Goodwill

The following tables summarize the changes in the carrying amounts of Goodwill (dollars in millions):



	GMNA		GME			GMIO			GMSA			Total Automotive			GM Financial		Total
Balance at January 1, 2012	$	26,399	$	581		$	610		$	151		$	27,741		$	1,278	$	29,019
Impairment charges	—		(590		)	(27		)	—			(617		)	—		(617		)
Effect of foreign currency translation and other	—		9			(1		)	(5		)	3			—		3
Balance at June 30, 2012	$	26,399	$	—		$	582		$	146		$	27,127		$	1,278	$	28,405

Accumulated impairment charges at December 31, 2011	$	—	$	(2,482	)	$	(270	)	$	—		$	(2,752	)	$	—	$	(2,752	)
Accumulated impairment charges at June 30, 2012	$	—	$	(3,072	)	$	(297	)	$	—		$	(3,369	)	$	—	$	(3,369	)

We adopted the provisions of ASU 2010-28 "When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts" (ASU 2010-28) on January 1, 2011 and performed Step 2 of the goodwill impairment testing analysis for our GME reporting unit which had a negative carrying amount resulting in the recognition of a cumulative-effect adjustment to Retained earnings. GME continued to have a negative carrying amount and because it was more likely than not further goodwill impairment existed in the three months ended March 31, 2012 and 2011 we recorded further Goodwill impairment charges in the three months ended March 31, 2012 and 2011. At March 31, 2012 GME's Goodwill balance was $0.

In the three months ended March 31 and June 30, 2012 we performed event-driven goodwill impairment tests at our GM Korea reporting unit, which resulted in a Goodwill impairment charge of $27 million in the three months ended March 31, 2012 within our GMIO segment.

The following tables summarize the Goodwill impairment charges recorded in the three and six months ended June 30, 2012 and 2011 (dollars in millions):



	2012
	GMNA		GME		GMIO		GMSA		Total Automotive		GM Financial		Total
Three months ended June 30	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Six months ended June 30	$	—	$	590	$	27	$	—	$	617	$	—	$	617



	2011
	GMNA		GME		GMIO		GMSA		Total Automotive		GM Financial		Total
Effect of Adoption of ASU 2010-28(a)	$	—	$	1,466	$	—	$	—	$	1,466	$	—	$	1,466
Three months ended June 30	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Six months ended June 30	$	—	$	395	$	—	$	—	$	395	$	—	$	395

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(a)	Impairment charges were recorded as a cumulative-effect adjustment to beginning Retained earnings upon the adoption of ASU 2010-28 in the three months ended March 31, 2011.

The Goodwill impairment charges recorded as a result of the initial adoption of ASU 2010-28 in the three months ended March 31, 2011 and the event-driven goodwill impairment tests in the six months ended June 30, 2012 and 2011 represent the net decreases in implied goodwill resulting primarily from decreases in the fair value-to-U.S. GAAP differences attributable to those assets and liabilities that gave rise to goodwill upon our application of fresh-start reporting, as discussed in Note 32 to our consolidated financial statements in our 2011 Form 10-K. The net decreases resulted primarily from a decrease in our nonperformance risk and an improvement in our incremental borrowing rates since July 10, 2009. At certain of the testing dates the net decrease also resulted from an increase in the high quality corporate bond rates utilized to measure our employee benefit obligations and a decrease in credit spreads between high quality corporate bond rates and market interest rates for companies with similar nonperformance risk. In addition, for the purpose of deriving an implied goodwill balance, deterioration in the business outlook for GME resulted in a reduction in the fair value of certain tax attributes and an increase in the fair value of estimated employee benefit obligations.

When performing our goodwill impairment testing, the fair values of our reporting units were determined based on valuation techniques using the best available information, primarily discounted cash flow projections. We make significant assumptions and estimates about the extent and timing of future cash flows, growth rates, market share and discount rates that represent unobservable inputs into our valuation methodologies. The cash flows are estimated over a significant future period of time, which makes those estimates and assumptions subject to a high degree of uncertainty. Where available and as appropriate, comparative market multiples and the quoted market price of our common stock are used to corroborate the results of the discounted cash flow method. Assumptions used in our discounted cash flow analysis that have the most significant effect on the estimated fair values of our reporting units include:

•Our estimated WACC;

•Our estimated long-term growth rates; and

•Our estimate of industry sales and our market share.

The valuation methodologies utilized to perform our goodwill impairment testing were consistent with those used in our application of fresh-start reporting on July 10, 2009 and in subsequent annual or event-driven goodwill impairment tests and utilized Level 3 measures. Because the fair value of goodwill can be measured only as a residual amount and cannot be determined directly we calculated the implied goodwill for GME and GM Korea in the same manner that goodwill is recognized in a business combination pursuant to Accounting Standards Codification (ASC) 805, "Business Combinations."

The following table summarizes the Goodwill balances and key assumptions, which are unobservable, utilized for each of our reporting units that required a Step 2 analysis (dollars and industry volumes in millions):



							Industry Volumes(a)(b)		Market Share(a)(b)
	Goodwill(c)		WACC		Long-Term Growth Rates		2011/2012	2015/2016	2011/2012		2015/2016
GME - At January 1, 2011	$	3,053	17.0	%	0.5	%	18.4	22.0	6.6	%	7.4	%
GME - At March 31, 2011	$	1,661	16.5	%	0.5	%	18.4	22.0	6.6	%	7.4	%
GME - At March 31, 2012	$	594	17.5	%	0.5	%	19.1	21.9	6.2	%	6.3	%
GM Korea - At March 31, 2012	$	564	14.8	%	3.0	%	81.0	97.1	1.4	%	1.1	%
GM Korea - At June 30, 2012	$	523	14.8	%	3.0	%	81.0	97.1	1.4	%	1.1	%

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(a)	Industry volumes and market share for GM Korea are based on global industry volumes because GM Korea exports vehicles globally.


(b)	GME amounts at January 1, 2011 and March 31, 2011 are 2011 through 2015 and GME amounts at March 31, 2012 are 2012 through 2016. GM Korea amounts are 2012 through 2015.


(c)	Represents the balance of Goodwill evaluated for impairment under the Step 2 analysis.

The WACCs considered various factors including bond yields, risk premiums and tax rates; the terminal values were determined using a growth model that applied a reporting unit's long-term growth rate to its projected cash flows beyond the forecast period; and industry sales and a market share for each reporting unit included annual estimates through the forecast period. In addition, minimum operating cash needs that incorporate specific business, economic and regulatory factors giving rise to varying cash needs were estimated.

During our Step 2 analyses we determined the fair values of these reporting units had not increased sufficiently to give rise to implied goodwill other than the goodwill arising from the fair value-to-U.S. GAAP differences attributable to those assets and liabilities that gave rise to goodwill upon our application of fresh-start reporting. On our testing dates our Step 2 analyses indicated GME's and GM Korea's implied goodwill was less than their recorded goodwill; therefore, Goodwill was adjusted at the various dates indicated in the table above, except for at June 30, 2012 GM Korea's implied goodwill exceeded its recorded goodwill. As such GM Korea's goodwill was not adjusted at June 30, 2012.

Future goodwill impairments that may be material could be recognized should the economic uncertainty continue, our equity price decline on a sustained basis, global economies enter into another recession and industry growth stagnates, or should we reverse deferred tax asset valuation allowances in certain tax jurisdictions. Our U.S. and Canadian operations are experiencing current profitability. To the extent this profitability trend continues our conclusion regarding the need for full valuation allowances could change leading to the reversal of a significant portion of valuation allowance in 2012. This could result in a material impairment of goodwill.

In these circumstances future goodwill impairments would largely be affected by decreases in the fair value-to-U.S. GAAP differences that have occurred subsequent to our application of fresh-start reporting. The decrease may occur upon: (1) an improvement in our credit rating; (2) a decrease in credit spreads between high quality corporate bond rates and market interest rates thus resulting in a decrease in the spread between our employee benefit related obligations under U.S. GAAP and their fair values; and/or (3) a change in the fair values of our estimated employee benefit obligations. A decrease would also occur upon reversal of our deferred tax asset valuation allowances. Any decreases in the fair value-to-U.S. GAAP differences that result in goodwill impairment would have a negative effect on our earnings that could be material.

Our fair value estimates for event-driven impairment tests assume the achievement of the future financial results contemplated in our forecasted cash flows and there can be no assurance that we will realize that value. The estimates and assumptions used are subject to significant uncertainties, many of which are beyond our control, and there is no assurance that anticipated financial results will be achieved.