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, 2021 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, 2022 is incorporated by reference into this MD&A. Overview Our vision for the future is a world with zero crashes, zero emissions and zero congestion. We will adapt to customer preferences while executing our growth-focused strategy to invest in EVs, hybrids, AVs, software-enabled services and other new business opportunities. To support strong margins and cash flow during this transition, we are strengthening our market position in profitable ICE vehicles, such as trucks and SUVs. We plan to execute our strategy with a steadfast commitment to good corporate citizenship through more sustainable operations and a leading health and safety culture. Our financial performance in 2023 was driven by the success of high-margin products like full-size pick-ups and SUVs, despite several headwinds, including higher interest rates and inflationary pressures, supply chain and logistics challenges, and work stoppages associated with recent labor negotiations. This performance was due to the strength of our vehicle portfolio, strong consumer demand and execution of our core business strategy, focused on fixed cost reduction and pricing discipline. In January 2023, we announced our intention to implement a cost reduction program to reduce automotive fixed costs by $2.0 billion on an annual run rate basis by the end of 2024. This goal includes the impact of higher expected depreciation and amortization expense and inflationary cost increases on fixed cost but excludes changes in our pension income. In March 2023, 27 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES we announced performance-based exits and a voluntary separation program (VSP) in an effort to accelerate attrition, which we believe will result in approximately $1.0 billion towards this target on an annual run rate basis. In addition to people costs, we are reducing our marketing and advertising expenses, streamlining our engineering expense by reducing complexity across the vehicle portfolio, adjusting the cadence of our EV launches due to customer demand, reducing launch-related expenses in the near-term, reprioritizing growth initiatives and reducing our overall overhead and discretionary costs. As we continue to assess our performance and the needs of our evolving business, additional restructuring and rationalization actions 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. Refer to the Consolidated Results and regional sections of this MD&A for additional information. Our collective bargaining agreement with the UAW, which was ratified in October 2019, expired on September 14, 2023. On September 15, 2023, the UAW initiated a strike at certain of our U.S. facilities and intermittently expanded the strike to additional facilities, causing stoppages to some vehicle production and parts distribution activities across our U.S. operations. We estimate that the lost vehicle production volumes and parts sales due to the UAW strike had an unfavorable impact of approximately $0.8 billion on Net income attributable to stockholders and $1.1 billion on our GMNA EBIT-adjusted in the year ended December 31, 2023. On November 16, 2023, the UAW ratified a new collective bargaining agreement (the Labor Agreement). The Labor Agreement, which continues through April 30, 2028, covers the wages, hours, benefits and other terms and conditions of employment for our UAW-represented employees. The key terms and provisions of the Labor Agreement are: • General wage increases of 11% upon ratification in 2023, 3% in September each of 2024, 2025 and 2026, and 5% in September 2027; • Consolidation of applicable wage classifications for in-progression, temporary and other employees – with employees reaching the top classification rate upon the completion of 156 weeks of active service; • The re-establishment of a cost-of-living allowance; • Lump sum ratification bonus payments of $5,000 paid to eligible employees in the three months ended December 31, 2023; • For members currently employed and enrolled in the Employees’ Pension Plan, an increase of $5.00 to the monthly basic benefit for past and future service provided; • A 3.6% increase in company contributions to eligible employees' defined contribution retirement accounts; and • Annual contribution of $500 to eligible retirees or surviving spouses. Beginning in 2024 and through the end of the term of the Labor Agreement, GM will offer three separate cash severance incentive programs to UAW-represented employees that meet the normal or early retirement eligibility requirements. On August 16, 2022, the IRA was enacted. The IRA modified climate and clean energy tax provisions and added new corporate tax credits for commercial EV purchases and investments in clean energy production, supply chains and manufacturing facilities. IRA benefits, including credits and lower material costs, are expected to materially affect net income in the future. We will continue to evaluate the IRA impacts on our financial results as additional regulatory guidance is issued. We face continuing market, operating and regulatory challenges in several countries across the globe due to, among other factors, competitive pressures, our product portfolio offerings, heightened emission standards, labor disruptions, foreign exchange volatility, evolving trade policy and political uncertainty. Refer to Part I, Item 1A. Risk Factors for a discussion of these challenges. For the year ending December 31, 2024, we expect EPS-diluted and EPS-diluted-adjusted of between $8.50 and $9.50, Net income attributable to stockholders of between $9.8 billion and $11.2 billion and EBIT-adjusted of between $12.0 billion and $14.0 billion. These expected financial results do not include the potential impact of future adjustments related to special items. Refer to the "Non-GAAP Measures" section of this MD&A for additional information. 28 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following table reconciles expected Net income attributable to stockholders under U.S. generally accepted accounting principles (GAAP) to expected EBIT-adjusted (dollars in billions): Year Ending December 31, 2024 Net income attributable to stockholders $ 9.8-11.2 Income tax expense 2.1-2.7 Automotive interest expense, net 0.1 EBIT-adjusted(a) $ 12.0-14.0 __________ (a) We do not consider the potential future impact of adjustments on our expected financial results. GMNA Industry sales in North America were 19.6 million units in the year ended December 31, 2023, representing an increase of 13.1% compared to the corresponding period in 2022. U.S. industry sales were 16.0 million units in the year ended December 31, 2023, representing an increase of 12.2% compared to the corresponding period in 2022. Our total vehicle sales in the U.S., our largest market in North America, were 2.6 million units for a market share of 16.2% in the year ended December 31, 2023, representing an increase of 0.3 percentage points compared to the corresponding period in 2022. We expect to sustain relatively strong EBIT-adjusted margins in 2024 on the continued strength of our product portfolio, improved EV margins and ongoing fixed cost reduction efforts, partially offset by pricing moderation with increased incentives. While we expect EV margins to improve in 2024, it is possible that we will continue to recognize losses to adjust inventory to net realizable value. Our outlook is dependent on the resiliency of the U.S. economy, continuing improvement of supply chain availability, EV-related cost reduction and overall economic conditions. GMI Industry sales in China were 25.0 million units in the year ended December 31, 2023, representing an increase of 6.3% compared to the corresponding period in 2022. Our total vehicle sales in China were 2.1 million units resulting in a market share of 8.4% in the year ended December 31, 2023, representing a decrease of 1.4 percentage points compared to the corresponding period in 2022. The ongoing supply chain disruptions, global macro-economic conditions 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 $0.4 billion in the year ended December 31, 2023. Price competition, growing customer acceptance of domestic brands and demand for NEVs, and a more challenging regulatory environment related to emissions, fuel consumption and NEVs have and will continue to place pressure on our operations in China. Outside of China, industry sales were 25.7 million units in the year ended December 31, 2023, representing an increase of 7.3% compared to the corresponding period in 2022. Our total vehicle sales outside of China were 1.0 million units for a market share of 4.0% in the year ended December 31, 2023, which is comparable to the corresponding period in 2022. Cruise Cruise Holdings, our majority-owned subsidiary, is pursuing the development and commercialization of AV technology. In October 2023, a hit-and-run accident involving a pedestrian and a third-party vehicle occurred, which resulted in the pedestrian being thrown into the path of a Cruise AV. During the resulting investigation, regulators perceived that Cruise representatives were not explicit about a secondary movement of the Cruise AV and, as a result, the California DMV suspended Cruise's permits to operate AVs in California without a safety driver. Shortly thereafter, Cruise voluntarily paused all of its driverless, supervised and manual AV operations in the U.S. while it examines its processes, systems and tools. This orderly pause is designed to rebuild public trust while Cruise undertakes a comprehensive safety review. In addition, certain federal and state agencies, including the California DMV, the California Public Utilities Commission, NHTSA, the U.S. Department of Justice and the SEC, have opened investigations or made inquiries in connection with the incident. We and Cruise are investigating these matters internally and intend to cooperate with all government regulators and agencies in connection with these matters. At this time, we are not able to predict when Cruise will resume driverless testing or commercial AV operations. Refer to Part I, Item 1A. Risk Factors for a further discussion of the risks associated with our AV strategy. In connection with the pause in operations and Cruise's refocused operational strategy, we recorded restructuring charges of $0.5 billion in the three months ended December 31, 2023, and also expect reductions of approximately $1.0 billion in Cruise expenses in 2024. 29 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES 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 penetration of our retail sales in the U.S. was 42% in the year ended December 31, 2023 and 43% in the corresponding period in 2022. 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 82% in the year ended December 31, 2023 and 80% in the corresponding period in 2022. In the year ended December 31, 2023, GM Financial's revenue consisted of leased vehicle income of 51%, retail finance charge income of 37% and commercial finance charge income of 7%. GM Financial's leasing program is exposed to residual values, which are heavily dependent on used vehicle prices. Gains on terminations of leased vehicles of $0.9 billion and $1.2 billion were included in GM Financial interest, operating and other expenses in the years ended December 31, 2023 and 2022. The decrease in gains is primarily due to higher leased portfolio net book values at termination and fewer terminated leases in 2023 compared to 2022. 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, 2023 December 31, 2022 Residual Value Units Percentage Residual Value Units Percentage Crossovers $ 12,830 648 67.5 % $ 14,207 736 67.3 % Trucks 6,793 210 21.9 % 6,961 228 20.9 % SUVs 2,304 58 6.0 % 2,595 66 6.0 % Cars 734 44 4.6 % 964 63 5.8 % Total $ 22,661 960 100.0 % $ 24,727 1,092 100.0 % 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 2023 2022 % Volume Mix Price Other (Dollars in billions) GMNA $ 141,445 $ 128,378 $ 13,067 10.2 % $ 8.5 $ 0.7 $ 3.2 $ 0.7 GMI 15,949 15,420 529 3.4 % $ (0.6) $ 0.4 $ 1.2 $ (0.4) Corporate 273 177 96 54.2 % $ — $ 0.1 Automotive 157,667 143,974 13,693 9.5 % $ 7.8 $ 1.1 $ 4.3 $ 0.4 Cruise 102 102 — — % $ — $ — GM Financial 14,225 12,766 1,459 11.4 % $ 1.5 Eliminations/reclassifications (151) (107) (44) (41.1) % $ — $ (0.1) Total net sales and revenue $ 171,842 $ 156,735 $ 15,108 9.6 % $ 7.8 $ 1.2 $ 4.3 $ 1.8 Refer to the regional sections of this MD&A for additional information on Volume, Mix, Price and Other. 30 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Automotive and Other Cost of Sales Years Ended December 31, Favorable/ (Unfavorable) Variance Due To 2023 2022 % Volume Mix Cost Other (Dollars in billions) GMNA $ 123,577 $ 109,651 $ (13,926) (12.7) % $ (6.1) $ (1.6) $ (6.2) $ — GMI 14,164 14,166 2 — % $ 0.5 $ (0.3) $ (0.3) $ 0.1 Corporate 513 500 (13) (2.6) % $ — $ (0.1) $ 0.1 Cruise 3,088 2,576 (512) (19.9) % $ — $ (0.5) Eliminations (12) (2) 10 n.m. $ — $ — Total automotive and other cost of sales $ 141,330 $ 126,892 $ (14,438) (11.4) % $ (5.6) $ (2.0) $ (7.0) $ 0.2 __________ n.m. = not meaningful 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, 2023, increased Cost was primarily due to: (1) increased campaigns and other warranty-related costs of $2.1 billion; (2) increased EV-related charges of $2.0 billion, primarily due to $1.7 billion in inventory adjustments to reflect the net realizable value at period end; (3) increased manufacturing costs of $0.9 billion; (4) charges of $0.7 billion related to the VSP; (5) increased engineering costs of $0.5 billion, driven primarily by $0.8 billion increase in AV engineering costs; partially offset by $0.4 billion decrease in Automotive engineering cost (6) charges of $0.5 billion related to Cruise restructuring; and (7) increased material and freight costs of $0.3 billion; partially offset by (8) decrease of $0.8 billion due to absence of the charge for the modification of Cruise stock incentive awards in 2022. In the year ended December 31, 2023, favorable Other was due to the weakening of the Canadian dollar and other currencies against the U.S. dollar, partially offset by the strengthening of the Mexican peso and other currencies against the U.S. dollar. Automotive and Other Selling, General and Administrative Expense Years Ended December 31, Year Ended 2023 vs. 2022 Change 2023 2022 2021 Favorable/ (Unfavorable) % Automotive and other selling, general and administrative expense $ 9,840 $ 10,667 $ 8,554 $ 827 7.8 % In the year ended December 31, 2023, Automotive and other selling, general and administrative expense decreased primarily due to: (1) decreased advertising, selling, and administrative costs of $0.7 billion; and (2) decrease of $0.3 billion due to the absence of the charge for the modification of Cruise stock incentive awards in 2022; partially offset by (3) charges of $0.2 billion related to the VSP. 31 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Interest Income and Other Non-operating Income, net Years Ended December 31, Year Ended 2023 vs. 2022 Change 2023 2022 2021 Favorable/ (Unfavorable) % Interest income and other non-operating income, net $ 1,537 $ 1,432 $ 3,041 $ 105 7.3 % In the year ended December 31, 2023, Interest income and other non-operating income, net increased primarily due to: (1) the absence of $0.7 billion loss related to the shutdown of our Russia business; (2) $0.6 billion increase in interest income; and (3) the absence of $0.4 billion in losses related to Stellantis N.V. (Stellantis) warrants; partially offset by (4) $1.3 billion decrease in non-service pension income primarily due to higher interest cost and lower expected return on assets (ROA); and (5) the absence of $0.3 billion in gains related to revaluation of investments. Income Tax Expense Years Ended December 31, Year Ended 2023 vs. 2022 Change 2023 2022 2021 Favorable/ (Unfavorable) % Income tax expense $ 563 $ 1,888 $ 2,771 $ 1,325 70.2 % In the year ended December 31, 2023, Income tax expense decreased primarily due to jurisdictional mix of earnings, valuation allowance adjustments and lower pre-tax income. For the year ended December 31, 2023 our ETR-adjusted was 15.7%. We expect our adjusted effective tax rate to be between 18% and 20% for the year ending December 31, 2024. 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 2023 2022 % Volume Mix Price Cost Other (Dollars in billions) Total net sales and revenue $ 141,445 $ 128,378 $ 13,067 10.2 % $ 8.5 $ 0.7 $ 3.2 $ 0.7 EBIT-adjusted $ 12,306 $ 12,988 $ (682) (5.3) % $ 2.3 $ (0.9) $ 3.2 $ (5.1) $ (0.2) EBIT-adjusted margin 8.7 % 10.1 % (1.4) % (Vehicles in thousands) Wholesale vehicle sales 3,147 2,926 221 7.6 % GMNA Total Net Sales and Revenue In the year ended December 31, 2023, Total net sales and revenue increased primarily due to: (1) increased net wholesale volumes primarily due to increased sales of crossover vehicles and full-size pickup trucks, partially offset by decreased sales of mid-size pickup trucks; (2) favorable Price as a result of low dealer inventory levels and strong demand for our products; (3) favorable Mix associated with increased sales of full-size pickup trucks and full-size SUVs and decreased sales of vans, passenger cars and mid-size pickup trucks, partially offset by increased sales of crossover vehicles; and (4) favorable Other due to increased sales of parts and accessories. 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 170%, 40% and 50% of our GMNA portfolio on a weighted-average basis. In the year ended December 31, 2023, EBIT-adjusted decreased primarily due to: (1) increased Cost primarily due to increased campaigns and other warranty-related costs of $2.0 billion, increased EV-related charges of $1.9 billion primarily due to $1.6 billion in inventory adjustments to reflect the net realizable value at period end, decreased non-service pension income of $1.1 billion and increased manufacturing costs of $0.9 billion, partially offset by decreased advertising, selling and administrative costs of $1.1 billion; and (2) unfavorable Mix associated with increased sales of crossover vehicles partially 32 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES offset by decreased sales of mid-size pickup trucks and passengers cars and increased sales of full-size SUVs; partially offset by (3) favorable Price; and (4) favorable Volume. GM International Years Ended December 31, Favorable/ (Unfavorable) Variance Due To 2023 2022 % Volume Mix Price Cost Other (Dollars in billions) Total net sales and revenue $ 15,949 $ 15,420 $ 529 3.4 % $ (0.6) $ 0.4 $ 1.2 $ (0.4) EBIT-adjusted $ 1,210 $ 1,143 $ 67 5.9 % $ (0.1) $ 0.1 $ 1.2 $ (0.3) $ (0.7) EBIT-adjusted margin 7.6 % 7.4 % 0.2 % Equity income — Automotive China $ 446 $ 677 $ (231) (34.1) % EBIT-adjusted — excluding Equity income $ 764 $ 466 $ 298 63.9 % (Vehicles in thousands) Wholesale vehicle sales 621 653 (32) (4.9) % 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-adjusted above. GMI Total Net Sales and Revenue In the year ended December 31, 2023, Total net sales and revenue increased primarily due to: (1) favorable pricing across multiple vehicle lines in Argentina, Brazil and the Middle East; and (2) favorable Mix primarily in Asia/Pacific and the Middle East; partially offset by (3) decreased net wholesale volumes in Egypt, Colombia and Chile primarily due to industry downturn, partially offset by increased volumes in Brazil due to a new vehicle launch; and (4) unfavorable Other primarily due to the foreign currency effect resulting from the weakening of the Argentine peso against the U.S. dollar, partially offset by increased components, parts and accessories sales. GMI EBIT-Adjusted In the year ended December 31, 2023, EBIT-adjusted increased primarily due to: (1) favorable Price; and (2) favorable Mix; partially offset by (3) unfavorable Cost primarily due to increased material, logistic and warranty-related costs and other costs to support a new vehicle launch in South America, partially offset by favorable impact due to an asset sale in Korea; (4) decreased net wholesale volumes; and (5) unfavorable Other primarily due to foreign currency effect resulting from the weakening of Argentine peso against the U.S. dollar and decreased equity income. 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 introduce a number of new product offerings under the Buick, Chevrolet and Cadillac brands in China and continue to grow our business under the local Baojun and Wuling brands while we are accelerating the development and rollout of EVs across our brands in China as part of our commitment to an all-electric future. 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, 2023 2022 2021 Wholesale vehicle sales including vehicles exported to markets outside of China 2,334 2,639 3,007 Total net sales and revenue $ 31,435 $ 35,857 $ 42,776 Net income $ 1,122 $ 1,407 $ 2,109 December 31, 2023 December 31, 2022 Cash and cash equivalents $ 6,875 $ 8,552 Debt $ 202 $ 197 33 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Cruise Years Ended December 31, 2023 vs. 2022 Change 2023 2022 2021 Favorable/ (Unfavorable) % Total net sales and revenue(a) $ 102 $ 102 $ 106 $ — — % EBIT (loss)-adjusted $ (2,695) $ (1,890) $ (1,196) $ (805) (42.6) % __________ (a) Primarily reclassified to Interest income and other non-operating income, net in our consolidated income statements in each of the years ended December 31, 2023, 2022 and 2021. Cruise EBIT (Loss)-Adjusted In the year ended December 31, 2023, EBIT (loss)-adjusted increased primarily due to an increase in development costs as we pursue the development and commercialization of AV technology in the U.S. and globally. GM Financial Years Ended December 31, 2023 vs. 2022 Change 2023 2022 2021 Amount % Total revenue $ 14,225 $ 12,766 $ 13,419 $ 1,459 11.4 % Provision for loan losses $ 826 $ 654 $ 248 $ 172 26.3 % EBT-adjusted $ 2,985 $ 4,076 $ 5,036 $ (1,091) (26.8) % Average debt outstanding (dollars in billions) $ 100.4 $ 93.8 $ 94.1 $ 6.6 7.0 % Effective rate of interest paid 4.7 % 3.1 % 2.7 % 1.6 % GM Financial Revenue In the year ended December 31, 2023, Total revenue increased primarily due to: (1) increased finance charge income of $1.7 billion primarily due to an increase in the effective yield resulting from higher benchmark interest rates and growth in the size of the portfolio; (2) increased investment income of $0.3 billion primarily due to an increase in benchmark interest rates; partially offset by (3) decreased leased vehicle income of $0.5 billion primarily due to a decrease in the average balance of the leased vehicles portfolio. GM Financial EBT-Adjusted In the year ended December 31, 2023, EBT-adjusted decreased primarily due to: (1) increased interest expense of $1.8 billion primarily due to an increased effective rate of interest on debt, resulting from higher benchmark interest rates, as well as an increase in average debt outstanding; (2) decreased leased vehicle income net of leased vehicle expenses of $0.9 billion primarily due to a decrease in the average balance of the leased vehicles portfolio and decreased lease termination gains due to higher leased portfolio net book values at termination and fewer terminated leases; (3) increased provision for loan losses of $0.2 billion due to lower recovery rates in 2023, as well as moderating credit performance; partially offset by (4) increased finance charge income of $1.7 billion primarily due to an increase in the effective yield resulting from higher benchmark interest rates and growth in the size of the portfolio; and (5) increased investment income of $0.3 billion primarily due to an increase in benchmark interest rates. Liquidity and Capital Resources We believe our current levels of cash, cash equivalents, marketable debt securities, available borrowing capacity under our credit facilities and other liquidity actions currently available to us are sufficient to meet our liquidity requirements in the short- and long-term. 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. Our known current material uses of cash include, among other possible demands: (1) capital spending and our investments in our battery cell manufacturing joint ventures of approximately $10.5 billion to $11.5 billion in 2024; (2) payments for engineering and product development activities , including investing in the development and commercialization of AV technology by Cruise; (3) payments associated with previously announced vehicle recalls and any other recall-related contingencies; (4) payments to service debt and other long-term obligations, including discretionary and mandatory contributions to our pension plans; (5) dividend payments on our common stock that are declared by our Board of Directors; and (6) payments to purchase shares of our common stock authorized by our Board of Directors. Refer to Note 7, Note 13 and Note 15 to our consolidated financial statements for additional funding requirements for our operating leases, debt and pension plans. Our material future uses of cash, which may vary from time to time based on market conditions and other factors, are 34 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES 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 $18.0 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. 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. To support our transition to EVs, we anticipate making investments in suppliers or providing funding towards the execution of strategic, multi-year supply agreements to secure critical materials. In addition, we have entered, and plan to continue to enter, into offtake agreements that generally obligate us to purchase defined quantities of output. These arrangements could have a short-term adverse impact on our cash and increase our inventory. 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. In November 2023, our Board of Directors increased the capacity under our previously announced common stock repurchase program by $10.0 billion to $11.4 billion and approved a $10.0 billion ASR program. On December 1, 2023, we advanced $10.0 billion under the ASR program and received approximately 215 million shares of common stock with a value of $6.8 billion, which were immediately retired. The final settlement of the transactions contemplated under the ASR Agreements is expected to occur no later than the three months ending December 31, 2024. Also, during the year ended December 31, 2023, we completed $1.1 billion of open market repurchases under the program and retired approximately 30 million shares of our common stock. We have $1.4 billion in capacity remaining under our common stock repurchase program as of December 31, 2023, with no expiration date. During the year ended December 31, 2023, we paid dividends of $0.5 billion to holders of our common stock. We anticipate that we will continue to declare and pay dividends on our common stock quarterly. 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 and Cruise 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. We manage our liquidity primarily at our treasury centers as well as at certain of our significant consolidated overseas subsidiaries. Over 85% of our cash and marketable debt securities were managed within North America and at our regional treasury centers at December 31, 2023. 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. In March 2023, we redeemed our $1.5 billion, 4.875% senior unsecured notes with a maturity date of October 2023 and recorded an insignificant loss. 35 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Also, in March 2023, we renewed and reduced the total borrowing capacity of our five-year, $11.2 billion facility to $10.0 billion, which now matures March 31, 2028. We also renewed and reduced the total borrowing capacity of our three-year, $4.3 billion facility to $4.1 billion, which now matures March 31, 2026, and renewed our 364-day, $2.0 billion revolving credit facility allocated for the exclusive use of GM Financial, which now matures March 30, 2024. In October 2023, we entered into a new 364-day unsecured revolving credit facility with a borrowing capacity of $6.0 billion, which we terminated on November 24, 2023. In November 2023, the Company entered an unsecured 364-day delayed draw term loan credit agreement that permits the Company to borrow up to $3.0 billion in the form of four term loans during an availability period that ends June 28, 2024. Amounts drawn and repaid may not be reborrowed and the final maturity date for any loans outstanding under the delayed draw credit agreement is November 27, 2024. We use credit facilities as a mechanism to provide additional flexibility in managing our global liquidity. Our Automotive borrowing capacity under credit facilities totaled $17.1 billion at December 31, 2023, which consisted primarily of three credit facilities, and $15.5 billion at December 31, 2022, which consisted primarily of two credit facilities. Total Automotive borrowing capacity under our credit facilities does not include our 364-day, $2.0 billion facility allocated for exclusive use of GM Financial. We did not have any borrowings against our primary facilities, but had letters of credit outstanding under our sub-facility of $0.7 billion and $0.4 billion at December 31, 2023 and 2022. If available capacity permits, GM Financial continues to have access to our five-year, $10.0 billion and three-year, $4.1 billion credit facilities. GM Financial did not have borrowings outstanding against any of these facilities at December 31, 2023 and 2022. We had intercompany loans from GM Financial of $0.2 billion at December 31, 2023 and 2022, which primarily consisted of commercial loans to dealers we consolidate. We did not have intercompany loans to GM Financial at December 31, 2023 and 2022. Refer to Note 5 to our consolidated financial statements for additional information. Several of our loan facilities, including our 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, 2023 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 $1.8 billion, $1.7 billion and $3.5 billion on its common stock in the years ended December 31, 2023, 2022 and 2021. Future dividends from GM Financial will depend on several factors including business and economic conditions, its financial condition, earnings, liquidity requirements and leverage ratio. 36 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following table summarizes our Automotive available liquidity (dollars in billions): December 31, 2023 December 31, 2022 Automotive cash and cash equivalents $ 12.2 $ 13.6 Marketable debt securities 7.6 10.8 Automotive cash, cash equivalents and marketable debt securities 19.8 24.4 Available under credit facilities(a) 16.4 15.1 Total Automotive available liquidity $ 36.3 $ 39.5 __________ (a) We had letters of credit outstanding under our sub-facility of $0.7 billion and $0.4 billion at December 31, 2023 and 2022. The following table summarizes the changes in our Automotive available liquidity (dollars in billions): Year Ended December 31, 2023 Operating cash flow $ 20.8 Capital expenditures (10.7) ASR program (10.0) Dividends paid and payments to purchase common stock (1.6) Payment of senior unsecured note (1.5) Investment in Ultium Cells Holdings LLC (0.7) GM investment in Cruise (0.5) Investment in Lithium Americas (0.3) Other non-operating (0.1) Increase in available credit facilities 1.4 Total change in automotive available liquidity $ (3.2) Automotive Cash Flow (Dollars in billions) Years Ended December 31, 2023 vs. 2022 Change 2023 2022 2021 Operating Activities Net income $ 10.1 $ 8.5 $ 7.8 $ 1.6 Depreciation, amortization and impairment charges 6.8 6.3 5.9 0.5 Pension and OPEB activities (1.0) (2.0) (2.4) 1.0 Working capital (0.4) 0.5 (4.0) (0.9) Accrued and other liabilities and income taxes 4.1 3.1 0.9 1.0 Other(a) 1.2 2.7 1.5 (1.5) Net automotive cash provided by (used in) operating activities(b) $ 20.8 $ 19.1 $ 9.7 $ 1.7 __________ (a) Includes $1.8 billion, $1.7 billion and $3.5 billion in dividends received from GM Financial in the years ended December 31, 2023, 2022 and 2021, partially offset by non-cash changes in other assets and liabilities. (b) Includes $4.8 billion, $6.7 billion and $0.6 billion in the years ended December 31, 2023, 2022 and 2021 which are eliminated within the consolidated statements of cash flows. Amounts eliminated primarily relate to purchases of, and collections on, wholesale finance receivables provided by GM Financial to our dealers and dividends issued by GM Financial to us. 37 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Years Ended December 31, 2023 vs. 2022 Change 2023 2022 2021 Investing Activities Capital expenditures $ (10.7) $ (9.0) $ (7.4) $ (1.7) Acquisitions and liquidations of marketable securities, net 3.5 (3.9) 1.0 7.4 Other(a) (1.5) (4.5) (1.8) 3.0 Net automotive cash provided by (used in) investing activities(b) $ (8.7) $ (17.5) $ (8.2) $ 8.8 __________ (a) Includes $0.7 billion, $0.8 billion and $0.5 billion of GM's investment in Ultium Cells Holdings LLC in the years ended December 31, 2023, 2022 and 2021, $0.5 billion, $2.4 billion and $1.0 billion of GM's investment in Cruise in the years ended December 31, 2023, 2022 and 2021, $0.3 billion of GM's investment in Lithium Americas in the year ended December 31, 2023, $2.1 billion for the purchase of Cruise preferred shares from SoftBank Vision Fund (AIV M2) L.P. (SoftBank) in the year ended December 31, 2022 and $0.9 billion related to the sale of Stellantis common shares, excluding dividends received and tax withholding, in the year ended December 31, 2022. (b) The investments in Cruise are eliminated within the consolidated statements of cash flows. The redemption of Cruise preferred shares from SoftBank in 2022 are reclassified to financing activities within the consolidated statements of cash flows. Years Ended December 31, 2023 vs. 2022 Change 2023 2022 2021 Financing Activities Net proceeds (payments) from short-term debt $ (1.5) $ (1.4) $ (0.5) $ (0.1) Issuance of senior notes — 2.3 — (2.3) Other(a) (12.1) (3.3) (0.4) (8.8) Net automotive cash provided by (used in) financing activities $ (13.6) $ (2.5) $ (0.9) $ (11.1) __________ (a) Includes $10.0 billion in advances against accelerated share repurchases in the year ended December 31, 2023, $1.1 billion and $2.5 billion for payments to purchase common stock in the years ended December 31, 2023 and 2022, $0.5 billion and $0.3 billion for dividends paid in the years ended December 31, 2023 and 2022 and $0.5 billion for repayments of senior unsecured notes for the year ended December 31, 2021. 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, 2023, net automotive cash provided by operating activities under U.S. GAAP was $20.8 billion, capital expenditures were $10.7 billion and adjustments for management actions were $1.5 billion. For the year ended December 31, 2022, net automotive cash provided by operating activities under U.S. GAAP was $19.1 billion, capital expenditures were $9.0 billion and adjustments for management actions were $0.4 billion. Refer to the "Non-GAAP Measures" section of this MD&A for additional information. 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 S&P. All four credit rating agencies currently rate our corporate credit at investment grade. The following table summarizes our credit ratings at January 16, 2024: Corporate Revolving Credit Facilities Senior Unsecured Outlook DBRS BBB (high) BBB (high) N/A Stable Fitch BBB BBB BBB Stable Moody's Investment Grade Baa2 Baa2 Stable S&P BBB BBB BBB Stable 38 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES Cruise Liquidity The following table summarizes Cruise's available liquidity (dollars in billions): December 31, 2023 December 31, 2022 Cruise cash and cash equivalents $ 1.3 $ 1.5 Cruise marketable securities — 1.4 Total Cruise available liquidity(a)(b) $ 1.3 $ 2.9 __________ (a) Excludes a multi-year credit agreement with GM Financial whereby Cruise can borrow, over time, up to an additional aggregate of $3.4 billion, through 2024, to fund the purchase of AVs from GM and all accessories, attachments, parts and other equipment acquired in connection with or otherwise relating to any AV. As of December 31, 2023, Cruise had total borrowings of $0.3 billion on previously expired lines under this agreement. (b) Excludes a multi-year framework agreement with us whereby Cruise can defer invoices received through June 2028, up to $0.8 billion, related to engineering and capital spending incurred by us on behalf of Cruise. As of December 31, 2023, Cruise deferred $0.5 billion under this agreement. The following table summarizes the changes in Cruise's available liquidity (dollars in billions): Year Ended December 31, 2023 Operating cash flow(a) $ (1.9) GM investment in Cruise 0.5 Other non-operating (0.1) Total change in Cruise available liquidity $ (1.6) __________ (a) Includes $0.2 billion cash outflows related to tendered Cruise Class B Common Shares classified as liabilities. Cruise Cash Flow (Dollars in billions) Years Ended December 31, 2023 vs. 2022 Change 2023 2022 2021 Net cash provided by (used in) operating activities $ (1.9) $ (1.8) $ (1.2) $ (0.1) Net cash provided by (used in) investing activities(a) $ 1.3 $ — $ (0.7) $ 1.4 Net cash provided by (used in) financing activities(b) $ 0.4 $ 1.8 $ 2.6 $ (1.4) __________ (a) Includes $1.4 billion of net proceeds from the liquidation of marketable securities in the year ended December 31, 2023. (b) Includes $0.5 billion, $2.4 billion and $1.0 billion in the years ended December 31, 2023, 2022 and 2021 related to investments from GM which are eliminated within the consolidated statements of cash flows and $2.1 billion in the year ended December 31, 2022 related to the purchase of Softbank’s shares in Cruise by Automotive which is reclassified to financing activities within the consolidated statements of cash flows. We expect the orderly pause of operations, associated restructuring actions, and Cruise’s refocused operational strategy will significantly reduce Cruise’s liquidity needs in 2024. 39 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES 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, 2023 December 31, 2022 Cash and cash equivalents $ 5.3 $ 4.0 Borrowing capacity on unpledged eligible assets 21.9 22.0 Borrowing capacity on committed unsecured lines of credit 0.7 0.5 Borrowing capacity on revolving credit facility, exclusive to GM Financial 2.0 2.0 Total GM Financial available liquidity $ 29.9 $ 28.5 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. At December 31, 2023, available liquidity exceeded GM Financial's liquidity targets. GM Financial did not have any borrowings outstanding against our credit facility designated for their exclusive use or the remainder of our revolving credit facilities at December 31, 2023 and 2022. Refer to the "Automotive Liquidity" section of this MD&A for additional details. 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, 2023, secured, committed unsecured and uncommitted unsecured credit facilities totaled $27.0 billion, $0.8 billion and $2.0 billion with advances outstanding of $5.0 billion, an insignificant amount and $2.0 billion. GM Financial Cash Flow (Dollars in billions) Years Ended December 31, 2023 vs. 2022 Change 2023 2022 2021 Net cash provided by (used in) operating activities $ 6.7 $ 5.5 $ 7.3 $ 1.2 Net cash provided by (used in) investing activities(a) $ (10.9) $ (10.0) $ (5.5) $ (0.9) Net cash provided by (used in) financing activities(b) $ 5.7 $ 4.0 $ (2.6) $ 1.7 __________ (a) Includes $(3.0) billion, $(5.0) billion and $2.9 billion in the years ended December 31, 2023, 2022 and 2021 for purchases of, and collections on, wholesale finance receivables and intercompany loans to GM which are eliminated within the consolidated statements of cash flows. (b) Includes $(1.8) billion, $(1.7) billion and $(3.5) billion in the years ended December 31, 2023, 2022 and 2021 for dividends to GM which are eliminated within the consolidated statements of cash flows. In the year ended December 31, 2023, Net cash provided by operating activities increased primarily due to: (1) an increase in finance charge income of $1.7 billion; (2) a net increase in cash provided by counterparty derivative collateral posting activities of $1.3 billion; (3) and a decrease in taxes paid to GM of $0.6 billion; partially offset by (4) an increase in interest paid of $2.0 billion and (5) a decrease in leased vehicle income of $0.5 billion. In the year ended December 31, 2023, Net cash used in investing activities increased primarily due to: (1) an increase in purchases of leased vehicles of $1.7 billion; (2) a decrease in the proceeds from termination of leased vehicles of $1.2 billion partially offset by (3) an increase in collections and recoveries on finance receivables of $1.3 billion; (4) and a decrease in purchases and originations of finance receivables of $0.5 billion. 40 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES In the year ended December 31, 2023, Net cash provided by financing activities increased primarily due to: (1) a net increase in borrowings of $6.9 billion; partially offset by (2) an increase in debt repayments of $5.1 billion; and (3) an increase in dividend payments of $0.1 billion. LIBOR Transition The International Swaps and Derivatives Association launched its Interbank Offered Rate (IBOR) Fallbacks Supplement and IBOR Fallbacks Protocol, which came into effect on January 25, 2021. The supplement incorporates fallbacks for new derivatives linked to LIBOR, and the protocol enables market participants to incorporate fallbacks for certain legacy derivatives linked to LIBOR. GM Financial adhered to the protocol prior to the June 30, 2023 cessation date and has transitioned all of its LIBOR-based derivative exposure. On March 15, 2022, Congress enacted the Adjustable Interest Rate (LIBOR) Act to address “tough legacy" contracts that lack adequate fallback provisions for determining a benchmark replacement to LIBOR. GM Financial expects to leverage the safe harbors and protections provided by the LIBOR Act and its implementing regulations to transition its limited LIBOR exposure remaining after the cessation date. 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. 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 $0.4 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 41 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES incentive liability by approximately $0.2 billion. 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 recovery rates and overall economic performance in its allowance estimate. Each 5% relative decrease/increase in the forecast recovery rates would increase/decrease the allowance for loan losses by $0.1 billion. At December 31, 2023, the weightings applied to the economic forecast scenarios considered resulted in an allowance for loan losses on the retail finance receivables portfolio of $2.3 billion. If the forecast economic conditions were based entirely on the weakest scenario considered, the allowance for loan losses would increase by $0.1 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 financing products for dealers and other businesses. GM Financial provides commercial lending products to its dealer customers th at include floorplan financing, also known as wholesale or inventory financing, which is lending to finance vehicle inventory. GM Financial also provides dealer loans, which are loans to finance improvements to dealership facilities, to provide working capital, or to purchase and/or finance dealership real estate. Additionally, GM Financial provides lending products to commercial vehicle upfitters and advances to certain of our subsidiaries. The allowance for loan losses on commercial finance receivables is based on historical loss experience for the consolidated portfolio, in addition to forecasted industry conditions. 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. 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 the inception of a lease, 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. During the term of a lease, GM Financial periodically evaluates the estimated residual value and may adjust the value downward, which increases the prospective depreciation, or upward (limited to the contractual residual value), which decreases the prospective depreciation. 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 proceeds GM Financial receives on the disposition of the vehicle are lower than the residual value estimated at the inception of the lease. Realization of the residual values is dependent on GM Financial's future ability to market the vehicles under prevailing market conditions. At December 31, 2023, the estimated residual value of GM Financial's leased vehicles was $22.7 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. 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. 42 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following table illustrates the effect of a 1% relative change in the estimated residual values at December 31, 2023, 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 2024 $ 158 2025 53 2026 15 2027 and thereafter 1 Total $ 227 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, 2023 or 2022. 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. In December 2023, an investment policy study was completed for the U.S. pension plans. As a result, the weighted-average long-term rate of ROA remains unchanged at 6.3% at December 31, 2023 and 2022. 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 other postretirement benefits (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, 2023. 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, 2023. 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 $5.9 billion and $3.3 billion at December 31, 2023 and 2022. The year-over-year change is primarily due to a decrease in discount rates and lower than expected asset returns. The funded status of the U.S. pension plans deteriorated in the year ended December 31, 2023 to $2.2 billion underfunded status from $0.1 billion overfunded status primarily due to: (1) service and interest costs of $2.4 billion; (2) the unfavorable effect of a decrease in discount rates of $1.3 billion; and (3) the unfavorable effect of plan amendments of $0.8 billion; partially offset by (4) the favorable effect of actual returns on plan assets of $1.8 billion; and (5) contributions of $0.4 billion. 43 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES 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 2024 Pension Expense Effect on December 31, 2023 PBO Effect on 2024 Pension Expense Effect on December 31, 2023 PBO 25 basis point decrease in discount rate -$58 +$914 -$5 +$312 25 basis point increase in discount rate +$53 -$872 +$6 -$299 25 basis point decrease in expected rate of ROA +$109 N/A +$25 N/A 25 basis point increase in expected rate of ROA -$109 N/A -$25 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. At December 31, 2023, valuation allowances against deferred tax assets were $7.0 billion. Refer to Note 17 to our consolidated financial statements for additional information on the composition of these valuation allowances and information on the $870 million income tax benefit resulting from the release of valuation allowances against deferred tax assets in Korea. Non-GAAP Measures We use both GAAP and non-GAAP financial measures for operational and financial decision making, and to assess Company and segment business performance. 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 (Most comparable GAAP measure: Net income attributable to stockholders) 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. 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, and certain costs arising from legal matters. For EBIT-adjusted and our other non- 44 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES 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 (Most comparable GAAP measure: Diluted earnings per common share) 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 release of significant deferred tax asset valuation allowances. ETR-adjusted (Most comparable GAAP measure: Effective tax rate) 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 (Most comparable GAAP measure: Return on equity) 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 OPEB liabilities; and average automotive net income tax assets during the same period. Adjusted automotive free cash flow (Most comparable GAAP measure: Net automotive cash provided by operating activities) 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. 45 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, 2023 2022 2021 Net income attributable to stockholders $ 10,127 $ 9,934 $ 10,019 Income tax expense 563 1,888 2,771 Automotive interest expense 911 987 950 Automotive interest income (1,109) (460) (146) Adjustments Voluntary separation program(a) 1,035 — — Buick dealer strategy(b) 569 511 — Cruise restructuring(c) 478 — — GM Korea wage litigation(d) (106) — 82 India asset sales(e) (111) — — Cruise compensation modifications(f) — 1,057 — Russia exit(g) — 657 — Patent royalty matters(h) — (100) 250 GM Brazil indirect tax matters(i) — — 194 Cadillac dealer strategy(j) — — 175 Total adjustments 1,865 2,125 701 EBIT-adjusted $ 12,357 $ 14,474 $ 14,295 __________ (a) These adjustments were excluded because they relate to the acceleration of attrition as part of the cost reduction program announced in January 2023, primarily in the U.S. (b) These adjustments were excluded because they relate to strategic activities to transition certain Buick dealers out of our dealer network as part of Buick’s EV strategy. (c) These adjustments were excluded because they relate to restructuring costs resulting from Cruise voluntarily pausing its driverless, supervised and manual AV operations in the U.S. while it examines its processes, systems and tools. The adjustments primarily consist of non-cash restructuring charges, supplier related charges and employee separation charges. (d) These adjustments were excluded because of the unique events associated with Supreme Court of the Republic of Korea (Korea Supreme Court) decisions related to our salaried workers in 2021 and partial resolution of subcontractor matters in 2023. (e) These adjustments were excluded because they relate to an asset sale resulting from our strategic decision in 2020 to exit India. (f) This adjustment was excluded because it relates to the one-time modification of Cruise stock incentive awards. (g) This adjustment was excluded because it relates to the shutdown of our Russia business including the write off of our net investment and release of accumulated translation losses into earnings. (h) These adjustments were excluded because they relate to certain royalties accrued with respect to past-year vehicle sales in 2021 and the resolution of substantially all of these matters in 2022. (i) This adjustment was excluded because it relates to a settlement with third parties relating to retrospective recoveries of indirect taxes in Brazil realized in prior periods. (j) This adjustment was excluded because it relates to strategic activities to transition certain Cadillac dealers out of our dealer network as part of Cadillac's EV strategy. 46 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, 2023 2022 2021 Amount Per Share Amount Per Share Amount Per Share Diluted earnings per common share $ 10,022 $ 7.32 $ 8,915 $ 6.13 $ 9,837 $ 6.70 Adjustments(a) 1,865 1.36 2,125 1.46 701 0.47 Tax effect on adjustments(b) (504) (0.37) (423) (0.29) (105) (0.07) Tax adjustments(c) (870) (0.64) (482) (0.33) (51) (0.03) Deemed dividend adjustment(d) — — 909 0.63 — — EPS-diluted-adjusted $ 10,513 $ 7.68 $ 11,044 $ 7.59 $ 10,382 $ 7.07 __________ (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, 2023, the adjustment consists of tax benefit related to the release of a valuation allowance against deferred tax assets considered realizable in Korea. In the year ended December 31, 2022, the adjustment consists of tax benefit related to the release of a valuation allowance against deferred tax assets considered realizable as a result of Cruise tax reconsolidation. 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. These adjustments were excluded because significant impacts of valuation allowances are not considered part of our core operations. (d) This adjustment consists of a deemed dividend related to the redemption of Cruise preferred shares from SoftBank in the year ended December 31, 2022. The following table reconciles our effective tax rate under U.S. GAAP to ETR-adjusted: Years Ended December 31, 2023 2022 2021 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 $ 10,403 $ 563 5.4 % $ 11,597 $ 1,888 16.3 % $ 12,716 $ 2,771 21.8 % Adjustments(a) 1,916 504 2,221 423 726 105 Tax adjustments(b) 870 482 51 ETR-adjusted $ 12,319 $ 1,937 15.7 % $ 13,818 $ 2,793 20.2 % $ 13,442 $ 2,927 21.8 % __________ (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, 2023, 2022 and 2021. 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 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, 2023 2022 2021 Net income attributable to stockholders $ 10.1 $ 9.9 $ 10.0 Average equity(a) $ 72.0 $ 66.6 $ 56.5 ROE 14.1 % 14.9 % 17.7 % __________ (a) Includes equity of noncontrolling interests where the corresponding earnings (loss) are included in Net income attributable to stockholders. 47 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES The following table summarizes the calculation of ROIC-adjusted (dollars in billions): Years Ended December 31, 2023 2022 2021 EBIT-adjusted(a) $ 12.4 $ 14.5 $ 14.3 Average equity(b) $ 72.0 $ 66.6 $ 56.5 Add: Average automotive debt and interest liabilities (excluding finance leases) 16.2 17.6 17.1 Add: Average automotive net pension & OPEB liability 8.1 9.4 15.8 Less: Average automotive net income tax asset (21.1) (21.2) (22.2) ROIC-adjusted average net assets $ 75.2 $ 72.3 $ 67.2 ROIC-adjusted 16.4 % 20.0 % 21.3 % __________ (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. 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 needs and preferences; (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 strategic portfolio of electric vehicles that will help drive consumer adoption; (4) the success of our current line of ICE vehicles, particularly our 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 AVs, including the various regulatory approvals and permits required for operating driverless AVs in multiple markets; (7) risks associated with climate change, including increased regulation of GHG 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) inflationary pressures and persistently high 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, particularly with respect to facilitating access to raw materials necessary for the production of EVs, 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; (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) pandemics, epidemics, disease outbreaks and other public health crises; (16) the 48 Table of Contents GENERAL MOTORS COMPANY AND SUBSIDIARIES 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; (17) our ability to manage risks related to security breaches, cyberattacks and other disruptions to our information technology systems and networked products, including connected vehicles and in-vehicle systems; (18) 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 information of our customers, employees, or suppliers; (19) 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; (20) costs and risks associated with litigation and government investigations; (21) the costs and effect on our reputation of product safety recalls and alleged defects in products and services; (22) any additional tax expense or exposure or failure to fully realize available tax incentives; (23) our continued ability to develop captive financing capability through GM Financial; and (24) 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. * * * * * * *