UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 10, 2006
GENERAL MOTORS CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
STATE OF DELAWARE 1-143 38-0572515
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(State or other jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
300 Renaissance Center, Detroit, Michigan 48265-3000
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (313) 556-5000
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 8.01. OTHER EVENTS
On April 2, 2006, General Motors Corporation ("GM") and its wholly owned
subsidiaries General Motors Acceptance Corporation, a Delaware corporation
("GMAC" or the "Company"), and GM Finance Co. Holdings Inc., a Delaware
corporation ("Holdco"), entered into a Purchase and Sale Agreement (the
"Agreement") with FIM Holdings LLC, a Delaware limited liability company
("Purchaser"), pursuant to which GM will sell to Purchaser common limited
liability company interests of GMAC representing 51% of the common limited
liability company interests of GMAC (following its conversion to limited
liability company form) upon the terms and subject to the conditions set forth
in the Agreement (the "Acquisition"). Subject to the satisfaction or waiver of
the various closing conditions, GM expects that the Acquisition will be
completed in the fourth quarter of 2006, at which time the dividend policy of
the Company is expected to be as described below, unless otherwise agreed by GM
and the Purchaser.
o The Company will distribute to GM and the Purchaser, as the holders of the
preferred membership interests in the Company, the accrued 10% yield for
the immediately preceding quarter based on the number of preferred
membership interests held by each. (GM will acquire $1.555 billion in
preferred membership interests from the Company at Closing at a 10%
discount, or a cash cost of $1.4 billion.)
o Prior to the second anniversary of the closing date, at least 40% and,
from and after the second anniversary of the closing date, at least 70%,
of the excess of (A) the earnings of the Company and its subsidiaries
generated in any fiscal quarter over (B) the amount of yield distributed
to the holders of the preferred membership interests in such fiscal
quarter as described above will be distributed to the members of the
Company pro rata in accordance with the number of common membership
interests held by each holder. Forty percent roughly approximates the
income tax expense that would be attributable to GM and the Purchaser,
although GM is not expected to have to use such distribution to pay actual
cash income taxes in the near term. In years three through five
following the Acquisition, Purchaser will reinvest cash distributions it
receives, at least attributable to the indirect interest of Cerberus
Capital Management, L.P. in the Company, in excess of 40% into additional
preferred membership interests of the Company.
o The board of directors of the Company could, with the consent of GM,
reduce any distribution below that described above. In addition, the board
of directors of the Company could, without the consent of GM, reduce any
distribution below that described above to the extent required to avoid a
reduction of the equity capital of the Company below an agreed minimum
capital amount (approximately net book value at closing).
o The board of directors of the Company could increase any distribution
described above, provided, that if such a distribution would be reasonably
likely to result in a credit downgrade of any unsecured indebtedness of
the Company or certain subsidiaries or a negative change in the outlook of
such credit rating of the Company or such subsidiaries, such distribution
would require the approval of at least a majority of the independent
directors of the Company.
o In any event, any distribution that would reduce the equity capital below
the required minimum capital amount would require the approval of at least
a majority of the independent directors of the Company.
If the Acquisition is completed, GM and GMAC will enter into a number of
agreements that will require that GMAC continue to allocate capital to provide
financing to GM customers and wholesale dealers in accordance with historical
practice. While GMAC will retain the right to make individual credit decisions,
GMAC will commit to fund a broad credit spectrum of customers and dealers
consistent with historical practice in the relevant jurisdiction. In the U.S.
and Canada, GMAC will continue to purchase retail lease contracts, and upon
remarketing of the leased vehicles at the end of the lease, GMAC will continue
to be responsible for 50% of the difference between the resale proceeds and the
adjusted Automotive Lease Guide value (known as lease risk sharing). Subject to
GMAC's fulfillment of certain conditions, GM will grant GMAC exclusivity for 10
years for U.S., Canadian, and international GM-sponsored retail and wholesale
marketing incentives.
The transaction is expected to reduce GMAC's cost of funds as GMAC's ratings are
delinked from GM's and improve over time. Under the agreements, GM will directly
benefit from GMAC's lower cost of funds. In the U.S., GMAC will pay GM $75
million annually to be the exclusive provider of incentives relating to retail
financing. The amount and timing of rate support paid by GM to GMAC are not
expected to be materially different from historic practice. GM will pay
estimated residual support on lease contracts at lease inception. GMAC will
continue to have access to GM trademarks, but going forward GMAC will
pay GM a royalty of 3.25% of GMAC's revenue from the sale of contracts for the
GM Protection Plan and GM Motor Club. The royalty fees are expected to total
approximately $25 million annually, but in no event will the fees be less than
$15 million annually.
Forward-Looking Statements
In this report and in related comments by management of GM, our use of the
words "expect," "anticipate," "estimate," "forecast," "initiative," "objective,"
"plan," "goal," "project," "outlook," "priorities," "target," "intend,"
"evaluate," "pursue," "seek," "may," "would," "could," "should," "believe,"
"potential," "continue," "designed," "impact," or the negative of any of those
words or similar expressions is intended to identify forward-looking statements.
While these statements represent our current judgment on what the future may
hold, and we believe these judgments are reasonable when made, these statements
are not guarantees of any events or financial results, and GM's actual results
may differ materially due to numerous important factors that may be revised or
supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors
include, among others, the following:
o The ability of GM to realize production efficiencies, to achieve
reductions in costs as a result of the turnaround restructuring and health
care cost reductions and to implement capital expenditures at levels and
times planned by management;
o Receipt of regulatory approvals needed to complete the Acquisition;
o The pace of product introductions;
o Market acceptance of GM's new products;
o Significant changes in the competitive environment and the effect of
competition in the Corporation's markets, including on GM's pricing
policies;
o Our ability to maintain adequate liquidity and financing sources and an
appropriate level of debt;
o Restrictions on GMAC's and ResCap's ability to pay dividends and prepay
subordinated debt obligations to us;
o Changes in the existing, or the adoption of new, laws, regulations,
policies or other activities of governments, agencies and similar
organizations where such actions may affect the production, licensing,
distribution or sale of our products, the cost thereof or applicable tax
rates;
o Costs and risks associated with litigation;
o The final results of investigations and inquiries by the SEC;
o Changes in our accounting principles, or their application or
interpretation, and our ability to make estimates and the assumptions
underlying the estimates, including the range of estimates for the Delphi
pension benefit guarantees, which could result in an impact on earnings;
o Changes in relations with unions and employees/retirees and the legal
interpretations of the agreements with those unions with regard to
employees/retirees;
o Negotiations and bankruptcy court actions with respect to Delphi's
obligations to GM, negotiations with respect to GM's obligations under the
pension benefit guarantees to Delphi employees, and GM's ability to
recover any indemnity claims against Delphi;
o Labor strikes or work stoppages at GM or its key suppliers such as Delphi
or financial difficulties at GM's key suppliers such as Delphi;
o Additional credit rating downgrades and the effects thereof;
o The effect of a potential sale or other extraordinary transaction
involving GMAC on the results of GM's and GMAC's operations and liquidity;
o Other factors affecting financing and insurance operating segments'
results of operations and financial condition such as credit ratings,
adequate access to the market, changes in the residual value of off-lease
vehicles, changes in U.S. government-sponsored mortgage programs or
disruptions in the markets in which our mortgage subsidiaries operate, and
changes in our contractual servicing rights;
o Shortages of and price increases for fuel; and
o Changes in economic conditions, commodity prices, currency exchange rates
or political stability in the markets in which we operate.
In addition, GMAC's actual results may differ materially due to numerous
important factors that are described in GMAC's most recent report on SEC Form
10-K, which may be revised or supplemented in subsequent reports on SEC Forms
10-Q and 8-K. Such factors include, among others, the following:
o The ability of GM to complete a transaction regarding a controlling
interest in GMAC while maintaining a significant stake in GMAC, securing
separate credit ratings and low cost funding to sustain growth for GMAC
and ResCap, and maintaining the mutually beneficial relationship between
GMAC and GM;
o Significant changes in the competitive environment and the effect of
competition in GM's markets, including on GM's pricing policies;
o Our ability to maintain adequate financing sources;
o Our ability to maintain an appropriate level of debt;
o The profitability and financial condition of GM, including changes in
production or sales of GM vehicles, risks based on GM's contingent benefit
guarantees and the possibility of labor strikes or work stoppages at GM or
at key suppliers such as Delphi;
o Funding obligations under GM and its subsidiaries' qualified U.S. defined
benefits pension plans;
o Restrictions on ResCap's ability to pay dividends and prepay subordinated
debt obligations to us;
o Changes in the residual value of off-lease vehicles;
o Changes in U.S. government-sponsored mortgage programs or disruptions in
the markets in which our mortgage subsidiaries operate;
o Changes in our contractual servicing rights;
o Costs and risks associated with litigation;
o Changes in our accounting assumptions that may require or that result from
changes in the accounting rules or their application, which could result
in an impact on earnings;
o Changes in the credit ratings of GMAC or GM;
o The threat of natural calamities;
o Changes in economic conditions, currency exchange rates or political
stability in the markets in which we operate; and
o Changes in the existing, or the adoption of new, laws, regulations,
policies or other activities of governments, agencies and similar
organizations.
Investors are cautioned not to place undue reliance on forward-looking
statements. GM undertakes no obligation to update publicly or otherwise revise
any forward-looking statements, whether as a result of new information, future
events or other such factors that affect the subject of these statements, except
where expressly required by law.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
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(Registrant)
Date: April 10, 2006 By: /s/PETER R. BIBLE
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(Peter R. Bible,
Chief Accounting Officer)