8-KRegulation FDOther EventsExhibits & Filings

General Motors Co 8-K Report, Regulation FD Disclosure (Jun 25, 2015)

Filed June 25, 2015For Securities:GM

Summary

General Motors (GM) filed an 8-K on June 25, 2015, primarily to disclose a significant accounting change related to its Venezuelan operations and to attach a presentation to financial analysts. The company announced a change in the exchange rate used to remeasure the net assets of its Venezuelan subsidiaries from the SICAD rate (BsF 12:$1) to the SIMADI rate (approximately BsF 200:$1). This change is deemed more reflective of the current economic reality in Venezuela, as future transactions at the SICAD rate are unlikely. As a consequence of this currency remeasurement, GM anticipates recording a pre-tax charge of approximately $600 million in the second quarter of 2015. This charge will be categorized as special for EBIT-adjusted reporting. Importantly, GM stated that this remeasurement is not expected to impact its South American or Venezuelan operating results, nor is it projected to affect its 2015 adjusted free cash flows. The filing also includes a presentation by the VP, Controller & Chief Accounting Officer covering GM's financial reporting practices.

Key Highlights

  • 1GM is changing the exchange rate for remeasuring its Venezuelan subsidiaries' net assets to the SIMADI rate (approx. BsF 200:$1), a significant devaluation from the SICAD rate (BsF 12:$1).
  • 2A pre-tax charge of approximately $600 million is expected in Q2 2015 due to this currency remeasurement.
  • 3The $600 million charge will be recorded primarily in Automotive cost of sales.
  • 4The remeasurement charge will be treated as a special item for adjusted EBIT (Earnings Before Interest and Taxes) reporting.
  • 5GM does not expect this change to impact its overall South American or Venezuelan operating results.
  • 6The company does not anticipate an impact on its 2015 adjusted free cash flows.
  • 7The filing includes a presentation by GM's Controller on financial reporting practices.

Frequently Asked Questions

The $600 million charge is primarily due to General Motors changing the exchange rate used to remeasure the net assets of its Venezuelan subsidiaries. The company is shifting from the SICAD rate (BsF 12:$1) to the SIMADI rate (approximately BsF 200:$1), which is considered more reflective of the current economic conditions in Venezuela.

The $600 million charge will be treated as a 'special' item for the purpose of calculating adjusted EBIT. This means it will likely be excluded from adjusted EBIT figures, providing investors with a view of underlying operational profitability excluding this specific, non-recurring event.

GM stated that it does not expect this decision to impact its South American or Venezuelan operating results. The charge relates to the remeasurement of net assets due to currency devaluation, not necessarily a decline in the operational performance of the subsidiaries themselves.

General Motors does not believe this currency remeasurement will affect its 2015 adjusted free cash flows. This suggests that while there's a significant accounting charge, it's not expected to result in an immediate or material cash outflow impacting the company's liquidity.