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Discontinued Operations | 6 Months Ended
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Jun. 30, 2017
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | Discontinued Operations On March 5, 2017 we entered into a Master Agreement (the Agreement) to sell our European Business, consisting of the Opel/Vauxhall Business and the Fincos, to Peugeot, S.A. (PSA Group) for net consideration with an estimated value of approximately $2.2 billion based upon exchange rates as of June 30, 2017, subject to foreign currency fluctuations. The net consideration to be paid for the Opel/Vauxhall Business under the Agreement has an estimated value of approximately $1.2 billion, consisting of (1) approximately $1.0 billion in cash; and (2) $700 million in warrants in PSA Group; partially offset by (3) the approximate $500 million de-risking premium payment to be made to PSA Group for assuming certain underfunded pension liabilities. The warrants are not exercisable for five years and do not include any governance or voting rights with respect to PSA Group. In addition, we have agreed to sell the shares of PSA Group received upon exercise of the warrants within 35 days after exercise. The net consideration to be paid for the Fincos will be 0.8 times their book value at closing, which we estimate will be approximately $1 billion. The purchase price is subject to certain working capital adjustments as provided in the Agreement. During the three months ended June 30, 2017, the assets and liabilities of the European Business have been presented as being held for sale and its operations and cash flows have been presented as discontinued operations. The transfer of the Opel/Vauxhall Business is expected to close in the second half of 2017 subject to the receipt of necessary regulatory approvals and satisfaction of other closing conditions, and the transfer of the Fincos is expected to close as soon as practicable after the receipt of the necessary antitrust, financial and other regulatory approvals and satisfaction of other closing conditions, which may be after the transfer of the Opel/Vauxhall Business. The transfer of the Fincos will not occur unless the transfer of the Opel/Vauxhall Business occurs. The Company expects to recognize a charge resulting from the sale of the European Business of approximately $5.5 to $6.0 billion. The expected charge principally relates to: (1) approximately $3.9 billion of deferred tax assets that will no longer be realizable or that will transfer to PSA Group upon sale; (2) approximately $1.6 billion related to previously deferred pension losses and payment of a de-risking premium to PSA Group for its assumption of certain underfunded pension liabilities; (3) a disposal loss on the Fincos of up to $700 million; and (4) other net charges primarily related to contract cancellations, working capital adjustments and certain transitional services and other costs to support the separation of operations to be provided for a period of time following closing. Proceeds will partially offset certain of these charges. Of these amounts, in the three months ended June 30, 2017 we recognized a disposal loss of $324 million as a result of the Fincos being classified as held for sale, charges of $421 million for the cancellation of product programs resulting from the convergence of vehicle platforms between our European Business and PSA Group and other insignificant charges. These charges were recorded in Income (loss) from discontinued operations, net of tax. The remainder of the expected charge will be recognized upon closing. Our wholly-owned subsidiary (the Seller) has agreed to indemnify PSA Group for certain losses resulting from any inaccuracy of the representations and warranties or breaches of our covenants included in the Agreement and for certain other liabilities, including emissions and product liabilities. The Company has entered into a guarantee for the benefit of PSA Group and pursuant to which the Company has agreed to guarantee the Seller's obligation to indemnify PSA Group for certain losses resulting from any inaccuracy of certain representations and warranties or breaches of our covenants in the Agreement and for certain other liabilities. Certain of these indemnification obligations are subject to time limitations, thresholds and/or caps as to the amount of required payments. We will retain net underfunded pension liabilities of approximately $7.0 billion primarily to current pensioners and former employees of the European Business with vested pension rights. PSA Group will assume approximately $2.9 billion of net underfunded pension liabilities primarily with respect to active employees of the European Business, and at closing, the Seller will make payments to PSA Group, or one or more pension funding vehicles, of approximately $3.4 billion, subject to foreign currency and discount rate fluctuations, in respect of these assumed liabilities, which includes pension funding payments for active employees and the de-risking premium payment of approximately $500 million discussed above. The pension liabilities described herein are calculated as of December 31, 2016 and have been updated to reflect foreign exchange rates at June 30, 2017. The actual pension liabilities retained by the Seller and assumed by PSA Group will be determined at the closing date and, as a result, may differ from the amounts reported herein. We have entered into interest rate swaps and foreign exchange forwards to hedge market risk associated with funding pension liabilities assumed by PSA Group. At closing we expect to draw upon our three year revolving credit facility to fund the payments made to PSA Group for the transferred pension liabilities. We plan to issue debt securities thereafter to repay the draw on our credit facility subject to market conditions. As part of the retained pension liabilities described above, we will retain the United Kingdom defined benefit pension plans in existence at signing related to the European Business, including responsibility for service cost accruals through the closing date. Those plans with active participants will close to future accrual as of the day before closing. Any future service cost accruals on and from the closing date will be the responsibility of PSA Group. We have agreed to purchase from and supply to PSA Group certain vehicles for a period of time following closing. As a result, Total net sales and revenue from continuing operations include $760 million and $570 million related to transactions with the European Business for the three months ended June 30, 2017 and 2016, and $1.5 billion and $1.2 billion for the six months ended June 30, 2017 and 2016 and Total costs and expenses from continuing operations include $713 million and $512 million related to transactions with the European Business for the three months ended June 30, 2017 and 2016 and $1.4 billion and $1.0 billion for the six months ended June 30, 2017 and 2016. Intercompany profit on these transactions was eliminated in consolidation. The following table summarizes the results of the discontinued operations:
| Three Months Ended |  | Six Months Ended
| June 30, 2017 |  | June 30, 2016 |  | June 30, 2017 |  | June 30, 2016
Automotive net sales and revenue | $ | 5,005 |  |  | $ | 5,649 |  |  | $ | 9,704 |  |  | $ | 10,567 |
GM Financial net sales and revenue | 139 |  |  | 146 |  |  | 267 |  |  | 286 |
Total net sales and revenue | 5,144 |  |  | 5,795 |  |  | 9,971 |  |  | 10,853 |
Automotive cost of sales | 4,906 |  |  | 5,291 |  |  | 9,466 |  |  | 10,008 |
GM Financial interest, operating and other expenses | 102 |  |  | 101 |  |  | 202 |  |  | 213 |
Automotive selling, general, and administrative expense | 353 |  |  | 339 |  |  | 679 |  |  | 687 |
Other income and (expense) items | (1 | ) |  | 36 |  |  | 2 |  |  | 65 |
Income (loss) from discontinued operations before taxes | (218 | ) |  | 100 |  |  | (374 | ) |  | 10 |
Loss on sale of discontinued operations before taxes(a) | 836 |  |  | — |  |  | 836 |  |  | — |
Total income (loss) from discontinued operations before taxes | (1,054 | ) |  | 100 |  |  | (1,210 | ) |  | 10 |
Income tax benefit | 284 |  |  | 6 |  |  | 371 |  |  | 104 |
Income (loss) from discontinued operations, net of tax | $ | (770 | ) |  | $ | 106 |  |  | $ | (839 | ) |  | $ | 114 |
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(a) | Includes contract cancellation charges associated with the disposal.
The following table summarizes the assets and liabilities of the European Business:
| June 30, 2017 |  | December 31, 2016
Current Assets |  |  |
Cash and cash equivalents | $ | 288 |  |  | $ | 386 |
Accounts and notes receivable, net | 1,226 |  |  | 938 |
GM Financial receivables, net | 6,506 |  |  | 5,938 |
Inventories | 3,233 |  |  | 2,748 |
Equipment on operating leases, net | 1,077 |  |  | 786 |
Other current assets | 432 |  |  | 382 |
Total current assets held for sale | 12,762 |  |  | 11,178 |
Non-current Assets |  |  |
GM Financial receivables, net | 4,134 |  |  | 3,723 |
Property, net | 3,743 |  |  | 3,217 |
Deferred income taxes | 2,163 |  |  | 1,920 |
Other assets | 360 |  |  | 515 |
Total non-current assets held for sale | 10,400 |  |  | 9,375 |
Total Assets Held for Sale | $ | 23,162 |  |  | $ | 20,553 |
Current Liabilities |  |  |
Accounts payable (principally trade) | $ | 4,098 |  |  | $ | 3,628 |
Short-term debt and current portion of long-term debt |  |  |
Automotive | 95 |  |  | 107 |
GM Financial | 5,530 |  |  | 5,124 |
Accrued liabilities | 4,570 |  |  | 3,299 |
Total current liabilities held for sale | 14,293 |  |  | 12,158 |
Non-current Liabilities |  |  |
Long-term debt |  |  |
Automotive | 75 |  |  | 85 |
GM Financial | 4,481 |  |  | 4,189 |
Pensions | 2,882 |  |  | 2,687 |
Other liabilities | 785 |  |  | 665 |
Total non-current liabilities held for sale | 8,223 |  |  | 7,626 |
Total Liabilities Held for Sale | $ | 22,516 |  |  | $ | 19,784 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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