Annual Report

1. Annual Report General Motors Corporation Natalie Williams ACG2021.0H1

2. Executive Summary I believe that General Motors Corporation is in the process of overcoming difficult times. Benefit costs for employees have left GM with an overwhelming expense burden. If finances worsen bankruptcy is a definite possibility. General Motors Corporation needs to reduce the amount of health care expenditures for retired employees and significantly reduce the number of current employees. Although it is unfortunate, these things must take place in order for GM to survive. Among other things, GM also needs to continue introducing new products to the market, allowing for increase in profits. In order to maintain its position as the leading producer in the automotive industry General Motors GM Annual Report (HTML) GM Annual Report (PDF)

3. Introduction Chief Executive Officer: G. Richard (Rick) Wagner Jr. Location: 300 Renaissance Center Detroit, Michigan 48265-3000 Ending date of latest fiscal year: December 31, 2005 The products and services that General Motors provides are “automotive production and marketing and financing and insurance operation” (GM Annual Report, page 43). Main geographic area of activity: North America- Canada, Mexico, and the United States

4. Audit Report General Motors Corporation Independent Auditors: Deloitte and Touche LLP Using the generally accepted accounting principles, the accounting firm Deloitte and Touche LLP stated that, to the best of their knowledge, the financial statements presented to them by the General Motors Corporation were acceptable. They did, however, report on March 28,2006 the fact that there had been a misstatement in 2005 by management (internal control) dealing with operating lease with daily rental car entities.

5. Stock Market Information Most recent price of GM stock:$31.78 Twelve month trading range of GM stock:$18.33 - $34.00 Dividends per share: “Cash dividends per share of GM $1 2/3 par value common stock were $2.00 in 2005, 2004, and 2003. At the February 6, 2006 meeting of the GM Board of Directors, the board approved the reduction of the quarterly dividend on GM$1 2/3 par value common stock from $0.50 per share to $0.25 per share, effective for the first quarter of 2006, which was paid on March 10, 2006 to holders of record as of February 16, 2006” (GM Annual Report). Date of the above information: October 10, 2006 (Most Recent Price, 12-Month Trading Range); February 6, 2006 (Dividends per share) In my opinion, I believe that it would be a good decision to hold your shares of GM stock. I would recommend carefully watching the price of GM stock to see if it continues to stay in the $30 range or if it increases or decreases. However, GM does show potential growth as you can see from the twelve month trading range of the stock. If the price of the stock declines, sell it- this shows a loss in confidence of the General Motors Corporation by other investors.

6. Industry Situation and Company Plans General Motors Corporation has a positive outlook on the automotive industry and I have a positive outlook on GM. GM is the leading automotive company in the world, whose sales increased from 2004 to 2005. The United States represents the largest sales market for GM. While automobile sales are high, GM plans to surpass its’ numbers and continue to grow exponentially. Health care benefits for its’ employees, however, have taken a toll on GM. The cost of health care has drastically increased. The employee benefits expense has increased by over one million dollars since 2004, yet GM is still looking ahead and planning for the future to overcome these costs. GM’s main focus for the future is to make North American operations profitable once again. GM has a plan to turn it’s market around. GM North America’s 4-Point Turn Around Plan: • Health Care Cost Reductions- “This agreement with the United Auto Workers is projected to reduce retiree health care liabilities by about $15 billion, and cut the company’s health care expense by about $3 billion, before taxes” (http://www.mindfully.org/Industry/2005/GM-Cut-30000-Jobs21nov05.htm). • Product Renaissance- “GM North America will continue with its aggressive product assault on all vehicle segments. To target key growth segments with the right products, GM earlier this year increased capital expenditures, with the vast majority of that increase going toward future car and truck…To help drive additional sales in the future, the product plan includes a heavy emphasis on high-growth segments, such as "crossovers," compact and luxury SUVs, large pickups and entry luxury cars” (http://www.mindfully.org/Industry/2005/GM-Cut-30000-Jobs21nov05.htm). • Sales and Marketing- This strategy includes strengthening GM's automotive brands, marketing that emphasizes the inherent value of GM cars and trucks, completing GM's distribution channel strategy, and aggressively targeting markets where GM has underperformed against the competition” (http://www.theautochannel.com/news/2005/11/21/148682.html).

7. Income Statement • The format of the General Motors Corporation Income Statement is most like a multi-step format. • There is a decrease in Gross Profit from 2004 to 2005. There is an extremely large amount of net loss in the Income from Operations Account and the Net Income Account.

8. Balance Sheet Total Liabilities and Minority Interest both increased from 2004 to 2005. Total Stockholder’s Equity and Total Assets both decreased. The Minority Interest Account and the Total Stockholder’s Equity Account changed the most.

9. Accounting Policies • Relating to revenue recognition GM accounting policy is as follows, “sales are generally recorded when products are shipped (when title and risks and rewards of ownership have passed), or when services are rendered to independent dealers or other third parties” (GM Annual Report, page 107). • The GM accounting policy for cash is as follows, “Cash and cash equivalents are defined as short-term, highly-liquid investments with original maturities of 90 days or less” (GM Annual Report, page 108). • At GM “Inventories are stated generally at cost, which is not in excess of the market” (GM Annual Report, page 119). • There are no other significant accounting policies relating to short-term investments or property and equipment.

10. 1) Significant Accounting Policies 2) Acquisition and Disposal of Business 3) Discontinued Operations 4) Asset Impairments 5) Post-Employment Benefit Costs 6) Investments in Non-Consolidated Affiliates 7) Marketable Securities 8) Variable Interest Entities 9) Finance Receivables and Securitizations 10) Inventories 11) Equipment on Operating Leases 12) Income Taxes 13) Property-Net 14) Goodwill and Intangible Assets 15) Other Assets 16) Accrued Expenses, Other Liabilities, and Deferred Income Taxes 17) Long-Term Debt and Loans Payable 18) Pensions and Other Post-Retirement Benefits 19) Commitments and Contingent Matters 20) Stockholder’s Equity 21) Earnings (Loss) Per Share Attributable to Common Stock 22) Derivative Financial Instruments and Risk Management 23) Fair Value of Financial Instruments 24) Stock Incentive Plans 25) Other Income 26) Segment Reporting 27) Subsequent Events Accounting PoliciesTopics of The Notes to the Financial Statements

11. 2004 (in millions) Working Capital: $55,515 - $74,947 = $ -19,432 Current liabilities exceed current assets. Current Ratio: $55,515 / $74,947 = 0.7407 GM has $.74 of current assets for each $1.00 of current liabilities. Receivable Turnover: $161,545 / ($21,336 + $20,532) / 2 = $161,545 / $20,884 = 7.7353 GM turns its receivables approximately 7.7 times a year. Avg. Days’ Sales Uncollected: 365 / 7.7353 = 48.2071 GM turns its receivables approximately 7.7 times a year, for an average of every 47.2 days. Inventory Turnover: $159,957 / ($12,247 + $11,602) / 2 = $159,957 / $11,924.5 = 13.4141 GM turned its inventory over approximately 13.4 times. Avg. Days’ Inventory on Hand: 365 / 13.4141 = 27.2101 GM turned its inventory, on average, every 27.2 days. 2005 (in millions) Working Capital: $54,082 - $74,818 = $ -20,736 Current liabilities exceed current assets. Current Ratio: $54,082 / $74,818 = 0.7228 GM has $.72 of current assets for each $1.00 of current liabilities- a slight decrease from 2004. Receivable Turnover: $158,221 / ($15,578 + $21,336) / 2 = $158,221 / $18,547 = 8.5301 GM turns its receivables approximately 8.5 times a year. Avg. Days’ Sales Uncollected: 365 / 8.5301 = 42.7897 GM turns its receivables approximately 8.5 times a year, for an average of every 42.8 days. Inventory Turnover: $171,033 / (14,354 + $12,247) / 2 = $171,033 / $13,300.50 = 12.8591 GM turned its inventories over approximately 12.9 times. Avg. Days’ Inventory on Hand: 365 / 12.8591 = 28.3846 GM turned its inventory, on average, every 28.4 days. Financial AnalysisLiquidity Ratios

12. 2004 (in millions) Profit Margin: $2804 / $193,517 = 0.0145 = 1.45 % On each dollar of net sales GM made 1.45 cents. Asset Turnover: $161,545 / ($479,921 + $448,507) / 2 = $161,545 / $464,214 = 0.3479 GM produces approximately $.35 in sales for each $1.00 invested. Return on Assets: $2,804 / ($479,921 + $448,507) / 2 = $2,804 / $464,214 = 0.0060 For each dollar invested, GM assets generated .60 cents of net income. Return on Equity: $2,804 / ($27,360 + $25,268) / 2 = $2,804 / $26,314 = 0.1065 GM earned 10.65 cents for every dollar invested by stockholders. 2005 (in millions) Profit Margin: $10,567 / $192,604 = 0.0549 = 5.49 % On each dollar of net sales GM made 5.49 cents- an increase from 2004. Asset Turnover: $158,221 / ($476,078 / $479921) / 2 = $158,221 / $477999.5 = 0.3310 GM produces approximately $.33 in sales for each $1.00 invested- a slight decrease from 2004. Return on Assets: $10,567 / ($479,921 + $476,078) / 2 = $10,567 / $477,999.5 = .0221 = 2.21 % For each dollar invested, GM assets generated 2.21 cents of income- an increase from 2004. Return on Equity: $10,567 / ($14,597 + $27,360) / 2 = $10,567 / $20,978.5 = 0.5037 = 50.37 % GM earned 50.37 cents for every dollar invested by stockholders- an increase from 2004. Financial AnalysisProfitability Ratios

13. 2004 (in millions) Debt to Equity: $452,164 / 27,360 = 16.5265 = 1652.65 % GM has an extremely high debt to equity ratio. This means that much of the company’s assets are financed by creditors. GM has a lower chance of surviving hard times in the world’s economy, because they must continue to pay creditors. 2005 (in millions) Debt to Equity: $460,442 / 14,597 = 31.5436 = 3154.36 % Once again, GM has an extremely high debt to equity ratio. The ratio has also greatly increased since 2004. Much of GM assets are financed by creditors. They must continue to repay these creditors even when the world’s economy is in poor shape, making GM’s rate of survival even lower. Financial AnalysisSolvency Ratios

14. Current Market Strength Ratios Price/Earnings Per Share: $31.78 / $-21.046 = -1.51 Since the market price is -1.51 times earnings, the investors of GM are paying a relatively low price in relation to earnings. This tells us that the investor’s confidence in GM is also relatively low. Dividend Yield: $.25 /$ 31.78 = 0.0078 = .78 % The current return to the investor’s in the form of dividends is .78%. (I was unable to locate any information pertaining to 2004 stock price, earnings per share, or dividends.) 2005 GM Financial Statements (PDF) 2005 GM Financial Statements (HTML) 2004 GM Financial Statements (PDF) 2004 GM Financial Statements (HTML) Financial AnalysisMarket Strength Ratios