MOTORS CORPORATION AND SUBSIDIARIES If we are not able to obtain adequate financing from the U.S. government or other sources or to execute our Viability Plan or if our Viability Plan does not result in an entity capable of sustaining itself over the long-term, or if we are unable to restructure our Series D convertible debentures prior to June 1, 2009, we could potentially be required to seek relief through a filing under the U.S. Bankruptcy Code, either through a prepackaged plan of reorganization or under an alternative plan, which could include liquidation. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Even if our progress under the Viability Plan is certified under the UST Loan Agreement and our debt restructuring is successful, our indebtedness and other obligations will continue to be significant. If the current economic environment does not improve we are not likely to generate sufficient cash flow from operations to satisfy our obligations as they come due, and as a result we would need additional funding, which may be difficult to obtain. Negative developments in the availability or terms of consumer credit through GMAC or other sources materially adversely affected our sales in 2008 and may have a similar effect in 2009 if credit markets deteriorate. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Because of our dependence on GMAC, we are subject to risks associated with other developments in the business and financial condition of GMAC. Inadequate liquidity could materially adversely affect our business operations in the future. GENERAL MOTORS CORPORATION AND SUBSIDIARIES We may not be able to reach agreement on the UAW VEBA Modification to fund and discharge retiree health care obligations or enter into the Labor Modifications required by the UST Agreements or with the UAW to modify our compensation structure and work rules. Even if the VEBA Modifications described in the UST Loan Agreement are implemented, we have agreed to contribute a significant amount of cash to fund the New VEBA in the relatively near future. We may not be able to reach an agreement with the unofficial committee of holders of our public debt regarding the terms of a potential exchange offer or successfully execute a reduction in our unsecured debt as envisioned by UST Loan Agreement. Our pension and OPEB expenses and funding obligations are expected to increase significantly as a result of the weak performance of financial markets and its effect on plan assets. GENERAL MOTORS CORPORATION AND SUBSIDIARIES The UST Loan Agreement contains significant representations and affirmative and negative covenants that may restrict our ability to take actions management believes are important to our long-term strategy, including our ability to enter into certain material transactions outside of the ordinary course of business. Failure of our suppliers due to current economic conditions to provide us with the systems, components and parts that we need to manufacture our automotive products and operate our business could result in a disruption in our operations and have a material adverse effect on our business. GENERAL MOTORS CORPORATION AND SUBSIDIARIES As part of our Viability Plan, we have reduced compensation and headcount for our management and non-management salaried employees, which may materially adversely affect our ability to hire and retain salaried employees. Our plan to reduce the number of our retail channels and core brands and to consolidate our dealer network is likely to reduce our total sales volume, may not create the structural cost savings we anticipate and is likely to result in restructuring costs that may materially adversely affect our result of operations. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Part of our Viability Plan involves the sale of some of our businesses, which will be difficult to execute both because of the weakness of the industry and the lack of available credit to finance an acquisition. Delphi is unlikely to emerge from bankruptcy in the near-term without government support and possibly may not emerge at all. GENERAL MOTORS CORPORATION AND SUBSIDIARIES We may not have adequate liquidity to fund our planned significant investment in new technology, and, even if funded, a significant investment in new technology may not result in successful vehicle applications. Shortages of and volatility in the price of oil could cause diminished profitability due to shifts in consumer vehicle demand. Our continued ability to achieve structural and materials cost reductions and to realize production efficiencies for our automotive operations is critical to our ability to achieve our Viability Plan and return to profitability. A significant amount of our operations are conducted by joint ventures that we cannot operate solely for our benefit. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Increase in cost, disruption of supply or shortage of raw materials could materially harm our business. We could be materially adversely affected by changes or imbalances in foreign currency exchange and other rates. We operate in a highly competitive industry in which many manufacturers have relatively high fixed costs and are faced with sharply decreasing demand. New laws, regulations or policies of governmental organizations regarding increased fuel economy requirements and reduced greenhouse gas emissions, or changes in existing ones, may have a significant negative effect on how we do business. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Pursuant to the transactions proposed in the Viability Plan to issue additional common stock to unsecured debt holders and to the UAW VEBA, substantially all of our common stock would be newly issued and distributed to exchanging bond holders and the UAW VEBA, and the voting power and share of future dividends of our currently outstanding common stock would be significantly and materially diluted. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Our common stock may be delisted from the New York Stock Exchange. If our common stock is deemed a penny stock, its liquidity may be materially adversely affected. Our business may be materially adversely affected by decreases in the residual value of off-lease vehicles. The pace of introduction and market acceptance of new vehicles is important to our success and the frequency of new vehicles introductions may be materially adversely affected by our reductions in capital expenditures. GENERAL MOTORS CORPORATION AND SUBSIDIARIES We have determined that our internal controls over financial reporting are currently not effective. The lack of effective internal controls could materially adversely affect our financial condition and ability to carry out our strategic business plan. Our businesses outside the United States expose us to additional risks that may materially adversely affect our business. New laws, regulations or policies of governmental organizations regarding safety standards, or changes in existing ones, may have a significant negative effect on how we do business. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Risks related to our ownership interest in GMAC Risks Related to GMAC Becoming a Bank Holding Company GMAC s business, financial condition and results of operations could be adversely affected by new regulations to which it is subject as a result of becoming a bank holding company. If GMAC is unable to satisfy applicable regulatory capital requirements in the future, it could become subject to enforcement actions and/or FDIC receivership. GMAC may not be successful in implementing its business plan as a bank holding company. Other Risks Related to GMAC s Business GMAC s business and the businesses of its subsidiaries, including Residential Capital, LLC (ResCap), require substantial capital, and continued disruption in GMAC s funding sources and access to the capital markets would continue to have a material adverse effect on its liquidity and financial condition. GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMAC s borrowing costs and access to the debt capital markets depend significantly on its credit ratings. GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMAC s indebtedness and other obligations are significant and could materially adversely affect its business. The profitability and financial condition of GMAC s operations are heavily dependent upon our performance, operations and prospects. GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMAC has substantial credit exposure to us and a bankruptcy by us could affect certain of GMAC s funding facilities. GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMAC s profitability and financial condition have been materially adversely affected by declines in the residual value of off-lease vehicles, and the residual value of off-lease vehicles may continue to decrease. The occurrence of recent adverse developments in the mortgage finance and credit markets has adversely affected ResCap s business, liquidity and its capital position and has raised substantial doubt about ResCap s ability to continue as a going concern. GENERAL MOTORS CORPORATION AND SUBSIDIARIES ResCap has significant near-term liquidity issues. There is a significant risk that ResCap will not be able to meet its debt service obligations and other funding obligations in the near-term. GMAC has extensive financing and hedging arrangements with ResCap, which could be at risk of nonpayment if ResCap were to file for bankruptcy. Current conditions in the residential mortgage market and housing markets may continue to adversely affect ResCap s earnings and financial condition. GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMAC s earnings may decrease because of increases or decreases in interest rates. GMAC s hedging strategies may not be successful in mitigating its risks associated with changes in interest rates and could affect its profitability and financial condition, as could GMAC s failure to comply with hedge accounting principles and interpretations. GENERAL MOTORS CORPORATION AND SUBSIDIARIES ResCap s ability to pay dividends to GMAC is restricted by contractual arrangements. A failure of or interruption in the communications and information systems on which GMAC relies to conduct its business could adversely affect GMAC s revenues and profitability. GMAC uses estimates and assumptions in determining the fair value of certain of its assets, in determining its allowance for credit losses, in determining lease residual values, and in determining its reserves for insurance losses and loss adjustment expenses. If GMAC s estimates or assumptions prove to be incorrect, its cash flow, profitability, financial condition, and business prospects could be materially adversely affected. GMAC s business outside the United States exposes GMAC to additional risks that may cause its revenues and profitability to decline. GENERAL MOTORS CORPORATION AND SUBSIDIARIES GMAC s business could be adversely affected by changes in foreign currency exchange rates. GMAC is exposed to credit risk, which could affect its profitability and financial condition. Fluctuations in valuation of investment securities or significant fluctuations in investment market prices could negatively affect revenues. GMAC may be required to repurchase contracts and provide indemnification if it breaches representations and warranties from its securitization and whole-loan transactions, which could harm GMAC s profitability and financial condition. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Significant indemnification payments or contract, lease, or loan repurchase activity of retail contracts or leases or mortgage loans could harm GMAC s profitability and financial condition. A loss of contractual servicing rights could have a material adverse effect on GMAC s financial condition, liquidity, and results of operations. The regulatory environment in which GMAC operates could have a material adverse effect on its business and earnings. GENERAL MOTORS CORPORATION AND SUBSIDIARIES Changes in accounting standards issued by the Financial Accounting Standards Board or other standard setting bodies may adversely affect GMAC s reported revenues, profitability, and financial condition. General business and economic conditions may significantly and adversely affect GMAC s revenues, profitability, and financial condition. GENERAL MOTORS CORPORATION AND SUBSIDIARIES The worldwide financial services industry is highly competitive. If GMAC is 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, GMAC s margins could be materially adversely affected.

Full 10-K form ▸

40730--3/5/2009--GENERAL_MOTORS_CORP