General Motors Co 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This MD&A should be read in conjunction with the accompanying audited consolidated financial statements and notes. Forward-looking statements in this MD&A are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. Risk Factors for a discussion of these risks and uncertainties. The discussion of our financial condition and results of operations for the year ended December 31, 2019 included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020 is incorporated by reference into this MD&A. Non-GAAP Measures Our non-GAAP measures include: earnings before interest and taxes (EBIT)-adjusted, presented net of noncontrolling interests; earnings before income taxes (EBT)-adjusted for our GM Financial segment; earnings per share (EPS)-diluted-adjusted; effective tax rate-adjusted (ETR-adjusted); return on invested capital-adjusted (ROIC-adjusted) and adjusted automotive free cash flow. Our calculation of these non-GAAP measures may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a result, the use of these non-GAAP measures has limitations and should not be considered superior to, in isolation from, or as a substitute for, related U.S. GAAP measures. These non-GAAP measures allow management and investors to view operating trends, perform analytical comparisons and benchmark performance between periods and among geographic regions to understand operating performance without regard to items we do not consider a component of our core operating performance. Furthermore, these non-GAAP measures allow investors the opportunity to measure and monitor our performance against our externally communicated targets and evaluate the investment decisions being made by management to improve ROIC-adjusted. Management uses these measures in its financial, investment and operational decision-making processes, for internal reporting and as part of its forecasting and budgeting processes. Further, our Board of Directors uses certain of these and other measures as key metrics to determine management performance under our performance-based compensation plans. For these reasons, we believe these non-GAAP measures are useful for our investors. EBIT-adjusted EBIT-adjusted is presented net of noncontrolling interests and is used by management and can be used by investors to review our consolidated operating results because it excludes automotive interest income, automotive interest expense and income taxes as well as certain additional adjustments that are not considered part of our core operations. 25 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Examples of adjustments to EBIT include, but are not limited to, impairment charges on long-lived assets and other exit costs resulting from strategic shifts in our operations or discrete market and business conditions; costs arising from the ignition switch recall and related legal matters; and certain currency devaluations associated with hyperinflationary economies. For EBIT-adjusted and our other non-GAAP measures, once we have made an adjustment in the current period for an item, we will also adjust the related non-GAAP measure in any future periods in which there is an impact from the item. Our corresponding measure for our GM Financial segment is EBT-adjusted because interest income and interest expense are part of operating results when assessing and measuring the operational and financial performance of the segment. EPS-diluted-adjusted EPS-diluted-adjusted is used by management and can be used by investors to review our consolidated diluted EPS results on a consistent basis. EPS-diluted-adjusted is calculated as net income attributable to common stockholders-diluted less adjustments noted above for EBIT-adjusted and certain income tax adjustments divided by weighted-average common shares outstanding-diluted. Examples of income tax adjustments include the establishment or reversal of significant deferred tax asset valuation allowances. ETR-adjusted ETR-adjusted is used by management and can be used by investors to review the consolidated effective tax rate for our core operations on a consistent basis. ETR-adjusted is calculated as Income tax expense less the income tax related to the adjustments noted above for EBIT-adjusted and the income tax adjustments noted above for EPS-diluted-adjusted divided by Income before income taxes less adjustments. When we provide an expected adjusted effective tax rate, we do not provide an expected effective tax rate because the U.S. GAAP measure may include significant adjustments that are difficult to predict. ROIC-adjusted ROIC-adjusted is used by management and can be used by investors to review our investment and capital allocation decisions. We define ROIC-adjusted as EBIT-adjusted for the trailing four quarters divided by ROIC-adjusted average net assets, which is considered to be the average equity balances adjusted for average automotive debt and interest liabilities, exclusive of finance leases; average automotive net pension and other postretirement benefits (OPEB) liabilities; and average automotive net income tax assets during the same period. Adjusted automotive free cash flow Adjusted automotive free cash flow is used by management and can be used by investors to review the liquidity of our automotive operations and to measure and monitor our performance against our capital allocation program and evaluate our automotive liquidity against the substantial cash requirements of our automotive operations. We measure adjusted automotive free cash flow as automotive operating cash flow from operations less capital expenditures adjusted for management actions. Management actions can include voluntary events such as discretionary contributions to employee benefit plans or nonrecurring specific events such as a closure of a facility that are considered special for EBIT-adjusted purposes. Refer to the “Liquidity and Capital Resources” section of this MD&A for additional information. 26 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following table reconciles Net income attributable to stockholders under U.S. GAAP to EBIT-adjusted: Years Ended December 31, 2021 2020 2019 Net income attributable to stockholders $ 10,019 $ 6,427 $ 6,732 Income tax expense 2,771 1,774 769 Automotive interest expense 950 1,098 782 Automotive interest income (146) (241) (429) Adjustments Patent royalty matters(a) 250 — — GM Brazil indirect tax matters(b) 194 — (1,360) Cadillac dealer strategy(c) 175 99 — GM Korea wage litigation(d) 82 — — GMI restructuring(e) — 683 — Ignition switch recall and related legal matters(f) — (130) — Transformation activities(g) — — 1,735 FAW-GM divestiture(h) — — 164 Total adjustments 701 652 539 EBIT-adjusted $ 14,295 $ 9,710 $ 8,393 ________ (a) This adjustment was excluded because it relates to potential royalties accrued with respect to past-year sales. (b) These adjustments were excluded because of the unique events associated with decisions rendered by the Superior Judicial Court of Brazil resulting in retrospective recoveries of indirect taxes in the year ended December 31, 2019, and a potential settlement with certain third parties relating to these recoveries in the year ended December 31, 2021. (c) These adjustments were excluded because they relate to strategic activities to transition certain Cadillac dealers from the network as part of Cadillac's electric vehicle strategy. (d) This adjustment was excluded because of the unique events associated with recent Supreme Court of the Republic of Korea (Korea Supreme Court) decisions related to our salaried workers. (e) These adjustments were excluded because of a strategic decision to rationalize our core operations by exiting or significantly reducing our presence in various international markets to focus resources on opportunities expected to deliver higher returns. The adjustments primarily consist of dealer restructurings, asset impairments, inventory provisions and employee separation charges in Australia, New Zealand, Thailand and India in the year ended December 31, 2020. (f) These adjustments were excluded because of the unique events associated with the ignition switch recall, which included various investigations, inquiries and complaints from constituents. (g) These adjustments were excluded because of a strategic decision to accelerate our transformation for the future to strengthen our core business, capitalize on the future of personal mobility, and drive significant cost efficiencies. The adjustments primarily consist of accelerated depreciation, supplier-related charges, pension and other curtailment charges and employee-related separation charges in the year ended December 31, 2019. (h) This adjustment was excluded because we divested our joint venture FAW-GM Light Duty Commercial Vehicle Co., Ltd. (FAW-GM), as a result of a strategic decision by both shareholders, allowing us to focus our resources on opportunities expected to deliver higher returns. 27 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following table reconciles diluted earnings per common share under U.S. GAAP to EPS-diluted-adjusted: Years Ended December 31, 2021 2020 2019 Amount Per Share Amount Per Share Amount Per Share Diluted earnings per common share $ 9,837 $ 6.70 $ 6,247 $ 4.33 $ 6,581 $ 4.57 Adjustments(a) 701 0.47 652 0.46 539 0.38 Tax effect on adjustments(b) (105) (0.07) (70) (0.05) (188) (0.13) Tax adjustments(c) (51) (0.03) 236 0.16 — — EPS-diluted-adjusted $ 10,382 $ 7.07 $ 7,065 $ 4.90 $ 6,932 $ 4.82 ________ (a) Refer to the reconciliation of Net income attributable to stockholders under U.S. GAAP to EBIT-adjusted within this section of the MD&A for adjustment details. (b) The tax effect of each adjustment is determined based on the tax laws and valuation allowance status of the jurisdiction to which the adjustment relates. (c) In the year ended December 31, 2021, the adjustments consist of tax benefits related to a deduction for an investment in a subsidiary and resolution of uncertainty relating to an indirect tax refund claim in Brazil, partially offset by tax expense related to the establishment of a valuation allowance against Cruise deferred tax assets. In the year ended December 31, 2020, the adjustment consists of tax expense related to the establishment of a valuation allowance against deferred tax assets in Australia and New Zealand. These adjustments were excluded because of the unique nature of these events and significant impacts of valuation allowances are not considered part of our core operations. The following table reconciles our effective tax rate under U.S. GAAP to ETR-adjusted: Years Ended December 31, 2021 2020 2019 Income before income taxes Income tax expense Effective tax rate Income before income taxes Income tax expense Effective tax rate Income before income taxes Income tax expense Effective tax rate Effective tax rate $ 12,716 $ 2,771 21.8 % $ 8,095 $ 1,774 21.9 % $ 7,436 $ 769 10.3 % Adjustments(a) 726 105 652 70 545 188 Tax adjustments(b) 51 (236) — ETR-adjusted $ 13,442 $ 2,927 21.8 % $ 8,747 $ 1,608 18.4 % $ 7,981 $ 957 12.0 % __________ (a) Refer to the reconciliation of Net income attributable to stockholders under U.S. GAAP to EBIT-adjusted within this section of the MD&A for adjustment details. Net income attributable to noncontrolling interests for these adjustments is included in the years ended December 31, 2021 and 2019. The tax effect of each adjustment is determined based on the tax laws and valuation allowance status of the jurisdiction to which the adjustment relates. (b) Refer to the reconciliation of diluted earnings per common share under U.S. GAAP to EPS-diluted-adjusted within this section of the MD&A for adjustment details. We define return on equity (ROE) as Net income (loss) attributable to stockholders for the trailing four quarters divided by average equity for the same period. Management uses average equity to provide comparable amounts in the calculation of ROE. The following table summarizes the calculation of ROE (dollars in billions): Years Ended December 31, 2021 2020 2019 Net income (loss) attributable to stockholders $ 10.0 $ 6.4 $ 6.7 Average equity(a) $ 56.5 $ 43.3 $ 43.7 ROE 17.7 % 14.9 % 15.4 % _______ (a) Includes equity of noncontrolling interests where the corresponding earnings (loss) are included in Net income (loss) attributable to stockholders. 28 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following table summarizes the calculation of ROIC-adjusted (dollars in billions): Years Ended December 31, 2021 2020 2019 EBIT-adjusted(a) $ 14.3 $ 9.7 $ 8.4 Average equity(b) $ 56.5 $ 43.3 $ 43.7 Add: Average automotive debt and interest liabilities (excluding finance leases) 17.1 27.8 14.9 Add: Average automotive net pension & OPEB liability 15.8 17.6 16.7 Less: Average automotive net income tax asset (22.2) (24.0) (23.5) ROIC-adjusted average net assets $ 67.2 $ 64.7 $ 51.8 ROIC-adjusted 21.3 % 15.0 % 16.2 % ________ (a) Refer to the reconciliation of Net income attributable to stockholders under U.S. GAAP to EBIT-adjusted within this section of the MD&A. (b) Includes equity of noncontrolling interests where the corresponding earnings (loss) are included in EBIT-adjusted. Overview Our vision for the future is a world with zero crashes, zero emissions and zero congestion, which guides our growth-focused strategy to invest in EVs and AVs, software-enabled services and subscriptions and new business opportunities, while strengthening our market position in profitable ICE vehicles, such as trucks and SUVs. We will execute our strategy with a diverse team and a steadfast commitment to good citizenship through sustainable operations and a leading health and safety culture. The automotive industry and GM are currently experiencing a global semiconductor supply shortage. The supply shortage has impacted, and continues to impact, multiple suppliers that incorporate semiconductors into the parts they supply to us. We expect the availability of semiconductors to improve throughout 2022. We will continue prioritizing our most popular and in-demand vehicles, including our full-size trucks, full-size SUVs, and EVs. We do not expect this shortage to impact our long-term growth and EV initiatives. In June 2021, we announced plans to increase our investment in EVs and AVs to more than $35.0 billion from 2020 through 2025, in part to accelerate battery and EV assembly capacity. We also continue to monitor the impact of the COVID-19 pandemic, and government actions and measures taken to prevent its spread, and the potential to affect our operations. Refer to Part I, Item 1A. Risk Factors for further discussion of these risks. For the year ending December 31, 2022, we expect EPS-diluted and EPS-diluted-adjusted of between $6.25 and $7.25, Net income attributable to stockholders of between $9.4 billion and $10.8 billion and EBIT-adjusted of between $13.0 billion and $15.0 billion. We do not consider the potential impact of future adjustments on our expected financial results. The following table reconciles expected Net income attributable to stockholders under U.S. GAAP to expected EBIT-adjusted (dollars in billions): Year Ending December 31, 2022 Net income attributable to stockholders $ 9.4-10.8 Income tax expense 2.8-3.4 Automotive interest expense, net 0.8 EBIT-adjusted(a) $ 13.0-15.0 ________ (a) We do not consider the potential future impact of adjustments on our expected financial results. We also face continuing market, operating and regulatory challenges in several countries across the globe due to, among other factors, weak economic conditions, competitive pressures, limitations in our product portfolio offerings, heightened emission standards, labor disruptions, foreign exchange volatility, rising material and services prices driven by inflationary pressures, evolving trade policy and political uncertainty. Refer to Part I, Item 1A. Risk Factors for a discussion of these challenges. 29 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES A s we continue to assess our performance and the needs of our evolving business, additional restructuring and rationalization acti ons could be required. These actions could give rise to future asset impairments or other charges, which may have a material impact on our operating results. GMNA Industry sales in North America were 18.5 million units in the year ended December 31, 2021, representing an increase of 4.3% compared to the corresponding period in 2020. U.S. industry sales were 15.4 million units in the year ended December 31, 2021, representing an increase of 3.3% compared to the corresponding period in 2020. The COVID-19 pandemic originally resulted in a contraction of total North America industry volumes in 2020 that continued into 2021. Dealer inventory remains constrained for several critical vehicles, including our full-size trucks and full-size SUVs. Our total vehicle sales in the U.S., our largest market in North America, were 2.2 million units for a market share of 14.4% in the year ended December 31, 2021, representing a decrease of 2.7 percentage points compared to the corresponding period in 2020. We expect to sustain relatively strong EBIT-adjusted margins in 2022 on the continued strength of favorable vehicle pricing and strong U.S. industry light vehicle demand, partially offset by higher costs associated with commodities, raw materials and logistics. Our outlook is dependent on the pricing environment, continuing improvement of the semiconductor supply shortage and overall economic conditions. As a result of the semiconductor supply shortage, we experienced interruptions to our planned production schedules and temporarily suspended certain manufacturing sites to prioritize production of our most popular and in-demand products, including our full-size trucks and full-size SUVs. Additionally, we have been manufacturing vehicles, without the impacted components, representing an inventory carrying value of approximately $0.6 billion at December 31, 2021. We expect to hold these vehicles in our inventory until they are completed and sold to our dealers, which we expect to happen in the six months ending June 30, 2022. GMI Industry sales in China were 25.9 million units in the year ended December 31, 2021, representing an increase of 3.8% compared to the corresponding period in 2020, which was adversely impacted by the COVID-19 pandemic. Our total vehicle sales in China were 2.9 million units resulting in a market share of 11.2% in the year ended December 31, 2021, representing a decrease of 0.5 percentage points compared to the corresponding period in 2020. The ongoing global semiconductor supply shortage, macro-economic impact of COVID-19 and geopolitical tensions continue to place pressure on China's automotive industry and our vehicle sales in China. Our Automotive China JVs generated equity income of $1.1 billion in the year ended December 31, 2021. Although price competition, higher costs associated with commodities and raw materials, and a more challenging regulatory environment related to emissions, fuel consumption and NEV requirements will place pressure on our operations in China, we will continue to build upon our strong brands, network, and partnerships in China as well as drive improvements in vehicle mix and cost. Outside of China, industry sales were 23.0 million units in the year ended December 31, 2021, representing an increase of 8.2% compared to the corresponding period in 2020. Our total vehicle sales outside of China were 0.8 million units for a market share of 3.6% in the year ended December 31, 2021, representing a decrease of 1.1 percentage points compared to the corresponding period in 2020. Cruise Cruise is actively testing AVs in the United States. Gated by safety and regulation, the goal of Cruise is to deliver its self-driving services as soon as possible. In the year ended December 31, 2021, Cruise Holdings issued Class G Preferred Shares (Cruise Class G Preferred Shares) in exchange for $2.7 billion from Microsoft Corporation (Microsoft), Walmart Inc. (Walmart) and other investors, including $1.0 billion from General Motors Holdings LLC. All proceeds related to the Cruise Class G Preferred Shares are designated exclusively for working capital and general corporate purposes of Cruise Holdings. In addition, Cruise Holdings and Microsoft entered into a long-term strategic relationship to accelerate the commercialization of self-driving vehicles. Refer to Note 20 to our consolidated financial statements for further details. Automotive Financing - GM Financial Summary and Outlook We believe that offering a comprehensive suite of financing products will generate incremental sales of our vehicles, drive incremental GM Financial earnings and help support our sales throughout various economic cycles. GM Financial's leasing program is exposed to residual values, which are heavily dependent on used vehicle prices. Used vehicle prices were higher in 2021 compared to 2020 levels, primarily due to low new vehicle inventory. In 2022, we expect used vehicle prices may decrease relative to 2021 levels, but to remain above pre-pandemic levels, primarily due to sustained low new vehicle inventory. The increase in used vehicle prices resulted in gains on terminations of leased vehicles of $2.0 billion in GM Financial interest, operating and other expenses for the year ended 30 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES December 31, 2021, and $1.3 billion in the corresponding period in 2020. The following table summarizes the estimated residual value based on GM Financial's most recent estimates and the number of units included in GM Financial Equipment on operating leases, net by vehicle type (units in thousands): December 31, 2021 December 31, 2020 Residual Value Units Percentage Residual Value Units Percentage Crossovers $ 16,696 897 67.3 % $ 16,334 964 65.5 % Trucks 7,886 264 19.8 % 7,455 275 18.7 % SUVs 3,104 80 5.9 % 3,435 92 6.3 % Cars 1,430 93 7.0 % 1,949 140 9.5 % Total $ 29,116 1,334 100.0 % $ 29,173 1,471 100.0 % GM Financial's penetration of our retail sales in the U.S. was 44% in the year ended December 31, 2021 and 45% in the corresponding period in 2020. Penetration levels vary depending on incentive financing programs available and competing third-party financing products in the market. GM Financial's prime loan originations as a percentage of total loan originations in North America was 73% in the year ended December 31, 2021 and 2020. In the year ended December 31, 2021, GM Financial's revenue consisted of leased vehicle income of 67%, retail finance charge income of 29% and commercial finance charge income of 2%. Consolidated Results We review changes in our results of operations under five categories: volume, mix, price, cost and other. Volume measures the impact of changes in wholesale vehicle volumes driven by industry volume, market share and changes in dealer stock levels. Mix measures the impact of changes to the regional portfolio due to product, model, trim, country and option penetration in current year wholesale vehicle volumes. Price measures the impact of changes related to Manufacturer’s Suggested Retail Price and various sales allowances. Cost primarily includes: (1) material and freight; (2) manufacturing, engineering, advertising, administrative and selling and warranty expense; and (3) non-vehicle related activity. Other primarily includes foreign exchange and non-vehicle related automotive revenues as well as equity income or loss from our nonconsolidated affiliates. Refer to the regional sections of this MD&A for additional information. Total Net Sales and Revenue Years Ended December 31, Favorable/ (Unfavorable) Variance Due To 2021 2020 % Volume Mix Price Other (Dollars in billions) GMNA $ 101,308 $ 96,733 $ 4,575 4.7 % $ (14.5) $ 10.8 $ 6.2 $ 2.1 GMI 12,172 11,586 586 5.1 % $ (1.6) $ 1.3 $ 0.9 $ 0.1 Corporate 104 350 (246) (70.3) % $ — $ (0.3) Automotive 113,584 108,669 4,915 4.5 % $ (16.1) $ 12.0 $ 7.0 $ 2.0 Cruise 106 103 3 2.9 % $ — GM Financial 13,419 13,831 (412) (3.0) % $ (0.4) Eliminations/reclassifications (105) (118) 13 11.0 % $ — $ — Total net sales and revenue $ 127,004 $ 122,485 $ 4,519 3.7 % $ (16.1) $ 12.0 $ 7.0 $ 1.6 Refer to the regional sections of this MD&A for additional information on volume, mix and price. 31 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Automotive and Other Cost of Sales Years Ended December 31, Favorable/ (Unfavorable) Variance Due To 2021 2020 % Volume Mix Cost Other (Dollars in billions) GMNA $ 87,419 $ 83,886 $ (3,533) (4.2) % $ 10.0 $ (4.6) $ (8.5) $ (0.4) GMI 11,802 12,515 713 5.7 % $ 1.4 $ (0.5) $ (0.3) $ 0.2 Corporate 200 310 110 35.5 % $ — $ 0.1 $ — Cruise 1,124 829 (295) (35.6) % $ (0.3) Eliminations (1) (1) — — % Total automotive and other cost of sales $ 100,544 $ 97,539 $ (3,005) (3.1) % $ 11.3 $ (5.1) $ (9.0) $ (0.2) The most significant element of our Automotive and other cost of sales is material cost, which makes up approximately two-thirds of the total amount. The remaining portion includes labor costs, depreciation and amortization, engineering, freight and product warranty and recall campaigns. Factors that most significantly influence a region's profitability are industry volume, market share, and the relative mix of vehicles (trucks, crossovers, cars) sold. Variable profit is a key indicator of product profitability. Variable profit is defined as revenue less material cost, freight, the variable component of manufacturing expense and warranty and recall-related costs. Vehicles with higher selling prices generally have higher variable profit. Refer to the regional sections of this MD&A for additional information on volume and mix. In the year ended December 31, 2021, unfavorable Cost was primarily due to: (1) increased material and freight costs of $4.0 billion; (2) increased engineering costs of $2.0 billion primarily related to accelerating our electric vehicle portfolio and the non-recurrence of austerity measures implemented in 2020 due to the COVID-19 pandemic; (3) increased manufacturing costs of $1.4 billion primarily related to the suspension of production and the non-recurrence of austerity measures implemented in 2020 due to the COVID-19 pandemic; (4) increased costs of $1.1 billion primarily related to parts and accessories; (5) increased other employee related costs of $0.7 billion; (6) charges of $0.3 billion related to potential royalties accrued with respect to past sales; partially offset by (7) charges of $0.7 billion primarily related to dealer restructuring charges, property and intangible asset impairments, inventory provisions and employee separation charges in Australia, New Zealand, Thailand and India in 2020; and (8) a decrease in campaign and other warranty-related costs of $0.2 billion, which includes Chevrolet Bolt recall costs of $2.0 billion and associated recoveries of $1.9 billion. In the year ended December 31, 2021, unfavorable Other was due to the foreign currency effect resulting from the strengthening of the Canadian Dollar and other currencies against the U.S. Dollar, partially offset by the weakening of the Brazilian Real and other currencies against the U.S. Dollar. Automotive and Other Selling, General and Administrative Expense Years Ended December 31, Year Ended 2021 vs. 2020 Change 2021 2020 2019 Favorable/ (Unfavorable) % Automotive and other selling, general and administrative expense $ 8,554 $ 7,038 $ 8,491 $ (1,516) (21.5) % In the year ended December 31, 2021, Automotive and other selling, general and administrative expense increased primarily due to increased advertising, administrative and other costs of $1.2 billion primarily related to the suspension of production and the non-recurrence of austerity measures implemented in 2020 due to the COVID-19 pandemic. 32 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Interest Income and Other Non-operating Income, net Years Ended December 31, Year Ended 2021 vs. 2020 Change 2021 2020 2019 Favorable/ (Unfavorable) % Interest income and other non-operating income, net $ 3,041 $ 1,885 $ 1,469 $ 1,156 61.3 % In the year ended December 31, 2021, Interest income and other non-operating income, net increased primarily due to an increase in non-service pension income of $0.8 billion and an increase in gains related to Stellantis N.V. (Stellantis) warrants of $0.2 billion. Income Tax Expense Years Ended December 31, Year Ended 2021 vs. 2020 Change 2021 2020 2019 Favorable/ (Unfavorable) % Income tax expense $ 2,771 $ 1,774 $ 769 $ (997) (56.2) % In the year ended December 31, 2021, Income tax expense increased primarily due to an increase in pre-tax income, partially offset by tax benefit related to a deduction for an investment in a subsidiary. For the year ended December 31, 2021 our ETR-adjusted was 21.8%. We expect our adjusted effective tax rate to be between 22% and 24% for the year ending December 31, 2022. Refer to Note 17 to our consolidated financial statements for additional information related to Income tax expense. GM North America Years Ended December 31, Favorable/ (Unfavorable) Variance Due To 2021 2020 % Volume Mix Price Cost Other (Dollars in billions) Total net sales and revenue $ 101,308 $ 96,733 $ 4,575 4.7 % $ (14.5) $ 10.8 $ 6.2 $ 2.1 EBIT-adjusted $ 10,318 $ 9,071 $ 1,247 13.7 % $ (4.5) $ 6.2 $ 6.2 $ (7.1) $ 0.5 EBIT-adjusted margin 10.2 % 9.4 % 0.8 % (Vehicles in thousands) Wholesale vehicle sales 2,308 2,707 (399) (14.7) % GMNA Total Net Sales and Revenue In the year ended December 31, 2021, Total net sales and revenue increased primarily due to: (1) favorable mix associated with decreased sales of crossover vehicles and passenger cars and increased sales of full-size SUVs and full-size pickup trucks, as a result of prioritizing semiconductor chips for our most popular and in-demand vehicles; (2) favorable price primarily due to lower incentives as a result of low dealer inventory levels and the launch of our full-size SUVs; and (3) favorable Other due to increased sales of parts and accessories and the foreign currency effect resulting from the strengthening of the Canadian Dollar and the Mexican Peso against the U.S. Dollar; partially offset by (4) decreased net wholesale volumes due to a decrease in sales of crossover vehicles and passenger cars, partially offset by increased sales of full-size SUVs and full-size pickup trucks. The impact on production in 2021 due to the ongoing semiconductor supply shortage exceeded the impact of production suspensions in 2020 due to the COVID-19 pandemic. GMNA EBIT-Adjusted The most significant factors that influence profitability are industry volume and market share. While not as significant as industry volume and market share, another factor affecting profitability is the relative mix of vehicles sold. Trucks, crossovers and cars sold currently have a variable profit of approximately 140%, 40% and 40% of our GMNA portfolio on a weighted-average basis. In the year ended December 31, 2021, EBIT-adjusted increased primarily due to: (1) favorable mix; (2) favorable price; and (3) favorable Other due to the foreign currency effect resulting from the strengthening of the Canadian Dollar against the U.S. Dollar and favorable revaluation of investments; partially offset by (4) unfavorable Cost due to increased material and freight 33 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES cost of $3.6 billion, increased engineering cost of $1.6 billion including the impact of accelerating our electric vehicle portfolio, increased manufacturing and advertising costs of $1.9 billion primarily related to the suspension of production and the non-recurrence of austerity measures implemented in 2020 due to the COVID-19 pandemic, and increased other employee related costs, partially offset by increased non-service pension income and a decrease in campaigns and other warranty-related costs, and (5) decreased net wholesale volumes. GM International Years Ended December 31, Favorable/ (Unfavorable) Variance Due To 2021 2020 % Volume Mix Price Cost Other (Dollars in billions) Total net sales and revenue $ 12,172 $ 11,586 $ 586 5.1 % $ (1.6) $ 1.3 $ 0.9 $ 0.1 EBIT (loss)-adjusted $ 827 $ (528) $ 1,355 n.m. $ (0.3) $ 0.7 $ 0.8 $ (0.4) $ 0.5 EBIT (loss)-adjusted margin 6.8 % (4.6) % 11.4 % Equity income — Automotive China $ 1,098 $ 512 $ 586 n.m. EBIT (loss)-adjusted — excluding Equity income $ (271) $ (1,040) $ 769 73.9 % (Vehicles in thousands) Wholesale vehicle sales 551 663 (112) (16.9) % ________ n.m. = not meaningful The vehicle sales of our Automotive China JVs are not recorded in Total net sales and revenue. The results of our joint ventures are recorded in Equity income, which is included in EBIT (loss)-adjusted above. GMI Total Net Sales and Revenue In the year ended December 31, 2021, Total net sales and revenue increased primarily due to: (1) favorable mix in South America, Asia/Pacific and the Middle East; (2) favorable pricing across multiple vehicle lines in South America; and (3) favorable Other primarily due to increased components, parts and accessories sales, partially offset by the foreign currency effects resulting from the weakening of various currencies against the U.S. dollar; partially offset by (4) decreased wholesale volumes primarily due to the semiconductor supply shortage and the wind-down of our vehicle sales operations in Australia, New Zealand and Thailand. GMI EBIT (loss)-Adjusted In the year ended December 31, 2021, EBIT-adjusted increased primarily due to: (1) favorable price; (2) favorable mix; and (3) favorable Other primarily due to increased equity income; partially offset by (4) unfavorable Cost primarily due to increased material costs; and (5) decreased wholesale volumes. We view the Chinese market as important to our global growth strategy and are employing a multi-brand strategy. In the coming years we plan to leverage our global architectures to increase the number of product offerings under the Buick, Chevrolet and Cadillac brands in China and continue to grow our business under the local Baojun and Wuling brands. We operate in the Chinese market through a number of joint ventures and maintaining strong relationships with our joint venture partners is an important part of our China growth strategy. The following table summarizes certain key operational and financial data for the Automotive China JVs (vehicles in thousands): Years Ended December 31, 2021 2020 2019 Wholesale vehicle sales including vehicles exported to markets outside of China 3,007 3,029 3,244 Total net sales and revenue $ 42,776 $ 38,736 $ 39,123 Net income $ 2,109 $ 1,239 $ 2,258 December 31, 2021 December 31, 2020 Cash and cash equivalents $ 10,254 $ 8,980 Debt $ 374 $ 313 34 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Cruise Years Ended December 31, 2021 vs. 2020 Change 2021 2020 2019 Favorable/ (Unfavorable) % Total net sales and revenue(a) $ 106 $ 103 $ 100 $ 3 2.9 % EBIT (loss)-adjusted $ (1,196) $ (887) $ (1,004) $ (309) (34.8) % ________ (a) Primarily reclassified to Interest income and other non-operating income, net in our consolidated income statement in each of the years ended December 31, 2021, 2020 and 2019. Cruise EBIT (Loss)-Adjusted In the year ended December 31, 2021, EBIT (loss)-adjusted increased primarily due to an increase in developmental costs as we progress towards the commercialization of a network of on-demand AVs in the U.S. GM Financial Years Ended December 31, 2021 vs. 2020 Change 2021 2020 2019 Amount % Total revenue $ 13,419 $ 13,831 $ 14,554 $ (412) (3.0) % Provision for loan losses $ 248 $ 881 $ 726 $ (633) (71.9) % EBT-adjusted $ 5,036 $ 2,702 $ 2,104 $ 2,334 86.4 % Average debt outstanding (dollars in billions) $ 94.1 $ 91.4 $ 91.2 $ 2.7 3.0 % Effective rate of interest paid 2.7 % 3.3 % 4.0 % (0.6) % GM Financial Revenue In the year ended December 31, 2021, Total revenue decreased primarily due to decreased leased vehicle income of $0.5 billion, primarily due to a decrease in the size of the leased vehicles portfolio; partially offset by increased finance charge income of $0.1 billion, primarily due to growth in the retail finance receivables portfolio, partially offset by a decrease in the effective yield and a decrease in the size of the commercial finance receivables portfolio. GM Financial EBT-Adjusted In the year ended December 31, 2021, EBT-adjusted increased primarily due to: (1) increased leased vehicle income net of leased vehicle expenses of $1.2 billion primarily due to decreased depreciation on leased vehicles resulting from increased residual value estimates and a decrease in the size of the portfolio, as well as increased lease termination gains; (2) decreased provision for loan losses of $0.6 billion primarily due to a reduction in the reserve levels established at the onset of the COVID-19 pandemic as a result of actual credit performance that was better than forecasted and favorable expectations for future charge-offs and recoveries, reflecting improved economic conditions, partially offset by reserves established for loans originated during the year ended December 31, 2021; (3) decreased interest expense of $0.5 billion due to decreased credit spreads on GM Financial debt, partially offset by an increase in the average debt outstanding; partially offset by (4) increased operating expenses of $0.2 billion in 2021. GM Financial interest, operating and other expenses includes a $0.1 billion loss on extinguishment of debt. Liquidity and Capital Resources We believe our current levels of cash, cash equivalents, marketable debt securities, available borrowing capacity under our revolving credit facilities and other liquidity actions currently available to us are sufficient to meet our liquidity requirements. We also maintain access to the capital markets and may issue debt or equity securities, which may provide an additional source of liquidity. We have substantial cash requirements going forward, which we plan to fund through our total available liquidity, cash flows from operating activities and additional liquidity measures, if determined to be necessary. 35 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following summarizes aggregated information about our material short and long-term cash requirements from our known contractual and other obligations (dollars in millions): Payments Due by Period 2022 2023-2024 2025-2026 2027 and after Total Automotive debt $ 334 $ 2,772 $ 2,571 $ 11,228 $ 16,905 Automotive Financing debt 33,333 33,594 14,739 10,871 92,537 Automotive interest payments(a) 945 1,687 1,389 7,790 11,811 Automotive Financing interest payments(b) 1,864 2,258 915 575 5,612 Operating lease obligations 262 482 355 490 1,589 Material 1,848 632 3 — 2,484 Other contractual obligations(c) 1,706 1,743 102 3,655 7,207 __________ (a) Amounts include automotive interest payments based on contractual terms and current interest rates on our debt and finance lease obligations. Automotive interest payments based on variable interest rates were determined using the interest rate in effect at December 31, 2021. (b) GM Financial interest payments were determined using the interest rate in effect at December 31, 2021 for floating rate debt and the contractual rates for fixed rate debt. GM Financial interest payments on floating rate tranches of the securitization notes payable were converted to a fixed rate based on the floating rate plus any expected hedge payments. (c) Primarily consists of information technology and other contractual services. Our known current material uses of cash include, among other possible demands: (1) capital spending and our investments in Ultium Cells LLC, our battery joint venture, of approximately $9.0 billion to $10.0 billion annually over the medium term in addition to payments for engineering and product development activities; (2) payments associated with previously announced vehicle recalls and any other recall-related contingencies; and (3) payments to service debt and other long-term obligations, including discretionary and mandatory contributions to our pension plans. Our material future uses of cash, which may vary from time to time based on market conditions and other factors, are focused on the three objectives of our capital allocation program: (1) grow our business at an average target ROIC-adjusted rate of 20% or greater; (2) maintain a strong investment-grade balance sheet, including a target average automotive cash balance of $18 billion; and (3) after the first two objectives are met, return available cash to shareholders. Our senior management evaluates our capital allocation program on an ongoing basis and recommends any modifications to the program to our Board of Directors, not less than once annually. Our liquidity plans are subject to a number of risks and uncertainties, including those described in the "Forward-Looking Statements" section of this MD&A and Part I, Item 1A. Risk Factors, some of which are outside of our control. We continue to monitor and evaluate opportunities to strengthen our competitive position over the long term while maintaining a strong investment-grade balance sheet. These actions may include opportunistic payments to reduce our long-term obligations, as well as the possibility of acquisitions, dispositions and investments with joint venture partners as well as strategic alliances that we believe would generate significant advantages and substantially strengthen our business. In January 2017, we announced that our Board of Directors had authorized the purchase of up to $5.0 billion of our common stock with no expiration date, as part of our common stock repurchase program. We have completed $1.7 billion of the $5.0 billion program through December 31, 2021. Cash flows that occur amongst our Automotive, Cruise and GM Financial operations are eliminated when we consolidate our cash flows. Such eliminations include, among other things, collections by Automotive on wholesale accounts receivables financed by dealers through GM Financial, payments between Automotive and GM Financial for accounts receivables transferred by Automotive to GM Financial, loans to Automotive from GM Financial, dividends issued by GM Financial to Automotive, tax payments by GM Financial to Automotive and Automotive cash injections in Cruise. The presentation of Automotive liquidity, Cruise liquidity and GM Financial liquidity presented below includes the impact of cash transactions amongst the sectors that are ultimately eliminated in consolidation. Automotive Liquidity Total available liquidity includes cash, cash equivalents, marketable debt securities and funds available under credit facilities. The amount of available liquidity is subject to seasonal fluctuations and includes balances held by various business units and subsidiaries worldwide that are needed to fund their operations. 36 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES We manage our liquidity primarily at our treasury centers as well as at certain of our significant consolidated overseas subsidiaries. Over 90% of our cash and marketable debt securities were managed within North America and at our regional treasury centers at December 31, 2021. We have used and will continue to use other methods including intercompany loans to utilize these funds across our global operations as needed. Our cash equivalents and marketable debt securities balances are primarily denominated in U.S. Dollars and include investments in U.S. government and agency obligations, foreign government securities, time deposits, corporate debt securities and mortgage and asset-backed securities. Our investment guidelines, which we may change from time to time, prescribe certain minimum credit worthiness thresholds and limit our exposures to any particular sector, asset class, issuance or security type. The majority of our current investments in debt securities are with A/A2 or better rated issuers. We use credit facilities as a mechanism to provide additional flexibility in managing our global liquidity. At December 31, 2020, the total size of our credit facilities was $18.5 billion, which consisted principally of four revolving credit facilities. In April 2021, we increased the total borrowing capacity of our five-year, $10.5 billion facility to $11.2 billion and extended the termination date for a $9.9 billion portion of the five-year facility by three years, now set to mature on April 18, 2026. The termination date of April 18, 2023 for the remaining portion of the five-year facility remains unchanged. We also renewed and increased the total borrowing capacity of our three-year, $4.0 billion facility to $4.3 billion, which now matures on April 7, 2024, and renewed our 364-day, $2.0 billion facility allocated for exclusive use by GM Financial, which now matures on April 6, 2022. We also terminated a separate 364-day, $2.0 billion revolving credit facility, entered into in May 2020. Additionally, the prior restrictions on share repurchases and dividends on our common shares were removed upon entrance into the renewed three-year, $4.3 billion facility. In December 2021, we terminated our three-year, $2.0 billion transformation credit facility. At December 31, 2021, the total size of our credit facilities was $15.5 billion, which consisted primarily of two credit facilities. If available capacity permits, GM Financial has access to our revolving credit facilities. GM Financial did not have borrowings outstanding against our revolving credit facilities at December 31, 2021 or 2020. Refer to Note 13 to our consolidated financial statements for additional information on credit facilities. We had intercompany loans from GM Financial of $0.2 billion and $0.4 billion at December 31, 2021 and 2020, which primarily consisted of commercial loans to dealers we consolidate, and we had no intercompany loans to GM Financial. Refer to Note 5 of our consolidated financial statements for additional information. Several of our loan facilities, including our revolving credit facilities, require compliance with certain financial and operational covenants as well as regular reporting to lenders. We have reviewed our covenants in effect as of December 31, 2021 and determined we are in compliance and expect to remain in compliance in the future. GM Financial's Board of Directors declared and paid dividends of $3.5 billion, $0.8 billion, and $0.4 billion on its common stock in 2021, 2020, and 2019. Current dividend levels are reflective of GM Financial earnings supported by strong residual values, favorable credit performance and improved economic conditions. Future dividends from GM Financial will depend on several factors including business and economic conditions, its financial condition, earnings, liquidity requirements and leverage ratio. 37 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following table summarizes our Automotive available liquidity (dollars in billions): December 31, 2021 December 31, 2020 Automotive cash and cash equivalents $ 14.5 $ 14.2 Marketable debt securities 7.1 8.1 Automotive cash, cash equivalents and marketable debt securities 21.6 22.3 Available under credit facilities(a) 15.2 18.2 Total Automotive available liquidity $ 36.8 $ 40.5 __________ (a) We had letters of credit outstanding under our sub-facility of $0.3 billion at December 31, 2021 and 2020. The following table summarizes the changes in our Automotive available liquidity (dollars in billions): Year Ended December 31, 2021 Operating cash flow $ 9.7 Capital expenditures (7.4) GM investment in Cruise (1.0) Investment in Ultium Cells LLC (0.5) Repayment of senior unsecured notes (0.5) Decrease in available credit facilities (3.0) Other non-operating (1.0) Total change in automotive available liquidity $ (3.7) Automotive Cash Flow (Dollars in billions) Years Ended December 31, 2021 vs. 2020 Change 2021 2020 2019 Operating Activities Net income $ 7.8 $ 5.0 $ 5.8 $ 2.8 Depreciation, amortization and impairment charges 5.9 5.5 6.7 0.4 Pension and OPEB activities (2.4) (1.6) (1.5) (0.8) Working capital (4.0) (1.7) (2.2) (2.3) Accrued and other liabilities and income taxes 0.9 (1.4) (1.5) 2.3 Other 1.5 1.7 0.1 (0.2) Net automotive cash provided by operating activities $ 9.7 $ 7.5 $ 7.4 $ 2.2 In the year ended December 31, 2021, the increase in Net automotive cash provided by operating activities was primarily due to: (1) higher dividends received from GM Financial of $2.7 billion; (2) favorable pre-tax earnings of $2.6 billion; partially offset by (3) unfavorable working capital; and (4) several other insignificant items. 38 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Years Ended December 31, 2021 vs. 2020 Change 2021 2020 2019 Investing Activities Capital expenditures $ (7.4) $ (5.3) $ (7.5) $ (2.1) Acquisitions and liquidations of marketable securities, net(a) 1.0 (3.6) 2.4 4.6 GM investment in Cruise (1.0) — (0.7) (1.0) Investment in Ultium Cells LLC (0.5) — — (0.5) Other (0.3) 0.1 0.2 (0.4) Net automotive cash used in investing activities $ (8.2) $ (8.8) $ (5.6) $ 0.6 __________ (a) Amount includes $0.6 billion and $0.3 billion of proceeds from the sale of our shares in Lyft, Inc. in the year ended December 31, 2020 and 2019. In the year ended December 31, 2021, cash provided by acquisitions and liquidations of marketable securities, net increased due to liquidations of securities to fund operating activities and investments, compared to net acquisitions of securities from revolver proceeds during the year ended December 31, 2020. Years Ended December 31, 2021 vs. 2020 Change 2021 2020 2019 Financing Activities Net proceeds (payments) from short-term debt $ (0.5) $ (0.5) $ 0.5 $ — Issuance of senior unsecured notes — 4.0 — (4.0) Repayment of senior unsecured notes (0.5) (0.5) — — Dividends paid and payments to purchase common stock — (0.6) (2.2) 0.6 Other 0.1 (0.3) (0.4) 0.4 Net automotive cash provided by (used in) financing activities $ (0.9) $ 2.1 $ (2.1) $ (3.0) Adjusted Automotive Free Cash Flow We measure adjusted automotive free cash flow as automotive operating cash flow from operations less capital expenditures adjusted for management actions. For the year ended December 31, 2021, net automotive cash provided by operating activities under U.S. GAAP was $9.7 billion, capital expenditures were $7.4 billion and adjustments for management actions were $0.3 billion. For the year ended December 31, 2020, net automotive cash provided by operating activities under U.S. GAAP was $7.5 billion, capital expenditures were $5.3 billion and adjustments for management actions were $0.3 billion. Status of Credit Ratings We receive ratings from four independent credit rating agencies: DBRS Limited (DBRS), Fitch Ratings (Fitch), Moody's Investor Service (Moody's) and Standard & Poor's (S&P). All four credit rating agencies currently rate our corporate credit at investment grade. The following table summarizes our credit ratings at January 18, 2022: Corporate Revolving Credit Facilities Senior Unsecured Outlook DBRS BBB BBB N/A Positive Fitch BBB- BBB- BBB- Stable Moody's Investment Grade Baa2 Baa3 Stable S&P BBB BBB BBB Stable Cruise Liquidity Cruise Holdings issued Cruise Class G Preferred Shares in exchange for $2.7 billion from Microsoft, Walmart and other investors, including $1.0 billion from General Motors Holdings LLC. Refer to Note 20 to our consolidated financial statements for additional information. In January 2022, Cruise Holdings met the requirements for commercial deployment under its agreements with SoftBank Vision Fund (AIV M2), L.P. (SoftBank), which triggered SoftBank's obligation to purchase additional Cruise convertible preferred shares for $1.35 billion. We expect SoftBank to complete the purchase of the majority of such additional preferred shares in the first quarter of 2022 and any balance by the end of 2022. Cruise will need one additional permit from the CPUC, which it has applied for, to commercially deploy such vehicles with paying passengers in California. 39 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following table summarizes Cruise's available liquidity (dollars in billions): December 31, 2021 December 31, 2020 Cruise cash and cash equivalents $ 1.6 $ 0.8 Cruise marketable securities 1.5 0.9 Total Cruise available liquidity (a) $ 3.1 $ 1.7 __________ (a) Excludes a multi-year credit agreement between Cruise and GM Financial whereby Cruise can request to borrow, over time, up to an aggregate of $5.2 billion, through 2024, to fund exclusively the purchase of AVs from GM. The following table summarizes the changes in Cruise's available liquidity (dollars in billions): Year Ended December 31, 2021 Operating cash flow $ (1.2) Issuance of Cruise Preferred Shares 1.7 GM investment in Cruise 1.0 Other non-operating (0.1) Total change in Cruise available liquidity $ 1.4 Cruise Cash Flow (Dollars in billions) Years Ended December 31, 2021 vs. 2020 Change 2021 2020 2019 Net cash used in operating activities $ (1.2) $ (0.8) $ (0.8) $ (0.4) Net cash used in investing activities $ (0.7) $ (0.7) $ (0.3) $ — Net cash provided by financing activities $ 2.6 $ — $ 1.1 $ 2.6 Automotive Financing – GM Financial Liquidity GM Financial's primary sources of cash are finance charge income, leasing income and proceeds from the sale of terminated leased vehicles, net distributions from credit facilities, securitizations, secured and unsecured borrowings and collections and recoveries on finance receivables. GM Financial's primary uses of cash are purchases and funding of finance receivables and leased vehicles, repayment or repurchases of secured and unsecured debt, funding credit enhancement requirements in connection with securitizations and secured credit facilities, interest costs, operating expenses, income taxes and dividend payments. GM Financial continues to monitor and evaluate opportunities to optimize its liquidity position and the mix of its debt between secured and unsecured debt. The following table summarizes GM Financial's available liquidity (dollars in billions): December 31, 2021 December 31, 2020 Cash and cash equivalents $ 4.0 $ 5.1 Borrowing capacity on unpledged eligible assets 19.2 19.0 Borrowing capacity on committed unsecured lines of credit 0.5 0.5 Borrowing capacity on revolving credit facility, exclusive to GM Financial 2.0 2.0 Total GM Financial available liquidity $ 25.7 $ 26.6 In the year ended December 31, 2021, GM Financial's available liquidity decreased primarily due to a decrease in cash and cash equivalents, partially offset by increased available borrowing capacity on unpledged eligible assets, resulting from the issuance of securitization transactions and unsecured debt. GM Financial structures liquidity to support at least six months of GM Financial's expected net cash flows, including new originations, without access to new debt financing transactions or other capital markets activity. GM Financial has access to $15.5 billion of our revolving credit facilities with exclusive access to the 364-day, $2.0 billion facility. Refer to the "Automotive Liquidity" section of this MD&A for additional details. We have a support agreement with GM Financial which, among other things, establishes commitments of funding from us to GM Financial. This agreement also provides that we will continue to own all of GM Financial’s outstanding voting shares so long as any unsecured debt securities 40 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES remain outstanding at GM Financial. In addition, we are required to use our commercially reasonable efforts to ensure GM Financial remains a subsidiary borrower under our corporate revolving credit facilities. Credit Facilities In the normal course of business, in addition to using its available cash, GM Financial utilizes borrowings under its credit facilities, which may be secured or unsecured, and GM Financial repays these borrowings as appropriate under its cash management strategy. At December 31, 2021, secured, committed unsecured and uncommitted unsecured credit facilities totaled $26.2 billion, $0.5 billion and $1.2 billion with advances outstanding of $3.5 billion, an insignificant amount and $1.2 billion. GM Financial Cash Flow (Dollars in billions) Years Ended December 31, 2021 vs. 2020 Change 2021 2020 2019 Net cash provided by operating activities $ 7.3 $ 8.0 $ 8.1 $ (0.7) Net cash used in investing activities $ (5.5) $ (9.3) $ (5.0) $ 3.8 Net cash provided by (used in) financing activities $ (2.6) $ 2.4 $ (3.5) $ (5.0) In the year ended December 31, 2021, Net cash provided by operating activities decreased primarily due to: (1) a decrease in counterparty derivative collateral posting activities of $0.6 billion; and (2) a decrease in leased vehicle income of $0.5 billion; partially offset by (3) a decrease in interest paid of $0.4 billion. In the year ended December 31, 2021, Net cash used in investing activities decreased primarily due to: (1) an increase in collections and recoveries on finance receivables of $4.9 billion; (2) an increase in proceeds from termination of leased vehicles of $1.0 billion; and (3) an increase in purchases of leased vehicles of $0.6 billion; partially offset by (4) an increase in purchases of retail finance receivables of $2.8 billion. In the year ended December 31, 2021, Net cash used in financing activities increased primarily due to: (1) a decrease in borrowings of $9.6 billion; (2) an increase in dividend payments of $2.7 billion; and (3) a decrease in preferred stock issuance of $0.5 billion; partially offset by (4) a decrease in debt repayments of $7.8 billion. LIBOR Transition As discussed in Part I, Item 1A. Risk Factors, banks will no longer be persuaded or compelled to submit rates for the calculation of LIBOR after 2021. GM Financial established a LIBOR transition initiative in 2019 to evaluate the potential impacts of the transition, and continues to implement strategies to mitigate the risks associated with the LIBOR discontinuation such as including fallback language into any new LIBOR based contracts. GM Financial has only a limited amount of debt outstanding that is scheduled to mature after June 30, 2023 and would utilize the Alternative Reference Rates Committee fallback process. Furthermore, GM Financial has adhered to the International Swaps and Derivatives Association’s Fallbacks Protocol and plans to transition its existing LIBOR-based derivative exposure in advance of the June 30, 2023 date when applicable LIBOR will no longer be published. For any residual exposure after the end of 2021, GM Financial expects to leverage relevant contractual and statutory solutions to transition such exposure. Critical Accounting Estimates The consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses in the periods presented. We believe the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in developing estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. Refer to Note 2 to our consolidated financial statements for our significant accounting policies related to our critical accounting estimates. Product Warranty and Recall Campaigns The estimates related to product warranties are established using historical information on the nature, frequency and average cost of claims of each vehicle line or each model year of the vehicle line and assumptions about future activity and events. When little or no claims experience exists for a model year or a vehicle line, the estimate is based on comparable models. We accrue the costs related to product warranty at the time of vehicle sale and we accrue the estimated cost of recall campaigns when they are probable and estimable. 41 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The estimates related to recall campaigns accrued at the time of vehicle sale are established by applying a paid loss approach that considers the number of historical recall campaigns and the estimated cost for each recall campaign. These estimates consider the nature, frequency and magnitude of historical recall campaigns, and use key assumptions including the number of historical periods and the weighting of historical data in the reserve studies. Costs associated with recall campaigns not accrued at the time of vehicle sale are estimated based on the estimated cost of repairs and the estimated vehicles to be repaired. Depending on part availability and time to complete repairs we may, from time to time, offer courtesy transportation at no cost to our customers. These estimates are re-evaluated on an ongoing basis and based on the best available information. Revisions are made when necessary based on changes in these factors. The estimated amount accrued for recall campaigns at the time of vehicle sale is most sensitive to the estimated number of recall events, the number of vehicles per recall event, the assumed number of vehicles that will be brought in by customers for repair (take rate) and the cost per vehicle for each recall event. The estimated cost of a recall campaign that is accrued on an individual basis is most sensitive to our estimated assumed take rate that is primarily developed based on our historical take rate experience. A 10% increase in the estimated take rate for all recall campaigns would increase the estimated cost by approximately $0.6 billion. Actual experience could differ from the amounts estimated requiring adjustments to these liabilities in future periods. Due to the uncertainty and potential volatility of the factors contributing to developing estimates, changes in our assumptions could materially affect our results of operations. Sales Incentives The estimated effect of sales incentives offered to dealers and end customers is recorded as a reduction of Automotive net sales and revenue at the time of sale. There may be numerous types of incentives available at any particular time. Incentive programs are generally specific to brand, model or sales region and are for specified time periods, which may be extended. Significant factors used in estimating the cost of incentives include type of program, forecasted sales volume, product mix, and the rate of customer acceptance of incentive programs, all of which are estimated based on historical experience and assumptions concerning future customer behavior and market conditions. A change in any of these factors affecting the estimate could have a significant effect on recorded sales incentives. A 10% increase in the cost of incentives would increase the sales incentive liability by an insignificant amount. Subsequent adjustments to incentive estimates are possible as facts and circumstances change over time, which could affect the revenue previously recognized in Automotive net sales and revenue. GM Financial Allowance for Loan Losses The GM Financial retail finance receivables portfolio consists of smaller-balance, homogeneous loans that are carried at amortized cost, net of allowance for loan losses. The allowance for loan losses on retail finance receivables reflects net credit losses expected to be incurred over the remaining life of the retail finance receivables, which have a weighted average remaining life of approximately two years. GM Financial forecasts net credit losses based on relevant information about past events, current conditions and forecast economic performance. GM Financial believes that the allowance is adequate to cover expected credit losses on the retail finance receivables; however, because the allowance for loan losses is based on estimates, there can be no assurance that the ultimate charge-off amount will not exceed such estimates or that our credit loss assumptions will not increase. GM Financial incorporates its outlook on forecast charge-off recovery rates and overall economic performance in its allowance estimate. Due to the high used vehicle prices in 2021, GM Financial increased its recovery rate forecast as of December 31, 2021. Each 5% relative decrease/increase in the forecast recovery rates would increase/decrease the allowance for loan losses by approximately $0.1 billion. At December 31, 2021, the weightings applied to the economic forecast scenarios considered resulted in an allowance for loan losses on the retail finance receivables portfolio of $1.8 billion. Using different possible weightings that GM Financial could apply to the economic forecast scenarios result in an allowance for loan losses ranging from $1.8 billion to $1.9 billion. Actual economic data and recovery rates that are lower than those forecasted by GM Financial could result in an increase to the allowance for loan losses. The GM Financial commercial finance receivables portfolio consists of floorplan financing as well as dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, or to purchase and/or finance dealership real estate. The allowance for loan losses on commercial finance receivables is based on historical loss experience for the consolidated portfolio, in addition to forecasted industry vehicle sales. There can be no assurance that the ultimate charge-off amount will not exceed such estimates or that GM Financial's credit loss assumptions will not increase. 42 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Valuation of GM Financial Equipment on Operating Lease Assets and Residuals GM Financial has investments in leased vehicles recorded as operating leases. Each leased asset in the portfolio represents a vehicle that GM Financial owns and has leased to a customer. At lease inception, an estimate is made of the expected residual value for the vehicle at the end of the lease term, which typically ranges from two to five years. GM Financial estimates the expected residual value based on third-party data that considers various data points and assumptions, including, but not limited to, recent auction values, the expected future volume of returning leased vehicles, significant liquidation of rental or fleet inventory, used vehicle prices, manufacturer incentive programs and fuel prices. Realization of the residual values is dependent on the future ability to market the vehicles under prevailing market conditions. The customer is obligated to make payments during the lease term for the difference between the purchase price and the contract residual value plus a money factor. However, since the customer is not obligated to purchase the vehicle at the end of the contract, GM Financial is exposed to a risk of loss to the extent the customer returns the vehicle prior to or at the end of the lease term and the value of the vehicle is lower than the residual value estimated at lease inception. At December 31, 2021, the estimated residual value of GM Financial's leased vehicles was $29.1 billion. Depreciation reduces the carrying value of each leased asset in GM Financial's operating lease portfolio over time from its original acquisition value to its expected residual value at the end of the lease term. In 2021, prices on leased vehicles at termination generally exceeded their contractual residual values due to high used vehicle prices. Accordingly, GM Financial increased the residual value estimates at December 31, 2021, which will result in a prospective decrease in the depreciation rate over the remaining term of the leased vehicles portfolio. If used vehicle prices weaken compared to estimates, GM Financial would increase depreciation expense and/or record an impairment charge on the lease portfolio. If an impairment exists, GM Financial would determine any shortfall in recoverability of the leased vehicle asset groups by year, make and model. Recoverability is calculated as the excess of: (1) the sum of remaining lease payments plus estimated residual value; over (2) leased vehicles, net less deferred revenue. Alternatively, if used vehicle prices outperform GM Financial's latest estimates, it may record gains on sales of off-lease vehicles and/or decreased depreciation expense. The following table illustrates the effect of a 1% relative change in the estimated residual values at December 31, 2021, which could increase or decrease depreciation expense over the remaining term of the leased vehicle portfolio, holding all other assumptions constant (dollars in millions): Impact to Depreciation Expense 2022 $ 207 2023 67 2024 16 2025 and thereafter 1 Total $ 291 Changes to residual values are rarely simultaneous across all maturities and segments, and also may impact return rates. If a decrease in residual values is concentrated among specific asset groups, the decrease could result in an immediate impairment charge. GM Financial reviewed the leased vehicle portfolio for indicators of impairment and determined that no impairment indicators were present at December 31, 2021 and 2020. Used vehicle prices were higher in 2021 compared to 2020 levels, primarily due to low new vehicle inventory. In 2022, GM Financial expects used vehicle prices may decrease relative to 2021 levels, but to remain above pre-pandemic levels, primarily due to sustained low new vehicle inventory. Pension and OPEB Plans Our defined benefit pension plans are accounted for on an actuarial basis, which requires the selection of various assumptions, including an expected long-term rate of return on plan assets, a discount rate, mortality rates of participants and expectation of mortality improvement. Our pension obligations include Korean statutory pension payments that are valued on a walk away basis. The expected long-term rate of return on U.S. plan assets that is utilized in determining pension expense is derived from periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks using standard deviations and correlations of returns among the asset classes that comprise the plans' asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return. 43 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES In December 2021, an investment policy study was completed for the U.S. pension plans. As a result of changes to our capital market assumptions, the weighted-average long-term rate of return on assets decreased from 5.6% at December 31, 2020 to 5.4% at December 31, 2021. The expected long-term rate of return on plan assets used in determining pension expense for non-U.S. plans is determined in a similar manner to the U.S. plans. Another key assumption in determining net pension and OPEB expense is the assumed discount rate used to discount plan obligations. We estimate the assumed discount rate for U.S. plans using a cash flow matching approach, which uses projected cash flows matched to spot rates along a high quality corporate bond yield curve to determine the weighted-average discount rate for the calculation of the present value of cash flows. We apply the individual annual yield curve rates instead of the assumed discount rate to determine the service cost and interest cost, which more specifically links the cash flows related to service cost and interest cost to bonds maturing in their year of payment. The Society of Actuaries (SOA) issued mortality improvement tables in the three months ended December 31, 2021. We reviewed our recent mortality experience and we determined our current mortality assumptions are appropriate to measure our U.S. pension and OPEB plans obligations as of December 31, 2021. Significant differences in actual experience or significant changes in assumptions may materially affect the pension obligations. The effects of actual results differing from assumptions and the changing of assumptions are included in unamortized net actuarial gains and losses that are subject to amortization to pension expense over future periods. The unamortized pre-tax actuarial loss on our pension plans was $3.7 billion and $8.4 billion at December 31, 2021 and 2020. The year-over-year change is primarily due to an increase in discount rates and higher than expected asset returns. The underfunded status of the U.S. pension plans improved in the year ended December 31, 2021 to $0.3 billion from $5.4 billion primarily due to: (1) the favorable effect of actual returns on plan assets of $3.7 billion; (2) the favorable effect of an increase in discount rates of $2.1 billion; and (3) changes in actuarial assumptions, demographic data updates and contributions of $0.5 billion; partially offset by (4) service and interest costs of $1.3 billion. The following table illustrates the sensitivity to a change in certain assumptions for the pension plans, holding all other assumptions constant: U.S. Plans(a) Non-U.S. Plans(a) Effect on 2022 Pension Expense Effect on December 31, 2021 PBO Effect on 2022 Pension Expense Effect on December 31, 2021 PBO 25 basis point decrease in discount rate -$98 +$1,502 -$3 +$560 25 basis point increase in discount rate +$93 -$1,439 +$10 -$531 25 basis point decrease in expected rate of return on assets +$139 N/A +$32 N/A 25 basis point increase in expected rate of return on assets -$139 N/A -$32 N/A __________ (a) The sensitivity does not include the effects of the individual annual yield curve rates applied for the calculation of the service and interest cost. Refer to Note 15 to our consolidated financial statements for additional information on pension contributions, investment strategies, assumptions, the change in benefit obligations and related plan assets, pension funding requirements and future net benefit payments. Refer to Note 2 to our consolidated financial statements for a discussion of the inputs used to determine fair value for each significant asset class or category. Valuation of Deferred Tax Assets The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The assessment regarding whether a valuation allowance is required or should be adjusted is based on an evaluation of possible sources of taxable income and also considers all available positive and negative evidence factors. Our accounting for the valuation of deferred tax assets represents our best estimate of future events. Changes in our current estimates, due to unanticipated market conditions, governmental legislative actions or events, could have a material effect on our ability to utilize deferred tax assets. Refer to Note 17 to our consolidated financial statements for additional information on the composition of valuation allowances. 44 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Forward-Looking Statements This report and the other reports filed by us with the SEC from time to time, as well as statements incorporated by reference herein and related comments by our management, may include "forward-looking statements" within the meaning of the U.S. federal securities laws. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements represent our current judgment about possible future events and are often identified by words like “aim,” “anticipate,” “appears,” “approximately,” “believe,” “continue,” “could,” “designed,” “effect,” “estimate,” “evaluate,” “expect,” “forecast,” “goal,” “initiative,” “intend,” “may,” “objective,” “outlook,” “plan,” “potential,” “priorities,” “project,” “pursue,” “seek,” “should,” “target,” “when,” “will,” “would,” or the negative of any of those words or similar expressions. In making these statements, we rely on assumptions and analysis based on our experience and perception of historical trends, current conditions and expected future developments as well as other factors we consider appropriate under the circumstances. We believe these judgments are reasonable, but these statements are not guarantees of any future events or financial results, and our actual results may differ materially due to a variety of important factors, many of which are beyond our control. These factors, which may be revised or supplemented in subsequent reports we file with the SEC, include, among others, the following: (1) our ability to deliver new products, services, technologies and customer experiences in response to increased competition and changing consumer preferences in the automotive industry; (2) our ability to timely fund and introduce new and improved vehicle models, including electric vehicles, that are able to attract a sufficient number of consumers; (3) our ability to profitably deliver a broad portfolio of electric vehicles that will help drive consumer adoption; (4) the success of our current line of full-size SUVs and full-size pickup trucks; (5) our highly competitive industry, which has been historically characterized by excess manufacturing capacity and the use of incentives, and the introduction of new and improved vehicle models by our competitors; (6) the unique technological, operational, regulatory and competitive risks related to the timing and commercialization of autonomous vehicles; (7) risks associated with climate change, including increased regulation of greenhouse gas emissions, our transition to electric vehicles and the potential increased impacts of severe weather events; (8) global automobile market sales volume, which can be volatile; (9) prices and uncertain availability of raw materials and commodities used by us and our suppliers, and instability in logistics and related costs; (10) our business in China, which is subject to unique operational, competitive, regulatory and economic risks; (11) the success of our ongoing strategic business relationships and of our joint ventures, which we cannot operate solely for our benefit and over which we may have limited control; (12) the international scale and footprint of our operations, which exposes us to a variety of unique political, economic, competitive and regulatory risks, including the risk of changes in government leadership and laws (including labor, trade, tax and other laws), political uncertainty or instability and economic tensions between governments and changes in international trade policies, new barriers to entry and changes to or withdrawals from free trade agreements, changes in foreign exchange rates and interest rates, economic downturns in the countries in which we operate, differing local product preferences and product requirements, changes to and compliance with U.S. and foreign countries' export controls and economic sanctions, differing labor regulations, requirements and union relationships, differing dealer and franchise regulations and relationships, difficulties in obtaining financing in foreign countries, and public health crises, including the occurrence of a contagious disease or illness, such as the COVID-19 pandemic; (13) any significant disruption, including any work stoppages, at any of our manufacturing facilities; (14) the ability of our suppliers to deliver parts, systems and components without disruption and at such times to allow us to meet production schedules; (15) the ongoing COVID-19 pandemic; (16) the success of any restructurings or other cost reduction actions; (17) the possibility that competitors may independently develop products and services similar to ours, or that our intellectual property rights are not sufficient to prevent competitors from developing or selling those products or services; (18) our ability to manage risks related to security breaches and other disruptions to our information technology systems and networked products, including connected vehicles and in-vehicle systems; (19) our ability to comply with increasingly complex, restrictive and punitive regulations relating to our enterprise data practices, including the collection, use, sharing and security of the Personal Identifiable Information of our customers, employees, or suppliers; (20) our ability to comply with extensive laws, regulations and policies applicable to our operations and products, including those relating to fuel economy, emissions and autonomous vehicles; (21) costs and risks associated with litigation and government investigations; (22) the costs and effect on our reputation of product safety recalls and alleged defects in products and services; (23) any additional tax expense or exposure; (24) our continued ability to develop captive financing capability through GM Financial; and (25) any significant increase in our pension funding requirements. For a further discussion of these and other risks and uncertainties, refer to Part I, Item 1A. Risk Factors. We caution readers not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors, except where we are expressly required to do so by law. * * * * * * * 45 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES