GM 2007 Annual Report

General Motors Corporation 2007 Annual Report next 100 YEARS of leadership. 100 YEARS of innovation. General Motors Corporation 1 100 YEARS of putting people on wheels. 2 General Motors Corporation And we’re just getting started. We’re making the best cars and trucks we ever have. And we’re selling them in more parts of the world than ever before. We’re very proud of our past, but even more excited about our future. We’re focused on what’s next: building the best General Motors yet. General Motors Corporation 3 Bob Lutz Vice Chairman, Global Product Development Fritz Henderson Rick Wagoner GM’s senior leadership in the President & Chairman & Cadillac Display at the 2008 Chief Operating Offi cer Chief Executive Offi cer North American International Auto Show in Detroit, Michigan. 4 General Motors Corporation DEAR STOCKHOLDERS: A century is a long time to be in business. For General Motors, it’s been a century of leadership and achievements, of challenges and opportunities. A centennial is a great time to refl ect on and celebrate the past. But for us, it’s more than that…it’s an opportunity to look forward to our next 100 years. GM’s centennial comes at an exciting time for the 2007 YEAR IN REVIEW auto industry, as we move aggressively to realize the 2007 was another year of important progress for GM, potential of two huge trends that are transforming the as we implemented further signifi cant structural cost global auto industry and society itself. The fi rst trend is reductions in North America, grew aggressively in emerg- the rapidly growing role, and importance, of emerging ing markets, negotiated an historic labor contract with markets. 2007 was the auto industry’s sixth consecutive our United Auto Workers union partners in the U.S., year of record global sales: about 71 million units. further developed a broad range of advanced propulsion That’s up about 24 percent in just six years – all of it technologies and, most importantly, introduced a series attributable to emerging markets. Going forward, we of breakthrough cars and trucks around the world. expect the growth and importance of emerging markets We’re pleased with the improvement trend in our to accelerate. automotive results. But we know we have more work to This extraordinary growth is helping to defi ne the do to achieve the profi tability and positive cash fl ow that second trend transforming our industry and world today, we need, and that our stockholders expect and deserve. and that is the need to develop robust alternatives to GM’s core automotive business generated record our traditional almost-complete reliance on oil to power revenue of $178 billion in 2007, a $7 billion improve- our vehicles. It’s clear that biofuels and advanced ment over 2006. In total, GM generated $181 billion in propulsion technologies will be required to address key revenue in 2007, compared with $206 billion in 2006. societal issues of energy supply, energy security and The decrease is primarily due to the deconsolidation CO2 emissions. of GMAC, following our sale of 51 percent of GMAC in Together, these two enormous trends provide an November 2006. extraordinary opportunity for GM to redefi ne ourself and Adjusted automotive earnings before tax, excluding to lead the reinvention of the global auto industry. We special items, were $553 million in 2007, an improvement are committed to take full advantage of these two of nearly $900 million versus 2006, despite a slowing extraordinary trends to drive GM’s transformation from U.S. economy, weak market conditions in the U.S. and a 100-year-old company, to a company that is ready to record high commodity costs – trends that will continue lead for 100 years to come. to impact our results in 2008. But fi rst things fi rst. To achieve the future that we GM’s total adjusted net loss in 2007, excluding envision for GM, we fi rst must complete the transforma- special items, was $23 million, refl ecting a $1.1 billion tion of GM that we’ve been aggressively driving for loss attributed to our 49 percent stake in GMAC. While several years. GMAC’s traditional auto fi nancing business performed General Motors Corporation 5 FINANCIAL HIGHLIGHTS (Dollars in millions, except per share amounts) Years Ended December 31, 2007 2006 2005 Net sales and revenue Automotive sales $178,199 $171,179 $158,623 Financial services and insurance revenue $÷÷2,923 $÷34,422 $÷34,427 Total net sales and revenue $181,122 $205,601 $193,050 Worldwide production volume (units in thousands) 9,286 9,181 9,051 Adjusted net income (loss)(1) Income (loss) $÷÷÷÷(23) $÷÷2,176 $÷«(3,205) Diluted earnings (loss) per share $÷÷«(0.04) $÷÷÷3.84 $÷÷«(5.67) Adjusted net profi t margin –% 1.1% (1.7) % Loss before cumulative effect of a change in accounting principle $«(38,732) $÷«(1,978) $«(10,308) Cumulative effect of a change in accounting principle – – $÷÷÷(109) Net loss $«(38,732) $÷«(1,978) $«(10,417) Net profi t margin before cumulative effect of a change in accounting principle (21.4) % (1.0) % (5.3) % Diluted earnings (loss) per share Before cumulative effect of a change in accounting principle $÷«(68.45) $÷÷«(3.50) $÷«(18.23) Net income $÷«(68.45) $÷÷«(3.50) $÷«(18.42) Book value per share of common stock $÷«(65.54) $÷÷«(9.99) $÷÷25.52 Number of common shares outstanding as of December 31 (in millions) 566 566 566 (1) A reconciliation of adjusted amounts in these Financial Highlights and in the Chairman’s Letter to Stockholders to amounts determined in accordance with accounting principles generally accepted in the United States may be found at www.gm.com/company/investor_information/, Earnings Releases, Financial Highlights. 6 General Motors Corporation well, those results were more than offset by massive and reduce dealer inventories, despite challenging losses in GMAC’s mortgage businesses. market conditions. Including special items, GM reported a loss of On the cost-side of our turnaround plan, we realized $38.7 billion, or $68.45 per diluted share in 2007. the full benefi t of our massive cost-reduction efforts in This loss is almost entirely attributable to the non-cash 2005 and 2006, with GM North America now running $38.3 billion special charge in the third quarter related at an annual structural-cost base that is $9 billion less to a non-cash valuation allowance against deferred tax than in 2005. We also continued to make progress in assets. The valuation allowance has no impact on cash, our long-term effort to improve quality. As one example, and does not refl ect a change in the company’s view of in the latest J.D. Power vehicle dependability survey, its long-term fi nancial outlook. Buick fi nished tied for fi rst place among all manufacturers, While these results are disappointing, in many and Cadillac came in third. We’ve also witnessed, since respects the bigger story for GM in 2007 is what went 2005, an 89 percent reduction in vehicle recall cam- on behind the numbers – under the hood, if you will. Look paigns involving safety and non-compliance. under the hood, and we see that 2007 was a “tipping And, very importantly, we also negotiated a new point” for GM in terms of structuring the company and labor agreement with our primary union, the United building the product and technology momentum neces- Auto Workers, in 2007. In addition to effectively address- sary to position us for sustained profi tability and growth ing our healthcare cost burden, as discussed below, in the rapidly changing global auto industry. this agreement will enable us to signifi cantly improve our competitive position in the U.S. I want to acknowl- MASSIVE TURNAROUND edge the UAW leadership and membership for their In 2007, we continued to aggressively implement the willingness to work creatively with us to address some turnaround plan for North America that we initiated in very tough issues, and their important role in reaching 2005, starting with the successful launch of several great last year’s agreement. new cars and trucks. We began 2007 by winning both the North American Car and Truck of the Year awards, ADDRESSING THE LEGACY COST BURDEN with the Saturn Aura and Chevy Silverado, respectively. We’ve also made tremendous progress on what has In 2008, we won the North American Car of the Year been probably our single-most challenging issue in recent award for the second year in a row, this time with the years: GM’s healthcare and legacy cost burden. Our all-new Chevy Malibu sedan. progress has been the result of a series of actions and In between, the Cadillac CTS was named Motor Trend’s agreements over the last several years affecting both 2008 Car of the Year, the Buick Enclave luxury crossover salaried and hourly workers. In total, they represent a was picked as Urban Wheel’s Truck of the Year, and the major milestone in reestablishing GM’s ability to be fully Chevy Corvette, Chevy Malibu and Cadillac CTS were cost competitive in the U.S. picked as Automobile magazine “All Stars,” and as three Consider that from 1993 through 2007, GM has spent of Car and Driver’s “10 Best Cars.” a total of $103 billion in the U.S. to fund legacy pensions In 2007, we continued to implement major improve- and retiree healthcare – an average of about $7 billion ments to our U.S. sales and marketing strategy. Over a year – a dramatic competitive and cash-fl ow disadvan- the past two years, we’ve re-focused our marketing tage.

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