GENERAL MOTORS CORP
Financial Statements and Supplementary Data    GENERAL MOTORS CORPORATION AND SUBSIDIARIES       CONSOLIDATED STATEMENTS OF INCOME                                       Years Ended December 31,               2005   2004   2003                       (Dollars in millions except per share       amounts)     GENERAL MOTORS CORPORATION AND SUBSIDIARIES                                  Total net sales and revenues (Notes 1 and 25)    $ 192,604     $ 193,517     $ 185,837                                 Cost of sales and other expenses      171,033       159,957       152,419           Selling, general, and administrative expenses      22,734       20,394       20,957           Interest expense      15,768       11,980       9,464                                   Total costs and expenses      209,535       192,331       182,840                                 Income (loss) from continuing operations before income taxes,     equity income and minority interests      (16,931 )     1,186       2,997           Income tax (benefit) expense (Note 12)      (5,878 )     (916 )     710           Equity income and minority interests      595       702       612                                 Income (loss) from continuing operations before cumulative     effect of accounting change      (10,458 )     2,804       2,899           (Loss) from discontinued operations (Note 3)      —       —       (219 )         Gain on sale of discontinued operations (Note 3)      —       —       1,179           Cumulative effect of accounting change (Note 1)      (109 )     —       —                               Net income (loss)    $ (10,567 )   $ 2,804     $ 3,859                             Basic earnings (loss) per share attributable to common     stocks                                  $12/3      par value                                    Continuing operations before cumulative effect of accounting     change    $ (18.50 )   $ 4.97     $ 5.17             Discontinued operations      —       —       2.14             Cumulative effect of accounting change (Note 1)      (0.19 )     —       —                                 Earnings (loss) per share attributable to     $12/3      par value    $ (18.69 )   $ 4.97     $ 7.31                                 (Loss) per share from discontinued operations attributable to                                    Class H    $ —     $ —     $ (0.22 )                           Earnings (loss) per share attributable to common stocks     assuming dilution                                  $12/3      par value                                    Continuing operations before cumulative effect of accounting     change    $ (18.50 )   $ 4.94     $ 5.09             Discontinued operations      —       —       2.11             Cumulative effect of accounting change (Note 1)      (0.19 )     —       —                                 Earnings (loss) per share attributable to     $12/3      par value    $ (18.69 )   $ 4.94     $ 7.20                                 (Loss) per share from discontinued operations attributable to                                    Class H    $ —     $ —     $ (0.22 )                           Reference should be made to the notes to consolidated financial statements.  II-53    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED STATEMENTS OF INCOME                                       Years Ended December 31,               2005   2004   2003                       (Dollars in millions)     AUTOMOTIVE AND OTHER OPERATIONS                                  Total net sales and revenues (Notes 1 and 25)    $ 158,221     $ 161,545     $ 155,831                                 Cost of sales and other expenses      162,173       150,224       143,408           Selling, general, and administrative expenses      13,222       11,863       11,737                                   Total costs and expenses      175,395       162,087       155,145           Interest expense      2,873       2,480       1,780           Net expense from transactions with Financing and Insurance     Operations (Note 1)      497       273       297                                 (Loss) from continuing operations before income taxes, equity     income, and minority interests      (20,544 )     (3,295 )     (1,391 )         Income tax (benefit) (Note 12)      (7,184 )     (2,440 )     (854 )         Equity income (loss) and minority interests      544       710       674                             Income (loss) from continuing operations before cumulative     effect of accounting change      (12,816 )     (145 )     137           (Loss) from discontinued operations (Note 3)      —       —       (219 )         Gain on sale of discontinued operations (Note 3)      —       —       1,179           Cumulative effect of accounting change (Note 1)      (109 )     —       —                               Net income (loss) — Automotive and Other     Operations    $ (12,925 )   $ (145 )   $ 1,097                             FINANCING AND INSURANCE OPERATIONS                                  Total revenues    $ 34,383     $ 31,972     $ 30,006                                 Interest expense      12,895       9,500       7,684           Depreciation and amortization expense (Note 13)      5,696       5,523       5,567           Operating and other expenses      9,236       8,426       8,705           Provisions for financing and insurance losses      3,440       4,315       3,959                                   Total costs and expenses      31,267       27,764       25,915                                 Net income from transactions with Automotive and Other     Operations (Note 1)      (497 )     (273 )     (297 )                               Income before income taxes, equity income and minority interests      3,613       4,481       4,388           Income tax expense (Note 12)      1,306       1,524       1,564           Equity income (loss) and minority interests      51       (8 )     (62 )                             Net income — Financing and Insurance Operations    $ 2,358     $ 2,949     $ 2,762                             The above Supplemental Information is intended to facilitate analysis of General Motors Corporation’s businesses: (1) Automotive and Other Operations; and (2) Financing and Insurance Operations.   Reference should be made to the notes to consolidated financial statements.  II-54    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES       CONSOLIDATED BALANCE SHEETS                                   December 31,               2005   2004                   (Dollars in millions)    ASSETS         Cash and cash equivalents (Note 1)    $ 30,726     $ 35,993           Other marketable securities (Note 7)      19,726       21,737                             Total cash and marketable securities      50,452       57,730           Finance receivables — net (Note 9)      180,793       199,600           Loans held for sale      21,865       19,934           Accounts and notes receivable (less allowances)      15,578       21,236           Inventories (less allowances) (Note 10)      14,354       12,247           Assets held for sale (Note 1)      19,030       —           Deferred income taxes (Note 12)      29,889       26,559           Net equipment on operating leases (less accumulated     depreciation) (Note 11)      38,187       34,214           Equity in net assets of nonconsolidated affiliates      3,291       6,776           Property — net (Note 13)      40,214       39,020           Intangible assets — net (Notes 1 and 14)      4,339       4,925           Other assets (Note 15)      58,086       57,680                         Total assets    $ 476,078     $ 479,921                      LIABILITIES AND STOCKHOLDERS’ EQUITY         Accounts payable (principally trade)    $ 29,913     $ 28,830           Notes and loans payable (Note 17)      285,750       300,279           Liabilities related to assets held for sale (Note 1)      10,941       —           Postretirement benefits other than pensions (Note 18)      33,997       28,182           Pensions (Note 18)      11,304       9,455           Deferred income taxes (Notes 12 and 16)      4,477       7,078           Accrued expenses and other liabilities (Note 16)      84,060       78,340                         Total liabilities      460,442       452,164           Minority interests      1,039       397       Stockholders’ equity (Note 20)                          $12/3      par value common stock (outstanding, 565,518,106 and     565,132,021 shares)      943       942           Capital surplus (principally additional paid-in capital)      15,285       15,241           Retained earnings      2,361       14,062                               Subtotal      18,589       30,245           Accumulated foreign currency translation adjustments      (1,722 )     (1,194 )         Net unrealized gains on derivatives      733       589           Net unrealized gains on securities      786       751           Minimum pension liability adjustment      (3,789 )     (3,031 )                             Accumulated other comprehensive loss      (3,992 )     (2,885 )                               Total stockholders’ equity      14,597       27,360                       Total liabilities, minority interests and stockholders’     equity    $ 476,078     $ 479,921                       Reference should be made to the notes to consolidated financial statements.  II-55    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED BALANCE SHEETS                                 December 31,               2005   2004                   (Dollars in millions)    ASSETS     Automotive and Other Operations                          Cash and cash equivalents (Note 1)    $ 15,187     $ 13,148           Marketable securities (Note 7)      1,416       6,655                             Total cash and marketable securities      16,603       19,803           Accounts and notes receivable (less allowances)      7,758       6,713           Inventories (less allowances) (Note 10)      13,851       11,717           Net equipment on operating leases (less accumulated     depreciation) (Note 11)      6,993       6,488           Deferred income taxes and other current assets (Note 12)      8,877       10,794                             Total current assets      54,082       55,515           Equity in net assets of nonconsolidated affiliates      3,291       6,776           Property — net (Note 13)      38,466       37,170           Intangible assets — net (Notes 1 and 14)      1,862       1,599           Deferred income taxes (Note 12)      22,849       17,639           Other assets (Note 15)      41,103       40,844                             Total Automotive and Other Operations assets      161,653       159,543       Financing and Insurance Operations                          Cash and cash equivalents (Note 1)      15,539       22,845           Investments in securities (Note 7)      18,310       15,082           Finance receivables — net (Note 9)      180,793       199,600           Loans held for sale      21,865       19,934           Assets held for sale      19,030       —           Net equipment on operating leases (less accumulated     depreciation) (Note 11)      31,194       27,726           Other assets (Note 15)      27,694       35,191           Net receivable from Automotive and Other Operations (Note 1)      4,452       2,426                             Total Financing and Insurance Operations assets      318,877       322,804                       Total assets    $ 480,530     $ 482,347                      LIABILITIES AND STOCKHOLDERS’ EQUITY     Automotive and Other Operations                          Accounts payable (principally trade)    $ 26,182     $ 24,257           Loans payable (Note 17)      1,519       2,062           Accrued expenses (Note 16)      42,665       46,202           Net payable to Financing and Insurance Operations (Note 1)      4,452       2,426                             Total current liabilities      74,818       74,947           Long-term debt (Note 17)      31,014       30,460           Postretirement benefits other than pensions (Note 18)      28,990       23,477           Pensions (Note 18)      11,214       9,371           Other liabilities and deferred income taxes (Notes 12 and     16)      22,023       16,206                             Total Automotive and Other Operations liabilities      168,059       154,461       Financing and Insurance Operations                          Accounts payable      3,731       4,573           Liabilities related to assets held for sale      10,941       —           Debt (Note 17)      253,217       267,757           Other liabilities and deferred income taxes (Notes 12 and     16)      28,946       27,799                             Total Financing and Insurance Operations liabilities      296,835       300,129                               Total liabilities      464,894       454,590           Minority interests      1,039       397             Total stockholders’ equity      14,597       27,360                       Total liabilities, minority interests and stockholders’     equity    $ 480,530     $ 482,347                       The above Supplemental Information is intended to facilitate analysis of General Motors Corporation’s businesses: (1) Automotive and Other Operations; and (2) Financing and Insurance Operations.   Reference should be made to the notes to consolidated financial statements.  II-56    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES       CONSOLIDATED STATEMENTS OF CASH FLOWS                                       For the Years Ended December 31,               2005   2004   2003                       (Dollars in millions)     Cash flows from continuing operating activities                                  Income (Loss) from continuing operations    $ (10,458 )   $ 2,804     $ 2,899           Adjustments to reconcile income (loss) from continuing     operations to net cash provided by operating activities                                    Depreciation and amortization expenses      15,769       14,152       13,513             Mortgages: servicing rights and premium amortization      1,142       1,675       1,797             Goodwill impairment      712       —       —             Provision for financing losses      1,085       1,944       1,721             Net gains on sale of finance receivables      (1,695 )     (1,312 )     (2,462 )           Other postretirement employee benefit (OPEB) expense      5,671       4,558       4,650             OPEB payments      (4,084 )     (3,974 )     (3,536 )           VEBA/ 401(h) (contributions)/ withdrawals      3,168       (8,618 )     (3,000 )           Pension expense      2,496       2,456       3,412             Pension contributions      (833 )     (919 )     (18,168 )           Retiree lump sum and vehicle voucher expense, net of payments      (264 )     (329 )     923             Net change in mortgage loans      (29,119 )     (2,312 )     (4,124 )           Net change in mortgage securities      (1,155 )     614       233             Change in other investments and miscellaneous assets      (653 )     83       409             Change in other operating assets and liabilities      (1,183 )     (1,644 )     (2,358 )           Other      2,545       178       915                             Net cash provided by (used in) continuing operating     activities    $ (16,856 )   $ 9,356     $ (3,176 )                           Cash flows from continuing investing activities                                  Expenditures for property      (8,179 )     (7,753 )     (7,091 )         Investments in marketable securities — acquisitions      (21,800 )     (15,278 )     (28,660 )         Investments in marketable securities — liquidations      22,537       15,911       24,253           Net change in mortgage servicing rights      (267 )     (326 )     (513 )         Increase in finance receivables      (6,582 )     (38,673 )     (56,119 )         Proceeds from sale of finance receivables      31,652       23,385       22,182           Proceeds from sale of business units/equity investments      846       —       4,148           Dividends received from discontinued operations      —       —       275           Operating leases — acquisitions      (15,496 )     (14,324 )     (11,032 )         Operating leases — liquidations      5,362       7,696       9,604           Investments in companies, net of cash acquired      1,355       (60 )     (201 )         Other      (863 )     1,359       (1,287 )                           Net cash provided by (used in) continuing investing     activities      8,565       (28,063 )     (44,441 )                           Cash flows from continuing financing activities                                  Net increase (decrease) in loans payable      (10,126 )     2,192       235           Long-term debt — borrowings      78,276       73,511       97,391           Long-term debt — repayments      (69,566 )     (57,822 )     (38,962 )         Proceeds from sales of treasury stocks      —       —       60           Cash dividends paid to stockholders      (1,134 )     (1,129 )     (1,121 )         Other      6,030       4,723       1,319                             Net cash provided by continuing financing activities      3,480       21,475       58,922                                 Effect of exchange rate changes on cash and cash equivalents      (85 )     671       929                                 Net increase (decrease) in cash and cash equivalents      (4,896 )     3,439       12,234           Cash and cash equivalents reclassified to Assets Held for Sale      (371 )     —       —           Cash and cash equivalents at beginning of the year      35,993       32,554       20,320                             Cash and cash equivalents at end of the year    $ 30,726     $ 35,993     $ 32,554                                 Net cash provided by operating activities of discontinued     operations      —       —       846           Net cash used in investing activities of discontinued operations      —       —       (629 )         Net cash provided by financing activities of discontinued     operations      —       —       918                                 Net increase in cash and cash equivalents of discontinued     operations      —       —       1,135           Cash retained by discontinued operations upon disposal                      (2,216 )         Cash reclassified as Assets of Discontinued Operations at     beginning of year      —       —       1,081                             Cash included in Assets of Discontinued Operations at end of     year    $ —     $ —     $ —       Reference should be made to the notes to consolidated financial statements.  II-57   Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTAL INFORMATION TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS                                                               For the Years Ended December 31,               2005   2004   2003                       Automotive   Financing   Automotive   Financing   Automotive   Financing       and Other   and   and Other   and   and Other   and       Operations   Insurance(a)   Operations   Insurance   Operations   Insurance                                           (Dollars in millions)             Cash flows from continuing operating activities                                                          Income (loss) from continuing operations before cumulative     effect of accounting change    $ (12,816 )   $ 2,358     $ (145 )   $ 2,949     $ 137     $ 2,762           Adjustments to reconcile income (loss) from continuing     operations before cumulative effect of accounting change to net     cash provided by operating activities     Depreciation and amortization expenses      10,073       5,696       8,629       5,523       7,946       5,567             Mortgages: servicing rights and premium amortization      —       1,142       —       1,675       —       1,797             Goodwill impairment      —       712       —       —       —       —             Provision for financing losses      —       1,085       —       1,944       —       1,721             Net gains on sale of finance receivables      —       (1,695 )     —       (1,312 )     —       (2,462 )           Postretirement benefits other than pensions, net of payments and     VEBA contributions/withdrawals      4,717       38       (8,048 )     14       (1,906 )     20             Pension expense, net of contributions      1,385       14       1,174       34       (13,869 )     36             Net change in mortgage loans      —       (29,119 )     —       (2,312 )     —       (4,124 )           Net change in mortgage securities      —       (1,155 )     —       614       —       233             Change in other investments and miscellaneous assets      173       (826 )     (22 )     105       (207 )     616             Change in other operating assets and liabilities      (5,466 )     4,283       (268 )     (1,376 )     2,921       (5,279 )           Other      1,970       575       (102 )     280       (348 )     1,263                                               Net cash provided by (used in) continuing operating     activities    $ 36     $ (16,892 )   $ 1,218     $ 8,138     $ (5,326 )   $ 2,150                                               Cash flows from continuing investing activities                                                          Expenditures for property      (7,896 )     (283 )     (7,284 )     (469 )     (6,616 )     (475 )         Investments in marketable securities — acquisitions      (2,616 )     (19,184 )     (2,209 )     (13,069 )     (13,138 )     (15,522 )         Investments in marketable securities — liquidations      7,663       14,874       4,609       11,302       7,109       17,144           Net change in mortgage servicing rights      —       (267 )     —       (326 )     —       (513 )         Increase in finance receivables      —       (6,582 )     —       (38,673 )     —       (56,119 )         Proceeds from sales of finance receivables      —       31,652       —       23,385       —       22,182           Proceeds from sale of business units/ equity investments      846       —       —       —       4,148       —           Dividends received from discontinued operations      —       —       —       —       275       —           Operating leases — acquisitions      —       (15,496 )     —       (14,324 )     —       (11,032 )         Operating leases — liquidations      —       5,362       —       7,696       —       9,604           Investments in companies, net of cash acquired      1,357       (2 )     (48 )     (12 )     (57 )     (144 )         Net investing activity with FIO      2,500       —       1,500       —       1,000       —           Other      640       (1,503 )     882       477       332       (1,619 )                                             Net cash provided by (used in) continuing investing     activities      2,494       8,571       (2,550 )     (24,013 )     (6,947 )     (36,494 )                                             Cash flows from continuing financing activities                                                          Net increase (decrease) in loans payable      (177 )     (9,949 )     (803 )     2,995       (234 )     469           Long-term debt — borrowings      386       77,890       758       72,753       14,785       82,606           Long-term debt — repayments      (46 )     (69,520 )     (79 )     (57,743 )     (19 )     (38,943 )         Net financing activity with Auto and Other      —       (2,500 )     —       (1,500 )     —       (1,000 )         Proceeds from sales of treasury stocks      —       —       —       —       60       —           Cash dividends paid to stockholders      (1,134 )     —       (1,129 )     —       (1,121 )     —           Other      —       6,030       —       4,723       —       1,319                                               Net cash provided by (used in) continuing financing     activities      (971 )     1,951       (1,253 )     21,228       13,471       44,451                                                   Effect of exchange rate changes on cash and cash equivalents      (40 )     (45 )     375       296       661       268           Net transactions with Automotive/ Financing Operations      520       (520 )     934       (934 )     403       (403 )                                                 Net increase (decrease) in cash and cash equivalents      2,039       (6,935 )     (1,276 )     4,715       2,262       9,972           Cash and cash equivalents reclassified to Assets Held for Sale      —       (371 )     —       —       —       —                                                   Cash and cash equivalents at beginning of the year      13,148       22,845       14,424       18,130       12,162       8,158                                               Cash and cash equivalents at end of the year    $ 15,187     $ 15,539     $ 13,148     $ 22,845     $ 14,424     $ 18,130                                               The above Supplemental Information is intended to facilitate analysis of General Motors Corporation’s businesses: (1) Automotive and Other Operations; and (2) Financing and Insurance Operations. Classification of cash flows for Financing and Insurance Operations is consistent with presentation in GM’s Consolidated Statement of Cash Flows. See Note 1.   Reference should be made to the notes to consolidated financial statements.  II-58    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES       CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY   FOR THE YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003                                                                                     Accumulated           Total               Other   Total       Capital   Capital   Comprehensive   Retained   Comprehensive   Stockholders’       Stock   Surplus   Income (Loss)   Earnings   Income (Loss)   Equity                                   (Dollars in millions)     Balance at January 1, 2003    $ 1,032     $ 21,583             $ 9,629     $ (25,832 )   $ 6,412           Shares issued      16       1,324               —       —       1,340           Comprehensive income:                                                            Net income      —       —     $ 3,859       3,859       —       3,859                                                     Other comprehensive income:                                                              Foreign currency translation adjustments      —       —       969       —       —       —               Unrealized gains on derivatives      —       —       256       —       —       —               Unrealized gains on securities      —       —       246       —       —       —               Minimum pension liability adjustment      —       —       20,755       —       —       —                                                         Other comprehensive income      —       —       22,226       —       22,226       22,226                                                           Comprehensive income      —       —     $ 26,085       —       —       —                                                   Effect of Hughes transactions (Note 3)      (111 )     (8,056 )                             (8,167 )         Stock Options              334                               334           Delphi spin-off adjustment(a)      —       —               20       —       20           Cash dividends      —       —               (1,121 )     —       (1,121 )                                             Balance at December 31, 2003    $ 937     $ 15,185             $ 12,387     $ (3,606 )   $ 24,903           Shares issued      5       138               —       —       143           Comprehensive income:                                                            Net income      —       —     $ 2,804       2,804       —       2,804                                                     Other comprehensive income:                                                              Foreign currency translation adjustments      —       —       621       —       —       —               Unrealized gains on derivatives      —       —       538       —       —       —               Unrealized gains on securities      —       —       133       —       —       —               Minimum pension liability adjustment      —       —       (571 )     —       —       —                                                         Other comprehensive income      —       —       721       —       721       721                                                           Comprehensive income      —       —     $ 3,525       —       —       —                                                   Stock Options              (82 )                             (82 )         Cash dividends      —       —               (1,129 )     —       (1,129 )                                             Balance at December 31, 2004    $ 942     $ 15,241             $ 14,062     $ (2,885 )   $ 27,360           Shares issued      1       102               —       —       103           Comprehensive income:                                                            Net (loss) income      —       —     $ (10,567 )     (10,567 )     —       (10,567 )                                                   Other comprehensive income:                                                              Foreign currency translation adjustments      —       —       (528 )     —       —       —               Unrealized gains on derivatives      —       —       144       —       —       —               Unrealized gains on securities      —       —       35       —       —       —               Minimum pension liability adjustment      —       —       (758 )     —       —       —                                                         Other comprehensive income      —       —       (1,107 )     —       (1,107 )     (1,107 )                                                         Comprehensive income      —       —     $ (11,674 )     —       —       —                                                   Stock Options              (58 )                             (58 )         Cash dividends      —       —               (1,134 )     —       (1,134 )                                             Balance at December 31, 2005    $ 943     $ 15,285             $ 2,361     $ (3,992 )   $ 14,597                                                         (a)       Write off of deferred taxes related to the 1999 spin-off of     Delphi Automotive Systems.    Reference should be made to the notes to consolidated financial statements.  II-59    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS         Note 1.  Significant Accounting Policies            Principles of Consolidation         The consolidated financial statements include the accounts of General Motors Corporation and domestic and foreign subsidiaries that are more than 50% owned, principally General Motors Acceptance Corporation and Subsidiaries (GMAC) (collectively referred to as the “Corporation,” “General Motors” or “GM”). In addition, GM consolidates variable interest entities (VIEs) for which it is deemed to be the primary beneficiary. General Motors’ share of earnings or losses of associates, in which at least 20% of the voting securities is owned, is included in the consolidated operating results using the equity method of accounting, except for investments where GM is not able to exercise significant influence over the operating and financial decisions of the investee, in which case the cost method of accounting is used. GM encourages reference to the GMAC Annual Report on Form 10-K for the period ended December 31, 2005, filed separately with the U.S. Securities and Exchange Commission (SEC) and incorporated herein by reference.        Certain amounts for 2004 and 2003 have been reclassified to conform to the 2005 classifications.           Nature of Operations, Financial Statement Presentation,     and Supplemental Information         GM presents its primary financial statements on a fully consolidated basis. Transactions between reportable operating segments, Automotive and Other Operations (Auto & Other) and Financing and Insurance Operations (FIO), have been eliminated in the Corporation’s consolidated financial statements. These transactions consist principally of borrowings and other financial services provided by FIO to Auto & Other. A master intercompany agreement governs the nature of these transactions to ensure that they are done in accordance with commercially reasonable standards.        To facilitate analysis, GM presents separate supplemental financial information for its reportable operating segments.        GM’s Auto & Other reportable operating segment consists of:            •       GM’s four automotive regions: GM North America (GMNA), GM     Europe (GME), GM Latin America/ Africa/ Mid-East (GMLAAM), and     GM Asia Pacific (GMAP), which constitute GM Automotive     (GMA); and         •       Other, which includes the elimination of intersegment     transactions, certain non-segment specific revenues and     expenditures, including legacy costs related to postretirement     benefits for certain Delphi and other retirees, and certain     corporate activities.         GM’s FIO reportable operating segment consists of GMAC and Other Financing, which includes financing entities that are not consolidated by GMAC.           Use of Estimates in the Preparation of the Financial     Statements         The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported therein. Due to the inherent uncertainties involved in making estimates, actual results reported in future periods may differ from those estimates.           Revenue Recognition         Sales generally are recorded when products are shipped (when title and risks and rewards of ownership have passed), or when services are rendered to independent dealers or other third parties. Provisions for dealer and customer sales incentives, customer leasing incentives, allowances, and rebates are made at the time of  II-60    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 1.   Significant Accounting     Policies — (continued)    vehicle sales. Incentives, allowances, and rebates related to vehicles previously sold are recognized as reductions of sales when announced.        Sales to daily rental car companies with guaranteed repurchase options are accounted for as equipment on operating leases. Lease revenue is recognized over the term of the lease. Management reviews residual values periodically to determine that estimates remain appropriate, and if an asset is impaired losses are recognized at the time of the impairment.        Financing revenue is recorded over the terms of the receivables using the interest method. Income from operating lease assets is recognized on a straight-line basis over the scheduled lease terms.        Insurance premiums are earned on a basis related to coverage provided over the terms of the policies. Commissions, premium taxes, and other costs incurred in acquiring new business are deferred and amortized over the terms of the related policies on the same basis as premiums are earned.           Advertising and Research and Development         Advertising, research and development, and other product-related costs are charged to expense as incurred. Advertising expense was $5.8 billion in 2005, $5.2 billion in 2004, and $4.7 billion in 2003. Research and development expense was $6.7 billion in 2005, $6.5 billion in 2004 and $6.2 billion in 2003.           Depreciation and Amortization         Expenditures for special tools placed in service after January 1, 2002 are amortized using the straight-line method over their estimated useful lives. Expenditures for special tools placed in service prior to January 1, 2002, are amortized over their estimated useful lives, primarily using the units of production method. Replacements of special tools for reasons other than changes in products are charged directly to cost of sales. As of January 1, 2001, the Corporation adopted the straight-line method of depreciation for real estate, plants, and equipment placed in service after that date. Assets placed in service before January 1, 2001, continue generally to be depreciated using accelerated methods. The accelerated methods accumulate depreciation of approximately two-thirds of the depreciable cost during the first half of the estimated useful lives of property groups as compared to the straight-line method, which allocates depreciable costs equally over the estimated useful lives of property groups. Management believes the adoption of the straight-line amortization/depreciation method for special tools placed into service after January 1, 2002, and real estate, plants, and equipment placed into service after January 1, 2001, better reflects the consistent use of these assets over their useful lives.        Equipment on operating leases is depreciated using the straight-line method over the term of the lease agreement. For Auto & Other, the difference between the net book value and the proceeds of sale or salvage on items disposed of is accounted for as a charge against or credit to sales allowances.           Goodwill and Other Intangibles         Goodwill and other intangible assets, net of accumulated amortization, are reported in other assets. In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142), goodwill represents the excess of the cost of an acquisition over the fair value of net assets acquired. Goodwill is reviewed for impairment utilizing a two step process. The first step of the impairment test requires us to identify the reporting units, and compare the fair value of each of these reporting units to the respective carrying value. The fair value of the reporting units is determined based on various analyses, including discounted cash flow projections. If the carrying value is less than the fair value, no impairment exists and the second step does not need to be completed. If the carrying value is higher than the  II-61    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 1.   Significant Accounting     Policies — (continued)    fair value, there is an indication that impairment may exist and a second step must be performed to compute the amount of the impairment. SFAS 142 requires goodwill to be tested for impairment annually at the same time every year, and when an event occurs or circumstances change such that it is reasonably possible that an impairment may exist. We generally perform our annual impairment tests in the third or fourth quarters.        Other intangible assets, which include customer lists, trademarks and other identifiable intangible assets, are amortized on a straight-line basis over an estimated useful life of three to 10 years.           Valuation of Long-Lived Assets         GM periodically evaluates the carrying value of long-lived assets to be held and used in the business, other than goodwill and intangible assets with indefinite lives, and assets held for sale when events and circumstances warrant, generally in conjunction with the annual business planning cycle. If the carrying value of a long-lived asset is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value for assets to be held and used. For assets held for sale, such loss is further increased by costs to sell. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Long-lived assets to be disposed of other than by sale are considered held and used until disposed of.           Foreign Currency Transactions and Translation         Foreign currency exchange transaction and translation losses, including the effect of derivatives, net of taxes, included in consolidated net income in 2005, 2004, and 2003, pursuant to SFAS No. 52, “Foreign Currency Translation,” amounted to $262 million, $167 million, and $122 million, respectively.           Policy and Warranty         Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information on the nature, frequency, and average cost of warranty claims. Management actively studies trends of warranty claims and takes action to improve vehicle quality and minimize warranty claims. See Note 16.           Exit or Disposal Activities         Costs to idle, consolidate or close facilities and provide postemployment benefits to employees on an other than temporary basis are accrued based on management’s best estimate of the wage and benefits costs that will be incurred for qualified employees under the JOBS bank provisions of the current labor agreement through the date of its expiration in September 2007, plus estimated costs expected to be paid thereafter. These estimates include a 45% and 9% projected level of acceptance of normal and early retirement offers, respectively, made pursuant to the current labor agreement. Costs related to the idlings of employees that are expected to be temporary are expensed as incurred. Costs to terminate a contract without economic benefit to the Corporation are expensed at the time the contract is terminated. One-time termination benefits that are not subject to contractual arrangements provided to employees who are involuntarily terminated are recorded when management commits to a detailed plan of termination, that plan is communicated to employees, and actions required to complete the plan indicate that significant changes are not likely. If employees are required to render service until they are terminated in order to earn the termination benefit, the benefits are recognized ratably over the future service period.  II-62    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 1.   Significant Accounting     Policies — (continued)            Cash and Cash Equivalents         Cash equivalents are defined as short-term, highly-liquid investments with original maturities of 90 days or less.           Statements of Cash Flows Supplementary Information                                          Years Ended December 31,           Automotive and Other Operations   2005   2004   2003                       (Dollars in millions)         Increase (decrease) in cash due to changes in other operating     assets and liabilities was as follows:                                    Accounts receivable    $ 59     $ (284 )   $ (575 )           Prepaid expenses and other deferred charges      (83 )     42       (578 )           Inventories      (1,484 )     (156 )     (518 )           Accounts payable      249       1,723       2,400             Deferred taxes and income taxes payable      (6,069 )     (444 )     2,235             Accrued expenses and other liabilities      3,935       11       2,887             Fleet rental — acquisitions      (9,452 )     (7,846 )     (7,761 )           Fleet rental — liquidations      7,379       6,686       4,831                                     Total    $ (5,466 )   $ (268 )   $ 2,921                                 Cash paid for interest    $ 2,790     $ 2,508     $ 1,398            During 2005, Auto & Other had cash inflows related to investments in companies, net of cash acquired, of approximately $1.4 billion. This amount is driven primarily by GM’s acquisition in 2005 of a majority interest in GM Daewoo, which resulted in GM consolidating GM Daewoo’s cash balance of approximately $1.6 billion (net of $70 million cash paid by GM to acquire the additional 6.3% interest in GM Daewoo).        During 2004 and 2003, Auto & Other had cash outflows related to investments in companies, net of cash acquired, of approximately $50 million and $60 million, respectively.                                         Years Ended December 31,           Financing and Insurance Operations   2005   2004   2003                       (Dollars in millions)         Increase (decrease) in cash due to changes in other operating     assets and liabilities was as follows:                                    Other receivables    $ 4,092     $ 419     $ (5,236 )           Other assets      48       (111 )     186             Accounts payable and other liabilities      332       (1,173 )     1,765             Deferred taxes and income taxes payable      (189 )     (511 )     (1,994 )                                   Total    $ 4,283     $ (1,376 )   $ (5,279 )                               Cash paid for interest    $ 13,025     $ 8,887     $ 6,965            During 2005, FIO made investments in companies, net of cash acquired, of approximately $2 million. During 2004 and 2003, FIO made investments in companies, net of cash acquired, of approximately $12 million and $144 million, respectively.  II-63    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 1.   Significant Accounting     Policies — (continued)            Derivative Instruments         GM is party to a variety of foreign exchange rate, interest rate and commodity forward contracts, and options entered into in connection with the management of its exposure to fluctuations in foreign exchange rates, interest rates, and certain commodity prices. These financial exposures are managed in accordance with corporate policies and procedures.        All derivatives are recorded at fair value on the consolidated balance sheet. Effective changes in fair value of derivatives designated as cash flow hedges and hedges of a net investment in a foreign operation are recorded in net unrealized gain/(loss) on derivatives, a separate component of other comprehensive income (loss). Amounts are reclassified from accumulated other comprehensive income (loss) when the underlying hedged item affects earnings. All ineffective changes in fair value are recorded currently in earnings. Changes in fair value of derivatives designated as fair value hedges are recorded currently in earnings offset, to the extent the derivative was effective, by changes in fair value of the hedged item. Changes in fair value of derivatives not designated as hedging instruments are recorded currently in earnings.           Assets and Liabilities Classified as Held for Sale         On August 3, 2005, GMAC announced that it had entered into a definitive agreement to sell a majority equity interest in GMAC Commercial Holding Corp. (GMAC Commercial Mortgage). See Note 27 for subsequent events. For the year ended December 31, 2005, GMAC Commercial Mortgage’s earnings and cash flows are fully consolidated in GM’s Consolidated Statements of Income and Statements of Cash Flows. However, as a result of the agreement to sell a majority equity interest, the assets and liabilities of GMAC Commercial Mortgage have been classified as held for sale separately in GM’s Consolidated Balance Sheet at December 31, 2005. The following table presents GMAC Commercial Mortgage’s major classes of assets and liabilities classified as held for sale as of December 31, 2005 (dollars in millions):                           Cash and cash equivalents    $ 371           Marketable securities      2,295                       Total cash and marketable securities      2,666           Finance receivables — net      2,990           Loans held for sale      9,019           Other assets      4,355                       Total assets held for sale    $ 19,030                     Accounts payable    $ 794           Debt      3,519           Deferred income taxes and other liabilities      6,628                         Total liabilities related to assets held for sale    $ 10,941                         Labor Force         GM, on a worldwide basis, has a concentration of its labor supply in employees working under union collective bargaining agreements, of which certain contracts expired in 2003.        The 2003 International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) labor contract was effective on October 6, 2003, covering a four-year term from 2003-2007. The contract included a $3,000 lump sum payment per UAW employee paid in October 2003, and a 3%  II-64    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 1.   Significant Accounting     Policies — (continued)    performance bonus per UAW employee was paid in October 2004. GM amortizes these payments over the 12-month period following the respective payment dates. UAW employees received a gross wage increase of 2% in 2005 and 3% in 2006. Active UAW employees were also granted pension benefit increases. There were no pension benefit increases granted to current retirees and surviving spouses. However, the contract does provide for four lump sum payments and two vehicle discount vouchers for current retirees and surviving spouses. The retiree lump sum payments and vehicle discount vouchers resulted in a charge to GM’s 2003 cost of sales of approximately $1.2 billion ($725 million after tax).   Change in Accounting Principle: Conditional Asset Retirement Obligations        Effective December 31, 2005, the Corporation adopted Financial Accounting Standards Board (FASB) Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (FIN 47). FIN 47 relates to legal obligations associated with retirement of a tangible long-lived assets that result from their acquisition, construction, or development or normal operation of a long-lived asset. GM performed an analysis of such obligations associated with all real property owned or leased, including plants, warehouses, and offices. GM’s estimates of conditional asset retirement obligations relate, in the case of owned properties, to costs estimated to be necessary for the legally required removal or remediation of various regulated materials, primarily asbestos. For leased properties, such obligations relate to the estimated cost of contractually required property restoration. The application of FIN 47 resulted in a charge, net of tax, of $109 million included in the Consolidated Statement of Income for the year ended December 31, 2005 as the cumulative effect of a change in accounting principle, all attributable to Auto & Other. The liability for conditional asset retirement obligations recognized at December 31, 2005, as the result of the application of FIN 47 was $181 million. Pro forma amounts, as if FIN 47 had been applied for all periods, follow (dollars in millions, except per share amounts).                                       Years Ended December 31,               2005   2004   2003                         Net income (loss) as reported    $ (10,567 )   $ 2,804     $ 3,859           Add: FIN 47 cumulative effect, net of tax      109       —       —           Less: FIN 47 depreciation and accretion expense, net of tax      (16 )     (14 )     (13 )                               Pro forma net income (loss)    $ (10,474 )   $ 2,790     $ 3,846                                 Earnings (loss) per share                                    Basic: As reported    $ (18.69 )   $ 4.97     $ 7.31                                         Pro forma    $ (18.52 )   $ 4.94     $ 7.29                                   Diluted: As reported    $ (18.69 )   $ 4.94     $ 7.20                                           Pro forma    $ (18.52 )   $ 4.92     $ 7.18                                 Pro forma asset retirement obligation — net, as of     year-end    $ 181     $ 159     $ 140                             New Accounting Standards        In December 2004, the Financial Accounting Standards Board (FASB) revised SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123R), requiring companies to record share-based payment transactions as compensation expense at fair market value. SFAS 123R further defines the concept of fair market value as it relates to such arrangements. Based on SEC guidance issued in Staff Accounting Bulletin (SAB) 107 in April 2005, the provisions of this statement will be effective for General Motors as of  II-65    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 1.   Significant Accounting     Policies — (continued)    January 1, 2006. The Corporation began expensing the fair market value of newly granted stock options and other stock based compensation awards to employees pursuant to SFAS 123 in 2003; therefore this statement is not expected to have a material effect on GM’s consolidated financial position or results of operations.        In accordance with the disclosure requirements of SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” since GM adopted the fair value based method of accounting for stock-based employee compensation pursuant to SFAS No. 123 effective January 1, 2003, for newly granted stock-based compensation awards only, the following table illustrates the effect on net income and earnings per share if compensation cost for all outstanding and unvested stock options and other stock-based employee compensation awards had been determined based on their fair values at the grant date (dollars in millions except per share amounts):                                         Years Ended December 31,               2005   2004   2003                         Income (loss) from continuing operations before cumulative     effect of accounting change    $ (10,458 )   $ 2,804     $ 2,899           Add: stock-based compensation expense, included in reported net     income, net of related tax effects      58       38       142           Deduct: total stock-based compensation expense determined under     fair value based method for all awards, net of related tax     effects      (58 )     (52 )     (195 )                               Pro forma net income from continuing operations    $ (10,458 )   $ 2,790     $ 2,846                                   Basic earnings per share from continuing operations attributable     to GM     $12/3      par value                                      - as reported    $ (18.50 )   $ 4.97     $ 5.17               - pro forma    $ (18.50 )   $ 4.94     $ 5.08             Diluted earnings per share from continuing operations     attributable to GM     $12/3      par value                                      - as reported    $ (18.50 )   $ 4.94     $ 5.09               - pro forma    $ (18.50 )   $ 4.92     $ 5.00            In December 2005, the FASB released FASB Staff Position (FSP) SFAS 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards,” which provides a practical transition election related to accounting for the tax effects of share-based payment awards to employees. The Corporation is currently reviewing the transition alternatives and will elect the appropriate alternative within one year of the adoption of SFAS 123(R).        In April 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” requiring retrospective application as the required method for reporting a change in accounting principle, unless impracticable or a pronouncement includes specific transition provisions. This statement also requires that a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. This statement carries forward the guidance in APB Opinion No. 20, “Accounting Changes,” for the reporting of the correction of an error and a change in accounting estimate. This statement is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005.        In November 2005, the FASB released FSP FIN 45-3, “Application of FASB Interpretation No. 45 to Minimum Revenue Guarantees Granted to a Business or Its Owners,” requiring companies to disclose minimum revenue guarantees in accordance with the guidelines provided in FIN 45 for interim and annual financial statements. GM adopted FIN 45-3 upon issuance. The Interpretation did not have a material effect on GM’s consolidated financial position or results of operations.        Effective July 1, 2003, the Corporation began consolidating certain variable interest entities to conform to FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). GM adopted the  II-66    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 1.  Significant Accounting     Policies — (concluded)    revision to FIN 46, FIN 46R, which clarified certain provisions of the original interpretation and exempted certain entities from its requirements. As of January 1, 2004, the adoption of FIN 46R did not have a significant effect on the Corporation’s financial condition or results of operations.         Note 2.  Acquisition and Disposal of Businesses         On February 3, 2005, GM completed the purchase of 16.6 million newly-issued shares of common stock in GM Daewoo for approximately $49 million, which increased GM’s ownership in GM Daewoo to 48.2% from 44.6%. No other shareholders in GM Daewoo participated in the issue. On June 28, 2005, GM purchased from Suzuki Motor Corporation (Suzuki) 6.9 million shares of outstanding common stock in GM Daewoo for approximately $21 million. This increased GM’s ownership in GM Daewoo to 50.9%. Accordingly, as of June 30, 2005, GM began consolidating GM Daewoo. This increased GM’s total assets and liabilities as of June 30, 2005 by approximately $4.7 billion and $4.5 billion, respectively, including one-time increases of $1.6 billion of cash and marketable securities and $1.3 billion of long-term debt.        The following unaudited financial information for the periods ended December 31, 2005, 2004, and 2003 represents amounts attributable to GM Daewoo on a basis consistent with giving effect to the increased ownership and consolidation as of January 1, 2003 (dollars in millions). The pro forma effect on net income (loss) is not significant compared to equity income recognized.                                     Year Ended December 31,               2005   2004   2003                         Total net sales and revenues    $ 5,738     $ 4,338     $ 3,161            On February 13, 2005, GM and Fiat S.p.A. (Fiat) reached a settlement agreement whereby GM agreed to pay Fiat approximately $2.0 billion and to return its 10% equity interest in Fiat Auto Holdings B.V. (FAH), to terminate the Master Agreement (including the Put Option) entered into in March 2000, settle various disputes related thereto, and acquire an interest in key strategic diesel engine assets, and other important rights with respect to diesel engine technology and know-how. The settlement agreement resulted in a pre-tax charge to earnings of approximately $1.4 billion ($886 million after tax). Since the underlying events and disputes giving rise to GM’s and Fiat’s agreement to settle these disputes and terminate the Master Agreement (including the Put Option) existed at December 31, 2004, GM recognized this charge in the fourth quarter of 2004. This charge was recorded in cost of sales and other expenses in Other Operations.        In addition, the settlement agreement included, among other things, the following actions or provisions:            •       The Fiat-GM Powertrain (FGP) joint venture company would be     dissolved and GM would regain complete ownership of all GM     assets originally contributed. During a transition period, FGP     would continue to supply both companies so that their respective     operations would not be disrupted.         •       GM will retain co-ownership with Fiat of the key powertrain     intellectual property, including SDE and JTD diesel engines and     the M20-32 six-speed     manual transmission;         •       GM will hold a 50% interest in a joint venture limited to     operating the powertrain manufacturing plant in Bielsko-Biala,     Poland, that currently produces the 1.3 liter SDE diesel     engine;         •       The companies will continue to supply each other with     powertrains under long-term contracts which provide considerable     ongoing savings;         •       GM and Fiat will also continue to work together to develop     certain car programs;         •       Fiat will participate in GM’s purchasing alliance program;         •       GM and Fiat have exchanged broad releases of all claims and     liabilities.   II-67    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 2.  Acquisition and Disposal of Businesses —     (concluded)         Effective May 13, 2005 the liquidation of these joint ventures and GM’s acquisition of certain strategic assets from Fiat were completed.        On April 4, 2005, GM completed the sale of its Electro-Motive Division (EMD) to an investor group led by Greenbriar Equity Group LLC and Berkshire Partners LLC. The sale covered substantially all of the EMD businesses, and both the LaGrange, Illinois and London, Ontario manufacturing facilities. This transaction did not have a material effect on GM’s consolidated financial position or results of operations.        In the fourth quarter of 2005, GM completed the sale of its 20.1% investment in the common stock of Fuji Heavy Industries Ltd. (FHI). In the second quarter of 2005, GM recorded an after tax impairment charge of $788 million associated with its investment in the common stock of FHI. In the fourth quarter of 2005, GM recorded a gain of $71 million, after tax, due to the appreciation of the fair value of such stock after June 30, 2005, the date of the FHI impairment charge. The sale generated net proceeds of approximately $775 million.        On August 3, 2005, GMAC announced that it had entered into a definitive agreement to sell a 60% equity interest in GMAC Commercial Holding Corp. (GMAC Commercial Mortgage). See Note 27 for subsequent events. As a result of the agreement, the assets and liabilities of GMAC Commercial Mortgage have been classified as held for sale separately in GM’s consolidated balance sheet at December 31, 2005. See Note 1.         Note 3.  Discontinued Operations         On December 22, 2003, GM completed a series of transactions that resulted in the split-off of Hughes from GM and the simultaneous sale of GM’s approximately 19.8% retained economic interest in Hughes to The News Corporation Limited (News Corporation).        In the transactions, GM split off Hughes by distributing Hughes common stock to the holders of GM Class H common stock in exchange for all outstanding shares of GM Class H common stock. Simultaneously, GM sold its 19.8% retained economic interest in Hughes to News Corporation in exchange for cash and News Corporation Preferred American Depositary Shares (Preferred ADSs). All shares of GM Class H common stock were then cancelled. News Corporation then acquired from the former GM Class H common stockholders an additional 14.2% of the outstanding shares of Hughes common stock in exchange for News Corporation Preferred ADSs.        GM sold 80% of its 19.8% retained economic interest in Hughes to News Corporation for a total of approximately $3.1 billion in cash. GM sold the remaining 20% of its retained economic interest in Hughes to News Corporation for approximately 28.6 million News Corporation Preferred ADSs, valued at $819 million at December 22, 2003. Including Hughes’ transaction expenses of approximately $90 million, GM recorded a net gain of $1.2 billion from the sale of GM’s approximately 19.8% economic interest in Hughes, reported as gain on sale of discontinued operations in GM’s Consolidated Statement of Income for 2003. In addition, as a result of the transactions, there was a net reduction to GM’s stockholders’ equity of approximately $7.0 billion.        GM sold all its News Corporation Preferred ADSs in January 2004.        The financial data related to GM’s investment in Hughes through December 22, 2003 is classified as discontinued operations for the year ended December 31, 2003. Hughes’ net sales included in discontinued operations were $9.8 billion, and Hughes’ net losses from discontinued operations were $219 million.  II-68    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 4.  Asset Impairments         GM reassesses the carrying value of long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, in connection with the annual business planning cycle, or when events and circumstances indicate the need for such a review. This impairment analysis is performed by comparing projected cash flows to the book value of specific product-related assets, which include special tools and other assets related to product lines, and facilities.        In the first quarter 2005, GMNA recorded an after tax charge of $84 million for the write-down to fair market value of various plant assets in connection with the cessation of production at a Lansing, Michigan assembly plant.        In the second quarter of 2005, GMAP determined that the value of its investment in the common stock of Fuji Heavy Industries Ltd. (FHI) was impaired on an other-than-temporary basis. Accordingly, GMAP recorded an after-tax impairment charge of $788 million associated with its investment in the common stock of FHI. In the fourth quarter of 2005, GM completed the sale of it is investment in FHI, and recorded a gain of $71 million, after tax, due to the appreciation of the fair value of such stock after June 30, 2005, the date of the FHI impairment charge.        In the third quarter of 2005, the business planning cycle was accelerated as a result of the lack of improved performance in the second quarter of 2005. In connection with this process, GM reviewed the carrying value of certain long-lived assets held and used, other than goodwill and intangible assets with indefinite lives. These reviews resulted in impairment charges in GMNA and GME. In addition, restructuring initiatives were announced in the third quarter of 2005 in GMAP, related to production in Australia, resulting in additional impairment charges. In GMLAAM, unusually strong South American currencies have adversely affected the profitability of GMLAAM’s export business. Management’s decision to adjust GMLAAM’s export volumes resulted in lower expected future cash flows, resulting in an impairment charge in the region. These reviews and initiatives resulted in after-tax impairment charges totaling $788 million recognized in the third quarter of 2005 ($468 million at GMNA, $176 million at GME, $99 million at GMLAAM, and $45 million at GMAP) for assets that were still in service.        In the fourth quarter of 2005, GMNA announced a restructuring initiative which will cease operations at nine assembly, stamping, and powertrain facilities and three Service Parts and Operations facilities by 2008. As a result of these capacity reduction initiatives, GM recorded an after-tax charge of $455 million for the write-down to fair market value of property, plants, and equipment for assets that were still in service as of December 31, 2005. See Note 5 for further discussion of the employee costs associated with this restructuring.        Total after-tax impairment charges recognized in 2005, were $2.0 billion, including $767 million for product-specific assets, $560 million for production and office facilities, and $717 for investments in equity securities. The charges were recorded in cost of sales and other expenses in the consolidated statement of income. Unless otherwise noted above, there were no employee idling or separation costs, and no lease contracts were terminated.        In 2004, impairment analyses resulted in after-tax charges totaling $383 million ($118 million at GMNA, $234 million at GME, and $31 million at Other) with respect to product-specific assets. Additional after-tax charges of $78 million were recorded at GMNA for the write-down to fair market value of various plant assets in connection with facilities rationalization actions at assembly plants in Baltimore, Maryland and Linden, New Jersey.        In the fourth quarter of 2004, GM completed its annual review of its investment in FAH. As a result of continued deterioration in the performance of Fiat Auto S.p.A. and its debt structure, GM recorded a non-cash charge of $220 million ($136 million, after-tax) to reduce the carrying value of GM’s investment in FAH to zero. See Note 2.  II-69    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 4.  Asset Impairments — (concluded)         In 2003, impairment analyses as described above resulted in after-tax charges totaling $491 million ($400 million at GMNA, $11 million at GME, $55 million at GMLAAM, and $25 million at GMAP) with respect to product-specific assets. Additional after-tax charges of $42 million were recorded at GMNA for the write-down to fair market value of various facilities.         Note 5.  Postemployment Benefit Costs (Plant Idling Reserve)         Costs to idle, consolidate or close facilities and provide postemployment benefits to employees on an other than temporary basis are accrued based on management’s best estimate of the wage and benefits costs that will be incurred for qualified employees under the JOBS bank provisions of the current labor agreement through the date of its expiration in September 2007, plus estimated costs expected to be paid thereafter. Costs related to the idling of employees that are expected to be temporary are expensed as incurred. GM reviews the adequacy and continuing need for these liabilities on an annual basis in conjunction with its year-end production and labor forecasts. Furthermore, GM reviews the reasonableness of the liabilities on a quarterly basis.        In 2005, GM recognized a pretax charge of $1.8 billion, or $1.2 billion after tax, for postemployment benefit liabilities related to the restructuring of North American operations announced in November 2005 (the GMNA restructuring). Approximately 17,500 employees are included in the charge for locations included in this action, some leaving the company through attrition and some transferring to other sites. GM’s overall four-year employment reduction through 2008 remains at the approximate 30,000 employee level previously announced.        The charge is composed of two elements. The first element includes the costs GM expects to incur under the existing JOBS bank provisions of the current collective bargaining agreement (CBA), through its expiration in September 2007. This element of the charge was calculated based on the substantive postemployment benefits plan that GM has developed over time with regard to the JOBS bank, including its historical experience related to acceptance of routine retirement offers.        GM is currently discussing the JOBS bank provisions of the CBA with the UAW in an effort to develop an agreed upon accelerated attrition program for active employees, by which the Corporation will be able to reduce the number of employees that are and will be in the JOBS bank in a cost effective manner. See Note 27 for subsequent events. In this regard, GM believes it is likely that the JOBS bank provisions will be modified after the current CBA expires. Consequently, the second element of the charge includes GM’s best estimate of costs to be paid after the expiration of the current CBA, including costs for employees at locations expected to be idled after the CBA expiration. In determining its best estimate, GM considered the effect of (i) the accelerated attrition program under discussion which, for employees in the JOBS bank, creates opportunities to return to active service, and (ii) policy changes that it intends to negotiate into the JOBS program.        The $1.8 billion reflects GM’s best estimate based on the information it has at the current time, but because the outcome of the discussions with the UAW may differ from GM’s current best estimate, this estimate could increase or decrease by material amounts in subsequent periods. GM also considered an alternative approach to estimating the charge, which would have excluded the anticipated impact of the accelerated attrition program and changes to the terms of the JOBS bank in the next CBA, and accrued an amount based on the terms of the current JOBS bank to reflect payments that would be made to idled employees until their estimated retirement dates including normal attrition and early retirement. That approach would have increased the pre-tax charge by $4.8 billion, to a total of $6.6 billion. GM rejected that approach because it believes the probability of payment of that amount is remote, the measurement methodology does not result in an amount that is probable, and the terms of the JOBS bank in the existing  II-70    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 5.  Postemployment Benefit Costs (Plant Idling     Reserve) — (concluded)    CBA do not reflect a substantive plan that GM expects will continue beyond the end of that CBA through the employees’ remaining service period.        The liability for postemployment benefits (primarily wage and benefit continuation) as of December 31, 2005 totals approximately $2.0 billion relating to multiple plants and approximately 18,400 employees. The liability for postemployment benefits was $237 million relating to numerous plants and to approximately 1,900 employees as of December 31, 2004. The liability for postemployment benefits was $384 million relating to approximately 2,900 employees as of December 31, 2003. The following tables summarize the activity from December 31, 2003 through December 31, 2005 for this liability (dollars in millions):                         Balance at December 31, 2003    $ 384             Spending      (151 )           Interest accretion      19             Additions      —             Adjustments      (15 )                   Balance at December 31, 2004    $ 237             Spending      (91 )           Interest accretion      12             Additions      1,891             Adjustments      (37 )                   Balance at December 31, 2005    $ 2,012                       Note 6.  Investment in Nonconsolidated Affiliates         Nonconsolidated affiliates of GM identified herein are those investees in which GM owns an equity interest and for which GM uses the equity method of accounting, because GM has the ability to exert significant influence over decisions relating to their operating and financial affairs. GM’s significant affiliates and the percentage of GM’s year-end equity ownership, or voting interest, in them include the following: Japan — FHI (sold at December 31, 2005, 20.1% in 2004 and 21.1% in 2003), Suzuki Motor Corporation (20.4% in 2005 and 2004, and 20.3% in 2003); China — Shanghai General Motors Co., Ltd. (50% in 2005, 2004, and 2003); SAIC GM Wuling Automobile Co., Ltd (34% in 2005, 2004, 2003); South Korea — GM-Daewoo (50.9% at December 31, 2005, 44.6% in 2004 and 2003) (with the increase in ownership to more than 50%, GM consolidated GM Daewoo at June 30, 2005 — see Note 2); Italy — GM-Fiat Powertrain (FGP) (dissolved at December 31, 2005, and 50% in 2004 and 2003).        Information regarding GM’s share of income for all nonconsolidated affiliates (as defined above) in the following countries is included in the table below (in millions):                                                         South   2005   Italy   Japan   China   Korea                             Book value of GM’s investments in affiliates      NA     $ 1,576     $ 1,020       NA           GM’s share of affiliates’ net income (loss)    $ 32     $ 183     $ 327     $ 17           Total assets of significant affiliates      NA     $ 15,507     $ 4,363       NA           Total liabilities of significant affiliates      NA     $ 7,467     $ 2,425       NA                                             2004                                             Book value of GM’s investments in affiliates    $ 1,293     $ 3,174     $ 1,173     $ 193           GM’s share of affiliates’ net income (loss)    $ 87     $ 255     $ 417     $ (53 )         Total assets of significant affiliates    $ 8,616     $ 30,582     $ 3,429     $ 5,288           Total liabilities of significant affiliates    $ 5,539     $ 17,417     $ 1,630     $ 4,447      II-71    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 6.  Investment in Nonconsolidated Affiliates —     (concluded)                                                          South   2003   Italy   Japan   China   Korea                             Book value of GM’s investments in affiliates    $ 946     $ 2,781     $ 964     $ 200           GM’s share of affiliates’ net income (loss)    $ 95     $ 196     $ 414     $ (74 )         Total assets of significant affiliates    $ 7,933     $ 29,622     $ 3,103     $ 3,263           Total liabilities of significant affiliates    $ 5,304     $ 17,764     $ 1,460     $ 2,892             Note 7.  Marketable Securities         Marketable securities held by GM are classified as available-for-sale, except for certain mortgage-related securities, which are classified as held-to-maturity or trading securities. Unrealized gains and losses, net of related income taxes, for available-for-sale securities are included as a separate component of stockholders’ equity. Unrealized gains and losses for trading securities are included in income on a current basis. GM determines cost on the specific identification basis.           Automotive and Other Operations         Investments in available for sale marketable securities were as follows (dollars in millions):                                                 Book/Fair   Unrealized   Unrealized       Cost   Value   Gains   Losses                           December 31, 2005                Type of security     Corporate debt securities and other   $ 741     $ 728     $ —     $ 13           U.S. government and agencies      455       450       —       5           Mortgage-backed securities      243       238       —       5                                       Total marketable securities    $ 1,439     $ 1,416     $ —     $ 23                                                                                 Book/Fair   Unrealized   Unrealized       Cost   Value   Gains   Losses                           December 31, 2004                Type of security     Corporate debt securities and other   $ 3,697     $ 3,691     $ 12     $ 18           U.S. government and agencies      2,146       2,141       6       11           Mortgage-backed securities      826       823       3       6                                       Total marketable securities    $ 6,669     $ 6,655     $ 21     $ 35                                        Debt securities totaling $99 million mature within one year and $938 million mature after one through five years, $79 million mature after five through ten years and $300 million mature after ten years. Proceeds from sales of marketable securities totaled $14.7 billion in 2005, $14.8 billion in 2004, and $7.1 billion in 2003. The gross gains related to sales of marketable securities were $37 million, $25 million, and $7 million in 2005, 2004, and 2003, respectively. The gross losses related to sales of marketable securities were $66 million in 2005, $30 million in 2004, and $11 million in 2003.  II-72    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 7.  Marketable Securities — (continued)            Financing and Insurance Operations         Investments in marketable securities were as follows (dollars in millions):                                                   Book/Fair   Unrealized   Unrealized       Cost   Value   Gains   Losses                           December 31, 2005                 Type of security                                          Bonds, notes, and other securities                                            United States government and agencies    $ 2,945     $ 2,904     $ 5     $ 46             States and municipalities      863       889       27       1             Foreign government securities      844       853       11       2             Mortgage and asset-backed securities      1,216       1,240       29       5             Corporate debt securities and other      6,136       6,144       43       35                                       Total debt securities available-for-sale      12,004       12,030       115       89           Mortgage-backed securities held-to-maturity      16       16       —       —           Mortgage-backed securities held for Trading purposes      3,766       3,897       131       —                                       Total debt securities      15,786       15,943       246       89           Equity securities      1,510       2,367       874       17                                         Total investment in marketable securities    $ 17,296     $ 18,310     $ 1,120     $ 106                                       Total consolidated other marketable securities    $ 18,735     $ 19,726     $ 1,120     $ 129                                                                                   Book/Fair   Unrealized   Unrealized       Cost   Value   Gains   Losses                           December 31, 2004                 Type of security                                          Bonds, notes, and other securities                                            United States government and agencies    $ 2,198     $ 2,208     $ 18     $ 8             States and municipalities      556       596       40       —             Foreign government securities      792       805       14       1             Mortgage and asset-backed securities      1,988       2,074       97       11             Corporate debt securities and other      3,399       3,489       97       7                                       Total debt securities available-for-sale      8,933       9,172       266       27           Mortgage-backed securities held-to-maturity      135       135       —       —           Mortgage-backed securities held for trading purposes      3,510       3,545       35       —                                       Total debt securities      12,578       12,852       301       27           Equity securities      1,505       2,230       731       6                                         Total investment in marketable securities    $ 14,083     $ 15,082     $ 1,032     $ 33                                       Total consolidated other marketable securities    $ 20,752     $ 21,737     $ 1,053     $ 68                                  II-73    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 7.  Marketable Securities — (continued)         Debt securities available-for-sale totaling $1.7 billion mature within one year, $6.0 billion mature after one through five years, $2.0 billion mature after five years through ten years, and $1.0 billion mature after ten years. Mortgage-backed securities and interests in securitization trusts totaled $1.3 billion. Proceeds from sales of marketable securities totaled $5.7 billion in 2005, $3.2 billion in 2004, and $7.6 billion in 2003. The gross gains related to sales of marketable securities were $186 million, $138 million, and $270 million in 2005, 2004, and 2003, respectively. The gross losses related to sales of marketable securities were $66 million, $49 million, and $202 million in 2005, 2004, and 2003, respectively.        The fair value and gross unrealized losses of the Corporation’s investments in an unrealized loss position that are not deemed to be other-than-temporarily impaired are summarized in the following table.                                               December 31, 2005               Less than 12 Months   12 months or longer                   Fair value   Unrealized losses   Fair value   Unrealized losses                           (Dollars in millions)         Automotive and Other Operations                                          Available for sale securities                                            Corporate debt securities and Other    $ 201     $ 3     $ 370     $ 10             U.S. government and agencies      289       2       84       3             Mortgage backed securities      153       3       65       2                                         Total marketable securities    $ 643     $ 8     $ 519     $ 15                                       Financing and Insurance Operations                                          Available for sale securities                                          Debt securities                                            U.S. Treasury and federal agencies    $ 1,590     $ 32     $ 520     $ 15             States and political subdivisions      79       1       —       —             Foreign government securities      179       1       —       —             Residential mortgage-backed securities      36       1       76       2             Interest-only strips      81       3       —       —             Corporate debt securities      1,865       20       331       10             Other      175       3       21       1                                       Total debt securities      4,005       61       948       28           Equity securities      137       15       19       2                                       Total available for sale securities    $ 4,142     $ 76     $ 967     $ 30                                       Total held to maturity securities    $ —     $ —     $ —     $ —                                  II-74    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 7.  Marketable Securities — (concluded)                                                  December 31, 2004               Less than 12 Months   12 months or longer                   Fair value   Unrealized losses   Fair value   Unrealized losses                           (Dollars in millions)         Automotive and Other Operations                                          Available for sale securities                                            Corporate debt securities and other    $ 1,698     $ 16     $ 81     $ 3             U.S. government and agencies      1,293       11       —       —             Mortgage backed securities      418       4       33       1                                         Total marketable securities    $ 3,409     $ 31     $ 114     $ 4                                       Financing and Insurance Operations                                          Available for sale securities                                          Debt securities                                            U.S. Treasury and federal agencies    $ 971     $ 8     $ —     $ —             Foreign government securities      208       1       —       —             Mortgage-backed securities:                                              Residential      67       5       —       —               Commercial      343       2       14       1             Interest-only strips      27       3       —       —             Corporate debt securities      547       5       —       —             Other      35       2       —       —                                       Total debt securities      2,198       26       14       1           Equity securities      88       6       —       —                                       Total available for sale securities    $ 2,286     $ 32     $ 14     $ 1                                       Total held to maturity securities    $ 15     $ 1     $ —     $ —                                         Note 8.  Variable Interest Entities         GM applied the provisions of FIN 46, later clarified by FIN 46R, to all variable interest entities beginning July 1, 2003. In connection with the application of FIN 46R, GM is providing information below concerning variable interest entities that: (1) are consolidated by GM because GM is deemed to be the primary beneficiary and (2) those entities that GM does not consolidate because, although GM has significant interests in such variable interest entities, GM is not the primary beneficiary.           Automotive and Other Operations         Synthetic Leases — GM leases real estate and equipment from various special purpose entities (SPEs) that have been established to facilitate the financing of those assets for GM by nationally prominent, creditworthy lessors. These assets consist principally of office buildings, warehouses, and machinery and equipment. The use of SPEs allows the parties providing the financing to isolate particular assets in a single entity and thereby syndicate the financing to multiple third parties. This is a conventional financing technique used to lower the cost of borrowing and, thus, the lease cost to a lessee such as GM. There is a well-established market in which institutions participate in the financing of such property through their purchase of interests in these SPEs. Certain of these SPEs were determined to be VIEs under FIN 46. GM consolidates any entities  II-75    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 8.     Variable Interest Entities — (continued)   with leases where GM provides a residual value guarantee of the leased property, and is considered the primary beneficiary under FIN 46. As of December 31, 2005, the carrying amount of assets and liabilities consolidated under FIN 46R amounted to $780 million and $1.0 billion, respectively, compared to $883 million and $1.0 billion as of December 31, 2004. Assets consolidated are classified as “Property” in GM’s consolidated financial statements. GM’s maximum exposure to loss related to consolidated VIEs amounts to $853 million. For other such lease arrangements involving VIEs, GM holds significant variable interests but is not considered the primary beneficiary under FIN 46R. GM’s maximum exposure to loss related to VIE’s where GM has a significant variable interest, but does not consolidate the entity, amounts to $639 million.           Financing and Insurance Operations         Automotive finance receivables — In certain securitization transactions, GMAC transfers consumer finance receivables and wholesale lines of credit into bank-sponsored multi-seller commercial paper conduits. These conduits provide a funding source to GMAC (as well as other transferors into the conduit) as they fund the purchase of the receivables through the issuance of commercial paper. Total assets outstanding in these bank-sponsored conduits approximated $15.3 billion as of December 31, 2005. While GMAC has a variable interest in these conduits, it is not considered to be the primary beneficiary, as GMAC does not retain the majority of the expected losses or returns. GMAC’s maximum exposure to loss as a result of its involvement with these non-consolidated variable interest entities is $132 million and would only be incurred in the event of a complete loss on the assets that GMAC transferred.        Mortgage warehouse funding — GMAC’s Mortgage operations transfer commercial and residential mortgage loans, lending receivables, home equity loans and lines of credit pending permanent sale or securitization through various structured finance arrangements in order to provide funds for the origination and purchase of future loans. These structured finance arrangements include transfers to warehouse funding entities, including GMAC and bank-sponsored commercial paper conduits. Transfers of assets from GMAC into each facility are accounted for as either sales (off-balance sheet) or secured financings (on-balance sheet) based on the provisions of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” However, in either case, creditors of these facilities have no legal recourse to the general credit of GMAC. Some of these warehouse funding entities represent variable interest entities under FIN 46R.        Management has determined that for certain mortgage warehouse funding facilities, GMAC is the primary beneficiary and, as such, consolidates the entities in accordance with FIN 46R. The assets of these residential mortgage warehouse entities totaled $7.2 billion at December 31, 2005, the majority of which are included in loans held for sale and finance receivables, net, in the Corporation’s Consolidated Balance Sheet.        During 2005, the use of the commercial mortgage warehouse entities was terminated. The assets of the commercial mortgage warehouse entities totaled $526 million at December 31, 2004, the majority of which are included in loans held for sale and finance receivables and loans, net of unearned income, included in the Corporation’s Consolidated Balance Sheet. The beneficial interest holders of these variable interest entities do not have legal recourse to the general credit of GMAC.        Residential mortgage loan alliances — GMAC has invested in strategic alliances with several mortgage loan originators. These alliances may include common or preferred equity investments, working capital or other subordinated lending, and warrants. In addition to warehouse lending arrangements, management has determined that GMAC does not have the majority of the expected losses or returns and as such, consolidation is not appropriate under FIN 46R. Total assets in these alliances were $139 million at  II-76    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 8.     Variable Interest Entities — (continued)   December 31, 2005. GMAC’s maximum exposure to loss under these alliances, including commitments to lend additional funds or purchase loans at above-market rates, is $265 million at December 31, 2005.        Construction and real estate lending — GMAC uses an SPE to finance construction lending receivables. The SPE purchases and holds the receivables and funds the majority of the purchases through financing obtained from third-party asset-backed commercial paper conduits. GMAC is the primary beneficiary, and as such, consolidates the entity in accordance with FIN 46R. The assets in this entity totaled $1.6 billion at December 31, 2005, which are included in finance receivables, net, in the Corporation’s Consolidated Balance Sheet. The beneficial interest holders of this variable interest entity do not have legal recourse to the general credit of GMAC.        GMAC has subordinated real estate lending arrangements with certain entities. These entitles are created to develop land and construct residential homes. Management has determined that GMAC does not have the majority of the expected losses or returns, and as such, consolidation is not appropriate under FIN 46R. Total assets in these entities were $496 million at December 31, 2005, of which $134 million represents GMAC’s maximum exposure to loss.        Warehouse lending — GMAC has a facility in which it transfers mortgage warehouse lending receivables to a 100% owned SPE which then sells a senior participation interest in the receivables to an unconsolidated qualifying special purpose entity (QSPE). The QSPE funds the purchase of the participation interest from the SPE through financing obtained from third-party asset-backed commercial paper conduits. The SPE funds the purchase of the receivables from GMAC with cash obtained from the QSPE, as well as a subordinated loan and/or an equity contribution from GMAC. The senior participation interest sold to the QSPE, and the commercial paper issued are not included in the assets or liabilities of GMAC. Once the receivables have been sold, they may not be purchased by the GMAC except in very limited circumstances, such as a breach in representations or warranties. Management has determined that GMAC is the primary beneficiary of the SPE, and as such, consolidates the entity in accordance with FIN 46R. The assets in this entity totaled $3.5 billion at December 31, 2005, which are included in finance receivables, net of unearned income, in the Corporation’s Consolidated Balance Sheet. The beneficial interest holders of this variable interest entity do not have legal recourse to the general credit of GMAC.        Collateralized debt obligations (CDOs) — GMAC’s Mortgage operations sponsor, purchase subordinate and equity interests in, and serve as collateral manager for CDOs. Under CDO transactions, a trust is established that purchases a portfolio of securities and issues debt and equity certificates, representing interests in the portfolio of assets. In addition to receiving variable compensation for managing the portfolio, GMAC sometimes retains equity investments in the CDOs. The majority of the CDOs sponsored by GMAC were initially structured or have been restructured (with approval by the senior beneficial interest holders) as QSPEs, and are therefore exempt from FIN 46R.        GMAC receives an asset management fee for purposes of surveillance of existing collateral performance. In the event that an asset is credit impaired, a call option is triggered whereby GMAC, as collateral manager, may buy the asset out of the pool and sell it to a third party. The call is triggered only by events that are outside of GMAC’s control, such as the downgrade by a rating agency of an asset in the pool or in the event more than a specified percentage of mortgage loans underlying a security are greater than 60 days delinquent (or have been liquidated). In the event the conditions under which GMAC can exercise the call option are met, GMAC recognizes these assets. In accordance with these provisions, GMAC did not recognize any assets as of December 31, 2005 or 2004.        For the majority of GMAC’s remaining CDOs, the results of the primary beneficiary analysis support the conclusion that consolidation is not appropriate under FIN 46R, because GMAC does not have the majority of the expected losses or returns. The assets in these CDOs totaled $3.1 billion at December 31, 2005, of  II-77    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 8.     Variable Interest Entities — (continued)   which GMAC’s maximum exposure to loss is $43 million, representing GMAC’s retained interests in these entities. The maximum exposure to loss would only occur in the unlikely event that there was a complete loss on GMAC’s retained interests in these entities. In addition, management has determined that for certain CDO entities, GMAC is the primary beneficiary, and as such, consolidates the entities in accordance with FIN 46R. The assets in these entities totaled $569 million at December 31, 2005, the majority of which are included in other marketable securities in the Corporation’s Consolidated Balance Sheet. The beneficiary interest holders of these variable interest entities do not have legal recourse to the general credit of GMAC.        Interests in real estate partnerships — GMAC’s Commercial Mortgage operations syndicate investments in real estate partnerships to unaffiliated investors, and in certain partnerships, have guaranteed the timely payments of a specified return to those investors. The investor’ returns are principally generated from each partnership’s share of affordable housing tax credits and tax losses derived from the partnership’s investments in entities which develop, own and operate affordable housing properties throughout the United States. These entities are considered VIE’s under FIN 46R. The determination of whether GMAC is the primary beneficiary of a given tax credit fund depends on many factors, including the number of limited partners and the rights and obligations of the general and limited partners in that fund.        GMAC has variable interests in the underlying operating partnerships (primarily in the form of limited partnership interests). The results of the variable interest analysis indicated that GMAC is not the primary beneficiary of some of these partnerships and, as a result, are not required to consolidate these entities under FIN 46R. Assets outstanding in these underlying operating partnerships approximated $6.5 billion at December 31, 2005. GMAC’s maximum exposure to loss related to these partnerships is $682 million. In addition, management has determined that for certain partnerships, GMAC is the primary beneficiary, and as such, consolidates the partnerships in accordance with FIN 46R. The impact of consolidation results in an increase to our assets totaling $452 million at December 31, 2005, which are included in the Corporations’ Consolidated Balance Sheet. This consolidation did not impact reported net income. Real estate assets held as collateral for these entities totaled $252 million at December 31, 2005. The beneficial interest holders of these variable interest entities do not have legal recourse to the GMAC’s general credit.        We hold variable interests in syndicated affordable housing partnerships where we provide unaffiliated investors with a guaranteed yield on their investment. These partnerships are reflected in the reporting segment held for sale in the Corporation’s Consolidated Balance Sheet under the financing method in accordance with Statement of Financial Accounting Standards No 66, Accounting for Sales of Real Estate (SFAS 66). GMAC’s exposure to loss at December 31, 2005 was $1.4 billion representing the $1.0 billion financing liability reflected in the Corporation’s Consolidated Balance Sheet (i.e. real estate syndication proceeds) as well as $0.4 billion in additional unpaid equity installments. The maximum exposure amount represents the amount payable to investors as unaffiliated investors place additional guaranteed commitments with GMAC, and decreases as tax benefits are delivered to the investors. Considering such amounts, GMAC exposure to loss in future periods is not expected to exceed $1.9 billion.        New market tax credit funds — The Corporation syndicates and manages investments in partnerships that make investments, typically mortgage loans that, in turn, qualify the partnerships to earn New Markets Tax Credits. New Markets Tax Credits permit taxpayers to receive a federal income tax credit for making qualified equity investments in community development entities. For one particular tax credit fund management has determined that GMAC does not have the majority of the expected losses or returns and, as such, consolidation is not appropriate under FIN 46R. The assets in these investments totaled $62 million at December 31, 2005, of which $41 million represents GMAC’s maximum exposure to loss. In addition to this entity, management has determined that for other tax credit funds, GMAC is a primary beneficiary and as such, consolidates these entities in accordance with FIN 46R. The impact of consolidation results in an increase to our assets totaling $206 million at December 31, 2005, which are included in the reporting segment  II-78    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 8.     Variable Interest Entities — (concluded)   held for sale in the Corporation’s Consolidated Balance Sheet. The beneficial interest holders of these variable interest entities do not have legal recourse to the general credit of GMAC.         Note 9.  Finance Receivables and Securitizations            Finance Receivables — Net         Finance receivables — net included the following (dollars in millions):                                 December 31,               2005   2004                 Consumer:                            Retail automotive    $ 71,452     $ 92,225             Residential mortgages      68,959       57,709                           Total consumer      140,411       149,934       Commercial:                            Automotive:                              Wholesale      19,641       27,796               Leasing and lease financing      1,228       1,466               Term loans to dealers and others      2,973       3,662             Commercial and industrial      16,936       14,203             Commercial real estate:                              Commercial mortgage(1)      43       3,148               Real estate construction      2,677       2,810                           Total commercial      43,498       53,085                           Total finance receivables and loans      183,909       203,019           Allowance for financing losses      (3,116 )     (3,419 )                         Total consolidated finance receivables — net(2)    $ 180,793     $ 199,600                                 (1)       At December 31, 2005, $3.0 billion ($2.1 billion     domestic and $949 million foreign) in GMAC Commercial     Mortgage’s finance receivables and loans were transferred     to the reporting segment held for sale on the Corporation’s     Consolidated Balance Sheet (refer to Note 1 for further     details).       (2)       Net of unearned income of $5.9 billion and     $7.6 billion at December 31, 2005 and 2004,     respectively.         Finance receivables that originated outside the United States were $32.5 billion and $35.4 billion at December 31, 2005 and 2004, respectively. The aggregate amounts of total finance receivables maturing in each of the five years following December 31, 2005, are as follows: 2006 — $61.4 billion; 2007 — $23.3 billion; 2008 — $16.8 billion; 2009 — $10.6 billion; 2010 — $6.5 billion; and 2011 and thereafter — $71.2 billion. Actual maturities may differ from those scheduled due to prepayments.  II-79    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 9.     Finance Receivables and Securitizations — (continued)           Securitizations of Finance Receivables and Mortgage     Loans         The Corporation securitizes automotive and mortgage financial assets as a funding source. GMAC sells retail finance receivables, wholesale loans, residential mortgage loans, commercial mortgage loans and commercial mortgage securities. The information contained below relates only to the transfers of finance receivables and loans that qualify as off-balance sheet securitizations under the requirements of SFAS 140.        The Corporation retains servicing responsibilities for and subordinated interests in all of its securitizations of retail finance receivables and wholesale loans. Servicing responsibilities are retained for the majority of its residential and commercial mortgage loan securitizations and the Corporation may retain subordinated interests in some of these securitizations. GMAC also holds subordinated interests and acts as collateral manager in the Corporation’s collateralized debt obligation (CDO) securitization program.        As servicer, GMAC generally receives a monthly fee stated as a percentage of the outstanding sold receivables. For retail automotive finance receivables where GMAC is paid a fee, the Corporation has concluded that the fee represents adequate compensation as a servicer and, as such, no servicing asset or liability is recognized. Considering the short-term revolving nature of wholesale loans, no servicing asset or liability is recognized upon securitization of the loans. As of December 31, 2005, the weighted average basic servicing fees for GMAC’s primary servicing activities were 100 basis points, 100 basis points, 40 basis points and 7 basis points of the outstanding principal balance for sold retail finance receivables, wholesale loans, residential mortgage loans, and commercial mortgage loans, respectively. Additionally, the Corporation retains the rights to cash flows remaining after the investors in most securitization trusts have received their contractual payments. In certain retail securitization transactions, retail receivables are sold on a servicing retained basis, but with no servicing compensation and, as such, a servicing liability is established and recorded in other liabilities. As of December 31, 2005 and December 31, 2004, servicing liabilities of $32 million and $30 million, respectively, were outstanding related to such retail securitization transactions. In 2005, GMAC completed a retail automotive securitization where the servicing fee received is considered greater than adequate compensation requiring the recording of a servicing asset. As of December 31, 2005, the fair value of the servicing asset was $30 million.        For mortgage servicing, the Corporation capitalizes the value expected to be realized from performing specified residential and commercial mortgage servicing activities as mortgage servicing rights.        GMAC maintains cash reserve accounts at predetermined amounts for certain securitization activities in the unlikely event that deficiencies occur in cash flows owed to the investors. The amounts available in such cash reserve accounts totaled $52 million, $1.0 billion, $88 million, and $7 million as of December 31, 2005 related to securitizations of retail finance receivables, wholesale loans, residential mortgage loans, and commercial mortgage loans, respectively, and $118 million, $1.0 billion, $44 million, and $10 million as of December 31, 2004, respectively.  II-80    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 9.     Finance Receivables and Securitizations — (continued)        The following tables summarize pre-tax gains on securitizations and certain cash flows received from and paid to securitization trusts for transfers of finance receivables and loans that were completed during 2005, 2004 and 2003 (dollars in millions):                                                     Year Ended December 31, 2005               Retail       Mortgage Loans   Commercial       Finance   Wholesale       Mortgage       Receivables   Loans   Residential   Commercial   Securities                                 Pre-tax gains on securitizations    $ (2 )   $ 543     $ 513     $ 68     $ 8           Cash flow information:                                                  Proceeds from new securitizations      4,874       7,705       41,987       3,990       741           Servicing fees received      65       179       245       21       —           Other cash flows received on retained interests      249       503       583       262       42           Proceeds from collections reinvested in revolving securitizations      —       102,306       —       —       —           Repayments of servicing advances      43       —       1,115       198       —           Cash outflow information:                                                  Servicing advances      (46 )     —       (1,163 )     (188 )     —           Purchase obligations and options:                                                  Representations and warranties obligations      —       —       (29 )     —       —           Administrator or servicer actions      (76 )     —       —       —       —           Asset performance conditional calls      —       —       (99 )     —       —           Clean-up calls      (715 )     —       (2,202 )     —       —      II-81    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 9.     Finance Receivables and Securitizations — (continued)                                                     Year Ended December 31, 2004               Retail       Mortgage loans   Commercial       Finance   Wholesale       Mortgage       Receivables   Loans   Residential   Commercial   Securities                                 Pre-tax gains on securitizations    $ 9     $ 497     $ 602     $ 54     $ 11           Cash flow information:                                                  Proceeds from new securitizations      1,824       9,188       29,412       2,108       935           Servicing fees received      105       174       208       20       —           Other cash flows received on retained interests      340       808       729       216       68           Proceeds from collections reinvested in revolving securitizations      —       91,360       —       —       —           Repayments of servicing advances      75       —       947       147       —           Cash outflow information:                                      —           Servicing advances      (64 )     —       (1,035 )     (169 )     —           Purchase obligations and options:                                                  Representations and warranties obligations      (1 )     —       (66 )     —       —           Administrator or servicer actions      (75 )     —       —       —       —           Asset performance conditional calls      —       —       (137 )     —       —           Clean-up calls      (269 )     —       (3,797 )     —       —                                                         Year Ended December 31, 2003               Retail       Mortgage Loans   Commercial       Finance   Wholesale       Mortgage       Receivables   Loans   Residential   Commercial   Securities                                 Pre-tax gains on securitizations    $ 37     $ 488     $ 522     $ 75     $ 14           Cash flow information:                                                  Proceeds from new securitizations      1,604       3,625       29,566       3,342       1,870           228       164       250       20       —           Other cash flows received on retained interests      753       174       955       317       69           Proceeds from collections reinvested in revolving securitizations      862       97,829       —       5       —           Repayments of servicing advances      114       —       1,208       116       —           Cash outflow information:                                                  Servicing advances      (118 )     —       (1,242 )     (117 )     —           Purchase obligations and options:(a)                                                  Representations and warranties obligations      (25 )     —       (154 )     —       —           Administrator or servicer actions      (146 )     —       —       —       —           Asset performance conditional calls      —       —       (122 )     —       —           Clean-up calls      (885 )     —       (1,919 )     —       —      II-82    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 9.     Finance Receivables and Securitizations — (continued)        Key economic assumptions used in measuring the estimated fair value of retained interests of sales completed during 2005 and 2004, as of the dates of such sales, were as follows:                                                                             Year Ended December 31, 2005   Year Ended December 31, 2004                   Retail   Mortgage loans       Retail   Mortgage loans           finance       Commercial   finance       Commercial       receivables   Residential       mortgage   receivables   Residential       mortgage       (a)   (b)   Commercial   securities   (a)   (b)   Commercial   securities                                             Key assumptions(c) (rates per annum):                                                                          Annual prepayment rate(d)      0.9-1.2 %     0.0-60.0 %     0.0-50.0 %     0.0 %     0.9-1.0 %     0.0- 51.3 %     0.0-50.0 %     0.0-19.9 %         Weighted average life (in years)      1.6-1.7       1.1-8.5       0.3-8.6       5.9-9.9       1.6-1.8       1.1-5.5       0.4-8.8       2.5-17.4           Expected credit losses      0.4-1.6 %     0.0-4.9 %     0.0 %     0.0 %     0.4 %     0.0-10.9 %     0.0 %     0.0-3.1 %         Discount rate      9.5-15.0 %     6.5- 21.4 %     4.2-10.7 %     10.0- 12.0 %     9.5 %     6.5- 24.8 %     4.3-15.0 %     8.2-11.7 %               (a)       The fair value of retained interests in wholesale     securitizations approximates cost because of the short-term and     floating rate nature of wholesale loans.                (b)       Included within residential mortgage loans are home equity loans     and lines, high     loan-to-value loans and     residential first and second mortgage loans.            (c)       The assumptions used to measure the expected yield on variable     rate retained interests are based on a benchmark interest rate     yield curve, plus a contractual spread, as appropriate. The     actual yield curve utilized varies depending on the specific     retained interests.            (d)       Based on the weighted average maturity (WAM) for finance     receivables and constant prepayment rate (CPR) for mortgage     loans and commercial mortgage securities.   II-83    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 9.     Finance Receivables and Securitizations — (continued)        The table below outlines the key economic assumptions and the sensitivity of the fair value of retained interests at December 31, 2005 to immediate 10% and 20% adverse changes in those assumptions (dollars in millions):                                                   Mortgage loans           Retail finance       Commercial mortgage       receivables (a)   Residential   Commercial   securities                             Carrying value/fair value of retained interests    $ 314     $ 1,057     $ 250     $ 182           Weighted average life (in years)      0.1-1.2       1.0-6.2       0.0-17.7       2.4-16.1           Annual prepayment rate      0.7-1.2% WAM       0.0-60.0% CPR       0.0-50.0% CPR       1.2-16.0% CPR             Impact of 10% adverse change      $(1 )     $(46 )     $(1 )     $—             Impact of 20% adverse change      (2 )     (82 )     (1 )     —           Loss assumption      0.4%(b )     0.0-16.9%       0.0-3.4%       0.0-6.7%             Impact of 10% adverse change      $(2 )     $(43 )     $(6 )     $(3 )           Impact of 20% adverse change      (4 )     (81 )     (10 )     (6 )         Discount rate      9.5-12.0%       6.5-40.0%       0.1-33.5%       5.3-21.1%             Impact of 10% adverse change      $(2 )     $(34 )     $(5 )     $(9 )           Impact of 20% adverse change      (5 )     (65 )     (10 )     (17 )         Market rate(d)      3.9-5.1%       (c )     (c )     (c )           Impact of 10% adverse change      $(7 )     $(11 )     $—       $—             Impact of 20% adverse change      (15 )     (26 )     —       —                 (a)       Fair value of retained interests in wholesale securitizations     approximates cost of $690 million because of the short-term     and floating rate nature of wholesale receivables.                (b)       Net of a reserve for expected credit losses totaling     $14 million at December 31, 2005. Such amounts are     included in the fair value of the retained interests, which are     classified as investment securities.            (c)       Forward benchmark interest rate yield curve plus contractual     spread.            (d)       Represents the rate of return paid to the investors.         These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% and 20% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which may magnify or counteract the sensitivities. Additionally, the Corporation hedges interest rate and prepayment risks associated with certain of the retained interests; the effects of such hedge strategies have not been considered herein. Expected static pool net credit losses include actual incurred losses plus projected net credit  II-84    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 9. Finance Receivables and Securitizations — (concluded)   losses divided by the original balance of the outstandings comprising the securitization pool. The table below displays the expected static pool net credit losses based on the Corporation’s securitization transactions.                                     Loans securitized in years ended       December 31, (a)               2005   2004   2003                         Retail automotive      0.4 %     0.4 %     0.4 %         Residential mortgage      0.0- 16.9 %     0.0- 26.1 %     0.0- 26.1 %         Commercial mortgage      0.0-3.4 %     0.0- 4.2 %     0.0- 6.6 %         Commercial investment securities      0.0-6.7 %     0.0- 39.5 %     0.9- 33.7 %               (a)       Static pool losses not applicable to wholesale finance     receivable securitizations because of their short-term nature.         The following table presents components of securitized financial assets and other assets managed, along with quantitative information about delinquencies and net credit losses:                                                               Total finance receivables   Amount 60 days or           and loans   more past due   Net credit losses                   December 31, (dollars in millions)   2005   2004   2005   2004   2005   2004                                     Retail automotive    $ 77,197     $ 97,631     $ 892     $ 806     $ 867     $ 1,044           Residential mortgage      167,584       129,550       8,682       6,686       885       944                                                     Total consumer      244,781       227,181       9,574       7,492       1,752       1,988           Wholesale      41,062       49,197       73       51       4       2           Commercial mortgage      43       21,353       —       410       4       130           Other automotive and commercial      23,852       22,155       575       544       33       71                                                     Total commercial(a)      64,957       92,705       648       1,005       41       203                                                   Total managed portfolio(b)      309,738       319,886     $ 10,222     $ 8,497     $ 1,793     $ 2,191                                                     Securitized finance receivables                                                            and loans      (103,947 )     (96,801 )                                           Loans held for sale (unpaid principal)      (21,882 )     (19,941 )                                                                                 Total finance receivables and loans    $ 183,909     $ 203,144                                                                                         (a)       Excludes $26,320 million in GMAC commercial mortgage’s     managed assets. At December 31, 2005, commercial mortgage     had $281 million in accounts past due and net credit losses     of $228 million.                (b)       Managed portfolio represents finance receivables and loans on     the balance sheet or that have been securitized, excluding     securitized finance receivables and loans that GMAC continues to     service but has no other continuing involvement (i.e., in which     GMAC retains an interest or risk of loss in the underlying     receivables).   II-85    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)   Note 10.     Inventories           Automotive and Other Operations         Inventories included the following (dollars in millions):                                   December 31,               2005   2004                     Productive material, work in process, and supplies    $ 5,471     $ 4,838           Finished product, service parts, etc.       9,871       8,321                             Total inventories at FIFO      15,342       13,159               Less LIFO allowance      (1,491 )     (1,442 )                               Total inventories (less allowances)    $ 13,851     $ 11,717            Inventories are stated generally at cost, which is not in excess of market. The cost of approximately 67% of U.S. inventories is determined by the last-in, first-out (LIFO) method. Generally, the cost of all other inventories is determined by either the first-in, first-out (FIFO) or average cost methods.        During 2005 and 2004, U.S. LIFO eligible inventory quantities were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of 2005 and 2004 purchases, the effect of which decreased cost of goods sold by approximately $100 million, pre-tax, in both 2005 and 2004.           Financing and Insurance Operations         Inventories included the following (dollars in millions):                             December 31,               2005   2004                     Off-lease vehicles    $ 503     $ 530                           Total consolidated inventories (less allowances)    $ 14,354     $ 12,247                       Note 11.     Equipment on Operating Leases        The Corporation has significant investments in its vehicle leasing portfolios. The residual values of vehicles on lease represent the estimate of the values of the assets at the end of the lease contracts and are initially determined based on appraisals and estimates. Realization of the residual values is dependent on the Corporation’s future ability to market the vehicles under then prevailing market conditions. Management reviews residual values periodically to determine that the estimates remain appropriate.           Automotive and Other Operations         Equipment on operating leases and accumulated depreciation were as follows (dollars in millions):                               December 31,               2005   2004                     Equipment on operating leases    $ 7,629     $ 7,475           Less accumulated depreciation      (636 )     (987 )                           Net book value    $ 6,993     $ 6,488      II-86    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 11.     Equipment on Operating Leases — (concluded)           Financing and Insurance Operations         Equipment on operating leases and accumulated depreciation were as follows (dollars in millions):                               December 31,               2005   2004                     Equipment on operating leases    $ 39,675     $ 36,002           Less accumulated depreciation      (8,481 )     (8,276 )                           Net book value    $ 31,194     $ 27,726                           Total consolidated net book value    $ 38,187     $ 34,214                            The lease payments to be received related to equipment on operating leases maturing in each of the five years following December 31, 2005, are as follows: Auto & Other — none, as the payment is received at lease inception and the income is deferred over the lease period; FIO — 2006-$6.3 billion; 2007-$4.4 billion; 2008- $2.4 billion; 2009-$665 million; and 2010-$27 million. There are no leases maturing after 2010.   Note 12.     Income Taxes        Income (loss) from continuing operations before income taxes and minority interests included the following (dollars in millions):                                       Years Ended December 31,               2005   2004   2003                         U.S. income (loss)    $ (16,171 )   $ 242     $ 1,802           Foreign income (loss)      (760 )     944       1,195                                   Total    $ (16,931 )   $ 1,186     $ 2,997                                  The provision for income taxes was estimated as follows (dollars in millions):                                           Years Ended December 31,               2005   2004   2003                         Income taxes estimated to be payable currently                                    U.S. federal    $ (147 )   $ (282 )   $ 167             Foreign      841       1,018       1,159             U.S. state and local      (2 )     36       414                                     Total payable currently      692       772       1,740                                 Deferred income tax expense (credit) — net                                    U.S. federal      (6,878 )     (427 )     134             Foreign      (668 )     (1,239 )     (1,136 )           U.S. state and local      976       (22 )     (28 )                                   Total deferred      (6,570 )     (1,688 )     (1,030 )                                     Total income taxes    $ (5,878 )   $ (916 )   $ 710                                  Annual tax provisions include amounts considered sufficient to pay assessments that may result from examination of prior year tax returns. Cash paid for income taxes in 2005, 2004, and 2003 was $305 million, $293 million, and $542 million, respectively.  II-87    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 12.     Income Taxes — (continued)        Provisions are made for estimated U.S. and foreign income taxes, less available tax credits and deductions, which may be incurred on the remittance of the Corporation’s share of subsidiaries’ undistributed earnings not deemed to be permanently reinvested. Taxes have not been provided on foreign subsidiaries’ earnings, which are deemed permanently reinvested, of $12.6 billion at December 31, 2005 and $11.0 billion at December 31, 2004. Quantification of the deferred tax liability, if any, associated with permanently reinvested earnings is not practicable.        A reconciliation of the provision for income taxes compared with the amounts at the U.S. federal statutory rate was as follows (dollars in millions):                                       Years Ended December 31,               2005   2004   2003                         Tax at U.S. federal statutory income tax rate    $ (5,926 )   $ 415     $ 1,049           State and local tax expense      (589 )     (949 )     21           Foreign rates other than 35%      (174 )     (510 )     (269 )         Taxes on unremitted earnings of subsidiaries      (276 )     (366 )     (125 )         Other tax credits      (69 )     (41 )     (52 )         Settlement of prior year tax matters      (515 )     (191 )     (194 )         Change in valuation allowance      2,178       1,432       566           ESOP dividend deduction(1)      (52 )     (53 )     (53 )         Realization of basis differences due to foreign reorganizations      (84 )     (483 )     —           Medicare prescription drug benefit      (325 )     (211 )     —           Loss carryforward related to investment write-down      —       (168 )     —           Stock contribution to pension plans(2)      —       —       (87 )         Other adjustments      (46 )     209       (146 )                                 Total income tax (benefit) expense    $ (5,878 )   $ (916 )   $ 710                                       (1)       Deduction for dividends paid on GM     $12/3      par value common stock held under the employee stock     ownership portion of the GM Savings Plans, pursuant to the     Economic Growth and Tax Relief Reconciliation Act of 2001.       (2)       Additional tax benefit related to the GM Class H Common     Stock contribution to the pension and VEBA plans.         Deferred income tax assets and liabilities for 2005 and 2004 reflect the effect of temporary differences between amounts of assets, liabilities, and equity for financial reporting purposes and the bases of such assets, liabilities, and equity as measured by tax laws, as well as tax loss and tax credit carryforwards.  II-88    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 12.     Income Taxes — (continued)        Temporary differences and carryforwards that gave rise to deferred tax assets and liabilities included the following (dollars in millions):                                               December 31,               2005   2004       Deferred Tax   Deferred Tax                   Assets   Liabilities   Assets   Liabilities                             Postretirement benefits other than pensions    $ 12,757     $ —     $ 9,377     $ —           Pension and other employee benefit plans      3,807       12,985       3,787       13,408           Warranties, dealer and customer allowances, claims, and discounts      6,739       52       6,907       42           Depreciation and amortization      5,713       2,584       5,043       3,118           Tax carryforwards      11,155       —       10,422       —           Lease transactions      —       4,351       19       3,801           Miscellaneous foreign      4,510       371       4,401       2,300           Other      9,981       3,677       9,050       3,804                                         Subtotal      54,662       24,020       49,006       26,473           Valuation allowances      (5,230 )     —       (3,052 )     —                                         Total deferred taxes    $ 49,432     $ 24,020     $ 45,954     $ 26,473                                         Net deferred tax assets    $ 25,412             $ 19,481                                                These deferred tax balances are included in the following captions in the consolidated balance sheet and supplemental information:                               2005   2004                     Current deferred tax assets    $ 7,073     $ 8,883           Current deferred tax liabilities      (3,759 )     (5,226 )         Non-current deferred tax assets      22,816       17,676           Non-current deferred tax liabilities      (718 )     (1,852 )                           Total    $ 25,412     $ 19,481                            Of the tax carryforwards at December 31, 2005, approximately 5% relates to the alternative minimum tax credit (which can be carried forward indefinitely), approximately 26% relates to U.S. federal net operating loss carryforwards and approximately 12% relates to the U.S. state net operating loss carryforwards, which will expire in 2006-2025 if not used. Approximately 85% of the U.S. state net operating loss carryforwards will not expire until after 2008. Approximately 38% of the tax carryforwards relate to general business credits (which consist primarily of research and experimentation credits) and U.S. foreign tax credits which will expire in 2009-2025 if not used. The remaining tax carryforwards relate to accumulated foreign operating losses of which approximately 93% can be carried forward indefinitely and the remaining 7% will expire by 2015.  II-89    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 12.     Income Taxes — (continued)        The Corporation has the following net deferred tax assets applicable to the following taxing jurisdictions where the Corporation’s operations have a recent history of pre-tax cumulative losses for financial reporting purposes:                                             Statutory               Operating Loss   Jurisdiction   2005   2004   Carryforward Period                         United States    $ 21,633     $ 15,719       20 years/ Unlimited           Germany      2,034       1,427       Unlimited           Brazil      0       453       Unlimited           United Kingdom      299       363       Unlimited           Spain      230       186       15 years                                 Total    $ 24,196     $ 18,148                                          The need to establish valuation allowances for these net deferred tax assets is assessed periodically based on a more-likely-than-not realization threshold, in accordance with SFAS 109, “Accounting for Income Taxes.” Appropriate consideration is given to all positive and negative evidence related to that realization. This assessment considers, among other matters, the nature, frequency and severity of recent losses, forecasts of future profitability, the duration of statutory carryforward periods, GM’s experience with tax attributes expiring unused, and tax planning alternatives. The weight given to these considerations depends upon the degree to which they can be objectively verified.        The valuation allowances that GM has recognized relate to certain U.S. state and foreign jurisdiction net deferred tax assets. The change in the valuation allowance and related considerations are as follows:                         Balance December 31, 2004    $ 3,052           Additions:                    US State & Local      1,424             Brazil      617             Other      137                     Balance December 31, 2005    $ 5,230                      United States — No valuation allowance has been established for GM’s U.S. Federal net deferred tax assets, which GM believes will more likely than not be realized. This expectation is based in part on the fact that, while GM has incurred cumulative losses over the last three years in the United States, those losses occurred only in 2005. Moreover, the 2005 U.S. losses were largely driven by the Corporation’s restructuring of its North American Operations; accordingly, those losses are unusual in nature and were incurred in order to improve future profitability. In addition, consideration has been given to the lengthy period over which these net deferred tax assets can be realized, and GM’s history of never having lost a significant U.S. Federal tax attribute through expiration. GM has also given consideration to its forecast of future profitability, which includes the following key elements:            •       The launch of new sport utility vehicles and full size     pick-up trucks     primarily in 2006, which are expected to produce substantially     higher revenues and profits than the predecessor models in these     segments in 2005;         •       The amendment of the GM Health Care Program for Hourly Employees     and the establishment of a defined contribution health care     plan, which will result in a substantial reduction in health     care costs in   II-90    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 12.  Income Taxes — (concluded)                   the U.S. beginning in 2006. The amendment has been ratified     by the UAW and granted preliminary approval by the     U.S. District Court for the Eastern District of Michigan;         •       Reductions of GMNA’s cost structure as a result of the     implementation of its restructuring plan; and         •       Continued strength of GMAC earnings in the U.S.         The anticipated outcome of these events is expected to improve GMNA’s pre-tax results in the United States. At the forecast levels of future profitability, the U.S. net deferred tax assets are considered more likely than not to be realizable over the periods that the underlying transactions become deductible for U.S. Federal tax purposes. If future events and/or the outcome of GM’s cost reduction actions were to be significantly different than GM currently forecasts, a substantial valuation allowance for the U.S. net deferred tax assets might be required. Furthermore, if GMAC’s U.S. pre-tax income declines or if a significant portion of GMAC’s U.S. pre-tax income were to no longer be available to GM, because of the sale of a controlling interest in GMAC or otherwise, a substantial valuation allowance may be required.        An additional valuation allowance was recorded in 2005 related to the 2005 loss allocable to certain U.S. state jurisdictions where it has been previously determined that tax attributes related to those jurisdictions were not realizable.        Brazil — In 2005, it was determined that it is more-likely-than-not that the deferred taxes in GM’s Brazilian operations would not be realized. Therefore, GM recorded a full valuation allowance against all tax credit carryforwards and net timing differences in Brazil. The decision was based on a consideration of historical results at GM’s operations in Brazil coupled with the government-imposed 30% annual limitation on net operating loss utilization.        Germany and United Kingdom (UK) — No valuation allowances have been established for GM’s net deferred tax assets in Germany or the UK. Although GM’s German and UK operations have incurred cumulative losses in recent years, GM believes other considerations overcome that fact and, accordingly, that their deferred tax assets will more-likely-than-not be realized. This determination is based in particular on the unlimited expiration of net operating loss carryforwards in Germany and the UK, together with those operations’ histories of utilizing tax attributions in the past through earnings, and their strong prospects for future earnings.        Spain — No valuation allowance has been established for GM’s Spanish net deferred tax assets, which GM believes will more-likely-than-not be realized. Spanish net operating loss carryforwards expire after 15 years, but losses in the Spanish operations have largely been caused by non-recurring transactions. In addition, GM believes its Spanish operations continue to have strong prospects for future earnings.        The Corporation has open tax years from primarily 1998 to 2005 with various significant taxing jurisdictions including the U.S., Canada, Mexico, Germany and Brazil. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle. The Corporation has established a liability of $3.6 billion for those matters where the amount of loss is probable and reasonably estimable. The amount of the liability is based on management’s best estimate given the Corporation’s history with similar matters and interpretations of current laws and regulations.  II-91    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 13.  Property — Net         Property — net was as follows (dollars in millions):                                             Estimated   December 31,       Useful Lives           (Years)   2005   2004                         Automotive and Other Operations                                    Land      —     $ 1,139     $ 967             Buildings and land improvements      2-40       16,179       15,636             Machinery and equipment      3-30       48,351       45,796             Construction in progress      —       4,099       3,807                                     Real estate, plants, and equipment              69,768       66,206               Less accumulated depreciation              (41,554 )     (39,405 )                                     Real estate, plants, and equipment — net              28,214       26,801                 Special tools — net              10,252       10,369                                         Total property — net            $ 38,466     $ 37,170                                 Financing and Insurance Operations                                    Equipment and other      2-10     $ 2,902     $ 3,086               Less accumulated depreciation              (1,154 )     (1,236 )                                       Total property — net (Note 15)            $ 1,748     $ 1,850                                 Total consolidated property — net            $ 40,214     $ 39,020                                  Depreciation and amortization expense was as follows (dollars in millions):                                         Years Ended December 31,               2005   2004   2003                         Automotive and Other Operations                                    Depreciation    $ 5,502     $ 5,028     $ 4,526             Amortization and impairment of special tools      4,495       3,563       3,391             Amortization of intangible assets      76       38       29                                     Total    $ 10,073     $ 8,629     $ 7,946                                 Financing and Insurance Operations                                    Depreciation    $ 5,679     $ 5,512     $ 5,556             Amortization of intangible assets      17       11       11                                     Total    $ 5,696     $ 5,523     $ 5,567                                 Total consolidated depreciation and amortization    $ 15,769     $ 14,152     $ 13,513                            II-92    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 14.  Goodwill and Intangible Assets         The components of the Corporation’s intangible assets as of December 31, 2005 and 2004 were as follows (dollars in millions):                                         Gross Carrying   Accumulated   Net Carrying   December 31, 2005   Amount   Amortization   Amount                         Automotive and Other Operations                                  Amortizing intangible assets:                                    Patents and intellectual property rights    $ 510     $ 148     $ 362           Non-amortizing intangible assets:                                    Goodwill                      757             Prepaid pension asset (Note 18)                      743                                     Total goodwill and intangible assets                    $ 1,862           Financing and Insurance Operations                                  Amortizing intangible assets:                                    Customer lists and contracts    $ 57     $ 41     $ 16             Trademarks and other      35       20       15                                     Total    $ 92     $ 61     $ 31                                 Non-amortizing intangible assets:                                    Goodwill                      2,446                                     Total goodwill and intangible assets (Note 15)                      2,477                                 Total consolidated goodwill and intangible assets                    $ 4,339                            II-93    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 14.  Goodwill and Intangible     Assets — (concluded)                                          Gross Carrying   Accumulated   Net Carrying   December 31, 2004   Amount   Amortization   Amount                         Automotive and Other Operations                                  Amortizing intangible assets:                                    Patents and intellectual property rights    $ 303     $ 69     $ 234           Non-amortizing intangible assets:                                    Goodwill                      600             Prepaid pension asset (Note 18)                      765                                     Total goodwill and intangible assets                    $ 1,599           Financing and Insurance Operations                                  Amortizing intangible assets:                                    Customer lists and contracts    $ 73     $ 41     $ 32             Trademarks and other      40       20       20                                     Total    $ 113     $ 61     $ 52                                 Non-amortizing intangible assets:                                    Goodwill                      3,274                                     Total goodwill and intangible assets (Note 15)                      3,326                                 Total consolidated goodwill and intangible assets                    $ 4,925                                  Aggregate amortization expense on existing acquired intangible assets was $93 million for the year ended December 31, 2005. Estimated amortization expense in each of the next five years is as follows: 2006 — $59 million; 2007 — $59 million; 2008 — $56 million; 2009 — $49 million; and 2010 — $23 million.        The changes in the carrying amounts of goodwill were as follows (dollars in millions):                                                             Total                       Auto &               GMNA   GME   Other   GMAC   Total GM                                 Balance as of December 31, 2003    $ 154     $ 413     $ 567     $ 3,223     $ 3,790           Goodwill acquired during the period      —       —       —       16       16           Effect of foreign currency translation      5       33       38       35       73           Other      (5 )     —       (5 )     —       (5 )                                           Balance as of December 31, 2004      154       446       600       3,274       3,874           Goodwill acquired during the period      238       —       238       22       260           Impairment losses/other(1)                              (734 )     (734 )         Effect of foreign currency translation      (9 )     (72 )     (81 )     (57 )     (138 )         Transfers to reporting segment held for sale(2)      —       —       —       (59 )     (59 )                                           Balance as of December 31, 2005    $ 383     $ 374     $ 757     $ 2,446     $ 3,203                                                   (1)       In the fourth quarter of 2005, GMAC recorded a goodwill     impairment pre-tax charge of $734 million, relating     primarily to the goodwill recognized in conjunction with the     1999 acquisition of The Bank of New York’s commercial     finance business.       (2)       At December 31, 2005, $59 million in GMAC Commercial     Mortgage goodwill was reclassified to assets held for sale.   II-94    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 15.   Other Assets            Automotive and Other Operations         Other assets included the following (dollars in millions)                               December 31,               2005   2004                     Investments in equity securities    $ 435     $ 350           Prepaid pension benefit cost (Note 18)      37,576       38,919           Other      3,092       1,575                             Total other assets    $ 41,103     $ 40,844                            Investments in equity securities at December 31, 2005 and 2004 include the fair value of investments in equity securities classified as available-for-sale for all periods presented. It is GM’s intent to hold these securities for longer than one year. Balances include historical costs of $225 million and $144 million with unrealized gains of $287 million and $209 million and unrealized losses of $77 million and $3 million at December 31, 2005 and 2004, respectively. “Other” in the table above includes restricted cash balances of $157 million and $57 million at December 31, 2005 and 2004, respectively.        In the fourth quarter of 2004, GM completed its annual review of its investment in FAH. As a result of further deterioration in the performance of Fiat Auto S.p.A. and its current debt structure, GM recorded a non-cash charge of $220 million ($136 million, after tax) to reduce the carrying value of GM’s investment in FAH to zero.           Financing and Insurance Operations         Other assets included the following (dollars in millions):                               December 31,               2005   2004                     Mortgage servicing rights    $ 4,015     $ 3,890           Premiums and other insurance receivables      1,873       1,763           Deferred policy acquisition costs      1,696       1,444           Derivative assets      3,000       9,489           Repossessed and foreclosed assets, net      689       615           Equity investments      535       1,751           Intangible assets (Note 14)      2,477       3,326           Property (Note 13)      1,748       1,850           Cash deposits held for securitization trusts      2,907       1,836           Restricted cash collections for securitization trusts      1,871       2,217           Accrued interest and rent receivable      1,163       1,178           Real estate investments      1,320       1,473           Debt issuance costs      726       753           Servicer advances      499       769           Inventory (Note 10)      503       530           Other      2,672       2,307                             Total other assets    $ 27,694     $ 35,191                      II-95    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 15.   Other Assets — (concluded)            Reclassification for Consolidated Balance Sheet     Presentation                                December 31,               2005   2004                     Auto & Other — other assets, as detailed above    $ 41,103     $ 40,844           FIO — other assets, as detailed above      27,694       35,191                             Subtotal      68,797       76,035           Prepaid assets and other      1,837       1,874           Inventory (Note 10)      (503 )     (530 )         Accounts receivable      (7,820 )     (14,523 )         Intangible assets (Note 14)      (2,477 )     (3,326 )         Property (Note 13)      (1,748 )     (1,850 )                           Total consolidated other assets    $ 58,086     $ 57,680                             Note 16.  Accrued Expenses, Other Liabilities, and Deferred Income     Taxes            Automotive and Other Operations         Accrued expenses, other liabilities, and deferred income taxes included the following (dollars in millions):                               December 31,               2005   2004                     Dealer and customer allowances, claims, and discounts    $ 11,605     $ 11,492           Deferred revenue and deposits from rental car companies      13,611       13,239           Policy, product warranty, and recall campaigns      9,128       9,315           Delphi contingent exposure      5,500       0           Payrolls and employee benefits (excludes postemployment)      3,970       4,642           Unpaid losses under self-insurance programs      1,827       1,784           Taxes      2,485       2,993           Interest      1,011       922           Postemployment benefits — Plant idling (Note 5)      2,012       237           Postemployment benefits — Extended disability benefits      1,135       1,163           Fiat settlement (Note 2)      —       1,364           Other      7,418       8,211                             Total accrued expenses and other liabilities    $ 59,702     $ 55,362           Pensions      90       84           Postretirement benefits      4,154       3,890           Deferred income taxes      742       3,072                             Total accrued expenses, other liabilities, and deferred income     taxes    $ 64,688     $ 62,408                             Current    $ 42,665     $ 46,202             Non-current      22,023       16,206                             Total accrued expenses, other liabilities, and deferred income     taxes    $ 64,688     $ 62,408                      II-96   Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 16.     Accrued Expenses, Other Liabilities, and Deferred Income Taxes — (concluded)        Policy, product warranty and recall campaigns liability (dollars in millions):                             December 31,               2005   2004                     Beginning balance    $ 9,315     $ 8,832           Payments      (4,696 )     (4,669 )         Increase in liability (warranties issued during period)      5,159       5,065           Adjustments to liability (pre-existing warranties)      (381 )     (85 )         Effect of foreign currency translation      (269 )     172                           Ending balance    $ 9,128     $ 9,315                            Policy, product warranty, and recall campaigns liability amounts in the table above include amounts with respect to certified-used vehicles. The December 31, 2004 disclosure has been revised accordingly to provide a comparative basis.           Financing and Insurance Operations         Other liabilities and deferred income taxes included the following (dollars in millions):                               December 31,               2005   2004                     Unpaid insurance losses, loss adjustment expenses, and unearned     insurance premiums    $ 7,588     $ 7,232           Interest      3,057       3,413           Deposits      8,367       7,477           Interest rate derivatives      2,224       934           Other      3,122       3,922                             Total other liabilities    $ 24,358     $ 22,978           Postretirement benefits      853       815           Deferred income taxes      3,735       4,006                             Total other liabilities and deferred income taxes    $ 28,946     $ 27,799                             Total consolidated accrued expenses and other liabilities    $ 84,060     $ 78,340                             Total consolidated deferred income tax liability (Note 12)    $ 4,477     $ 7,078                      II-97    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 17.  Long-Term Debt and Loans Payable            Automotive and Other Operations         Long-term debt and loans payable were as follows (dollars in millions):                                                     Weighted-Average           Interest Rate   December 31,                   2005   2004   2005   2004                             Long-term debt and loans payable                                            Payable within one year                                              Current portion of long-term debt(1)      5.8%       5.7%     $ 564     $ 584               All other      7.4%       3.0%       955       1,478                                             Total loans payable                      1,519       2,062             Payable beyond one year(1)      6.9%       6.8%       31,084       30,425             Unamortized discount                      (97 )     (103 )           Mark-to-market adjustment(2)                      27       138                                               Total long-term debt                      31,014       30,460                                               Total long-term debt and loans payable                    $ 32,533     $ 32,522                                             (1)       The weighted-average interest rates include the impact of     interest rate swap agreements.       (2)       Effective January 1, 2001 the Corporation has been     recording its hedged debt at fair market value on its balance     sheet due to the adoption of SFAS No. 133,     “Accounting for Derivative Instruments and Hedging     Activities.”         Long-term debt payable beyond one year at December 31, 2005 includes scheduled maturities as follows: 2007 — $1 billion; 2008 — $1.9 billion; 2009 — $0.4 billion; 2010 — $0.2 billion; 2011 and after — $27.6 billion. Included in the long-term debt payable beyond one year are certain convertible debentures of approximately $1.2 billion that may be put to GM for cash settlement in 2007, ahead of its scheduled maturity after 2011.        To protect against foreign exchange risk, GM has entered into cross currency swap agreements. The notional amount of such agreements as of December 31, 2005 and 2004 for Auto & Other were approximately $2.4 billion and $2.2 billion, respectively.        Amounts payable beyond one year after cross currency swaps at December 31, 2005 included $3.9 billion in currencies other than the U.S. dollar, primarily the Euro ($1.8 billion), the Korean won ($1.5 billion), the Australian dollar ($239 million), the Brazilian real ($225 million), and the Canadian dollar ($115 million).        At December 31, 2005 and 2004, long-term debt and loans payable for Auto & Other included $26.0 billion and $25.3 billion, respectively, of obligations with fixed interest rates and $6.5 billion and $7.2 billion, respectively, of obligations with variable interest rates (predominantly LIBOR), after interest rate swap agreements.        To achieve its desired balance between fixed and variable rate debt, GM has entered into interest rate swaps. The notional amount of pay variable swap agreements as of December 31, 2005 and 2004 for Auto & Other was approximately $5.5 billion and $5.9 billion, respectively.        GM’s Auto & Other business maintains substantial lines of credit with various banks that totaled $8.0 billion at December 31, 2005, of which $2.4 billion represented short-term credit facilities and $5.6 billion represented long-term credit facilities. At December 31, 2004, bank lines of credit totaled $9.0 billion, of  II-98   Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)   Note 17.                              Long-Term Debt and Loans Payable — (continued)   which $3.4 billion represented short-term credit facilities and $5.6 billion represented long-term credit facilities. The unused short-term and long-term portions of the credit lines totaled $0.9 billion and $5.6 billion at December 31, 2005, compared with $2.7 billion and $5.6 billion at December 31, 2004. In addition, GM’s consolidated affiliates with non-GM minority shareholders, primarily GM Daewoo, have lines of credit with various banks that totaled $2.5 billion at December 31, 2005, all of which represented long-term facilities. The unused portion of the credit lines totaled $1.5 billion at December 31, 2005. Certain bank lines of credit contain covenants with which the Corporation and applicable subsidiaries were in compliance throughout the year ended December 31, 2005.        In view of GM’s recent restatement of its prior financial statements, GM believes that there is substantial uncertainty as to whether the bank syndicate would be required to honor a borrowing request under its $5.6 billion long-term credit facility, and therefore there is a high risk that GM would not be able to borrow under this facility. GM believes that issues also may arise from its restatement under various financing agreements, which consist principally of obligations under sale/ leaseback transactions and other lease obligations and do not include GM’s public debt indentures, as to which GM is a party. GM has evaluated the effect of its restatement under these financing agreements, including its legal rights with respect to any claims that could be asserted, and believes that it has sufficient access to liquidity to mitigate any likely impact of these matters.           Financing and Insurance Operations         Debt was as follows (dollars in millions):                                                 Weighted-Average           Interest Rate   December 31,                   2005   2004   2005   2004                             Payable within one year                                            Current portion of long-term debt(1)      4.9%       3.9%     $ 41,733     $ 37,300             Commercial paper(1)      5.5%       2.5%       528       8,416             All other      4.6%       2.8%       39,793       45,327                                           Total loans payable                      82,054       91,043                                       Payable beyond one year(1)      5.2%       4.9%       171,699       176,090           Unamortized discount                      (538 )     (650 )         Mark to market adjustment                      2       1,274                                           Total long-term debt and loans payable                      171,163       176,714               Total debt                    $ 253,217     $ 267,757                                       Total consolidated notes and loans payable                    $ 285,750     $ 300,279                                             (1)       The weighted-average interest rates include the effect of     interest rate swap agreements.         Debt payable beyond one year at December 31, 2005 included maturities as follows: 2007 — $33.9 billion; 2008 — $25.6 billion; 2009 — $10.0 billion; 2010 — $8.8 billion; 2011 and after — $93.4 billion.        Amounts payable beyond one year after consideration of foreign currency swaps at December 31, 2005 included $23.9 billion in currencies other than the U.S. dollar, primarily the Canadian dollar ($8.1 billion), the euro ($6.6 billion), the U.K. pound sterling ($6.1 billion), and the Australian dollar ($1.4 billion).  II-99   Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 17.  Long-Term Debt and Loans Payable — (concluded)         At December 31, 2005 and 2004, debt for FIO included $93.2 billion and $137 billion, respectively, of obligations with fixed interest rates and $160.0 billion and $130.8 billion, respectively, of obligations with variable interest rates (predominantly LIBOR), after considering the impact of interest rate swap agreements.        To achieve its desired balance between fixed and variable rate debt, GM has entered into interest rate swap, cap, and floor agreements. The notional amounts of such agreements as of December 31, 2005 for FIO were approximately $104.5 billion relating to swap agreements ($75.4 billion pay variable and $29.1 billion pay fixed). The notional amounts of such agreements as of December 31, 2004 for FIO were approximately $85.9 billion relating to swap agreements ($56.7 billion pay variable and $29.2 billion pay fixed).        GM’s FIO business maintains substantial lines of credit with various banks that totaled $47.2 billion at December 31, 2005, of which $11.2 billion represented short-term credit facilities and $36 billion represented long-term credit facilities. At December 31, 2004, bank lines of credit totaled $60.3 billion, of which $23 billion represented short-term credit facilities and $37.3 billion represented long-term credit facilities. The unused short-term and long-term portions of the credit lines totaled $3.1 billion and $32.2 billion at December 31, 2005 compared with $8.5 billion and $35.9 billion at December 31, 2004. Certain bank lines of credit contain covenants with which the Corporation and applicable subsidiaries were in compliance throughout the year ended December 31, 2005.         Note 18.  Pensions and Other Postretirement Benefits         GM sponsors a number of defined benefit pension plans covering substantially all U.S. and Canadian employees as well as certain other non-U.S. employees. Plans covering U.S. and Canadian represented employees generally provide benefits of negotiated, stated amounts for each year of service as well as significant supplemental benefits for employees who retire with 30 years of service before normal retirement age. The benefits provided by the plans covering U.S. and Canadian salaried employees and employees in certain other non-U.S. locations are generally based on years of service and compensation history. GM also has certain nonqualified pension plans covering executives that are based on targeted wage replacement percentages and are unfunded.        GM’s funding policy with respect to its qualified pension plans is to contribute annually not less than the minimum required by applicable law and regulations, or to directly pay benefit payments where appropriate. GM made pension contributions to the U.S. hourly and salaried, other U.S., and non-U.S. pension plans, or made direct payments where appropriate, as follows (dollars in millions):                                     2005   2004   2003                         U.S. hourly and salaried    $ —     $ —     $ 18,504           Other U.S.       125       117       117           Non-U.S.       708       802       442            In 2006, GM does not have any contributions due for its U.S. hourly plan. In February 2006, GM contributed $1.7 million into its salaried pension plan. This contribution was a required contribution on behalf of GM employees who were former participants in the Saturn PCRP plan, which was merged into the salaried pension plan in 2005. GM does not expect to make any additional contributions into the salaried pension plan in 2006. During 2006, GM expects to contribute or pay benefits of approximately $100 million to its other U.S. pension plans and $500 million to its primary non-U.S. pension plans, which include GM Canada Limited, Adam Opel and Vauxhall.  II-100    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 18.  Pensions and Other Postretirement Benefits —     (continued)         Additionally, GM maintains hourly and salaried benefit plans that provide postretirement medical, dental, vision, and life insurance to most U.S. retirees and eligible dependents. The cost of such benefits is recognized in the consolidated financial statements during the period employees provide service to GM. Certain of the Corporation’s non-U.S. subsidiaries have postretirement benefit plans, although most participants are covered by government sponsored or administered programs. The cost of such programs generally is not significant to GM.        In 2004, GM contributed a total of $9.0 billion to plan assets including $8.8 billion to its U.S. hourly and salaried Voluntary Employees Beneficiary Association (VEBA) trusts for OPEB plans (consisting of $8.4 billion in cash and $0.4 billion in XM Satellite Radio Holdings, Inc. common stock shares) and $0.2 billion to a salaried 401(h) account. This was the first such contribution related to the salaried OPEB plan and 401(h) account. Contributions by participants to the other OPEB plans were $89 million and $87 million for the years ended December 31, 2005 and 2004, respectively. In 2005, GM withdrew a total of $3.2 billion from plan assets of its VEBA trusts for OPEB plans. GM withdrew $1 billion from its VEBA trust on February 1, 2006 and another $1 billion from its VEBA trust on March 1, 2006.        GM uses a December 31 measurement date for the majority of its U.S. pension plans and a September 30 measurement date for U.S. OPEB plans. GM’s measurement dates for its Canadian, Adam Opel and Vauxhall Motors primary non-U.S. pension plans are November 30, September 30 and September 30, respectively. GM’s measurement dates for its Canadian and South African non-U.S. OPEB plans are December 31.  II-101    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 18.  Pensions and Other Postretirement Benefits —     (continued)                                                                                    U.S. Plans   Non-U.S. Plans       Non-U.S.       Pension Benefits   Pension Benefits   U.S. Other Benefits   Other Benefits                           2005   2004   2005   2004   2005   2004   2005   2004                                           (Dollars in millions)     Change in benefit obligations                                                                          Benefit obligation at beginning of year    $ 90,760     $ 87,285     $ 18,056     $ 15,088     $ 73,772     $ 64,547     $ 3,702     $ 2,995           Service cost      1,117       1,097       322       247       702       566       50       39           Interest cost      4,883       5,050       965       892       4,107       3,726       218       201           Plan participants’ contributions      22       22       27       26       88       85       1       2           Amendments      (65 )     54       113       163       —       10       —       —           Actuarial losses      (975 )     3,683       2,233       1,040       6,720       8,527       (200 )     288           Benefits paid      (6,695 )     (6,605 )     (911 )     (806 )     (4,208 )     (3,690 )     (118 )     (114 )         Exchange rate movements      —       —       (942 )     1,201       —       —       —       —           Curtailments, settlements, and other      86       174       778       205       —       1       107       291                                                               Benefit obligation at end of year      89,133       90,760       20,641       18,056       81,181       73,772       3,760       3,702                                                           Change in plan assets                                                                          Fair value of plan assets at beginning of year      90,886       86,169       9,023       7,560       16,016       9,998       —       —           Actual return on plan assets      10,924       11,046       1,382       814       2,258       981       —       —           Employer contributions      125       117       505       802       2,008       5,037       —       —           Plan participants’ contributions      22       22       27       26       —       —       —       —           Benefits paid      (6,695 )     (6,605 )     (911 )     (806 )     —       —       —       —           Exchange rate movements      —       —       (119 )     627       —       —       —       —           Curtailments, settlements, and other      (12 )     137       18       —       —       —       —       —                                                               Fair value of plan assets at end of year      95,250       90,886       9,925       9,023       20,282       16,016       —       —                                                               Funded status(1)      6,117       126       (10,716 )     (9,033 )     (60,899 )     (57,756 )     (3,760 )     (3,702 )         Unrecognized actuarial loss      25,538       31,604       6,554       5,411       30,592       27,345       1,698       1,326           Unrecognized prior service cost      4,616       5,862       770       808       (714 )     (445 )     (584 )     51           Unrecognized transition obligation      —       —       28       39       —       —       —       —           Employer contributions/withdrawals in fourth quarter      —       —       203       —       (1,176 )     4,000       —       —           Benefits paid in fourth quarter      —       —       —       —       846       999       —       —           Business Combination after Measurement Date      —       —       (187 )     —       —       __ —       —       —                                                                     Net amount recognized    $ 36,271     $ 37,592     $ (3,348 )   $ (2,775 )   $ (31,351 )   $ (25,857 )   $ (2,646 )   $ (2,325 )                                                             Amounts recognized in the consolidated balance sheets consist of:                                                                              Prepaid benefit cost    $ 37,280     $ 38,570     $ 296     $ 349     $ —     $ —     $ —     $ —               Accrued benefit liability      (1,177 )     (1,152 )     (10,127 )     (8,303 )     (31,351 )     (25,857 )     (2,646 )   $ (2,325 )             Intangible asset      —       —       743       765       —       —       —       —               Accumulated other comprehensive income      168       174       5,740       4,414       —       —       —       —                                                                 Net amount recognized    $ 36,271     $ 37,592     $ (3,348 )   $ (2,775 )   $ (31,351 )   $ (25,857 )   $ (2,646 )   $ (2,325 )                                                                   (1)       Includes overfunded status of the combined U.S. hourly and     salaried pension plans of $7.5 billion as of     December 31, 2005, and $1.6 billion as of     December 31, 2004.   II-102    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 18.  Pensions and Other Postretirement Benefits —     (continued)         The total accumulated benefit obligation, the accumulated benefit obligation and fair value of plan assets for GM’s pension plans with accumulated benefit obligations in excess of plan assets, and the projected benefit obligation and fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets are as follows (dollars in millions):                                               U.S. Plans   Non-U.S. Plans                   2005   2004   2005   2004                         Accumulated Benefit Obligation    $ 86,885     $ 88,053     $ 19,714     $ 17,097       Plans with ABO in excess of plan assets                                            ABO    $ 1,207     $ 1,224     $ 19,232     $ 16,631             Fair value of plan assets      30       85       9,249       8,388       Plans with PBO in excess of plan assets                                            PBO    $ 1,703     $ 31,176     $ 20,515     $ 17,907             Fair value of plan assets      295       29,548       9,622       8,708            The components of pension and OPEB expense along with the assumptions used to determine benefit obligations are as follows (dollars in millions):                                                                                                                 Non-U.S. Plans       Non-U.S.       U.S. Plans Pension Benefits   Pension Benefits   U.S. Other Benefits   Other Benefits                           2005   2004   2003   2005   2004   2003   2005   2004   2003   2005   2004   2003                                                         Components of expense                                                                                                          Service cost    $ 1,117     $ 1,097     $ 919     $ 322     $ 247     $ 228     $ 702     $ 566     $ 503     $ 50     $ 39     $ 34           Interest cost      4,883       5,050       5,162       965       892       803       4,107       3,726       3,630       218       201       168           Expected return on plan assets      (7,898 )     (7,823 )     (6,374 )     (740 )     (669 )     (573 )     (1,684 )     (1,095 )     (444 )     —       —       —           Amortization of prior service cost      1,164       1,279       1,148       102       93       101       (70 )     (87 )     (19 )     8       8       7           Amortization of transition obligation/(asset)      —       —       —       6       7       11       —       —       —       —       —       —           Recognized net actuarial loss      2,065       1,857       1,744       281       188       167       2,250       1,138       722       88       62       46           Curtailments, settlements, and other      115       34       27       114       204       49       —       —       —       2       —       3                                                                                       Net expense    $ 1,446     $ 1,494     $ 2,626     $ 1,050     $ 962     $ 786     $ 5,305     $ 4,248     $ 4,392     $ 366     $ 310     $ 258                                                                                   Weighted-average assumptions used to determine benefit     obligations at December 31(1)                                                                                                          Discount rate      5.70 %     5.60 %     6.00 %     4.72 %     5.61 %     6.12 %     5.45 %     5.75 %     6.25 %     5.00 %     6.00 %     6.75 %         Rate of compensation increase      4.9 %     5.0 %     5.0 %     3.1 %     3.2 %     3.4 %     4.2 %     3.9 %     4.2 %     4.0 %     4.0 %     4.0 %     Weighted-average assumptions used to determine net expense     for years ended December 31(2)                                                                                                          Discount rate      5.60 %     6.00 %     6.75 %     5.61 %     6.12 %     6.23 %     5.75 %     6.25 %     6.75 %     6.00 %     6.75 %     7.00 %         Expected return on plan assets      9.0 %     9.0 %     9.0 %     8.5 %     8.4 %     8.5 %     8.8 %     8.0 %     7.0 %     —       —       —           Rate of compensation increase      5.0 %     5.0 %     5.0 %     3.2 %     3.4 %     3.4 %     3.9 %     4.2 %     4.4 %     4.0 %     4.0 %     4.0 %               (1)       Determined as of end of year       (2)       Determined as of beginning of year   II-103    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 18.  Pensions and Other Postretirement Benefits —     (continued)         In recent years, GM estimated the discount rate for its U.S. pension and OPEB obligations by reference to Moody’s AA Index, Citibank Salomon Smith Barney’s above-median curve, and Watson Wyatt’s bond-matching model as well as benchmarking.        Beginning with 2005 year-end valuations, GM estimates the discount rate for its U.S. pension and OPEB obligations using an iterative process based on a hypothetical investment in a portfolio of high-quality bonds and a hypothetical reinvestment of the proceeds of such bonds upon maturity (at forward rates derived from a yield curve) until its U.S. pension and OPEB obligations are fully defeased. GM incorporates this reinvestment component into its methodology because it is not feasible, in light of the magnitude and time horizon over which its U.S. pension and OPEB obligations extend, to accomplish full defeasance through direct cash flows from an actual set of bonds selected at any given measurement date. This improved methodology, considered a change in estimate, was developed during 2005 and was adopted because it was deemed superior to the previously available algorithms for estimating assumed discount rates. In particular, this approach permits a better match of future cash outflows related to benefit payments with future cash inflows associated with bond coupons and maturities in the hypothetical described above.        GM’s discount rate estimation under this iterative process involves four steps:        First, GM identifies a bond universe that consists of all AA-rated or higher bonds with an amount outstanding greater than $25 million. GM excludes from this universe all callable and convertible bonds, mortgage-backed and asset-backed securities and bonds with a negative credit watch. The bond universe data, including amounts outstanding, market prices, credit ratings and other relevant data, is obtained from Bloomberg.        Second, GM creates a defeasance portfolio from the bond universe by selecting a set of bonds that would yield cash flows (through coupons, maturation and reinvestment) that are sufficient to defease its U.S. pension and OPEB obligations. Reinvestments are assumed to occur at forward rates calculated using a yield curve developed with the following methodology. For years during which the bond universe has a sufficient number of bonds, the yield curve is based on the yields of such bonds. For future years, when the bond universe does not have a sufficient number of bonds, the yield curve is extrapolated as follows:            •       GM computes the spread between the yield curve and the swap     curve (a market-based curve),         •       To extrapolate the yield curve for the period beginning after     the last year where substantial bonds are available in the bond     universe and ending in year 50, GM adds the spread to the swap     curve, which is observable over 50 years, and         •       To extrapolate the yield curve beyond the 50th year, GM     assumes that the last one-year forward rate on the yield curve     (at the 49th year) remains constant for the remaining years.         Third, GM determines the market value of the defeasance portfolio using the actual initial market value of the bonds selected as part of the defeasance portfolio.        Fourth, GM computes the internal rate of return (IRR) of the defeasance portfolio based on its market value as of the measurement date and the final net cash flows from the coupons, maturations and reinvestments. GM uses this IRR as the discount rate for its U.S. pension and OPEB obligations.        Beginning with 2005 year-end valuations, GM rounds its discount rates for its U.S. pensions and U.S. OPEB plans to the nearest 0.05 percentage point, rather than to the nearest 0.25 percentage point as in prior years.        Using this new methodology, GM has established for its U.S. pension plans and U.S. OPEB plans discount rates of 5.70% and 5.45%, respectively, for year-end 2005.  II-104    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 18.  Pensions and Other Postretirement Benefits —     (continued)         GM sets the discount rate assumption annually for each of its retirement-related benefit plans at their respective measurement dates to reflect the yield of a portfolio of high quality, fixed-income debt instruments matched against the timing and amounts of projected future benefits.                         Assumed Health-care Trend Rates at December 31   2005   2004                     Initial Health-care Cost Trend Rate      10.0 %     10.5 %         Ultimate Health-care Cost Trend Rate      5.0 %     5.0 %         Number of Years to Ultimate Trend Rate      6       6            A one percentage point increase in the assumed health care trend rates for all future periods would have increased the U.S. Accumulated Postretirement Benefit Obligation (APBO) by $9.3 billion at December 31, 2005 and the U.S. aggregate service and interest cost components of non-pension postretirement benefit expense for 2005 by $629 million. A one-percentage point decrease would have decreased the U.S. APBO by $7.7 billion and the U.S. aggregate service and interest cost components of non-pension postretirement benefit expense for 2005 by $516 million.        GM’s long-term strategic mix and expected return on assets assumptions are derived from detailed periodic studies conducted by GM’s actuaries and GM’s asset management group. The U.S. study includes a review of alternative asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations) and correlations for each of the asset classes that comprise the funds’ asset mix. The primary non-U.S. plans conduct similar studies in conjunction with local actuaries and asset managers. While the studies give appropriate consideration to recent fund performance and historical returns, the assumptions are primarily long-term, prospective rates.        The capital market assumptions underpinning GM’s long-term strategic mix and long-term expected return assumptions are reexamined annually. The reexaminations of capital market assumptions in 2005 reaffirmed both the 9% long-term expected return assumption and GM’s long-term strategic allocation for the U.S. pension plans.        GM’s strategic asset mix for U.S. pension plans is intended to reduce exposure to equity market risks and to utilize asset classes which are not highly correlated as well as asset classes where active management has historically generated excess returns and places greater emphasis on manager skills to produce excess return while employing various risk mitigation strategies to reduce volatility. In 2005, GM’s target allocations for pension assets fell within the following ranges: global equity, 41%-49%; global bonds, 30%-36%; real estate, 8%-12%; and alternative, 9%-13%.        With the significant contributions made to GM’s hourly VEBA in 2004, a new investment policy was adopted during the year to manage plan assets under a single investment policy with an expanded range of assets classes. The hourly VEBA is managed to achieve long-term asset returns while maintaining adequate liquidity for reimbursement of benefit payments, as needed. The new asset allocation was implemented on October 1, 2004. In addition, in late 2004, a new salaried VEBA was created and funded. It is primarily invested in shorter-term liquid securities. For 2005, the expected return for the hourly VEBA was 9.0% and the expected return for the salaried VEBA was 4.5%. The blended expected rate of return on VEBA assets was 8.8% in 2005.  II-105    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 18.  Pensions and Other Postretirement Benefits —     (concluded)         U.S. and non-U.S. pension plans and OPEB plans have the following asset allocations, as of their respective measurement dates in 2004 and 2005:                                                                   Plan Assets           Plan Assets   Primary   Plan Assets       U.S. Pension   Non-U.S. Pension   OPEB       Plans Actual   Plans Actual   Actual       Percentage of   Percentage of   Percentage of       Plan Assets   Plan Assets   Plan Assets                   Asset Category   2005   2004   2005   2004   2005   2004                                     Equity Securities      47 %     47 %     61 %     61 %     52 %     41 %         Debt Securities      32 %     35 %     31 %     31 %     31 %     48 %         Real Estate      7 %     8 %     8 %     8 %     3 %     2 %         Other      14 %     10 %     0 %     0 %     14 %     9 %                                                   Total      100 %     100 %     100 %     100 %     100 %     100 %                                                  Equity securities include GM common stock in the amounts of $11 million (less than 1% of total pension plan assets) and $29 million (less than 1% of total pension plan assets) at December 31, 2005 and 2004, respectively. In addition, due to market-neutral investment strategies in place at some of GM’s external asset managers, the pension plan trusts also hold short positions in GM common stock which had a value of $(18) million at December 31, 2005.        On December 8, 2003, President Bush signed into law the Medicare Prescription Drug Improvement and Modernization Act of 2003. The Act introduces a prescription drug benefit beginning in 2006 under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. Due to the levels of benefits provided under GM’s U.S. health care plans, management has concluded that GM’s U.S. health care plans are at least actuarially equivalent to Medicare Part D.        GM elected not to defer accounting for the effects of the Act and remeasured GM’s postretirement benefit obligation as of December 8, 2003. The remeasurement reduced GM’s December 31, 2004 APBO by $4.1 billion, increased plan assets by $0.4 billion, and decreased the unrecognized actuarial loss by $4.6 billion. The effect of the Act on 2005 and 2004 OPEB expense is included in the tables above.        The following benefit payments, which reflect estimated future employee service, as appropriate, are expected to be paid (dollars in millions):                                                             Pension Benefits   Other Benefits   Non-U.S. Other Benefits                           Primary Non-   Gross Benefit   Gross Medicare   Gross Benefit   Gross Medicare       U.S. Plans   U.S. Plans   Payments   Part D Receipts   Payments   Part D Receipts                                     2006      6,794       834       4,337       181       128       —           2007      6,693       865       4,637       271       137       —           2008      6,728       905       4,916       301       147       —           2009      6,744       940       5,163       328       157       —           2010      6,754       979       5,383       353       167       —           2011-2015    $ 33,517     $ 5,443     $ 29,187     $ 2,116     $ 993     $ —      II-106    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 19.  Commitments and Contingent Matters            Commitments         GM had the following minimum commitments under noncancelable capital leases having remaining terms in excess of one year, primarily for property (dollars in millions):                                                                                 2011       2006   2007   2008   2009   2010   and after                                     Minimum commitments    $ 194     $ 190     $ 446     $ 148     $ 141     $ 874           Sublease income      (19 )     (19 )     (19 )     (19 )     (19 )     (301 )                                                 Net minimum commitments    $ 175     $ 171     $ 427     $ 129     $ 122     $ 573                                                    GM had the following minimum commitments under noncancelable operating leases having remaining terms in excess of one year, primarily for property (dollars in millions):                                                                                 2011       2006   2007   2008   2009   2010   and after                                     Minimum commitments    $ 1,076     $ 895     $ 1,368     $ 749     $ 770     $ 4,073           Sublease Income      (246 )     (247 )     (241 )     (236 )     (227 )     (2,592 )                                                 Net minimum commitments    $ 830     $ 648     $ 1,127     $ 513     $ 543     $ 1,481                                                    Certain of these minimum commitments fund the obligations of non-consolidated VIEs. Certain of the leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases were $1,034 million, $990 million, and $926 million in 2005, 2004, and 2003, respectively.        GM sponsors a credit card program, entitled the GM Card program, which offers rebates that can be applied primarily against the purchase or lease of GM vehicles. The amount of rebates available to qualified cardholders (net of deferred program income) was $4.5 billion, $4.5 billion, and $4.1 billion at December 31, 2005, 2004, and 2003, respectively.        GM has guarantees related to its performance under operating lease arrangements and the residual value of leased assets totaling $639 million (included in table above). Expiration dates vary, and certain leases contain renewal options. The fair value of the underlying assets is expected to fully mitigate GM’s obligations under these guarantees. Accordingly, no liabilities were recorded with respect to such guarantees.        Also, GM has entered into agreements with certain suppliers and service providers that guarantee the value of the supplier’s assets and agreements with third parties that guarantee fulfillment of certain suppliers’ commitments. The maximum exposure under these commitments amounts to $106 million.        GMAC has guaranteed certain amounts related to the securitization of mortgage loans, agency loan programs, loans sold with recourse, and the repayment of third-party debt. In addition, GMAC issues financial standby letters of credit as part of their financing and mortgage operations. At December 31, 2005, approximately $28 million was recorded with respect to these guarantees, the maximum exposure under which is approximately $10.3 billion.        In connection with certain divestitures prior to January 1, 2003, GM has provided guarantees with respect to benefits for former GM employees relating to pensions, postretirement health care, and life insurance. Other than items pertaining to the fourth quarter 2005 charge with respect to the contingent exposures relating to the Delphi Chapter 11 filing, including under the benefit guarantees, the maximum exposure under these agreements cannot be estimated due to the nature of these indemnities. No amounts have been recorded for such indemnities as the Corporation’s obligations under them are not probable and estimable.  II-107    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 19.  Commitments and Contingent     Matters — (continued)         In addition to guarantees, GM has entered into agreements indemnifying certain parties with respect to environmental conditions pertaining to ongoing or sold GM properties. Due to the nature of the indemnifications, GM’s maximum exposure under these agreements cannot be estimated. No amounts have been recorded for such indemnities as the Corporation’s obligations under them are not probable and estimable.        In addition to the above, in the normal course of business GM periodically enters into agreements that incorporate indemnification provisions. While the maximum amount to which GM may be exposed under such agreements cannot be estimated, it is the opinion of management that these guarantees and indemnifications are not expected to have a material adverse effect on the Corporation’s consolidated financial position or results of operations.           Contingent Matters         Litigation is subject to uncertainties and the outcome of individual litigated matters is not predictable with assurance. Various legal actions, governmental investigations, claims, and proceedings are pending against the Corporation, including a number of shareholder class actions, bondholder class actions, shareholder derivative suits and ERISA class actions and other matters arising out of alleged product defects including asbestos-related claims; employment-related matters; governmental regulations relating to safety, emissions, and fuel economy; product warranties; financial services; dealer, supplier, and other contractual relationships; and environmental matters.        GM has established reserves for matters in which losses are probable and can be reasonably estimated. Some of the matters may involve compensatory, punitive, or other treble damage claims, or demands for recall campaigns, incurred but not reported asbestos-related claims, environmental remediation programs, or sanctions, that if granted, could require the Corporation to pay damages or make other expenditures in amounts that could not be estimated at December 31, 2005. After discussion with counsel, it is the opinion of management that such liability is not expected to have a material adverse effect on the Corporation’s consolidated financial condition or results of operations.                Delphi Bankruptcy         On October 8, 2005, Delphi filed a petition for Chapter 11 proceedings under the United States Bankruptcy Code for itself and many of its U.S. subsidiaries. Delphi is GM’s largest supplier of automotive systems, components and parts, and GM is Delphi’s largest customer.        GM will continue to work constructively in the court proceedings with Delphi, Delphi’s unions, and other participants in Delphi’s restructuring process. GM’s goal is to pursue outcomes that are in the best interests of GM and its stockholders, and that enable Delphi to continue as an important supplier to GM.        Delphi has indicated to GM that it expects no disruption in its ability to supply GM with the systems, components and parts it needs as Delphi pursues a restructuring plan under the Chapter 11 process. Although the challenges faced by Delphi during its restructuring process could create operating and financial risks for GM, that process is also expected to present opportunities for GM, but there can be no assurance that GM will be able to realize any benefits.        There is a risk that Delphi or one or more of its affiliates may reject or threaten to reject individual contracts with GM, either for the purpose of exiting specific lines of business or in an attempt to increase the price GM pays for certain parts and components. As a result, GM might be materially adversely affected by disruption in the supply of automotive systems, components and parts that could force the suspension of production at GM assembly facilities.  II-108    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 19.  Commitments and Contingent     Matters — (continued)         In addition, various financial obligations Delphi has to GM as of the date of Delphi’s Chapter 11 filing, including the $951 million payable for amounts that Delphi owed to GM relating to Delphi employees who were formerly GM employees and subsequently transferred back to GM as job openings became available to them under certain employee “flowback” arrangements as of the date of Delphi’s filing for Chapter 11, may be subject to compromise in the bankruptcy proceedings, which may result in GM receiving payment of only a portion of the face amount owed by Delphi.        GM will seek to minimize this risk by protecting our right of setoff against the $1.15 billion we owed to Delphi as of the date of its Chapter 11 filing. A procedure for determining setoff claims has been put in place by the bankruptcy court. However, the extent to which these obligations are covered by our right to setoff may be subject to dispute by Delphi, the creditors committee, or Delphi’s other creditors, and limitation by the court. GM cannot provide any assurance that it will be able to fully or partially setoff such amounts. However, to date setoffs of approximately $52.5 million have been agreed to by Delphi and taken by GM. Although GM believes that it is probable that it will be able to collect all of the amounts due from Delphi, the financial impact of a substantial compromise of our right of setoff could have a material adverse impact on our financial position.        In connection with GM’s spin-off of Delphi in 1999, GM entered into separate agreements with the UAW, the International Union of Electrical Workers and the United Steel Workers. In each of these three agreements (Benefit Guarantee Agreement(s)), GM provided contingent benefit guarantees to make payments for limited pension and OPEB expenses to certain former GM U.S. hourly employees who transferred to Delphi as part of the spin-off and meet the eligibility requirements for such payments (Covered Employees).        Each Benefit Guarantee Agreement contains separate benefit guarantees relating to pension, post-retirement health care and life insurance benefits. These limited benefit guarantees each have separate triggering events that initiate potential GM liability if Delphi fails to provide the corresponding benefit at the required level. Therefore, it is possible that GM could incur liability under one of the guarantees (e.g., pension) without triggering the other guarantees (e.g., post-retirement health care or life insurance). In addition, with respect to pension benefits, GM’s obligation under the pension benefit guarantees only arises to the extent that the combination of pension benefits provided by Delphi and the Pension Benefit Guaranty Corporation (PBGC) falls short of the amounts GM has guaranteed.        The Chapter 11 filing by Delphi does not by itself trigger any of the benefit guarantees. In addition, the benefit guarantees expire on October 18, 2007 if not previously triggered by Delphi’s failure to pay the specified benefits. If a benefit guarantee is triggered before its expiration date, GM’s obligation could extend for the lives of affected Covered Employees, subject to the applicable terms of the pertinent benefit plans or other relevant agreements.        The benefit guarantees do not obligate GM to guarantee any benefits for Delphi retirees in excess of the levels of corresponding benefits GM provides at any given time to GM’s own hourly retirees. Accordingly, if any of the benefits GM provides to its hourly retirees are reduced, there would be a similar reduction in GM’s obligations under the corresponding benefit guarantee.        A separate agreement between GM and Delphi requires Delphi to indemnify GM if and to the extent GM makes payments under the benefit guarantees to the UAW employees or retirees. GM received a notice from Delphi, dated October 8, 2005, that it was more likely than not that GM would become obligated to provide benefits pursuant to the benefit guarantees to the UAW employees or retirees. The notice stated that Delphi was unable at that time to estimate the timing and scope of any benefits GM might be required to provide under those benefit guarantees. Any recovery by GM under indemnity claims against Delphi might be  II-109    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 19.  Commitments and Contingent     Matters — (concluded)    subject to partial or complete discharge in the Delphi reorganization proceeding. As a result, GM’s claims for indemnity may not be paid in full.        As part of the discussion to attain GM’s tentative health-care agreement with the UAW, GM provided former GM employees who became Delphi employees the potential to earn up to seven years of credited service for purposes of eligibility for certain health-care benefits under the GM/ UAW benefit guarantee agreement.        GM believes that it is probable that it has incurred a contingent liability due to Delphi’s Chapter 11 filing. GM believes that the range of the contingent exposures is between $5.5 billion and $12 billion, with amounts near the low end of the range considered more possible than amounts near the high end of the range assuming an agreement is reached among GM, Delphi, and Delphi’s unions. As a result, GM established a reserve of $5.5 billion ($3.6 billion after tax) as a non-cash charge in the fourth quarter of 2005. These views reflect GM’s current assessment that it is unlikely that a Chapter 11 process will result in both a termination of Delphi’s pension plan and complete elimination of its OPEB plans. The amount of this charge may change, depending on the result of discussions among GM, Delphi, and Delphi’s unions, and other factors. GM is currently unable to estimate the amount of additional charges, if any, which may arise from Delphi’s Chapter 11 filing. A consensual agreement to resolve the Delphi matter may cause GM to incur additional costs in exchange for benefits that would accrue to GM over time.        With respect to the possible cash flow effect on GM related to its ability to make either pension or OPEB payments, if any are required under the benefit guarantees, GM would expect to make such payments from ongoing operating cash flow and financings. Such payments, if any, are not expected to have a material effect on GM’s cash flows in the short-term. However, if payable, these payments would be likely to increase over time, and could have a material effect on GM’s liquidity in coming years. (For reference, Delphi’s 2004 Form 10-K reported that its total cash outlay for OPEB for 2004 was $226 million, which included $154 million for both hourly and salaried retirees, the latter of whom are not covered under the benefit guarantees, plus $72 million in payments to GM for certain former Delphi hourly employees that flowed back to retire from GM). If benefits to Delphi’s U.S. hourly employees under Delphi’s pension plan are reduced or terminated, the resulting effect on GM cash flows in future years due to the Benefit Guarantee Agreements is currently not reasonably estimable.        See Note 27 for subsequent events.         Note 20.  Stockholders’ Equity         The following table presents changes in capital stock for the period from January 1, 2003 to December 31, 2005 (dollars in millions):                                       Common Stocks               Total       $12/3       Capital       Par Value   Class H   Stock                     Balance at January 1, 2003    $ 936     $ 96     $ 1,032             Shares issued      1       15       16             Hughes split-off      —       (111 )     (111 )                           Balance at December 31, 2003      937       —       937             Shares issued      5       —       5                             Balance at December 31, 2004      942       —       942             Shares issued      1       —       1                             Balance at December 31, 2005    $ 943     $ —     $ 943                            II-110    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 20.  Stockholders’ Equity — (concluded)            GM Class H Stock         Effective December 22, 2003, GM split off Hughes by distributing Hughes common stock to the holders of GM Class H common stock in exchange for all outstanding shares of GM Class H common stock. All shares of GM Class H common stock were then cancelled.           Common Stock         The liquidation rights of the GM $12/3  par value common stock are subject to certain adjustments if outstanding common stock is subdivided, by stock split or otherwise.           Other Comprehensive Income         The changes in the components of other comprehensive income (loss) are reported net of income taxes, as follows (dollars in millions):                                                                                           Years Ended December 31,                           2005     2004     2003                           Pre-tax   Tax Exp.   Net     Pre-tax   Tax Exp.   Net     Pre-tax   Tax Exp.   Net       Amount   (Credit)   Amount     Amount   (Credit)   Amount     Amount   (Credit)   Amount                                                     Foreign currency translation adjustments    $ (962 )   $ (434 )   $ (528 )     $ 1,237     $ 616     $ 621       $ 1,642     $ 673     $ 969           Unrealized (loss) gain on securities:                                                                                        Unrealized holding gain gain      216       76       140         299       114       185         465       166       299             Reclassification adjustment      (165 )     (60 )     (105 )       (80 )     (28 )     (52 )       (84 )     (31 )     (53 )                                                                       Net unrealized gain      51       16       35         219       86       133         381       135       246           Minimum pension liability adjustment      (1,320 )     (562 )     (758 )       (874 )     (303 )     (571 )       33,378       12,623       20,755           Net unrealized gain on derivatives      219       75       144         701       163       538         329       73       256                                                                         Other comprehensive income (loss)    $ (2,012 )   $ (905 )   $ (1,107 )     $ 1,283     $ 562     $ 721       $ 35,730     $ 13,504     $ 22,226                                                                           Note 21.  Earnings (Loss) Per Share Attributable to Common Stock         Earnings per share (EPS) attributable to each class of GM common stock was determined based on the attribution of earnings to each such class of common stock for the period divided by the weighted-average number of common shares for each such class outstanding during the period. Diluted EPS attributable to each class of GM common stock considers the effect of potential common shares, unless the inclusion of the  II-111    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 21.     Earnings (Loss) Per Share Attributable to Common Stock — (continued)   potential common shares would have an antidilutive effect. The attribution of earnings to each class of GM common stock was as follows (dollars in millions):                                         Years Ended December 31,               2005   2004   2003                         Earnings (loss)attributable to common stocks                                    $12/3      par value                                      Continuing operations    $ (10,458 )   $ 2,804     $ 2,899               Discontinued operations      —       —       (48 )             Gain on sale of discontinued operations      —       —       1,249               Cumulative effect of accounting change      (109 )     —       —                                   Earnings (loss) attributable to     $12/3      par value    $ (10,567 )   $ 2,804     $ 4,100             Earnings (loss) from discontinued operations attributable to     Class H    $ —     $ —     $ (241 )                                 Total earnings (loss) attributable to common stocks    $ (10,567 )   $ 2,804     $ 3,859                                  For the period prior to December 22, 2003, the date GM completed its split-off of Hughes, earnings attributable to GM $12/3  par value common stock represent the earnings attributable to all GM common stocks, reduced by the Available Separate Consolidated Net Income (ASCNI) of Hughes for the period for which GM Class H common stock was outstanding.        The calculated loss used for computation of the ASCNI of Hughes are then multiplied by a fraction, the numerator of which is equal to the weighted-average number of shares of GM Class H common stock outstanding (1.1 billion as of December 22, 2003) and the denominator of which is a number equal to the weighted-average number of shares of GM Class H common stock which if issued and outstanding would represent a 100% interest in the earnings of Hughes (the “Average Class H dividend base”). The Average Class H dividend base was 1.4 billion at December 22, 2003, the date GM completed its split-off of Hughes and the GM Class H common stock ceased to be outstanding.  II-112    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)    Note 21.     Earnings (Loss) Per Share Attributable to Common Stock — (continued)        The reconciliation of the amounts used in the basic and diluted earnings per share computations for income from continuing operations was as follows (dollars in millions except per share amounts):                                       $12/3 Par Value Common Stock                   Per Share       Income   Shares   Amount                     Year ended December 31, 2005                              Basic EPS                                    Income (loss) from continuing operations attributable to common     stocks    $ (10,458 )     565     $ (18.50 )     Effect of Dilutive Securities                                    Assumed exercise of dilutive stock options      —       —       —                             Diluted EPS                                    Adjusted income (loss) attributable to common stocks    $ (10,458 )     565     $ (18.50 )                           Year ended December 31, 2004                              Basic EPS                                    Income from continuing operations attributable to common stocks    $ 2,804       565     $ 4.97       Effect of Dilutive Securities                                    Assumed exercise of dilutive stock options      —       2       (0.03 )                           Diluted EPS                                    Adjusted income attributable to common stocks    $ 2,804       567     $ 4.94                             Year ended December 31, 2003                              Basic EPS                                    Income from continuing operations attributable to common stocks    $ 2,899       561     $ 5.17       Effect of Dilutive Securities                                    Assumed exercise of dilutive stock options      —       8       (0.08 )                           Diluted EPS                                    Adjusted income attributable to common stocks    $ 2,899       569     $ 5.09                                  Certain stock options and convertible securities were not included in the computation of diluted earnings per share for the periods presented since the instruments’ underlying exercise prices were greater than the average market prices of GM $12/3 par value common stock and inclusion would be antidilutive. Such shares not included in the computation of diluted earnings per share were 111 million, 88 million, and 176 million as of December 31, 2005, 2004, and 2003, respectively. In addition, for periods in which there was a loss attributable to common stocks, options to purchase shares of GM $12/3  par value common stock with the underlying exercise prices less than the average market prices were outstanding, but were excluded from the calculations of diluted loss per share, as inclusion of these securities would have reduced the net loss per share.        As of December 31, 2005 GM had $8.1 billion of convertible debentures outstanding, including $1.2 billion principal amount of 4.5% Series A convertible senior debentures due 2032 (Series A), $2.6 billion principal amount of 5.25% Series B convertible senior debentures due 2032 (Series B), and $4.3 billion principal amount of 6.25% Series C convertible senior debentures due 2033 (Series C). In October 2004, the  II-113    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 21.  Earnings (Loss) Per Share Attributable to Common     Stocks — (concluded)    FASB ratified the consensus of the EITF with respect to Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share.” On November 5, 2004, GM unilaterally and irrevocably waived, and relinquished, its right (the waiver) to use stock, and has committed to use cash, to settle the principal amount of the securities if (1) holders ever choose to convert the securities or (2) GM is ever required by holders to repurchase the securities. GM retains the right to use either cash or stock to settle any amount that might become due to security holders in excess of the principal amount (the in-the-money amount). The various circumstances under which conversion of the securities may occur are described in the paragraphs 1-4 below, while paragraph 5 describes the circumstances under which GM might be required to repurchase the securities.            1)       If the closing sale price of GM’s     $12/3      par value common stock exceeds 120% of the conversion     price of that security (which closing prices are $70.20 for the     Series A securities, $64.90 for the Series B     securities, and $47.62 for the Series C securities) for at     least 20 trading days in the 30 consecutive trading days ending     on the last trading day of the preceding fiscal quarter; or         2)       During the five business day period after any nine consecutive     trading day period in which the trading price of the debentures     for each day of such period was less than 95% of the product of     the closing sale price of GM’s     $12/3      par value common stock multiplied by the number of     shares issuable upon conversion of $25.00 principal amount of     the debentures; or         3)       If the debentures have been called for redemption (Series A     on March 6, 2007, Series B on March 6, 2009 and     Series C on July 20, 2010); or         4)       Upon the occurrence of specified corporate events; or         5)       If the investor requires GM to repurchase the debentures on the     specified repurchase dates for each security (Series A:     March 6 of 2007, 2012, 2017, 2022, and 2027, or, if any of those     days is not a business day, the next succeeding business day;     Series B: March 6 of 2014, 2019, 2024, and 2029, or, if any     of those days is not a business day, the next succeeding     business day; Series C: July 15 of 2018, 2023 and 2028 or,     if any of those days is not a business day, the next succeeding     business day).         No shares potentially issuable to satisfy the in-the-money-amount of the convertible debentures have been included in diluted earnings per share as of December 31, 2005, as the convertible debentures have not met the requirements for conversion.         Note 22.  Derivative Financial Instruments and Risk Management         GM is exposed to market risk from changes in foreign currency exchange rates, interest rates, and certain commodity prices. In the normal course of business, GM enters into a variety of foreign exchange, interest rate, and commodity forward contracts, swaps, and options, with the objective of minimizing exposure arising from these risks. A risk management control system is utilized to monitor foreign exchange, interest rate, commodity, and related hedge positions.           Cash Flow Hedges         GM uses financial instruments designated as cash flow hedges to hedge the Corporation’s exposure to foreign currency exchange risk associated with buying, selling, and financing in currencies other than the local currencies in which it operates, and to variability in cash flows related to its exposure to commodity price risk associated with changes in prices of commodities used in its automotive business, primarily nonferrous metals used in the manufacture of automotive components and to hedge exposure to variability in cash flows related to floating rate and foreign currency financial instruments. For transactions denominated in foreign currencies, GM typically hedges forecasted and firm commitment exposures up to three years in the future. For  II-114    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 22.  Derivative Financial Instruments and Risk     Management — (concluded)    commodities, GM typically hedges exposures up to three years in the future. For the year ended December 31, 2005, hedge ineffectiveness associated with instruments designated as cash flow hedges decreased cost of sales and other expenses by $37 million. For the year ended December 31, 2004, hedge ineffectiveness associated with instruments designated as cash flow hedges decreased cost of sales and other expenses by $26 million. Derivative gains and losses included in other comprehensive income are reclassified into earnings at the time that the associated hedged transactions impact the income statement. For the year ended December 31, 2005, net derivative losses of $208 million were reclassified to cost of sales and other expenses and net derivative gains of $200 million were reclassified to revenue. For the year ended December 31, 2004, net derivative gains of $245 million were reclassified to cost of sales and other expenses. These net losses/gains were offset by net gains/losses on the transactions being hedged. Approximately $103 million of net derivative gains included in other comprehensive income at December 31, 2005, is expected to be reclassified into earnings within 12 months from that date. For the years ended December 31, 2005 and 2004, there were net gains of approximately $47 million and $26 million, respectively, which were reclassified into earnings as a result of discontinuance of certain commodity cash flow hedges because it was probable that the original forecasted transactions will not occur.           Fair Value Hedges         GM uses financial instruments designated as fair value hedges to manage certain of the Corporation’s exposure to interest rate risk. GM is subject to market risk from exposures to changes in interest rates due to its financing, investing, and cash management activities. A variety of instruments is used to hedge GM’s exposure associated with its fixed rate debt and mortgage servicing rights (MSRs). For the year ended December 31, 2005, hedge ineffectiveness associated with instruments designated as fair value hedges, primarily due to hedging of MSRs, decreased selling, general, and administrative expenses by $34 million and decreased selling, general, and administrative expenses by $104 million in 2004. Changes in time value of the instruments (which are excluded from the assessment of hedge effectiveness) decreased selling, general, and administrative expenses by $59 million in 2005 and $180 million in 2004.           Net Investment Hedges         GM uses foreign currency denominated debt to hedge the foreign currency exposure of its net investments in foreign operations. Foreign currency translation gains and losses related to these debt instruments are recorded in Other Comprehensive Loss as a foreign currency translation adjustment. For the years ended December 31, 2005 and 2004, a $142 million and $64 million unrealized loss were recorded in accumulated foreign currency translation.           Undesignated Derivative Instruments         Forward contracts and options not designated as hedging instruments under SFAS No. 133 may also be used to hedge certain foreign currency, commodity, and interest rate exposures. Unrealized gains and losses on such instruments are recognized currently in earnings.         Note 23.  Fair Value of Financial Instruments         The estimated fair value of financial instruments has been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value; therefore, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions and/or estimation methodologies may be material to the estimated fair value amounts.  II-115    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 23.  Fair Value of Financial     Instruments — (concluded)         Book and estimated fair values of financial instruments, for which it is practicable to estimate fair value, were as follows (dollars in millions):                                               December 31,               2005   2004                   Book Value   Fair Value   Book Value   Fair Value   AUTOMOTIVE AND OTHER OPERATIONS                    ASSETS           Other assets(1)    $ 1,830     $ 1,310     $ 841     $ 520             Derivative assets    $ 1,767     $ 1,767     $ 2,089     $ 2,089          LIABILITIES           Long-term debt(2)    $ 31,014     $ 20,837     $ 30,460     $ 31,276             Other liabilities(1)    $ 535     $ 447     $ 537     $ 591             Derivative liabilities    $ 859     $ 859     $ 724     $ 724                                               FINANCING AND INSURANCE OPERATIONS                    ASSETS           Finance receivables — net(3)    $ 180,793     $ 181,090     $ 199,600     $ 199,827             Derivative assets    $ 3,000     $ 3,000     $ 9,489     $ 9,489          LIABILITIES           Debt(2)    $ 253,217     $ 244,956     $ 267,757     $ 268,813             Derivative liabilities    $ 2,444     $ 2,444     $ 953     $ 953             Other liabilities    $ 5,930     $ 5,830     $ 4,230     $ 4,106                 (1)       Other assets include various financial instruments (e.g.,     long-term receivables and certain investments) that have fair     values based on discounted cash flows, market quotations, and     other appropriate valuation techniques. The fair values of     retained subordinated interests in trusts and excess servicing     assets (net of deferred costs) were derived by discounting     expected cash flows using current market rates. Estimated values     of Industrial Development Bonds, included in other liabilities,     were based on quoted market prices for the same or similar     issues.       (2)       Long-term debt has an estimated fair value based on quoted     market prices for the same or similar issues or based on the     current rates offered to GM for debt of similar remaining     maturities.       (3)       The fair value was estimated by discounting the future cash     flows using applicable spreads to approximate current rates     applicable to each category of finance receivables.         Due to their short-term nature, the book value approximates fair value for cash and marketable securities, accounts and notes receivable (less allowances), accounts payable (principally trade), Auto & Other loans payable and FIO debt payable within one year for the periods ending December 31, 2005 and 2004.         Note 24.  Stock Incentive Plans         GM’s stock incentive plans consist of the General Motors 2002 Stock Incentive Plan, formerly the 1997 General Motors Amended Stock Incentive Plan (GMSIP), the General Motors 1998 Salaried Stock Option Plan (GMSSOP), and the General Motors 2002 Long Term Incentive Plan (GMLTIP). The GMSIP and the GMLTIP are administered by the Executive Compensation Committee of the GM Board. The GMSSOP is administered by the Vice President of Global Human Resources.  II-116    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 24.  Stock Incentive Plans — (continued)         Under the GMSIP, 27.4 million shares of GM $12/3  par value common stock may be granted from June 1, 2002, through May 31, 2007, of which approximately 4.9 million were available for grants at December 31, 2005. Any shares granted and undelivered under the GMSIP, due primarily to expiration or termination, become again available for grant. Options granted prior to 1997 under the GMSIP generally are exercisable one-half after one year and one-half after two years from the dates of grant. Stock option grants awarded since 1997 vest ratably over three years from the date of grant. Option prices are 100% of fair market value on the dates of grant and the options generally expire 10 years from the dates of grant, subject to earlier termination under certain conditions.        Under the GMSSOP, which commenced January 1, 1998 and ends December 31, 2007, the number of shares of GM $12/3 par value common stock that may be granted each year is determined by management. Approximately 0.8 million shares of GM $12/3  par value common stock were available for grants at December 31, 2005. Stock options vest one year following the date of grant and are exercisable two years from the date of grant. Option prices are 100% of fair market value on the dates of grant and the options generally expire 10 years and two days from the dates of grant subject to earlier termination under certain conditions.        The GMLTIP consists of award opportunities granted to participants that are based on the achievement of specific corporate business criteria. The target number of shares of GM $12/3  par value common stock that may be granted each year is determined by management. These grants are subject to a three-year performance period and the final award payout may vary based on the achievement of those criteria. The condition for all three plans is a minimum percentile ranking of GM’s Total Shareholder Return among the companies in the S&P 500.        As of December 31, 2005, approximately 4.8 million target shares were outstanding under the GMLTIP. Of these outstanding shares, a total of 2.8 million were granted in 2003 and 2004 at a grant-date fair value of $37.28, and $49.33, respectively. Management intends to settle these awards with GM $12/3  par value common stock. Of the remaining outstanding shares, approximately 2.0 million shares were granted in 2005 at a fair value of $39.13. Management intends to settle these awards in cash. The preceding is the targeted number of shares that would finally be granted should the targeted performance condition be achieved. Final payout is subject to approval by the Executive Compensation Committee of the Board of Directors.        The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:                                                             2005   2004   2003                       GM   GM   GM   GM   GM   GM       SIP   SSOP   SIP   SSOP   SIP   SSOP                                     Interest rate      3.8 %     — %     3.1 %     3.1 %     2.9 %     2.9 %         Expected life (years)      6.0       —       5.0       5.0       5.0       5.0           Expected volatility      32.5 %     — %     33.9 %     33.9 %     35.4 %     35.4 %         Dividend yield      5.5 %     — %     3.7 %     3.7 %     5.0 %     5.0 %    II-117    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 24.  Stock Incentive Plans — (continued)         Changes in the status of outstanding options were as follows:                                               GMSIP   GMSSOP       $12/3 Par Value Common   $12/3 Par Value Common                       Weighted-       Weighted-       Shares   Average   Shares   Average       under   Exercise   under   Exercise       Option   Price   Option   Price                             Options outstanding at                                            January 1, 2003      65,822,160     $ 56.45       18,957,199     $ 59.91           Granted      11,148,605     $ 40.06       5,666,127     $ 40.05           Exercised      1,489,170     $ 42.28       —       —           Terminated      996,029     $ 55.06       233,270     $ 56.92                                       Options outstanding at     December 31, 2003      74,485,566     $ 54.38       24,390,056     $ 55.33           Granted      8,055,460     $ 53.83       3,315,479     $ 53.92           Exercised      1,346,996     $ 40.77       31,320     $ 47.92           Terminated      1,738,737     $ 55.26       83,589     $ 54.02                                       Options outstanding at     December 31, 2004      79,455,293     $ 54.53       27,590,626     $ 55.17                                       Granted      8,024,090     $ 36.33       —     $ —           Exercised      337,324     $ 33.14       —     $ —           Terminated      3,011,473     $ 48.20       376,991     $ 53.51                                       Options outstanding at     December 31, 2005      84,130,586     $ 53.11       27,213,635     $ 55.19                                       Options exercisable at     December 31, 2003      48,932,216     $ 58.56       13,825,058     $ 63.29                                         December 31, 2004      59,445,049     $ 56.69       18,667,303     $ 59.94                                         December 31, 2005      68,207,480     $ 55.55       23,953,781     $ 55.37                                        The weighted-average grant-date fair value was $7.23, $12.82 and $8.58 for GMSIP options granted in 2005, 2004, and 2003, respectively. The grant-date fair value was $12.85 in 2004 and $8.58 in 2003 for GMSSOP options granted.  II-118    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 24.  Stock Incentive Plans — (concluded)         The following table summarizes information about GM’s stock option plans at December 31, 2005:                                                           Weighted-                       Average   Weighted-       Weighted-           Remaining   Average       Average   Range of   Options   Contractual   Exercise   Options   Exercise   Exercise Prices   Outstanding   Life (yrs.)   Price   Exercisable   Price                                GMSIP     $12/3      Par Value Common                                           $20.00 to $39.99      7,608,141       9.1     $ 36.34       100,334     $ 36.58                 40.00 to 49.99      22,255,719       4.0     $ 42.66       18,812,269     $ 43.13                 50.00 to 59.99      34,561,835       6.1     $ 51.96       29,589,986     $ 51.63                 60.00 to 83.50      19,704,891       3.5     $ 73.40       19,704,891     $ 73.40                                               $20.00 to $83.50      84,130,586       5.2     $ 53.11       68,207,480     $ 55.55                                            GMSSOP     $12/3      Par Value Common                                           $40.05      5,513,298       7.1     $ 40.05       5,513,298     $ 40.05                 46.59      2,218,613       2.0     $ 46.59       2,218,613     $ 46.59                 50.46      4,828,683       6.0     $ 50.46       4,828,683     $ 50.46                 52.35      3,763,918       5.0     $ 52.35       3,763,918     $ 52.35                 53.92      3,259,854       8.1     $ 53.92       —     $ —                 71.53      3,689,049       3.0     $ 71.53       3,689,049     $ 71.53                 75.50      3,940,220       4.0     $ 75.50       3,940,220     $ 75.50                                               $40.05 to $75.50      27,213,635       5.3     $ 55.19       23,953,781     $ 55.37                                         Note 25.     Other Income                                         Years Ended December 31,               2005   2004   2003                     Automotive and Other Operations                                    Interest income    $ 883     $ 816     $ 1,389             Rental car lease revenue      1,483       2,112       1,460             Claims, commissions, and grants      968       1,097       916             Gain on sale of GM Defense      —       —       814             Other      538       792       400                                     Total other income    $ 3,872     $ 4,817     $ 4,979                                                                   Years Ended December 31,               2005   2004   2003                     Financing and Insurance Operations                                    Interest income    $ 1,671     $ 807     $ 684             Insurance premiums      3,762       3,528       3,178             Mortgage banking revenue      3,268       2,969       4,204             Automotive securitization income      752       753       760             Other      3,435       3,280       2,303                                     Total other income    $ 12,888     $ 11,337     $ 11,129                            II-119    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 26:  Segment Reporting         SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” established standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. GM’s chief operating decision maker is the Chief Executive Officer. The operating segments are managed separately because each operating segment represents a strategic business unit that offers different products and serves different markets.        GM’s Auto & Other reportable operating segment consists of GM’s four automotive regions: GM North America (GMNA), GM Europe (GME), GM Latin America/Africa/Mid-East (GMLAAM), and GM Asia Pacific (GMAP), which constitute GM Automotive (GMA); and Other. GMNA designs, manufactures, and/or markets vehicles primarily in North America under the following nameplates: Chevrolet, Pontiac, GMC, Buick, Cadillac, Saturn, and HUMMER. GME, GMLAAM, and GMAP primarily meet the demands of customers outside North America with vehicles designed, manufactured, and marketed under the following nameplates: Opel, Vauxhall, Holden, Saab, Buick, Chevrolet, GMC, Cadillac, and Daewoo. Other includes the elimination of intersegment transactions, certain non-segment specific revenues and expenditures, including legacy costs related to postretirement benefits for certain Delphi and other retirees, and certain corporate activities. GM’s FIO reportable operating segment consists of GMAC and Other Financing, which includes financing entities that are not consolidated by GMAC. GMAC provides a broad range of financial services, including consumer vehicle financing, full-service leasing and fleet leasing, dealer financing, car and truck extended service contracts, residential and commercial mortgage services, commercial and vehicle insurance, and asset-based lending.        The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies except that the disaggregated financial results have been prepared using a management approach, which is consistent with the basis and manner in which GM management internally disaggregates financial information for the purposes of assisting in making internal operating decisions. GM evaluates performance based on stand-alone operating segment net income and generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. Revenues are attributed to geographic areas based on the location of the assets producing the revenues.  II-120    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 26:  Segment Reporting — (continued)                                                                                                                          Auto &       Other   Total       GMNA   GME   GMLAAM   GMAP   GMA   Other   Other   GMAC   Financing   Financing                                                   (Dollars in millions)     2005                                                                                          Manufactured products sales and revenues:                                                                                            External customers    $ 105,452     $ 29,607     $ 10,896     $ 8,446     $ 154,401     $ (52 )   $ 154,349     $ —     $ —     $ —             Intersegment      (4,261 )     1,499       715       2,050       3       (3 )     —       —       —       —                                                                               Total manufactured products      101,191       31,106       11,611       10,496       154,404       (55 )     154,349       —       —       —           Financing revenue      —       —       —       —       —       —       —       21,299       196       21,495           Other income      3,564       613       134       397       4,708       (836 )     3,872       12,738       150       12,888                                                                           Total net sales and revenues    $ 104,755     $ 31,719     $ 11,745     $ 10,893     $ 159,112     $ (891 )   $ 158,221     $ 34,037     $ 346     $ 34,383                                                                           Depreciation and amortization    $ 7,605     $ 1,743     $ 329     $ 379     $ 10,056     $ 17     $ 10,073     $ 5,548     $ 148     $ 5,696           Interest income(a)    $ 1,347     $ 406     $ 57     $ 47     $ 1,857     $ (974 )   $ 883     $ 2,185     $ (514 )   $ 1,671           Interest expense    $ 3,166     $ 543     $ 197     $ 107     $ 4,013     $ (1,140 )   $ 2,873     $ 12,930     $ (35 )   $ 12,895           Income tax expense (benefit)    $ (2,540 )   $ (709 )   $ 622     $ (165 )   $ (2,792 )   $ (4,392 )   $ (7,184 )   $ 1,311     $ (5 )   $ 1,306           Earnings (losses) of nonconsolidated associates    $ (30 )   $ 102     $ 15     $ 534     $ 621     $ 19     $ 640     $ (6 )   $ —     $ (6 )         Net income (loss) from continuing operations    $ (8,156 )   $ (1,177 )   $ (569 )   $ (217 )   $ (10,119 )   $ (2,697 )   $ (12,816 )   $ 2,383     $ (25 )   $ 2,358           Investments in nonconsolidated affiliates    $ 60     $ 359     $ 155     $ 2,597     $ 3,171     $ 120     $ 3,291     $ 308     $ (308 )   $ —           Segment assets    $ 126,876     $ 20,954     $ 4,722     $ 10,141     $ 162,693     $ (1,040 )   $ 161,653     $ 320,487     $ (1,610 )   $ 318,877           Expenditures for property    $ 5,555     $ 1,259     $ 229     $ 839     $ 7,882     $ 14     $ 7,896     $ 279     $ 4     $ 283       2004                                                                                          Manufactured products sales and revenues:                                                                                            External customers    $ 112,881     $ 29,126     $ 8,045     $ 5,775     $ 155,827     $ 901     $ 156,728     $ —     $ —     $ —             Intersegment      (2,602 )     1,030       673       903       4       (4 )     —       —       —       —                                                                               Total manufactured products      110,279       30,156       8,718       6,678       155,831       897       156,728       —       —       —           Financing revenue      —       —       —       —       —       —       —       20,331       304       20,635           Other income      4,266       664       74       300       5,304       (487 )     4,817       10,857       480       11,337                                                                           Total net sales and revenues    $ 114,545     $ 30,820     $ 8,792     $ 6,978     $ 161,135     $ 410     $ 161,545     $ 31,188     $ 784     $ 31,972                                                                           Depreciation and amortization    $ 6,381     $ 1,779     $ 195     $ 235     $ 8,590     $ 39     $ 8,629     $ 5,299     $ 224     $ 5,523           Interest income(a)    $ 1,026     $ 392     $ 20     $ 13     $ 1,451     $ (635 )   $ 816     $ 1,117     $ (310 )   $ 807           Interest expense    $ 2,729     $ 403     $ 74     $ 21     $ 3,227     $ (747 )   $ 2,480     $ 9,535     $ (35 )   $ 9,500           Income tax expense (benefit)    $ (599 )   $ (640 )   $ 31     $ (11 )   $ (1,219 )   $ (1,221 )   $ (2,440 )   $ 1,544     $ (20 )   $ 1,524           Earnings (losses) of nonconsolidated associates    $ 40     $ 102     $ (3 )   $ 666     $ 805     $ (16 )   $ 789     $ (6 )   $ —     $ (6 )         Net income (loss) from continuing operations    $ 1,409     $ (925 )   $ 60     $ 730     $ 1,274     $ (1,419 )   $ (145 )   $ 2,968     $ (19 )   $ 2,949           Investments in nonconsolidated affiliates    $ 482     $ 1,476     $ 276     $ 4,541     $ 6,775     $ 1     $ 6,776     $ 179     $ (179 )   $ —           Segment assets    $ 126,982     $ 26,586     $ 4,192     $ 4,923     $ 162,683     $ (3,140 )   $ 159,543     $ 324,217     $ (1,413 )   $ 322,804           Expenditures for property    $ 5,163     $ 1,331     $ 158     $ 496     $ 7,148     $ 136     $ 7,284     $ 470     $ (1 )   $ 469       See notes on next page  II-121    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 26:  Segment Reporting — (continued)                                                                                                                          Auto &       Other   Total       GMNA   GME   GMLAAM   GMAP   GMA   Other   Other   GMAC   Financing   Financing                                                   (Dollars in millions)     2003                                                                                          Manufactured products sales and revenues:                                                                                            External customers    $ 114,756     $ 25,960     $ 4,755     $ 4,578     $ 150,049     $ 803     $ 150,852     $ —     $ —     $ —             Intersegment      (2,044 )     946       555       543       —       —       —       —       —       —                                                                               Total manufactured products      112,712       26,906       5,310       5,121       150,049       803       150,852       —       —       —           Financing revenue      —       —       —       —       —       —       —       18,247       630       18,877           Other income      3,598       572       77       217       4,464       515       4,979       11,101       28       11,129                                                                           Total net sales and revenues    $ 116,310     $ 27,478     $ 5,387     $ 5,338     $ 154,513     $ 1,318     $ 155,831     $ 29,348     $ 658     $ 30,006                                                                           Depreciation and amortization    $ 6,199     $ 1,211     $ 248     $ 233     $ 7,891     $ 55     $ 7,946     $ 5,279     $ 288     $ 5,567           Interest income(a)    $ 1,445     $ 375     $ 36     $ 4     $ 1,860     $ (471 )   $ 1,389     $ 937     $ (253 )   $ 684           Interest expense    $ 1,762     $ 343     $ 119     $ 11     $ 2,235     $ (455 )   $ 1,780     $ 7,564     $ 120     $ 7,684           Income tax expense (benefit)    $ 224     $ (378 )   $ (149 )   $ 44     $ (259 )   $ (595 )   $ (854 )   $ 1,555     $ 9     $ 1,564           Earnings (losses) of nonconsolidated associates    $ 113     $ 102     $ 7     $ 560     $ 782     $ (48 )   $ 734     $ (3 )   $ (4 )   $ (7 )         Net income (loss) from continuing operations    $ 879     $ (466 )   $ (329 )   $ 576     $ 660     $ (523 )   $ 137     $ 2,728     $ 34     $ 2,762           Investments in nonconsolidated affiliates    $ 462     $ 1,139     $ 431     $ 3,944     $ 5,976     $ 56     $ 6,032     $ 50     $ (50 )   $ —           Segment assets    $ 130,372     $ 23,951     $ 3,038     $ 3,302     $ 160,663     $ 1,247     $ 161,910     $ 288,350     $ 51     $ 288,401           Expenditures for property    $ 4,650     $ 1,202     $ 110     $ 576     $ 6,538     $ 78     $ 6,616     $ 473     $ 2     $ 475                 (a)       Interest income is included in net sales and revenues from     external customers.     II-122    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 26:  Segment Reporting — (concluded)         Information concerning principal geographic areas was as follows (dollars in millions):                                                                 2005   2004   2003                       Net   Long   Net   Long   Net   Long       Sales &   Lived   Sales &   Lived   Sales &   Lived       Revenues   Assets(1)   Revenues   Assets(1)   Revenues   Assets(1)                                     North America                                                            United States    $ 127,316     $ 49,540     $ 134,380     $ 46,712     $ 133,955     $ 47,354             Canada and Mexico      16,769       12,739       15,484       10,443       14,667       8,530                                                       Total North America      144,085       62,279       149,864       57,155       148,622       55,884           Europe                                                            France      2,612       333       2,669       262       2,429       216             Germany      7,384       4,090       6,710       4,479       5,945       3,996             Spain      2,847       1,182       2,661       1,181       2,143       1,256             United Kingdom      7,859       1,958       7,563       2,273       6,480       2,244             Other      12,944       3,798       13,622       3,805       12,356       3,537                                                       Total Europe      33,646       11,361       33,225       12,000       29,353       11,249           Latin America                                                            Brazil      3,813       784       2,987       609       2,328       584             Other Latin America      3,729       158       2,611       180       1,685       186                                                       Total Latin America      7,542       942       5,598       789       4,013       770           All Other      7,331       3,819       4,830       3,290       3,849       2,820                                                       Total    $ 192,604     $ 78,401     $ 193,517     $ 73,234     $ 185,837     $ 70,723                                                         (1)       Consists of property (Note 13), equipment on operating     leases (Note 11), net of accumulated depreciation.          Note 27.  Subsequent Events         GM withdrew $1 billion from its hourly VEBA trust on February 1, 2006, and an additional $1 billion from its hourly VEBA trust on March 1, 2006.        On February 6, 2006, the Board declared a quarterly cash dividend of $0.25 per share, a reduction from the quarterly rate of $0.50 per share that had been followed since the first quarter of 1997.        On March 7, 2006, GM sold 92.36 million shares of its investment in Suzuki for approximately $2.0 billion in cash, reducing its equity stake from 20.4% to approximately 3.7% (16.3 million shares). GM expects a pre-tax gain in the range of $600 million to $650 million.        On March 22, 2006, GM announced that GM, Delphi and the UAW reached a tentative agreement intended to reduce the number of U.S. hourly employees at GM and Delphi through an accelerated attrition program. The agreement is subject to approval by the bankruptcy court of Delphi’s participation in the agreement. If so approved, the agreement will provide for a combination of early retirement programs and other incentives designed to help reduce employment levels at both GM and Delphi. The agreement also calls for the flowback of 5,000 UAW-represented Delphi employees to GM by September 2007 (subject to extension). Eligible UAW-represented Delphi employees may elect to retire from Delphi or flow back to GM  II-123    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)         Note 27.  Subsequent Events — (concluded)    and retire. Under the agreement, GM has agreed to assume the financial obligations relating to the lump sum payments to be made to eligible Delphi U.S. hourly employees accepting normal or voluntary retirement incentives and certain post-retirement employee benefit obligations relating to Delphi employees who flow back to GM under the agreement. GM expects to record the costs associated with eligible GM employees under this attrition program in 2006 as employees agree to participate. The estimated costs associated with those eligible UAW-represented Delphi employees who elect to flow back to GM were included in the reserve recorded by GM in 2005 related to contingent liabilities associated with Delphi’s Chapter 11 filing.        On March 23, 2006, GMAC sold 78% of its equity in GMAC Commercial Mortgage for approximately $1.5 billion in cash. At the closing, GMAC Commercial Mortgage repaid to GMAC approximately $7.3 billion of intercompany loans, bringing GMAC’s total cash proceeds to $8.8 billion. Furthermore, at the closing, GMAC Commercial Mortgage changed its name to Capmark Financial Group Inc. (Capmark). GMAC will also invest an additional $250 million in Capmark trust preferred stock. GMAC’s remaining interest in GMAC Commercial Mortgage will be reflected as an equity method investment.  II-124    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTARY INFORMATION   Selected Quarterly Data (Unaudited)                                                                               2005 Quarters(1)               1st(3)   2nd(4)   3rd(5)   4th(6)                           As Previously       As Previously       As Previously       As Previously           Reported   Restated   Reported   Restated   Reported   Restated   Announced   Revised                                           (Dollars in millions except per share amounts)         Total net sales and revenues    $ 45,773     $ 45,773     $ 48,469     $ 48,469     $ 47,182     $ 47,182     $ 51,180     $ 51,180           Income (losses) from continuing operations before income taxes     and minority interests    $ (2,108 )   $ (2,294 )   $ (1,577 )   $ (1,405 )   $ (2,722 )   $ (2,871 )   $ (7,293 )   $ (10,361 )         Income tax expense (benefit)      (935 )     (972 )     (330 )     (245 )     (989 )     (1,107 )     (2,372 )     (3,554 )         Minority interests      (16 )     (16 )     (18 )     (18 )     (37 )     (37 )     32       32           Earnings of nonconsolidated associates      85       85       191       191       137       137       221       221           Cumulative effect of accounting change      —       —       —       —       —       —       (109 )     (109 )                                                               Net income    $ (1,104 )   $ (1,253 )   $ (1,074 )   $ (987 )   $ (1,633 )   $ (1,664 )   $ (4,777 )   $ (6,663 )                                                             Basic earnings (losses) per share attributable to     $12/3      par value    $ (1.95 )   $ (2.22 )   $ (1.90 )   $ (1.75 )   $ (2.89 )   $ (2.94 )   $ (8.45 )   $ (11.78 )                                                             Average number of shares of common stock outstanding —     basic (in millions)     $12/3      par value      565       565       565       565       566       566       566       566           Earnings (loss) per share attributable to common stock assuming     dilution     $12/3      par value    $ (1.95 )   $ (2.22 )   $ (1.90 )   $ (1.75 )   $ (2.89 )   $ (2.94 )   $ (8.45 )   $ (11.78 )                                                             Average number of shares of common stock outstanding —     diluted (in millions)     $12/3      par value      565       565       565       565       566       566       566       566           Net income by reportable operating segment/ region Automotive     and Other Operations                                                                            GMNA    $ (1,560 )   $ (1,704 )   $ (1,194 )   $ (1,121 )   $ (2,095 )   $ (2,165 )   $ (2,832 )   $ (3,249 )           GME      (525 )     (547 )     (89 )     (112 )     (382 )     (363 )     (220 )     (176 )           GMLAAM      46       31       33       25       (74 )     (68 )     (599 )     (559 )           GMAP      60       70       (612 )     (605 )     114       126       159       189             Other Operations      146       168       (20 )     18       122       145       (1,874 )     (3,028 )                                                             Net income (loss) — Automotive and     Other Operations      (1,833 )     (1,982 )     (1,882 )     (1,795 )     (2,315 )     (2,325 )     (5,366 )     (6,823 )         Financing and Insurance Operations                                                                            Net income — Financing and Insurance Operations      729       729       808       808       682       661       589       160                                                               Net income    $ (1,104 )   $ (1,253 )   $ (1,074 )   $ (987 )   $ (1,633 )   $ (1,664 )   $ (4,777 )   $ (6,663 )                                                        II-125    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTARY INFORMATION    Selected Quarterly Data (Unaudited) — (continued)                                                             2005 Year-to-Date(2)               3 Months Ended   6 Months Ended   9 Months Ended       March 31, 2005   June 30, 2005   September 30, 2005                       As Previously       As Previously       As Previously           Reported   Restated   Reported   Restated   Reported   Restated                                   (Dollars in millions)     Consolidated                                                          Net cash provided by (used in) continuing operating activities    $ (4,137 )     (6,148 )   $ 2,489       (1,781 )   $ 3,676       (7,256 )         Net cash provided by (used in) continuing investing activities      (2,016 )     (5 )     1,257       5,527       (179 )     10,753           Net cash provided by (used in) continuing financing activities    $ (3,007 )     (3,007 )     (7,066 )     (7,066 )     (3,772 )     (3,772 )         Effect of exchange rate changes on cash and cash equivalents      (444 )     (444 )     (412 )     (412 )     (120 )     (120 )                                                 Net increase (decrease) in cash and cash equivalents    $ (9,604 )   $ (9,604 )   $ (3,732 )   $ (3,732 )   $ (395 )   $ (395 )     Automotive and Other Operations                                                          Net cash provided by (used in) continuing operating activities    $ (2,555 )   $ (2,555 )   $ (2,138 )   $ (2,138 )   $ (2,482 )   $ (1,715 )         Net cash provided by (used in) continuing investing activities      154       154       1,817       1,817       2,871       2,871           Net cash provided by (used in) continuing financing activities      (47 )     (47 )     (519 )     (519 )     (779 )     (779 )         Effect of exchange rate changes on cash and cash equivalents      (369 )     (369 )     (283 )     (283 )     (36 )     (36 )         Net transactions with Financing and Insurance      (126 )     (126 )     420       420       973       206                                                   Net increase (decrease) in cash and cash equivalents    $ (2,943 )   $ (2,943 )   $ (703 )   $ (703 )   $ 547     $ 547       Financing and Insurance Operations                                                          Net cash provided by (used in) continuing operating activities    $ (1,582 )     (3,593 )   $ 4,627       357     $ 6,158       (5,541 )         Net cash provided by (used in) continuing investing activities      (1,670 )     341       440       4,710       (1,550 )     9,382           Net cash provided by (used in) continuing financing activities      (3,460 )     (3,460 )     (7,547 )     (7,547 )     (4,493 )     (4,493 )         Effect of exchange rate changes on cash and cash equivalents      (75 )     (75 )     (129 )     (129 )     (84 )     (84 )         Net transactions with Automotive and Other      126       126       (420 )     (420 )     (973 )     (206 )                                                 Net increase (decrease) in cash and cash equivalents    $ (6,661 )   $ (6,661 )   $ (3,029 )   $ (3,029 )   $ (942 )   $ (942 )    II-126    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTARY INFORMATION    Selected Quarterly Data (Unaudited) — (continued)   (1) Restatement of quarterly results   Previously announced restatements        GM previously disclosed in a Current Report on Form 8-K dated November 9, 2005, that it would restate its financial statements to correct the accounting for credits and other lump sum payments from suppliers. Additionally, GM has subsequently chosen to restate its financial statements for errors it has identified in all periods presented in this filing. The restatement of GM’s previously reported financial results for the years ended December 31, 2004, 2003, and 2002 have been reflected in our Annual Report on Form 10-K/A for the year ended December 31, 2004. The restatement effects for the first three quarters of 2005 and previously announced fourth quarter and calendar year 2005 results are summarized below.                                                         2005 Quarters   2005           Calendar       1st   2nd   3rd   4th   Year                                   (Dollars in millions)         Net (loss)                                                  As originally reported/announced:(a) Quarterly results    $ (1,104 )   $ (1,074 )   $ (1,633 )   $ (4,777 )                   Calendar year results                                    $ (8,554 )         Adjustments, net of tax, for:                                                    Supplier credits: quarterly basis(b)      4       11       11       10                                      annual     basis(b)                                      2             Disposal loss adjustment(c)      (107 )     49       17       31       (10 )           Benefit plans economic assumptions(d)      (16 )     (16 )     (16 )     (16 )     (64 )         Other, net-of-tax(e)      (30 )     43       (43 )     137       107                                             Total of above adjustments      (149 )     87       (31 )     162       35           Delphi contingent exposures(f)      —       —       —       (1,248 )     (1,248 )         GMNA restructuring(g)      —       —       —       (361 )     (361 )         Goodwill impairment(h)      —       —       —       (439 )     (439 )                                           As restated    $ (1,253 )   $ (987 )   $ (1,664 )   $ (6,663 )   $ (10,567 )                                                 (a)       Quarterly results previously reported for the first three     quarters of 2005 do not include adjustments for the estimated     effect of supplier credits, discussed below, that are included     in announced fourth quarter and calendar year 2005 results.     Accordingly, the sum of the above quarterly results does not     equal the announced calendar year results.       (b)       GM erroneously recorded as a reduction to cost of sales certain     payments and credits received from suppliers prior to completion     of the earnings process. GM concluded that the payments and     credits received were associated with agreements for the award     of future services or products or other rights and privileges     and should be recognized when subsequently earned. The     “quarterly basis” adjustments above reflect the     totals, net of tax, to correct the original accounting for such     credits for each quarter of 2005. Calendar year results for     2005, as previously announced, included an estimate of such     effects; accordingly, only the final adjustment to this estimate     is shown above on an annual basis.       (c)       GM’s portfolio of vehicles on operating lease with daily     rental car entities, which was impaired at lease inception, was     prematurely revalued in 2005 to reflect increased anticipated     proceeds upon disposal.   II-127    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTARY INFORMATION    Selected Quarterly Data (Unaudited) — (continued)         (d)       GM originally estimated its discount rate for the     U.S. Hourly pension plan referencing certain indicators     which, in view of evolving guidance, did not provide the best     estimate to defease the pension liability. The above adjustments     represent the amounts, net of tax, to correct the original     accounting estimates.       (e)       For quarters covered by this filing, GM has recorded other     accounting adjustments it has identified that were not recorded     in the proper period. These     out-of-period     adjustments were not material to the financial statements as     originally reported; however, as part of the restatement, they     are being recognized in the period in which the underlying     transactions occurred. The effect of these adjustments,     net-of-tax, was     $(30) million, $43 million, $(43) million, and     $137 million for each quarter of 2005, respectively. The     significant     out-of-period     adjustments were related to the following matters:     (1) Engineering and facility-related expenses recorded in     improper periods. (2) Over-depreciation of certain fixed     assets. (3) Reconciliation of prior year tax provisions to     actual tax returns. Of the $(43) million adjustment in the     third quarter, $96 million relates to engineering and     facility-related expenses, and $(113) relates to     over-depreciation of certain fixed assets. Of the     $137 million adjustment in the fourth quarter,     $118 million relates to tax matters.    Adjustments to Preliminary Results reported on Form 8-K dated January 26, 2006        In addition to the above restatement adjustments, GM’s fourth quarter and calendar year 2005 preliminary results reported on Form 8-K dated January 26, 2006 have been adjusted for the following items:         (f)      Delphi Contingent Exposures — Range of contingent     exposures reported in preliminary results refined to reflect     further developments. GM believes that the range of the     contingent exposures is between $5.5 billion and     $12 billion, with amounts near the low end of the range     considered more possible than amounts near the high end of the     range assuming an agreement is reached among GM, Delphi, and     Delphi’s unions.       (g)      GMNA Restructuring — Restructuring charges as reported     in preliminary results were revised to include GM’s best     estimate of costs to be incurred after the expiration of the     current labor agreement in September 2007.       (h)      Goodwill Impairment — Recognition of goodwill     impairment charges relating to GMAC’s Commercial Finance     operating segment. The impairment charges pertain primarily to     the goodwill recognized in connection with the     1999 acquisition of The Bank of New York’s commercial     finance business.    (2) Restatement of interim statements of cash flows        GM has restated its statements of cash flows to correct for the erroneous classification of cash flows from certain mortgage transactions within our financing and insurance operations. Certain mortgage loan originations and purchases were not appropriately classified as either operating cash flows or investing cash flows consistent with the original designation as loans held for sale or loans held for investment. In addition, proceeds from sales and repayments related to certain mortgage loans, which initially were classified as mortgage loans held for investment and subsequently transferred to mortgage loans held for sale, were reported as operating cash flows instead of investing cash flows in our consolidated statements of cash flows. Finally, certain non-cash proceeds and transfers were not appropriately presented in the statements of cash  II-128    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTARY INFORMATION   Selected Quarterly Data (Unaudited) — (continued)   flows. The effects of the restatement adjustments on GM’s previously reported interim statements of cash flows for 2005 are summarized below.                                       2005 Year-To-Date               3 Months Ended   6 Months Ended   9 Months Ended       March 31, 2005   June 30, 2005   September 30, 2005                       (Dollars in millions)     Financing and Insurance Operations                              Net cash provided by (used in) operating activities                                  As originally reported    $ (1,582 )   $ 4,627     $ 6,158           Adjustments for:                                    Restatement — Mortgage related activity      (2,011 )     (4,270 )     (10,932 )           Reclassification — Net transactions with     Automotive/Financing Operations      —       —       (767 )                               As restated    $ (3,593 )   $ 357     $ (5,541 )                           Net cash provided by (used in) investing activities                                  As originally reported    $ (1,670 )   $ 440     $ (1,550 )         Adjustments for:                                    Restatement — Mortgage related activity      2,011       4,270       10,932                                 As restated    $ 341     $ 4,710     $ 9,382                             (3) First quarter 2005 results include the following after-tax items:            •       A charge of $148 million for a salaried attrition program     relating to voluntary early retirement and other separation     programs in the U.S.         •       A charge of $84 million for plant and facility impairments     relating to the write-down to fair market value of various plant     assets in connection with action to discontinue production at     the Lansing assembly plant.         •       A charge of $422 million for the GME restructuring plan,     announced in the fourth quarter of 2004, targeting a reduction     in annual structural costs of an estimated $600 million by     2006. A total reduction of 12,000 employees, including 10,000 in     Germany, from 2005-2007 through separation programs, early     retirements, and selected outsourcing initiatives is expected.     The charge in the first quarter of 2005 covers approximately     5,650 people, of whom 4,900 are in Germany.    (4) Second quarter 2005 results include the following after-tax items:            •       A charge of $788 million related to the write-down to fair     market value, as of June 30, 2005, of GM’s investment     in approximately 20% of the common stock of Fuji Heavy     Industries (FHI).         •       An additional charge of $126 million, related to the GME     restructuring plan noted above and costs related to dissolving     GM’s powertrain and purchasing joint ventures with Fiat.     The charge covers approximately 600 additional separations, as     well as charges related to previous separations that are     required to be amortized over future periods.   II-129   Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTARY INFORMATION    Selected Quarterly Data (Unaudited) — (continued)   (5) Third quarter 2005 results include the following after-tax items:            •       A charge of $788 million ($468 million at GMNA,     $176 million at GME, $99 million at GMLAAM, and     $45 million at GMAP) for plant and facility impairments     reflecting the results of third quarter reviews of the carrying     value of long-lived assets held and used, other than goodwill     and intangible assets with indefinite lives. The impairments     consist of $672 million, after tax, related to     product-specific assets that were written down and     $116 million, after tax, related to office and production     facilities, which were still in service at year-end 2005. There     were no employee idling or separation costs and no lease     contracts were terminated.         •       An additional charge, related to the GME restructuring plan     noted above, of $56 million for approximately 500     additional separations, as well as charges related to previous     separations that are required to be amortized over future     periods.    (6) Fourth quarter 2005 results include the following after-tax items:            •       A charge of $1.7 billion in connection with the North     American manufacturing capacity actions announced in November     2005. This charge includes $1.2 billion associated with the     hourly employees at the facilities GM is idling and     $455 million for the non-cash write-down of property,     plants and equipment.         •       A charge of pre-tax $5.5 billion, $3.6 billion after     tax, for GM’s contingent exposures relating to     Delphi’s Chapter 11 filing, including under the     benefit guarantees for certain former GM U.S. hourly     employees who transferred to Delphi. GM believes that the range     of the contingent exposures is between $5.5 billion and     $12 billion.         •       A gain of $71 million, related to the sale of GM’s     investment in the common stock of FHI, due to the appreciation     of the fair value of such stock after June 30, 2005, the     date of the FHI impairment charge. Also in the fourth quarter,     GME recorded cancellation charges of $20 million (after     tax) related to FHI, resulting in a net adjustment of     $51 million in the fourth quarter.         •       Restructuring charges totaling $114 million, as follows: An     additional after-tax charge, related to the GME restructuring     plan noted above, of $69 million for approximately 800     additional separations, as well as charges related to previous     separations that are required to be amortized over future     periods; $38 million at GMAP; and $7 million at Other.         •       A charge of $109 million related to the adoption of     FIN 47, “Accounting for Conditional Asset Retirement     Obligations,” as of December 31, 2005, which was     recorded as the cumulative effect of a change in accounting     principle.         •       A benefit of $49 million related to the effect of changes     in Polish tax law at a GM Powertrain joint venture. Amount is     included in equity income.         •       The recognition of a valuation allowance of $617 million     against deferred tax assets at GM do Brasil.   II-130    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTARY INFORMATION    Selected Quarterly Data (Unaudited) — (continued)                                               2004 Quarters               1st   2nd   3rd   4th (1)                           (Dollars in millions except per share amounts)         Total net sales and revenues    $ 47,862     $ 49,293     $ 44,934     $ 51,428           Income (losses) from continuing operations before income taxes     and minority interests    $ 1,216     $ 1,449     $ 94     $ (1,573 )         Income tax expense (benefit)      243       223       (39 )     (1,343 )         Minority interests      (23 )     (23 )     (12 )     (23 )         Earnings of nonconsolidated associates      275       236       162       110                                         Net income    $ 1,225     $ 1,439     $ 283     $ (143 )                                     Basic earnings (losses) per share attributable to     $12/3      par value    $ 2.17     $ 2.55     $ 0.50     $ (0.25 )                                     Average number of shares of common stock outstanding —     basic (in millions)     $12/3      par value      564       565       565       565           Earnings (loss) per share attributable to common stock assuming     dilution     $12/3      par value    $ 2.15     $ 2.53     $ 0.50     $ (0.25 )                                     Average number of shares of common stock outstanding —     diluted (in millions)     $12/3      par value      569       568       567       565           Net income (loss) by reportable operating segment/region     Automotive and Other Operations                                            GMNA    $ 344     $ 366     $ (166 )   $ 865             GME      (109 )     (62 )     (207 )     (547 )           GMLAAM      (17 )     18       17       42             GMAP      272       253       74       131             Other Operations      (22 )     65       (85 )     (1,377 )                                     Net income (loss) — Automotive and Other Operations      468       640       (367 )     (886 )         Financing and Insurance Operations Net income —     Financing and Insurance Operations      757       799       650       743                                       Net income    $ 1,225     $ 1,439     $ 283     $ (143 )                                           (1)       Fourth quarter 2004 results include the following:             •       An after-tax gain of $118 million resulting from the     contribution of 11 million shares of XM Satellite Radio     Holdings Inc. Class A common stock valued at     $432 million to GM’s Voluntary Employees’     Beneficiary Association (VEBA);         •       A $78 million after-tax charge related primarily to     previously announced facilities rationalization actions at     GM’s Baltimore, MD and Linden, NJ plants;         •       A $383 million after-tax charge related to the results of     GM’s annual review of the carrying value of its long-lived     assets held and used, other than goodwill and intangible assets     with indefinite lives;         •       A $136 million after-tax charge related to the write-off of     GM’s remaining investment balance in Fiat Auto Holdings,     B.V. and reflects completion of an impairment study relating to     the carrying value of that investment;   II-131    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SUPPLEMENTARY INFORMATION    Selected Quarterly Data (Unaudited) — (concluded)            •       A $540 million after-tax favorable adjustment for various     adjustments resulting from changes in tax laws both in the U.S.     and overseas and capital loss carryforwards; and         •       An after-tax charge of $886 million related to the     February 13, 2005 GM and Fiat agreement under which GM will     pay Fiat approximately $2.0 billion and will return its 10%     equity interest in FAH to settle various disputes and terminate     the Master Agreement (including the Put Option) entered into in     March 2000, and acquire an interest in key strategic diesel     engine assets, and other important rights with respect to diesel     engine technology and know-how.         This Item 8 should also be read in conjunction with Part II, Item 8 (Financial Statements and Supplementary Data) of the GMAC Annual Report on Form 10-K for the period ended December 31, 2005, filed separately with the SEC, which is incorporated into this document by reference.             Item 9.  Changes in and disagreements with accountants on     accounting and financial disclosure         None   * * * * * *             Item 9A.       Controls and Procedures         Evaluation of Disclosure Controls and Procedures        The Corporation maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods.        GM’s management, with the participation of its chief executive officer and its chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, GM’s chief executive officer and chief financial officer concluded that, as of that date, GM’s disclosure controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, were not effective at the reasonable assurance level because of the identification of material weaknesses in our internal control over financial reporting, which we view as an integral part of our disclosure controls and procedures.        As discussed in Selected Quarterly Data, GM is making certain adjustments to restate previously reported 2005 quarterly financial results. In order to analyze the internal control considerations associated with the adjustments underlying the restatements, GM management evaluated (1) each adjustment as to whether it was caused by an internal control deficiency and (2) the effectiveness of actions that had been taken to remediate identified internal control deficiencies.        Among other matters, management’s assessment identified the following material weaknesses and significant deficiency:            (A)       A material weakness was identified related to our design and     maintenance of adequate controls over the preparation, review,     presentation and disclosure of amounts included in our     consolidated statements of cash flows, which resulted in     misstatements therein. Cash outflows related to certain mortgage     loan originations and purchases were not appropriately     classified as either operating cash flows or investing cash     flows consistent with our original description as loans held for     sale or loans held for investment. In addition, proceeds from     sales and repayments related to certain mortgage loans, which     initially were classified as mortgage loans held for investment     and subsequently transferred to mortgage loans held for sale,     were reported as operating cash flows instead of   II-132    Table of Contents                investing cash flows in our consolidated statements of cash     flows, as required by Statement of Financial Accounting     Standards No. 102 Statement of Cash Flows —     Exemption of Certain Enterprises and Classification of Cash     Flows from Certain Securities Acquired for Resale. Finally,     certain non-cash proceeds and transfers were not appropriately     presented in the Statements of Cash Flows.    GM management is in the process of remediating this material weakness through the design and implementation of enhanced controls to aid in the correct preparation, review, presentation and disclosures of our consolidated statement of cash flows. Management will monitor, evaluate and test the operating effectiveness of these controls.            (B)       A material weakness was identified related to the fact that     GM’s management did not adequately design the control     procedures used to account for GM’s portfolio of vehicles     on operating lease with daily rental car entities, which was     impaired at lease inception, and prematurely revalued to reflect     increased anticipated proceeds upon disposal. This material     weakness was identified in January, 2006, and remediated by     discontinuing the premature revaluation of previously recognized     impairments.         (C)       In the third quarter of 2005, GM management reported a material     weakness in internal controls related to the ineffective     operation of the procedures to determine whether an impairment     was necessary with respect to the Corporation’s foreign     investments accounted for under the equity method which resulted     in the failure to timely reduce the carrying value of GM’s     investment in the common stock of Fuji Heavy Industries to fair     value. GM fully remediated its related controls and procedures     related to this matter prior to December 31, 2005. Details     of the remediation actions were included in Item 4 of     GM’s Amendment No. 1 on     Form 10-Q/A for     the second quarter of 2005.             (D)       GM management also identified a significant deficiency in     internal controls related to accounting for complex contracts.     This deficiency was identified as a result of certain contracts     being accounted for incorrectly and without appropriate     consideration of the economic substance of the contracts. GM     management is in the process of remediating this significant     deficiency by implementing a delegation of authority for     approval of the accounting for complex contracts that requires     formal review and approval by experienced accounting personnel.         Other than indicated above, there were no changes in the Corporation’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.   * * * * * *             Item 9B.       Other Information         None  II-133    Table of Contents      PART III   GENERAL MOTORS CORPORATION AND SUBSIDIARIES             Item 10.  Code of Ethics for Senior Executives         General Motors Corporation has adopted a code of ethics that applies to the Corporation’s directors, officers, and employees, including the Chief Executive Officer, Chief Financial Officer, Controller, Chief Accounting Officer, and any other persons performing similar functions. The text of GM’s code of ethics, “Winning With Integrity,” has been posted on the Corporation’s Internet website at http://investor.gm.com at “Investor Information — Corporate Governance.”   * * * * * *       Items 10, 11, 12, 13, and 14        Information required by Part III (Items 10, 11, 12, 13, and 14) of this Form 10-K is incorporated by reference from General Motors Corporation’s definitive Proxy Statement for its 2006 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the 2005 fiscal year, all of which information is hereby incorporated by reference in, and made part of, this Form 10-K, except that the information required by Item 10 with respect to executive officers of the Registrant is included in Item 4A of Part I of this report.   * * * * * *  III-1    Table of Contents      PART IV   GENERAL MOTORS CORPORATION AND SUBSIDIARIES
(a)        1. All Financial Statements and Supplemental Information        See Part II            2. Financial Statement Schedule II —     Allowances for the Years Ended December 31, 2005, 2004, and     2003        IV-3            3. Exhibits             (b)         Exhibits                Exhibits listed below, which have been filed with the SEC     pursuant to the Securities Act of 1933, as amended, or the     Securities Exchange Act of 1934, as amended, and which were     filed as noted below, are hereby incorporated by reference and     made a part of this report with the same effect as filed     herewith.                             (3)(i)         Restated Certificate of Incorporation dated March 1, 2004     incorporated herein by reference to Exhibit 3(i) to General     Motors Corporation’s annual report on Form 10-K filed     March 11, 2004.             (3)(ii)†         Bylaws of General Motors Corporation, as amended, dated     February 29, 2004             (4)(a)         Indenture, dated as of November 15, 1990, between General     Motors Corporation and Citibank, N.A., Trustee,     incorporated herein by reference to Exhibit Amendment     No. 1(a) to Form S-3 Registration Statement     No. 33-41577 filed July 3, 1991.             (4)(b)(i)         Indenture, dated as of December 7, 1995, between General     Motors Corporation and Citibank, N.A., Trustee, incorporated     herein by reference to Exhibit 4(a) to Amendment No. 1 to     Form S-3 Registration Statement No. 33-64229 filed     November 14, 1995.             (4)(b)(ii)         First Supplemental Indenture, dated as of March 4, 2002,     between General Motors Corporation and Citibank, N.A.,     incorporated herein by reference to Exhibit 2 to the Current     Report on Form 8-K of General Motors Corporation filed     March 6, 2002.             4(b)(iii)         Second Supplemental Indenture, dated as of November 5,     2004, between General Motors Corporation and Citibank, N.A.,     incorporated herein by reference to Exhibit 4.1 to the Current     Report on Form 8-K of General Motors Corporation filed     November 10, 2004.             4(b)(iv)         Third Supplemental Indenture, dated as of November 5, 2004,     between General Motors Corporation and Citibank, N.A.     incorporated herein by reference to Exhibit 4.2 to the Current     Report on Form 8-K of General Motors Corporation filed     November 10, 2004.             4(b)(v)         Fourth Supplemental Indenture, dated as of November 5,     2004, between General Motors Corporation and Citibank, N.A.,     incorporated herein by reference to Exhibit 4.3 to the Current     Report on Form 8-K of General Motors Corporation filed     November 10, 2004.             (10)†         Agreement, dated as of October 22, 2001, between General     Motors Corporation and General Motors Acceptance Corporation.             (10)(a)*         General Motors 2002 Annual Incentive Plan, incorporated herein     by reference to Exhibit A to the Proxy Statement of General     Motors Corporation filed April 21, 2002.             (10)(b)*         General Motors 2002 Stock Incentive Plan, incorporated herein by     reference to Exhibit A to the Proxy Statement of General Motors     Corporation filed April 21, 2002.             (10)(c)*         General Motors 2002 Long-term Incentive Plan, incorporated     herein by reference to Exhibit A to the Proxy Statement of     General Motors Corporation filed April 21, 2002.        IV-1    Table of Contents  PART IV   GENERAL MOTORS CORPORATION AND SUBSIDIARIES    Exhibits and Financial Statement Schedule — (concluded)                       (10)(d)*         Compensation Plan for Nonemployee Directors, incorporated herein     by reference to Exhibit A to the Proxy Statement of General     Motors Corporation filed April 16, 1997.             10(e)*         Employment Agreement, dated as of December 5, 2000, between     General Motors Corporation and John M. Devine, incorporated     herein by reference to Exhibit 10(e) to General Motors     Corporations’s annual report on Form 10-K filed     march 7, 2001.             (10)(f)*         Extension to Employment Agreement, dated as of December 5,     2005 between General Motors Corporation and John M. Devine     incorporated herein by reference to Exhibit 99.1 to the Current     Report on Form 8-K of General Motors Corporation filed     December 9, 2005.             (10)(g)*†         General Motors Company Vehicle Operations — Senior     Management Vehicle Program (SMVP) Supplement, revised     December 15, 2005.             (10)(h)*†         Compensation Statement for G.R. Wagoner, Jr. commencing     January 1, 2003.             (10)(i)*†         Compensation Statement for John M. Devine commencing     January 1, 2003.             (10)(j)*†         Compensation Statement for Robert A. Lutz commencing     January 1, 2003.             (10)(k)*†         Compensation Statement for G.L. Cowger commencing     February 1, 2004.             (10)(l)*†         Compensation Statement for Thomas A. Gottschalk commencing     January 1, 2005 and description of retirement program.             (10)(m)*†         GM Supplemental Executive Retirement Plan as amended through     October 18, 2005.             (10)(n)*†         General Motors Benefit Equalization Plan for Salaried Employees,     amended as of October 18, 2005.             (10)(o)*†         Description of Executive and Board Compensation Reductions.             (12)†         Computation of Ratios of Earnings to Fixed Charges for the Years     Ended December 31, 2005, 2004, and 2003.             (13)†         General Motors Acceptance Corporation Annual Report on     Form 10-K, File No. 001-03754, for the fiscal year ended     December 31, 2005.             (21)†         Subsidiaries of the Registrant as of December 31, 2005.             (23)†         Consent of Independent Registered Public Accounting Firm.             (31.1)†         Section 302 Certification of the Chief Executive Officer.             (31.2)†         Section 302 Certification of the Chief Financial Officer.             (32.1)†         Certification of the Chief Executive Officer Pursuant to 18     U.S.C. Section 1350, As Adopted Pursuant to     Section 906 of the Sarbanes-Oxley Act of 2002.             (32.2)†         Certification of the Chief Financial Officer Pursuant to 18     U.S.C. Section 1350, As Adopted Pursuant to     Section 906 of the Sarbanes-Oxley Act of 2002.                   *       Management contract or compensatory plan required to be filed as     an exhibit pursuant to Item 15(b) of     Form 10-K.    † Filed herewith.  IV-2    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SCHEDULE II — ALLOWANCES                                                               Additions   Additions               Balance at   Charged to   Charged to       Balance at       Beginning   Costs and   Other       End of   Description   of Year   Expenses   Accounts   Deductions   Year                               (Dollars in millions)     For the Year Ended December 31, 2005                                                  Allowances Deducted from Assets                                                    Allowance for credit losses    $ 3,419     $ 1,088     $ —     $ 1,391 (b)   $ 3,116               Accounts and notes receivable (for doubtful receivables)      303       73       —       38 (b)     338               Inventories (principally for obsolescence of service parts)      338       70 (c)     —       —       408               Other investments and miscellaneous assets (receivables and     other)      10       —       7       —       17             Miscellaneous allowances (mortgage and other)      161       25       21       123       84                                                   Total Allowances Deducted from Assets    $ 4,231     $ 1,256     $ 28     $ 1,552     $ 3,963                                         For the Year Ended December 31, 2004                                                  Allowances Deducted from Assets                                                    Allowance for credit losses    $ 3,042     $ 1,944     $ —     $ 1,567 (b)   $ 3,419               Accounts and notes receivable (for doubtful receivables)      212       112       5 (a)     26 (b)     303               Inventories (principally for obsolescence of service parts)      393       —       —       55 (c)     338               Other investments and miscellaneous assets (receivables and     other)      84       —       —       74       10             Miscellaneous allowances (mortgage and other)      193       28       163       223       161                                                   Total Allowances Deducted from Assets    $ 3,924     $ 2,084     $ 168     $ 1,945     $ 4,231                                         For the Year Ended December 31, 2003                                                  Allowances Deducted from Assets                                                    Allowance for credit losses    $ 2,991     $ 1,721     $ —     $ 1,670 (b)   $ 3,042               Accounts and notes receivable (for doubtful receivables)      166       63       15 (a)     32 (b)     212               Inventories (principally for obsolescence of service parts)      255       138 (c)     —       —       393               Other investments and miscellaneous assets (receivables and     other)      26       —       58       —       84             Miscellaneous allowances (mortgage and other)      153       78       15       53       193                                                   Total Allowances Deducted from Assets    $ 3,591     $ 2,000     $ 88     $ 1,755     $ 3,924                                                   Notes:                   (a)       Primarily reflects the recovery of accounts previously     written-off.            (b)       Accounts written off.            (c)       Represents net change of inventory allowances.    Reference should be made to the notes to the GM consolidated financial statements.  IV-3    Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES       SIGNATURES        Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.                GENERAL MOTORS CORPORATION                 (Registrant)    Date: March 28, 2006            By:       /s/ G. RICHARD WAGONER, JR.                       G. Richard Wagoner, Jr.          Chairman and Chief Executive Officer         Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on this 28th day of March 2006 by the following persons on behalf of the Registrant and in the capacities indicated, including a majority of the directors.                     Signature   Title                            /s/ G. RICHARD WAGONER, JR. (G. Richard Wagoner, Jr.)        Chairman and Chief Executive Officer                /s/ FREDERICK A. HENDERSON (Frederick A. Henderson)        Vice Chairman and Chief Financial Officer                /s/ WALTER G. BORST (Walter G. Borst)        Treasurer                /s/ PAUL W. SCHMIDT (Paul W. Schmidt)        Controller                /s/ PETER R. BIBLE (Peter R. Bible)        Chief Accounting Officer        IV-4   Table of Contents  GENERAL MOTORS CORPORATION AND SUBSIDIARIES   SIGNATURES                     Signature   Title                            /s/ PERCY BARNEVIK (Percy Barnevik)        Director                /s/ ERSKINE BOWLES (Erskine Bowles)        Director                /s/ JOHN H. BRYAN (John H. Bryan)        Director                /s/ ARMANDO M. CODINA (Armando Codina)        Director                /s/ GEORGE M.C. FISHER (George M.C. Fisher)        Director                /s/ KAREN KATEN (Karen Katen)        Director                /s/ KENT KRESA (Kent Kresa)        Director                /s/ ELLEN J. KULLMAN (Ellen J. Kullman)        Director                /s/ PHILIP A. LASKAWY (Philip A. Laskawy)        Director                /s/ ECKHARD PFEIFFER (Eckhard Pfeiffer)        Director                /s/ JEROME B. YORK (Jerome York)        Director        IV-5      EX-3.(II) 2 k03376exv3wxiiy.htm BYLAWS OF GENERAL MOTORS CORPORATION    exv3wxiiy       Exhibit 3(ii)  GENERAL MOTORS CORPORATION      BYLAWS  As of December 6, 2005          GENERAL MOTORS CORPORATION  BYLAWS  INDEX                      Page     ARTICLE I—MEETINGS OF STOCKHOLDERS           1.1. Annual Meetings      3     1.2. Special Meetings      3     1.3. Notice of Meetings      3     1.4. List of Stockholders Entitled to Vote      3     1.5. Quorum      3     1.6. Conduct of Meeting      4     1.7. Voting; Proxies      4     1.8. Fixing Date for Determination of Stockholders of Record      4     1.9. Adjournments      5     1.10. Judges      5     1.11. Notice of Stockholder Nomination and Stockholder Business      5                 ARTICLE II — BOARD OF DIRECTORS           2.1. Responsibility and Number      6     2.2. Election; Resignation; Vacancies      6     2.3. Regular Meetings      7     2.4. Special Meetings      7     2.5. Quorum; Vote Required for Action      7     2.6. Conduct of Meeting      7     2.7. Transactions with Corporation      8     2.8. Ratification      8     2.9. Written Action by Directors      8     2.10. Telephonic Meetings Permitted      9     2.11. Independent Directors      9     2.12. Access to Books and Records      9                 ARTICLE III — COMMITTEES           3.1. Committees of the Board of Directors      9     3.2. Election; Vacancies; Independence      10     3.3. Procedure; Quorum      10     3.4. Investment Funds Committee      10     3.5. Audit Committee      10     3.6. Executive Compensation Committee      11     3.7. Public Policy Committee      11     3.8. Directors and Corporate Governance Committee      11       1                           Page     ARTICLE IV — OFFICERS           4.1. Election of Officers      12     4.2. Chief Executive Officer      12     4.3. President      12     4.4. Vice Chairman of the Corporation      12     4.5. Chief Financial Officer      12     4.6. Treasurer      13     4.7. Secretary      13     4.8. Controller      13     4.9. General Counsel      13     4.10. General Auditor      13     4.11. Chief Tax Officer      13     4.12. Subordinate Officers      13     4.13. Resignation; Removal; Suspension; Vacancies      14                 ARTICLE V — INDEMNIFICATION           5.1. Right to Indemnification of Directors and Officers      14     5.2. Advancement of Expenses of Directors and Officers      15     5.3. Claims by Officers or Directors      15     5.4. Indemnification of Employees      15     5.5. Advancement of Expenses of Employees      15     5.6. Non-Exclusivity of Rights      16     5.7. Other Indemnification      16     5.8. Insurance      16     5.9. Amendment or Repeal      16                 ARTICLE VI — MISCELLANEOUS           6.1. Prohibition on Certain Stock Purchases      16     6.2. Seal      18     6.3. Fiscal Year      18     6.4. Notice      18     6.5. Waiver of Notice      18     6.6. Voting of Stock Owned by the Corporation      18     6.7. Form of Records      19     6.8. Offices      19     6.9. Amendment of Bylaws      19     6.10. Gender Pronouns      19                 DEFINITION OF CERTAIN TERMS USED IN BYLAW 6.1      i       2       GENERAL MOTORS CORPORATION BYLAWS  ARTICLE I MEETINGS OF STOCKHOLDERS  1.1. Annual Meetings.  The annual meeting of stockholders for the election of directors, ratification or rejection of the selection of auditors, and the transaction of such other business as may properly be brought before the meeting shall be held on the first Tuesday in June in each year, or on such other date and such place and time as the chairman of the board or the board of directors shall designate.  1.2. Special Meetings.  Special meetings of stockholders may be called by the board of directors or the chairman of the board at such place, date, and time and for such purpose or purposes as shall be set forth in the notice of such meeting.  1.3. Notice of Meetings.  Written notice of each meeting of stockholders shall be given by the chairman of the board and/or the secretary in compliance with the provisions of Delaware law.  1.4. List of Stockholders Entitled to Vote.  The secretary shall prepare or have prepared before every meeting of stockholders a complete list of the stockholders entitled to vote at the meeting in compliance with the provisions of Delaware law.  1.5. Quorum.  At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these bylaws, the holders of one-third of the voting power of the outstanding shares of stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided in Section 1.9 of these bylaws until a quorum shall attend. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.  3       1.6. Conduct of Meeting.  The chairman of the board or, if he so designates, a vice chairman of the Corporation, an executive vice president or vice president shall preside at each meeting of the stockholders; provided, however, that if the chairman of the board does not preside and has not designated an officer of the Corporation to preside, the board of directors may designate any person to preside over the meeting. The secretary of the Corporation shall record the proceedings of meetings of the stockholders, but in the absence of the secretary, the person presiding over the meeting shall designate any person to record the proceedings.  1.7. Voting; Proxies.  Each stockholder shall be entitled to vote in accordance with the number of shares and voting powers of the voting shares held of record by him. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy, but such proxy, whether revocable or irrevocable, shall comply with the requirements of Delaware law. Voting at meetings of stockholders, on other than the election of directors, need not be by written ballot unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall so determine. At all meetings of stockholders for the election of directors a plurality of the voting power of the shares of stock present in person or represented by proxy and entitled to vote shall be sufficient. All other elections and questions shall, unless otherwise provided by law or by the certificate of incorporation or these bylaws, be decided by the vote of the holders of a majority of the voting power of the shares of stock entitled to vote thereon present in person or by proxy at the meeting.  1.8. Fixing Date for Determination of Stockholders of Record.  To determine the stockholders of record, the board of directors may fix a record date, provided that the record date shall not precede the date upon which the board adopts the resolution fixing the record date and provided further that the record shall be: (a) in the case of determination of stockholders entitled to receive notice of or to vote at any meeting of stockholders or adjournment thereof, not more than 60 nor less than ten days before the date of such meeting; (b) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, not more than ten days from the date upon which the resolution fixing the record date is adopted by the board; and (c) in the case of any other action, not more than 60 days prior to such other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board may choose to fix a new record date for the adjourned meeting.  4       1.9. Adjournments.  Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.  1.10. Judges.  All votes by ballot at any meeting of stockholders shall be conducted by two judges appointed for the purpose, either by the board of directors or by the chairman of the meeting. The judges shall decide upon the qualifications of voters, count the votes, and declare the result.  1.11. Notice of Stockholder Nomination and Stockholder Business.  At a meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. Nominations for the election of directors may be made by the board of directors or by any stockholder entitled to vote for the election of directors who complies with the notice requirements set forth in this section. Other matters to be properly brought before the meeting must be: (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board, including matters covered by rule 14a-8 of the Securities and Exchange Commission (the “SEC”); (b) otherwise properly brought before the meeting by or at the direction of the board; or (c) otherwise properly brought before the meeting by a stockholder pursuant to the notice requirements of this section.  A stockholder who intends to make a nomination or to bring any other matter before a meeting of stockholders must give notice of his intent in writing or by electronic transmission. Such notice must be received by the secretary, in the case of an annual meeting not more than 180 days and not less than 120 days before the date of the meeting, or in the case of a special meeting, not more than 15 days after the day on which notice of the special meeting is first mailed to stockholders.  Every such notice by a stockholder shall state:  (a) the name and address of the stockholder of the Corporation who intends to make a nomination or bring up any other matter;  5       (b) a representation that the stockholder is a holder of the Corporation’s voting stock and intends to appear in person or by proxy at the meeting to make the nomination or bring up the matter specified in the notice;  (c) if he intends to make a nomination, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder;  (d) if he intends to make a nomination, such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC if each nominee had been nominated by the board; and  (e) if he intends to bring up any other matter, a description of the matter and of any material interest of the stockholder in the matter.  Notice of intent to make a nomination shall be accompanied by the written consent of each nominee to serve as director of the Corporation if elected.  At the meeting of stockholders, the presiding officer may declare out of order and disregard any nomination or other matter not presented in accordance with this section.  ARTICLE II BOARD OF DIRECTORS  2.1. Responsibility and Number.  The business and affairs of the Corporation shall be managed by or under the direction of a board of directors. The number of directors shall be determined from time to time by resolution of the board, but the total number of directors shall not be less than eight or more than 20.  2.2. Election; Resignation; Vacancies.  At each annual meeting of stockholders, the stockholders shall elect directors who shall each hold office for a term commencing on the date of the annual meeting, or such later date as shall be determined by the board of directors, and ending on the next annual meeting of stockholders, or until his successor is elected and qualified. Any director may resign at any time upon notice given in writing or by electronic transmission to the chairman of the board or to the secretary. Any vacancy occurring in the board for any cause may be filled by a majority of the remaining members of the board, although such majority is less than a quorum. Each director so elected shall hold office until the expiration of the term of the other directors or until his successor is elected and qualified.  6       2.3. Regular Meetings.  Unless otherwise determined by resolution of the board of directors, a meeting of the board for the election of officers and the transaction of such other business as may come before it shall be held as soon as practicable following the annual meeting of stockholders, and other regular meetings of the board shall be held either on the first Tuesday of each month designated by the chairman of the board, or if that is a legal holiday, then on the next Tuesday that is not a legal holiday, or such other days as may from time to time be designated by the chairman of the board.  2.4. Special Meetings.  Special meetings of the board of directors may be called by the chairman of the board, or the chairman of the board may by written designation appoint a vice chairman of the Corporation, an executive vice president, or a vice president to call such meeting. Special meetings may also be called by the chairman of the directors and corporate governance committee or by written request of one-third of the directors then in office. Notice of a special meeting of the board of directors shall be sent by the secretary of the Corporation either by first class United States mail at least four days before such meeting, or by overnight mail, courier service, electronic transmission, or hand delivery at least 24 hours before the special meeting.  2.5. Quorum; Vote Required for Action.  At all meetings of the board of directors, one-third of the whole board shall constitute a quorum for the transaction of business. Except in cases in which applicable law, the certificate of incorporation, or these bylaws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board.  2.6. Conduct of Meeting.  The board of directors shall annually elect one of its members to be chairman of the board and shall fill any vacancy in the position of chairman of the board at such time and in such manner as the board shall determine. The chairman of the board may but need not be an officer of or employed in an executive or any other capacity by the corporation.  The chairman of the board shall preside at meetings of the board and lead the board in fulfilling its responsibilities as defined in section 2.1.  In the absence of the chairman of the board, the chairman of the directors and corporate governance committee or, in his absence, a member of the board selected by the members present, shall preside at meetings of the board. The secretary of the corporation shall act as secretary of the meetings of the board, but in his absence the presiding officer may appoint a secretary for the meeting.  7       2.7. Transactions with Corporation.  No contract or transaction between the Corporation and one or more of its directors, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board of directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose: (1) if the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the board or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors are less than a quorum; or (2) if the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) if the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the board, a committee thereof, or the stockholders.  Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board or of a committee which authorizes the contract or transaction.  2.8. Ratification.  Any transaction questioned in any stockholders’ derivative suit on the grounds of lack of authority, defective or irregular execution, adverse interest of director, officer or stockholder, non-disclosure, miscomputation, or the application of improper principles or practices of accounting may be ratified before or after judgment, by the board of directors or by the stockholders in case less than a quorum of directors are qualified; and, if so ratified, shall have the same force and effect as if the questioned transaction had been originally duly authorized, and said ratification shall be binding upon the Corporation and its stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned transaction.  2.9. Written Action by Directors.  Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and written evidence of such consent is filed with the minutes of proceedings of the board or committee.  8       2.10. Telephonic Meetings Permitted.  Members of the board of directors, or any committee of the board, may participate in a meeting of such board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this bylaw shall constitute presence in person at such meeting.  2.11. Independent Directors.  (a) A majority of the individuals nominated by the board of directors as candidates for election to the board by the stockholders at the next annual meeting of stockholders shall qualify to be Independent Directors (as defined in this section).  (b) If the board elects directors between annual meetings of stockholders, the majority of all directors holding office immediately after such election shall be Independent Directors.  (c) For purposes of this bylaw, the term “Independent Director” shall mean a director who qualifies as independent under any definition or standard of “independence” adopted by the SEC or the New York Stock Exchange.  2.12 Access to Books and Records  The records, books, and accounts of the Corporation maintained by or under the supervision of the chief financial officer, the secretary, or any other officer shall be open, during the usual hours for business of the Corporation, to the examination of any director for any purpose reasonably related to his role as a director.  ARTICLE III COMMITTEES  3.1. Committees of the Board of Directors.  The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, consisting of one or more of the directors of the corporation, to be committees of the board. To the extent provided in any resolution of the board, these bylaws, or any charter adopted by such committee and approved by the board, and to the extent permissible under Delaware law and the certificate of incorporation, any such committee shall have and may exercise all the powers and authority of the board in the management of the business and affairs of the Corporation.  The standing committees of the board shall be the audit committee, the directors and corporate governance committee, the executive compensation committee, the investment funds committee, and the public policy committee. The board (but not a committee thereof)  9       may designate additional committees of the board and may prescribe for each committee such powers and authority as may properly be granted to such committees in the management of the business and affairs of the Corporation.  3.2. Election; Vacancies; Independence.  The members and the chairman of each standing committee of the board of directors shall be designated annually by the board at its first meeting after each annual meeting of stockholders or at any other time the board shall determine. The members of other committees of the board may be designated at such time as the board may determine. Vacancies in any committee may be filled at such time and in such manner as the board shall determine. Only Independent Directors as defined in section 2.11 of these bylaws shall be members of any standing committee.  3.3. Procedure; Quorum.  Except to the extent otherwise provided in these bylaws or any resolution of the board of directors, each committee of the board may fix its own rules of procedure.  At all meetings of any committee of the board, one-third of the members thereof shall constitute a quorum for the transaction of business. The vote of a majority of the members present at a meeting of a committee of the board at which a quorum is present shall be the act of the committee unless the certificate of incorporation, these bylaws, or a resolution of the board requires the vote of a greater number.  3.4. Investment Funds Committee.  The investment funds committee shall be responsible for assisting the board of directors with its general oversight responsibility for the investment funds of the Corporation and its subsidiaries. The committee shall serve, where it is designated by the governing documents, as a named fiduciary of the defined benefit employee benefit plans of the Corporation and any subsidiary of the Corporation that are covered by the Employee Retirement Income Security Act of 1974 (ERISA) where and to the extent that it is designated by the plan’s governing documents. In addition, the committee shall report annually to the board regarding the performance of the named fiduciaries and administrators of such plans of their responsibilities under ERISA, and the investment activity of the defined benefit plans among such plans. The board and management of the Corporation and its subsidiaries shall retain all authority to determine the amount and timing of any future funding of such plans.  3.5. Audit Committee.  The audit committee shall have and may exercise the powers, authority, and responsibilities that are normally appropriate for the functions of an audit committee. The committee shall also annually select the independent accountants for the following calendar year, and that  10       selection shall be submitted to the board of directors for their concurrence and to the stockholders for their ratification or rejection at the annual meeting of stockholders.  3.6. Executive Compensation Committee.  The executive compensation committee shall be responsible for matters related to executive compensation and all other equity-based incentive compensation plans of the Corporation. The committee shall determine the compensation of: (a) employees of the Corporation who are directors of the Corporation; and (b) upon the recommendation of the chief executive officer, all senior officers of the Corporation and any other employee of the Corporation who occupies such other position as may be designated by the committee from time to time. The committee shall review the compensation of any director, officer or other employee of any direct or indirect subsidiary of the Corporation as may be designated by the committee from time to time to determine if it has any objection to such compensation. The committee shall have and may exercise the powers and authority granted to it by any incentive compensation plan for employees of the Corporation.  Where any employee benefit or incentive compensation plan affects employees of the Corporation or its subsidiaries and the compensation of such employees is determined or subject to review by the committee, such plan shall be submitted to the committee for its review before adoption by the Corporation or its subsidiary. Any such plan or amendment or modification shall be made effective with respect to employees of the Corporation only if and to the extent approved by the committee.  3.7. Public Policy Committee.  The public policy committee shall, upon its own initiative or otherwise, inquire into all phases of the Corporation’s business activities that relate to matters of public policy. The committee may make recommendations to the board of directors to assist it in formulating and adopting basic policies calculated to promote the best interests of the Corporation and the community.  3.8. Directors and Corporate Governance Committee.  The directors and corporate governance committee shall be responsible for matters related to service on the board of directors of the corporation, and associated issues of corporate governance. The committee from time to time shall conduct studies of the size and composition of the board. Prior to each annual meeting of stockholders, the committee shall recommend to the board the individuals to constitute the nominees of the board, so that the board may solicit proxies for their election. The committee shall review the qualifications of individuals for consideration as director candidates and shall recommend to the board, for its consideration, the names of individuals for election by the board. In addition, the committee shall from time to time conduct studies and make recommendations to the board regarding compensation of directors.  11       ARTICLE IV OFFICERS  4.1. Election of Officers.  The board of directors shall elect such officers of the Corporation with the titles and duties that it designates, provided that the Corporation shall have at least two officers at any time. There may be a chief executive officer, a president, one or more chairmen of the Corporation, one or more executive vice presidents, one or more vice presidents, a chief financial officer. a secretary, a treasurer, a controller, a general counsel, a general auditor, and a chief tax officer. The officers, other than the chief executive officer and the president, shall each have the powers, authority, and responsibilities of those officers provided by the bylaws or as the board or the chief executive officer may determine. One person may hold any number of offices. Elected officers shall hold their offices at the pleasure of the board or until their earlier resignation.  4.2. Chief Executive Officer.  The chief executive officer shall have the general executive responsibility for the conduct of the business and affairs of the Corporation. He shall exercise such other powers, authority, and responsibilities as the board of directors may determine.  In the absence of or during the physical disability of the chief executive officer, the board may designate an officer who shall have and exercise the powers, authority, and responsibilities of the chief executive officer.  4.3. President.  The president shall have and exercise such powers, authority and responsibilities as the board of directors may determine.  4.4. Vice Chairman of the Corporation  The vice chairman shall have and exercise such powers, authority, and responsibilities as the board of directors may determine. The vice chairman may be, but not is required to be, a member of the board of directors.  4.5. Chief Financial Officer  The chief financial officer shall be the principal financial officer of the Corporation. He shall render such accounts and reports as may be required by the board of directors or any committee of the board. The financial records, books and accounts of the Corporation shall be maintained subject to his direct or indirect supervision.  12       4.6. Treasurer.  The treasurer shall have direct or indirect custody of all funds and securities of the Corporation and shall perform all acts incident to the position of treasurer.  4.7. Secretary.  The secretary shall keep the minutes of all meetings of stockholders and directors and shall give all required notices and have charge of such books and papers as the board of directors may require. He shall submit such reports to the board or to any committee as the board or such committee may request. Any action or duty required to be performed by the secretary may be performed by an assistant secretary.  4.8. Controller.  The controller shall be in charge of the accounts of the Corporation and shall perform all acts incident to the position of controller.  4.9. General Counsel.  The general counsel shall be the chief legal officer of the Corporation and shall have general control of all matters of legal import concerning the Corporation.  4.10. General Auditor.  The general auditor shall have such powers, authority and responsibilities as are incident to the position of general auditor in the performance of an independent audit activity of the Corporation and shall have direct access to the audit committee.  4.11. Chief Tax Officer.  The chief tax officer shall have responsibility for all tax matters involving the Corporation, with authority to sign and to delegate to others authority to sign all returns, reports, agreements and documents involving the administration of the Corporation’s tax affairs.  4.12. Subordinate Officers.  The board of directors may from time to time appoint one or more assistant officers to the officers of the Corporation, and such other subordinate officers as the board of directors may deem advisable. Such subordinate officers shall have such powers, authority and responsibilities as the board or the chief executive officer may from time to time determine. The board may grant to any committee of the board or the chief executive officer the power and authority to appoint subordinate officers and to prescribe their respective terms of office, powers, authority, and responsibilities. Each subordinate officer shall hold his  13       position at the pleasure of the board, the committee of the board appointing him, the chief executive officer, and any other officer to whom such subordinate officer reports.  4.13. Resignation; Removal; Suspension; Vacancies.  Any officer may resign at any time by giving written notice to the chief executive officer or the secretary. Unless stated in the notice of resignation, the acceptance thereof shall not be necessary to make it effective. It shall take effect at the time specified therein or, in the absence of such specification, it shall take effect upon the receipt thereof.  Any officer elected by the board of directors may be suspended or removed at any time by the affirmative vote of a majority of the board. Any subordinate officer of the Corporation appointed by the board, a committee of the board, or the chief executive officer may be suspended or removed at any time by a majority vote of a quorum of the board, the committee that appointed such subordinate officer, the chief executive officer, or any other officer to whom such subordinate officer reports.  Subject to any contractual limitations, the chief executive officer may suspend the powers, authority, responsibilities and compensation of any employee, including any elected officer or appointed subordinate officer, for a period of time sufficient to permit the board or the appropriate committee of the board a reasonable opportunity to consider and act upon a resolution relating to the reinstatement, further suspension, or removal of such person.  As appropriate, the board, a committee of the board, and/or the chief executive officer may fill any vacancy created by the resignation, death, retirement, or removal of an officer in the same manner as provided for the election or appointment of such person.  ARTICLE V INDEMNIFICATION  5.1. Right to Indemnification of Directors and Officers.  Subject to the other provisions of this article, the corporation shall indemnify and advance expenses to every director and officer (and to such person’s heirs, executors, administrators or other legal representatives) in the manner and to the full extent permitted by applicable law as it presently exists, or may hereafter be amended, against any and all amounts (including judgments, fines, payments in settlement, attorneys’ fees and other expenses) reasonably incurred by or on behalf of such person in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (“a proceeding”), in which such director or officer was or is made or is threatened to be made a party or is otherwise involved by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, fiduciary or member of any other corporation, partnership, joint venture, trust, organization or other enterprise. The Corporation shall not  14       be required to indemnify a person in connection with a proceeding initiated by such person if the proceeding was not authorized by the board of directors of the Corporation.  5.2. Advancement of Expenses of Directors and Officers.  The Corporation shall pay the expenses of directors and officers incurred in defending any proceeding in advance of its final disposition (“advancement of expenses”); provided, however, that the payment of expenses incurred by a director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified under this article or otherwise.  5.3. Claims by Officers or Directors.  If a claim for indemnification or advancement of expenses by a director or officer under this article is not paid in full within 90 days after a written claim therefor has been received by the Corporation, the claimant may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or advancement of expenses under applicable law.  5.4. Indemnification of Employees.  Subject to the other provisions of this article, the Corporation may indemnify and advance expenses to every employee who is not a director or officer (and to such person’s heirs, executors, administrators, or other legal representatives) in the manner and to the full extent permitted by applicable law as it presently exists, or may hereafter be amended against any and all amounts (including judgments, fines, payments in settlement, attorneys’ fees, and other expenses) reasonably incurred by or on behalf of such person in connection with any proceeding, in which such employee was or is made or is threatened to be made a party or is otherwise involved by reason of the fact that such person is or was an employee of the corporation, or is or was serving at the request of the Corporation as a director, officer, employee, fiduciary, or member of any other corporation, partnership, joint venture, trust, organization, or other enterprise. The ultimate determination of entitlement to indemnification of employees who are not officers and directors shall be made in such manner as is provided by applicable law. The Corporation shall not be required to indemnify a person in connection with a proceeding initiated by such person if the proceeding was not authorized by the board of the Corporation.  5.5. Advancement of Expenses of Employees.  The advancement of expenses of an employee who is not a director or officer shall be made by or in the manner provided by resolution of the board of directors or by a committee of the board.  15       5.6. Non-Exclusivity of Rights.  The rights conferred on any person by this article shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, any provision of the certificate of incorporation or of these bylaws or of any agreement, any vote of stockholders or disinterested directors, or otherwise.  5.7. Other Indemnification.  The Corporation’s obligation, if any, to indemnify any person who was or is serving at its request as a director, officer or employee of another corporation, partnership, joint venture, trust, organization, or other enterprise shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, trust, organization, or other enterprise.  5.8. Insurance.  The board of directors may, to the full extent permitted by applicable law as it presently exists, or may hereafter be amended from time to time, authorize an appropriate officer or officers to purchase and maintain at the Corporation’s expense insurance: (a) to reimburse the corporation for any obligation which it incurs under the provisions of this article as a result of the indemnification of past, present or future directors, officers, employees, agents, and any persons who has served in the past, is now serving, or in the future will serve at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise; and (b) to pay on behalf of or to indemnify such persons against liability in instances in which they may not otherwise be indemnified by the Corporation under the provisions of this article, whether or not the Corporation would have the power to indemnify such persons against such liability under this article.  5.9. Amendment or Repeal.  Any repeal or modification of the foregoing provisions of this article shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification.  ARTICLE VI MISCELLANEOUS  6.1. Prohibition on Certain Stock Purchases.  (a) Except as set forth in subsection (b) hereof, in addition to any affirmative vote of stockholders required by any provision of law, the certificate of incorporation or bylaws of  16       the Corporation, or any policy adopted by the board of directors, neither the Corporation nor any subsidiary shall knowingly effect any direct or indirect purchase or other acquisition of any GM Equity Security of any class or classes issued by the Corporation at a price which is in excess of the highest Market Price of such GM Equity Security on the largest principal national securities exchange in the United States on which such security is listed for trading on the date that the understanding to effect such transaction is entered into by the Corporation (whether or not such transaction is concluded or a written agreement relating to such transaction is executed on such date, such date to be conclusively established by determination of the board), from any Interested Person (i.e., any person who is the direct or indirect beneficial owner of more than three percent (3%) of the aggregate voting power of the Voting Shares of the Corporation) who has beneficially owned such GM Equity Securities for less than two years prior to such date, without the affirmative vote of the holders of the Voting Shares which represent at least a majority of the aggregate voting power of the Corporation, excluding Voting Shares beneficially owned by such Interested Person, voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be otherwise required, or that a lesser percentage may be specified, by law or any agreement with any national securities exchange, or otherwise.  (b) The provisions of Section (a) hereof shall not be applicable with respect to:  (i) any purchase, acquisition, redemption or exchange of GM Equity Securities, the purchase, acquisition, redemption or exchange of which, at the time any such transaction is entered into, is provided for in the certificate of incorporation (including any resolution or resolutions of the board providing for the issuance of Preferred Stock or Preference Stock by the corporation);  (ii) any purchase or other acquisition of GM Equity Securities made as part of a tender or exchange offer by the corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any successor provisions to such Act, rules or regulations);  (iii) any purchase or acquisition of GM Equity Securities made pursuant to an open market purchase program which has been approved by the board of directors; or  (iv) any purchase or acquisition of GM Equity Securities made from, or any purchase or acquisition of GM Equity Securities made pursuant to or on behalf of, an employee benefit plan maintained by the Corporation, or any subsidiary or any trustee of, or fiduciary with respect to any such plan when acting in such capacity.  (c) The board shall have the exclusive right and power to interpret the provisions of this bylaw, including, without limitation, the adoption of written definitions of terms used in this  17       bylaw (any such definitions shall be filed with the secretary of the Corporation, and such definitions as may prevail shall be made available to any stockholder upon written request); any such interpretation made in good faith shall be binding and conclusive upon all holders of GM Equity Securities.  6.2. Seal.  The corporate seal shall have inscribed upon it the name of the Corporation, the year of its organization and the words “Corporate Seal,” and “Delaware.” The seal and any duplicate of the seal shall be in the charge of the secretary or an assistant secretary.  6.3. Fiscal Year.  The fiscal year of the Corporation shall begin on January 1 and terminate on December 31 of each year.  6.4. Notice.  Unless otherwise stated, any notice required to be given by these bylaws must be given in writing delivered in person, by first class United States mail, overnight mail or courier service, or by facsimile or other electronic transmission followed by a paper copy of such notice delivered by overnight mail or courier service.  6.5. Waiver of Notice.  Whenever any notice is required to be given, a waiver thereof in writing, signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except if the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such written notice of waiver need not specify the business to be transacted at or the purpose of any regular or special meeting of the stockholders, board of directors, or committee of the board.  6.6. Voting of Stock Owned by the Corporation.  The board of directors, the investment funds committee or the chairman of the board may authorize any person and delegate to one or more officers or subordinate officers the authority to authorize any person to vote or to grant proxies to vote in behalf of the Corporation at any meeting of stockholders or in any solicitation of consent of any corporation in which the Corporation may hold stock or other voting securities.  18       6.7. Form of Records.  Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. Upon the request of any person entitled to inspect records, the Corporation shall so convert such records.  6.8. Offices.  The Corporation shall maintain a registered office inside the State of Delaware and may also have other offices outside or inside the State of Delaware. The books of the Corporation may be kept outside or inside the State of Delaware.  6.9. Amendment of Bylaws.  The board of directors shall have power to adopt, amend, or repeal the bylaws at any regular or special meeting of the board. The stockholders shall also have power to adopt, amend, or repeal the bylaws at any annual or special meeting, subject to compliance with the notice provisions provided in section 1.11.  6.10. Gender Pronouns.  Whenever the masculine pronoun is used in these bylaws, it shall be deemed to refer to either the masculine or the feminine gender.  19       DEFINITION OF CERTAIN TERMS USED IN BYLAW 6.1 OF GENERAL MOTORS CORPORATION  For the purposes of section 6.1 (formerly section 6.12) of the bylaws of General Motors Corporation, the board of directors adopted the following definitions effective March 5, 1990:  (i) “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange, as in effect on January 1, 1990.  (ii) “Beneficial Owner” and “Beneficial Ownership” shall have the meanings ascribed to such terms in Rule 13d-3 and Rule 13d-5 of the General Rules and Regulations under the Exchange Act, as in effect on January 1, 1990.  (iii) “GM Equity Security” shall mean any security described in Section 3(a) (11) of the Exchange Act, as in effect on January 1, 1990, which is issued by GM and traded on a national securities exchange or the NASDAQ National Market System.  (iv) “Interested Person” shall mean any person (other than the Corporation or any Subsidiary) that is the direct or indirect Beneficial Owner of more than three percent (3%) of the aggregate voting power of the Voting Shares, and any affiliate or associate of any such person. For the purpose of determining whether a Person is an Interested Person, the outstanding Voting Shares shall include unissued shares of voting stock of the Corporation of which the Interested Person is the Beneficial Owner, but shall not include any other shares of voting stock of the corporation which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise, to any Person who is not the Interested Person.  (v) “Market Price” of shares of a class of GM Equity Security on any day shall mean the highest sale price (regular way) of shares of such class of GM Equity Security on such day, or, if that day is not a trading day, on the trading day immediately preceding such day, on the largest principal national securities exchange on which such class of stock is then listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, then the highest reported sale price for such shares in the over-the-counter market as reported on the NASDAQ National Market System, or if such sale prices shall not be reported thereon, the highest bid price so reported, or, if such price shall not be reported thereon, as the same shall be reported by the National Quotation Bureau Incorporated; in the case of any GM Equity Security which is the Preferred Stock or Preference Stock of the Corporation (of any series), the Market Price thereof   i           shall be the Market Price, as hereinabove defined, of the Voting Shares which the holder of such Preferred Stock or Preference Stock may then acquire by reason of the redemption, exchange, conversion or exercise of other rights as may be provided for in the terms of such securities.  (vi) “Person” shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group deemed to be a person pursuant to Section 13(d)(3) of the Exchange Act, as in effect on January 1, 1990.  (vii) “Subsidiary” shall mean any company of which the corporation owns, directly or indirectly, (A) a majority of the outstanding shares of equity securities, or (B) shares having a majority of the voting power represented by all of the outstanding voting stock of such company. For the purpose of determining whether a company is a Subsidiary, the outstanding voting stock and shares of equity securities thereof shall include unissued shares of which the corporation is the Beneficial Owner but, except for the purpose of determining whether a company is a Subsidiary for purposes of the definition of Interested Person as used in Bylaw Section 6.12 [now section 6.1], shall not include any other shares which may be issuable pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or otherwise, to any Person who is not the Corporation.  (viii) “Voting Shares” shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.   ii           EX-10 3 k03376exv10.htm AGREEMENT, DATED AS OF OCTOBER 22, 2001    exv10       Exhibit 10  AGREEMENT  This Agreement is dated as of October 22, 2001 between General Motors Corporation, a Delaware corporation (“GM”), and General Motors Acceptance Corporation, a Delaware corporation (“GMAC”).  Recitals     A.   GMAC is a diversified financial services company that supports the sale of GM’s products by providing, among other things, wholesale, retail, and lease financing for the purchase and lease of those products.      B.   GMAC is highly dependent on the public debt markets to raise funds for its business.      C.   GMAC’s ability to raise funds in the public debt markets is highly dependent on its credit ratings, which, in turn, are dependent on the level of GMAC’s equity capital, profitability, the quality of its assets, and its liquidity.      D.   It is important to the success of GM that GMAC remains a viable finance company that can fund itself in the public debt markets and continue supporting the sale of GM’s products.      E.   Towards maintaining the viability of GMAC, the parties desire to provide for certain agreements regarding transactions between them and the creditworthiness of GMAC.    NOW, THEREFORE, for good and valuable consideration and the mutual agreements herein provided, the parties agree as follows:     1.   The parties agree that all Affiliate Receivables shall be on arm’s-length terms. For purposes hereof, “Affiliate Receivables” means any advance, loan, extension of credit, or other financing to GM or any affiliate of GM whose assets and liabilities are classified on GM’s consolidated balance sheet as Automotive (“Automotive Affiliate”). GMAC shall enforce, and cause its subsidiaries to enforce, all Affiliate Receivables in a commercially reasonable manner, and GM shall pay, and cause its Automotive Affiliates to pay, Affiliate Receivables in accordance with their terms.      2.   GMAC shall not, nor shall it permit any of its subsidiaries to, guarantee any indebtedness of, or purchase any equity securities issued by, or make any other investment in, GM (parent company only) or any Automotive Affiliate. In addition, GMAC shall not, nor shall it permit any of its subsidiaries to, purchase or finance any real property or manufacturing equipment (including tooling) from or of GM or any Automotive Affiliate that is classified as an Automotive asset on GM’s consolidated balance sheet, except in conformance with prudent and commercially reasonable standards established on an arms-length basis. GM shall not, nor shall it permit any Automotive Affiliate to, request or require GMAC, or GMAC’s subsidiaries, to do any of the transactions prohibited by this Section 2.                  3.   GM and GMAC agree that GMAC’s total stockholder’s equity as stated on or reflected in its consolidated financial statements shall, at the end of any calendar quarter during which this Agreement is in effect, be maintained at a commercially reasonable level appropriate to support the amount, quality, and mix (i.e., retail finance receivables, wholesale finance receivables, lease receivables and non-automotive assets held on balance sheet) of GMAC’s assets as stated on or reflected in its consolidated financial statements for the same calendar quarter, taking into account general business conditions affecting GMAC.      4.   GMAC shall, and shall cause each of its subsidiaries to, conduct its business, including its finance and lease business, in a prudent and commercially reasonable manner, including maintaining and adhering to credit risk underwriting standards for finance and lease receivables and residual assumptions for lease receivables it acquires or originates that are consistent with industry standards. GM shall not, nor shall it permit any Automotive Affiliate to, require GMAC or any of its subsidiaries to accept credit or residual risk beyond what it would be willing to accept acting in a prudent and commercially reasonable manner. For avoidance of doubt, acquisition, or origination of finance or lease receivables having terms that are not market-based shall be considered to be prudent and commercially reasonable if subsidies (in the form of interest rate subvention payments, guarantees, residual risk sharing arrangements, or otherwise) are provided by GM or an Automotive Affiliate in an amount sufficient to assure that GMAC or a finance subsidiary of GMAC, as the case may be, will receive the economic benefits of such receivables as if they had been acquired or originated on market-based terms. Notwithstanding the foregoing, in recognition of the fact that GM uses GMAC as the predominant provider of financial services for special retail and lease programs to support the sale of products manufactured by GM and other Automotive Affiliates, it is understood that it would be commercially reasonable and prudent for GMAC to accept higher concentrations of automotive credit risk than it might otherwise accept in order to continue as the predominant provider of financial services to GM and the other Automotive Affiliates with respect to such programs.      5.   GM and GMAC agree that (a) GMAC shall at all times maintain its books, records, financial statements, and bank accounts separate from those of GM and any Automotive Affiliate; (b) GMAC shall maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain, or identify its assets from those of GM and any Automotive Affiliate; (c) the funds and other assets of GMAC shall not be commingled with those of GM or any Automotive Affiliate; (d) GMAC shall at all times hold itself out as a legal entity separate and distinct from GM and any Automotive Affiliate; and (e) they otherwise will take such reasonable and customary action so that GMAC will not be consolidated with GM or any Automotive Affiliate in any case or other proceeding seeking liquidation, reorganization, or other relief with respect to GM or any Automotive Affiliate or its debts under any bankruptcy, insolvency, or other similar law.      6.   In the event that GM or any of its subsidiaries engages in a corporate transaction that causes the Pension Benefit Guaranty Corporation (“PBGC”) to threaten to terminate the pension plans sponsored by GM or any of its subsidiaries, GM shall, or shall cause any of its subsidiaries to, seek to negotiate a settlement with the PBGC to avoid an involuntary plan termination. In connection with such negotiated settlement, GM shall endeavor not to grant to the PBGC a security interest in the assets of GMAC that has priority over the claims of unsecured creditors of GMAC.    - 2 -             7.   All determinations to be made under this Agreement shall be made in accordance with, or with reference to financial statements prepared in accordance with, United States generally accepted accounting principles. For purposes of this Agreement, the term “lease receivables” shall mean “net investment in operating leases” as stated on or reflected in GMAC’s consolidated financial statements.      8.   During the term of this Agreement, GMAC shall continue to make inventory and capital financing generally available to dealers of vehicles manufactured or sold by GM or its Automotive Affiliates and shall continue to make retail and lease financing generally available to such dealers’ customers to substantially the same extent that GMAC has historically made such services available, so long as providing such services to such an extent would not result in a breach of any of the foregoing provisions. Nothing herein precludes GMAC from providing or continuing to provide financial services to automotive manufacturers other than GM or from providing or continuing to provide mortgage, insurance or other non-automotive financial services in the ordinary course of business.      9.   This Agreement shall be construed and interpreted in accordance with, and governed by, the internal laws of the State of New York, excluding any choice of law rules that may direct the application of the laws of another jurisdiction.      10.   This Agreement shall terminate on the Termination Date, which shall initially be October 22, 2006. On October 22, 2002, and on each October 22 thereafter during the term of this Agreement, the Termination Date shall be extended automatically for an additional one-year period (ending on the October 22 next following the then-current Termination Date) unless either party shall have given the other party written notice during the period beginning on July 1 and ending on October 1 immediately preceding such October 22, specifying its election not to extend the Termination Date beyond the then-current Termination Date and that the term of this Agreement shall, therefore, expire on such then-current Termination Date.    - 3 -          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.                            GENERAL MOTORS CORPORATION       GENERAL MOTORS ACCEPTANCE CORPORATION                       By:    /s/ ERIC A. FELDSTEIN   Eric A. Feldstein         By:    /s/ WILLIAM F. MUIR   William F. Muir   Its:    Vice President Finance and Treasurer        Its:    Executive Vice President and                    Chief Financial Officer     - 4 -       EX-10.(G) 4 k03376exv10wxgy.htm GENERAL MOTORS COMPANY VEHICLE OPERATIONS    exv10wxgy       Exhibit 10(g)    Company Vehicle Operations  SENIOR MANAGEMENT VEHICLE PROGRAM (SMVP) SUPPLEMENT                            http://cvo.gm.com    Revised: 12/15/05             TABLE OF CONTENTS:     1.   PURPOSE OF THE SENIOR MANAGEMENT VEHICLE PROGRAM (SMVP)      2.   PARTICIPATION         2.1   SMVP Participation Waiver (Opt-out)       3.   CVO ONLINE DRIVER ORIENTATION      4.   PROGRAM ADMINISTRATION FEE REQUIREMENT      5.   VEHICLE ASSIGNMENT         5.1   Vehicle Selection        5.2   Assignment Period        5.3   SMVP Participation During Leave of Absence       6.   IMPUTED INCOME      7.   DRIVE AND BUY      8.   BIENNIAL PURCHASE / LEASE REQUIREMENT         8.1   Overview        8.2   New or Returning Participant’s Compliance Requirement        8.3   Waivers and Extensions to Waivers        8.4   Short-Term Exceptions              Company Vehicle Operations Program Supplement for Senior Management Vehicle Program (SMVP) Drivers     1.   PURPOSE OF THE SENIOR MANAGEMENT VEHICLE PROGRAM (SMVP)          The purpose of the Senior Management Vehicle Program (SMVP) is to increase exposure of GM vehicles by allowing senior management to drive company-owned vehicles of their preference. Members of senior management are encouraged to use their assigned vehicles as a means to promote GM’s diverse line of products.      2.   PARTICIPATION         2.1   SMVP Participation Waiver (Opt-out)            Participation in the SMVP is optional. If an eligible participant decides to opt-out of the program, a Participation Waiver Request form (CVO-011) must be completed. This form is available on the Forms page and SMVP page of the CVO website.       3.   CVO ONLINE DRIVER ORIENTATION          To ensure consistent communication of applicable program policies and responsibilities, participants are required to complete the CVO Online Driver Orientation and acknowledge program compliance during the orientation. The Online Driver Orientation is required for all new PEP and SMVP participants, as well as any PEP or SMVP participant returning from an ISP assignment after an absence of more than one year. In addition, any PEP or SMVP participant who has been on medical leave, extended absence, or FMLA for more than one year will also be required to complete the orientation.          The web-based orientation can be accessed through the Company Vehicle Operations website at http://cvo.gm.com. All participants who are required to complete the Online Driver Orientation will receive a notice via e-mail, which will contain their access code and a direct link to the orientation program. Participants will have 30 days from the day they received the notice to complete the Online Driver Orientation.          The program is also available for use on a voluntary basis. Those interested in viewing the Online Driver Orientation may send an e-mail, including their full name and e-mail address, to cvo.administration7@gm.com. Shortly after the e-mail is received, a response will be sent to the e-mail address provided containing a login name and access code. Access for this login name will remain active for a 30-day period.      4.   PROGRAM ADMINISTRATION FEE REQUIREMENT          SMVP participants are charged a monthly Program Administration Fee, one-half of which is withheld semi-monthly as a payroll deduction. The administration fee collected from SMVP and PEP participants is used to offset a portion of the SMVP/PEP program costs, which include the following:         •   Inventory carrying costs        •   Collision and liability coverage        •   Licensing and titling        •   Fuel and fluids costs                 Company Vehicle Operations Program Supplement for Senior Management Vehicle Program (SMVP) Drivers       •   Personnel to administer the program, including pre-delivery inspections and vehicle switches        •   Personal property and use tax on inventory        •   Lease/maintenance costs for the property required to store incoming and outgoing vehicles (i.e., the regional centers)    The Corporation periodically reviews the overall program expense and determines when the administrative fee amount should be adjusted.     5.   VEHICLE ASSIGNMENT         5.1   Vehicle Selection            SMVP participants can select the vehicle they will be assigned by completing the SMVP Vehicle Preferences form (CVO-021). See the Model Year PEP and GM Employee Purchase Programs Product Availability Matrix on the Reference Materials page of the CVO website for information on Marketing constraints. SMVP participants will be advised of any production constraints for their selected vehicle by their CVO vehicle coordinator.        5.2   Assignment Period            SMVP vehicles are to be assigned and driven for a minimum of 90 days regardless of mileage. The 90-day vehicle in-service period may not be reduced or increased to accommodate an eligible purchaser’s personal circumstances. However, the assignment period may be adjusted as a result of GM business directives or by circumstances such as GM shutdowns, GM holidays, and the availability of replacement vehicles for SMVP drivers.        5.3   SMVP Participation During Leave Of Absence            SMVP participants may continue to participate in the SMVP during the following types of leaves of absence (provided the participant is still able to safely operate the assigned vehicle and complies with all program requirements):         •   Leave of absence which is not initiated by the employee (for example, disability) (No longer than 12 months)        •   Family and Medical Leave Act (FMLA) or Dependent Care Leave of Absence (No longer than 6 months)            Participants who are planning to take a leave of absence for FMLA or Dependent Care may request to continue SMVP participation during their leave for up to the 6-month maximum by submitting a Family and Medical Leave Act (FMLA) or Dependent Care Leave of Absence Product Evaluation Program (PEP) Agreement form (CVO-047) to their business unit Human Resources representative.    Fuel expenses incurred during the leaves of absence are at the expense of the employee. However, the Corporation will continue to bear the cost of an oil change, window washing fluid, wiper replacement and vehicle washes during the leave.            Company Vehicle Operations Program Supplement for Senior Management Vehicle Program (SMVP) Drivers     6.   IMPUTED INCOME          Tax laws require GM to impute income to SMVP participants for the benefit they derive from the personal (non-business) use of SMVP vehicles. In order to comply with this obligation, appropriate amounts of income are imputed in the compensation SMVP participants are paid at the end of each month. The specific amount of income imputed to an individual SMVP participant during any particular month is based on the dealer net value of the vehicle assigned to that driver on a particular day of that month, as reflected in CVMS (Company Vehicle Management System).          SMVP participants are given additional compensation to offset taxes (“gross-up”) related to the use of assigned vehicles they drive, up to a certain maximum dealer net value. The SMVP participants are responsible for the expense of personal taxes on imputed income resulting from any incremental value in the excess of the set maximum dealer net value.      7.   DRIVE AND BUY          SMVP participants are allowed to purchase/lease two company-owned vehicles (any combination of D&B or tagged) each calendar year. Many participants utilize the D&B option to comply with the PEP Biennial Purchase/Lease Requirement, which also applies to the SMVP. In this circumstance, it is necessary for a participant to place their D&B order early enough to have the vehicle produced, shipped, evaluated and purchased/leased two years from their last purchase or lease date. SMVP participants may designate a vehicle for D&B purposes by submitting a Senior Management Vehicle Program (SMVP) Vehicle Request Form (CVO-045).          Information on D&B product availability and restriction can be accessed on the Reference Materials page of the CVO website by clicking on the link Model Year PEP and GM Employee Purchase Programs Product Availability Matrix.          Generally, when a D&B vehicle has been received and prepped for delivery by a CVO vehicle exchange facility, the SMVP participant who ordered the D&B will be scheduled for a vehicle exchange. The replaced vehicle will be re-assigned to another assigned driver to complete the assignment period, if needed.          D&B vehicles are GM inventory intended for eventual sale as an unaltered GM product. Participants should not alter or add accessories to their assigned D&B vehicle (i.e., trailer hitch, oversized mirrors, etc.).          To check the status of a D&B order, participants should call the Drive and Buy Status Hot Line at (313)-667-7457 or they can contact their CVO coordinator.          If it becomes necessary to cancel a D&B order/vehicle “tag”, a participant must submit a PEP Request to Cancel Tag on Drive and Buy Vehicle form (CVO-046) to the appropriate CVO Region Assistant Manager. The form is available in the Forms section of the CVO website.          If a SMVP participant cancels a D&B order/vehicle “tag” twice within a 24-month period, the participant may not place a D&B order for 36 months from the date the CVO Region Assistant Manager signs off on the second occurrence. The participant will retain the requirement to purchase/lease a vehicle under provisions of the Biennial Purchase/Lease Requirement. (See section 8. BIENNIAL PURCHASE / LEASE REQUIREMENT.)          A cancelled D&B order/vehicle “tag” will be included and counted within the prescribed 24-month period if:                 Company Vehicle Operations Program Supplement for Senior Management Vehicle Program (SMVP) Drivers       1.   The participant ordered, was assigned and drove the D&B vehicle, thus “benefiting from the use of a vehicle of their choosing” according to Federal tax regulations and        2.   The reason for dropping the tag was other than:         •   Major mechanical problems (validated by warranty history of the vehicle)        •   Vehicle damage (validated by Incident Report claim submitted to ESIS)        •   Job transfer to another state        •   Job transferred overseas (ISP assignment)        •   Circumstances beyond the participant’s control (i.e., life event change, divorce, etc.)    D&B vehicles are sold as “used vehicles” and, as such, are not expected to be free of all evidence of ordinary use. Therefore, minor cosmetic vehicle damage, such as surface scratches or “dimples”, will not be repaired by GM prior to the sale of the vehicle and may not be used as a valid justification for a participant to cancel purchase of a D&B vehicle.  See General Policy Handbook for U.S. Assigned Drivers, section 13. VEHICLE REPLACEMENT WHEN ASSIGNED VEHICLE REQUIRES REPAIR, for policy regarding vehicle exchange when a currently assigned vehicle requires repair.     8.   BIENNIAL PURCHASE / LEASE REQUIREMENT         8.1   Overview            The PEP Biennial Purchase/Lease Requirement policy, which applies to both the PEP and SMVP, requires participants to:         •   Purchase or lease a current or immediate past model year GM vehicle for their family’s/household’s personal use at least once every two years and        •   Be in compliance at all times by retaining the purchased/leased vehicle until replaced with another current or immediate past model year GM vehicle by 2 years from their last purchase/lease date on record or sooner*    (See General Policy Handbook for U.S. Assigned Drivers, section 7.4 Family / Household Members, for definition of “family/household member(s)”.) (“Current model year” is defined as the latest Vehicle Identification Number (VIN) model year of a vehicle make or model.)         (*A “sooner” purchase/lease date will reset the beginning of the next 2-year compliance measurement period to that date.) The assignment of a SMVP vehicle is not intended to avoid the need for a personal family/household vehicle.     The method of attaining compliance is at the discretion of the participant. A participant may choose to purchase/lease from one of the following GM Vehicle Purchase Program options: Company-Owned (Drive and Buy or “tagged”) or GMS (GM Out-of Stock). A participant may also elect to satisfy their requirement by purchasing/leasing a GM vehicle on a retail basis. Participants who intend to meet the Biennial Purchase/Lease            Company Vehicle Operations Program Supplement for Senior Management Vehicle Program (SMVP) Drivers           Requirement through a lease are reminded that the requirement applies regardless of the lease term into which they enter.            For participants who choose to comply with the Biennial Purchase/Lease Requirement using the Drive and Buy program (see section 7. DRIVE AND BUY), it is necessary that they order a vehicle early enough to have it produced, driven and purchased/leased by two years from their last purchase/lease date on record. Participants should consider the availability of their desired vehicle when making their purchase/lease plans. High demand vehicles are limited in their availability and long in their production lead time. Ordering a high demand vehicle or new model and subsequently learning there is limited possibility of owning it by the participant’s required purchase/lease date is not an acceptable reason for deviation from the Biennial Purchase/Lease Requirement.            The PEP/SMVP vehicle retention policy, which requires a participant to retain for family/household use a current or immediate past model vehicle at all times, should not be confused with the GM Employee Vehicle Purchase Program (EVPP) retention policy that applies to purchased/leased GMS or used Company-Owned vehicles. Vehicles purchased/leased through the VPP must be retained in accordance with the requirements of the VPP’s Rules and Guidelines, in effect at the time of vehicle purchase/lease. The VPP Rules and Guidelines can be accessed through the GM Family First website or on the Employee Vehicle Purchase Program page of the CVO website.            When a SMVP participant satisfies the Biennial Purchase/Lease Requirement through the purchase/lease of a company-owned vehicle through the Drive and Buy option or through the Company-Owned Vehicle Request System, the purchase information is automatically updated into the Company Vehicle Management System (CVMS). In this case, there is no need for the participant to submit a compliance notification form.            When a SMVP participant satisfies the Biennial Purchase/Lease Requirement through the purchase/lease or other acquisition of a current or immediate past model year GM vehicle, which is not a company-owned vehicle, they must submit a PEP Biennial Purchase/Lease Requirement Compliance form (CVO-040) to CVO Administration, as indicated on the form.            CVO monitors participant compliance with the Biennial Purchase/Lease Requirement based on the date on record for the participant’s last purchase or lease. Non-compliant participants, who are notified by CVO during the compliance verification process, must verify their compliance within 30 days of the notification by submission of form CVO-040. A participant who does not submit their compliance information within 30 days is required to return their assigned vehicle to their CVO Region office. In the case of a field driver in the CVO National Region, they are required to return their assigned vehicle and keys to the dealer from which the vehicle was originally obtained and notify their CVO contact.            A participant, who had been removed from the SMVP due to non-compliance with the Biennial Purchase/Lease Requirement, is ineligible to participate in the SMVP for a period of 90 days from the date they returned their assigned vehicle. After the 90-day ineligibility period, the participant, who becomes compliant and has submitted form CVO-040, should contact their vehicle coordinator to schedule a vehicle assignment to resume participation.        8.2   New or Returning Participant’s Compliance Requirement                 Company Vehicle Operations Program Supplement for Senior Management Vehicle Program (SMVP) Drivers           While the Biennial Purchase/Lease Requirement policy requires a participant to be in compliance at all times, a new participant or one that is returning (e.g., repatriating from an ISP assignment) has a six-month grace period from the date of their program eligibility to become compliant.            Based on their date of eligibility to participate in the SMVP, a new or returning participant should decide the best method to ensure compliance within the six-month grace period. For example, it may not be feasible to order a Drive and Buy vehicle due to end-of-model production, vehicle order cut-off dates, etc. Therefore, the best method may be GMS or some other option to satisfy their requirement.            When a new or returning participant satisfies the Biennial Purchase/Lease Requirement through GMS or other option (not through purchase/lease of a company-owned vehicle) they must submit a PEP Biennial Purchase/Lease Requirement Compliance form (CVO-040).            In the event a new or returning participant is in jeopardy of a significant financial hardship as the result of entering into a lease (which expires later than the six-month requirement) prior to being notified of their appointment to PEP/SMVP, they should contact CVO Administration at (313)-667-7458 to discuss their situation. The current leased vehicle may meet the Biennial Purchase/Lease Requirement.            It should be noted that having a Drive and Buy vehicle ordered but not purchased at the end of the six-month grace period does not put a participant in compliance.            Note: The compliance policy for new participants also applies to participants whose Biennial Purchase/Lease Requirement waivers are not extended.        8.3   Waivers and Extensions to Waivers            Adherence to the Biennial Purchase/Lease Requirement may not be appropriate in all circumstances. For example, there may be no other adult licensed drivers in a participant’s family/household or the other licensed drivers in the family/household are also provided a company vehicle by their employer. However, the Biennial Purchase/Lease Requirement must be complied with if the spouse or qualified same-sex domestic partner is self-employed or effectively his or her own employer. In such circumstances, a participant may request a waiver from the purchase/lease requirement by submitting a PEP Participant’s Request for Waiver/Exception to the Biennial Purchase/Lease Requirement form (CVO-050).            Participants with approved Biennial Purchase/Lease Requirement waivers on file are required to confirm each year that the circumstance, which previously warranted an approved waiver, continues to exist. If the same circumstance continues to exist, the participant must submit a PEP Biennial Purchase/Lease Requirement Participant’s Waiver Continuation Statement form (CVO-051), 12 months from the date on their last submitted form.            Participants who no longer qualify for a waiver are permitted up to six months from the date of the condition, which qualified them for the waiver ceases to exist to comply with the Biennial Purchase/Lease Requirement. If compliance is fulfilled through GMS or other option (which is not through purchase/lease of a company-owned vehicle) the participant must submit a PEP Biennial Purchase/Lease Requirement Compliance form                  Company Vehicle Operations Program Supplement for Senior Management Vehicle Program (SMVP) Drivers           (CVO-040). CVO Administration should be notified at (313)-667-7458 when a waiver condition changes.            Please note that participants who qualify for a waiver to the Biennial Purchase/Lease Requirement and who do not have their own vehicle insurance may be subject to personal financial exposure if they drive a vehicle that is not owned by GM. (See General Policy Handbook for U.S. Assigned Drivers, section 9.6 Risk to Assigned Drivers Who Do Not Own and Insure a Personal Vehicle.)        8.4   Short-Term Exceptions            Participants who believe they have a valid reason for not meeting their compliance verification date (two years from their last purchase/lease date) must submit a PEP Participant’s Request for Waiver/Exception to the Biennial Purchase/Lease Requirement form (CVO-050).            A short-term exception to the Biennial Purchase/Lease Requirement is permissible when an unanticipated condition prevents delivery of an intended purchase/lease vehicle in an ordinary and reasonable timeframe, for example, an unforeseen delay in production scheduling or vehicles damaged in transit.            A short-term exception is not permissible for circumstances caused by participants, such as ordering a limited production vehicle with known delivery constraints or failing to place a vehicle order with enough time to allow for order processing, production scheduling, manufacturing and shipping to the point of service. Circumstances with regard to improper timing for placing vehicle orders are expected to be limited to those beyond a participant’s control.            EX-10.(H) 5 k03376exv10wxhy.htm COMPENSATION STATEMENT FOR G.R. WAGONER, JR.    exv10wxhy       Exhibit 10(h)  Name: G.R. Wagoner, Jr.  COMPENSATION STATEMENT                Commencing: January 1, 2003    Salary: $183,333.32 Per Month     I agree the salary cited will be my total salary during each monthly period in which GM continues it in effect for all hours worked, including overtime.  I acknowledge I am aware of trade secrets or other confidential and/or proprietary information concerning GM; the disclosure of which will cause irreparable harm to the Corporation. I agree that I will not disclose to any person or entity any such trade secret, confidential and/or proprietary information and, upon termination of my employment with GM, I shall return all documents or other materials containing such information to GM.  For a period of two years immediately following my voluntary termination of employment with GM or any of its subsidiaries, I will not, without the prior written consent of the GM Chief Executive Officer, engage in or perform any services of a similar nature to those I performed at GM for any other corporation or business engaged in the design, manufacture, development, promotion, sale, or financing of automobiles or trucks within North America, Latin America, Asia, Australia, or Europe in competition with GM, any of its subsidiaries or affiliates, or any joint ventures to which GM or any of its subsidiaries or affiliates is a party. If the terms of this paragraph are found by a court to be unenforceable due to the duration, products or territory covered, such court shall be authorized to interpret these terms in a manner that makes the paragraph enforceable within that particular jurisdiction.  This Statement reaffirms that my employment is from month-to-month on a calendar month basis and I acknowledge GM retains the right in its discretion to increase or decrease my monthly compensation. The parties agree Michigan law applies to this Compensation Statement even if I am employed outside the state.  I agree that my job responsibilities with GM and a significant portion of my compensation are consideration for the confidentiality and non-compete agreements noted above. I acknowledge that my breach of the confidentiality or non-competition provisions of this agreement will cause irreparable harm to GM because of the weakened ability of GM to fairly compete and the inherent difficulty in quantifying the damage caused to GM from such breach. Such irreparable harm can and should be remedied by an injunction against me without any bond being required because any other potential remedy will not be as prompt, certain and full as is necessary to prevent such harm. I acknowledge that my breach of this non-compete agreement will cause GM a greater degree of harm than could be caused to me by living up to the terms because I am being compensated by GM at such a level so as to be able to sustain myself for the non-competition period and am also able to work in fields of business which are not competitive with GM, its affiliates or joint ventures. I further acknowledge that the non-competition provisions are reasonable in duration, geographical area and line of business.  I acknowledge that there are no other oral or written understandings or agreements in effect regarding my salary, nature or duration of employment, or the other matters set forth in this Compensation Statement.  No modification or amendment of this Compensation Statement will be effective unless it is in writing and signed by both parties.                                         Employee    General Motors Corporation                            Date    Date            EX-10.(I) 6 k03376exv10wxiy.htm COMPENSATION STATEMENT FOR JOHN M. DEVINE    exv10wxiy       Exhibit 10(i)  John M. Devine  COMPENSATION STATEMENT                Commencing: January 1, 2003    Salary: $129,166.66 Per Month     I agree I am classified as an exempt employee for purposes of the Fair Labor Standards Act, and the salary provided to me pursuant to the letter agreement of even date herewith will be my total salary during each monthly period in which GM continues it in effect for all hours worked, including overtime.  I acknowledge that I will become aware of trade secrets or other confidential and/or proprietary information concerning GM, the disclosure of which will cause irreparable harm to the Corporation. I agree that I will not disclose to any person or entity any such trade secret, confidential and/or proprietary information and, upon termination of my employment with GM, I shall return all documents or other materials containing such information to GM. I also acknowledge that I will not disclose to GM or its employees any trade secrets or other confidential and/or proprietary information of any prior employer without the specific written authorization of the prior employer. I represent that I am not subject to any agreements that would preclude my employment with GM.  For a period of one year immediately following my termination of employment with GM or any of its subsidiaries for any reason, I will not, without the prior written consent of the GM Chief Executive Officer, engage in or perform any services of a similar nature to those I performed at GM for any other corporation or business engaged in the design, manufacture, development, promotion, sale, or financing of automobiles or trucks within North America, Latin America, Asia, Australia, or Europe in competition with GM, any of its subsidiaries or affiliates, or any joint ventures to which GM or any of its subsidiaries or affiliates is a party. If the terms of this paragraph are found by a court to be unenforceable due to the duration, products or territory covered, such court shall be authorized to interpret these terms in a manner that makes the paragraph enforceable within that particular jurisdiction.  This Statement reaffirms that my employment is from month-to-month on a calendar month basis and I acknowledge that except as provided in the letter agreements of even date herewith, GM retains the right in its discretion to increase or decrease my compensation. The parties agree Michigan law applies to this Compensation Statement even if I am employed outside the state.  I agree that my job responsibilities with GM and a significant portion of my compensation as more fully described in the letter agreements of even date herewith are consideration for the confidentiality and non-compete agreements noted above.  I acknowledge that, with the exception of the Agreement between General Motors Corporation and John M. Devine (dated December 13, 2000), there are no other oral or written understandings or agreements in effect regarding my salary, nature or duration of employment, or the other matters set forth in this compensation statement.  No modification or amendment of this Compensation Statement will be effective unless it is in writing and signed by both parties.                                         Employee    General Motors Corporation                            Date    Date            EX-10.(J) 7 k03376exv10wxjy.htm COMPENSATION STATEMENT FOR ROBERT A. LUTZ    exv10wxjy       Exhibit 10(j)  Robert A. Lutz COMPENSATION STATEMENT                Commencing: January 1, 2003    Salary: $129,166.66 Per Month     I agree I am classified as an exempt employee for purposes of the Fair Labor Standards Act, and the salary provided to me pursuant to the letter agreement of even date herewith will be my total salary during each monthly period in which GM continues it in effect for all hours worked, including overtime.  I acknowledge that I will become aware of trade secrets or other confidential and/or proprietary information concerning GM, the disclosure of which will cause irreparable harm to the Corporation. I agree that I will not disclose to any person or entity any such trade secret, confidential and/or proprietary information and, upon termination of my employment with GM, I shall return all documents or other materials containing such information to GM. I also acknowledge that I will not disclose to GM or its employees any trade secrets or other confidential and/or proprietary information of any prior employer without the specific written authorization of the prior employer. I represent that I am not subject to any agreements that would preclude my employment with GM.  For a period of one year immediately following my termination of employment with GM or any of its subsidiaries for any reason, I will not, without the prior written consent of the GM Chief Executive Officer, engage in or perform any services of a similar nature to those I performed at GM for any other corporation or business engaged in the design, manufacture, development, promotion, sale, or financing of automobiles or trucks within North America, Latin America, Asia, Australia, or Europe in competition with GM, any of its subsidiaries or affiliates, or any joint ventures to which GM or any of its subsidiaries or affiliates is a party. If the terms of this paragraph are found by a court to be unenforceable due to the duration, products or territory covered, such court shall be authorized to interpret these terms in a manner that makes the paragraph enforceable within that particular jurisdiction.  This Statement reaffirms that my employment is from month-to-month on a calendar month basis and I acknowledge that except as provided in the letter agreements of even date herewith, GM retains the right in its discretion to increase or decrease my compensation. The parties agree Michigan law applies to this Compensation Statement even if I am employed outside the state.  I agree that my job responsibilities with GM and a significant portion of my compensation as more fully described in the letter agreements of even date herewith are consideration for the confidentiality and non-compete agreements noted above.  I acknowledge that, with the exception of the Agreements between General Motors Corporation and Robert A. Lutz (dated September 1, 2001, and December 20, 2002), there are no other oral or written understandings or agreements in effect regarding my salary, nature or duration of employment, or the other matters set forth in this compensation statement.  No modification or amendment of this Compensation Statement will be effective unless it is in writing and signed by both parties.                                         Employee    General Motors Corporation                            Date    Date            EX-10.(K) 8 k03376exv10wxky.htm COMPENSATION STATEMENT FOR G.L. COWGER    exv10wxky       Exhibit 10(k) Name: G. L. Cowger  COMPENSATION STATEMENT                Commencing: February 1, 2004    Salary: $70,833.32 Per Month     I agree the salary cited will be my total salary during each monthly period in which GM continues it in effect for all hours worked, including overtime.  I acknowledge I am aware of trade secrets or other confidential and/or proprietary information concerning GM; the disclosure of which will cause irreparable harm to the Corporation. I agree that I will not disclose to any person or entity any such trade secret, confidential and/or proprietary information and, upon termination of my employment with GM, I shall return all documents or other materials containing such information to GM.  For a period of two years immediately following my voluntary termination of employment with GM or any of its subsidiaries, I will not, without the prior written consent of the GM Chief Executive Officer, engage in or perform any services of a similar nature to those I performed at GM for any other corporation or business engaged in the design, manufacture, development, promotion, sale, or financing of automobiles or trucks within North America, Latin America, Asia, Australia, or Europe in competition with GM, any of its subsidiaries or affiliates, or any joint ventures to which GM or any of its subsidiaries or affiliates is a party. If the terms of this paragraph are found by a court to be unenforceable due to the duration, products or territory covered, such court shall be authorized to interpret these terms in a manner that makes the paragraph enforceable within that particular jurisdiction.  This Statement reaffirms that my employment is from month-to-month on a calendar month basis and I acknowledge GM retains the right in its discretion to increase or decrease my monthly compensation. The parties agree Michigan law applies to this Compensation Statement even if I am employed outside the state.  I agree that my job responsibilities with GM and a significant portion of my compensation are consideration for the confidentiality and non-compete agreements noted above. I acknowledge that my breach of the confidentiality or non-competition provisions of this agreement will cause irreparable harm to GM because of the weakened ability of GM to fairly compete and the inherent difficulty in quantifying the damage caused to GM from such breach. Such irreparable harm can and should be remedied by an injunction against me without any bond being required because any other potential remedy will not be as prompt, certain and full as is necessary to prevent such harm. I acknowledge that my breach of this non-compete agreement will cause GM a greater degree of harm than could be caused to me by living up to the terms because I am being compensated by GM at such a level so as to be able to sustain myself for the non-competition period and am also able to work in fields of business which are not competitive with GM, its affiliates or joint ventures. I further acknowledge that the non-competition provisions are reasonable in duration, geographical area and line of business.  I acknowledge that, with the exception of the Agreement between General Motors Corporation and Gary L. Cowger (signed by Gary L. Cowger on July 30, 2000 and Greg Lau on June 6, 2000), there are no other oral or written understandings or agreements in effect regarding my salary, nature or duration of employment, or the other matters set forth in this Compensation Statement.  No modification or amendment of this Compensation Statement will be effective unless it is in writing and signed by both parties.                                         Employee    General Motors Corporation                            Date    Date            EX-10.(L) 9 k03376exv10wxly.htm COMPENSATION STATEMENT FOR THOMAS A. GOTTSCHALK    exv10wxly       Exhibit 10(l)  Name: Thomas A. Gottschalk  COMPENSATION STATEMENT                Commencing: January 1, 2005    Salary: $83,333.32 Per Month     I agree the salary cited will be my total salary during each monthly period in which GM continues it in effect for all hours worked, including overtime.  I acknowledge I am aware of trade secrets or other confidential and/or proprietary information concerning GM; the disclosure of which will cause irreparable harm to the Corporation. I agree that I will not disclose to any person or entity any such trade secret, confidential and/or proprietary information and, upon termination of my employment with GM, I shall return all documents or other materials containing such information to GM.  For a period of two years immediately following my voluntary termination of employment with GM or any of its subsidiaries, I will not, without the prior written consent of the GM Chief Executive Officer, engage in or perform any services of a similar nature to those I performed at GM for any other corporation or business engaged in the design, manufacture, development, promotion, sale, or financing of automobiles or trucks within North America, Latin America, Asia, Australia, or Europe in competition with GM, any of its subsidiaries or affiliates, or any joint ventures to which GM or any of its subsidiaries or affiliates is a party. If the terms of this paragraph are found by a court to be unenforceable due to the duration, products or territory covered, such court shall be authorized to interpret these terms in a manner that makes the paragraph enforceable within that particular jurisdiction.  This Statement reaffirms that my employment is from month-to-month on a calendar month basis and I acknowledge GM retains the right in its discretion to increase or decrease my monthly compensation. The parties agree Michigan law applies to this Compensation Statement even if I am employed outside the state.  I agree that my job responsibilities with GM and a significant portion of my compensation are consideration for the confidentiality and non-compete agreements noted above. I acknowledge that my breach of the confidentiality or non-competition provisions of this agreement will cause irreparable harm to GM because of the weakened ability of GM to fairly compete and the inherent difficulty in quantifying the damage caused to GM from such breach. Such irreparable harm can and should be remedied by an injunction against me without any bond being required because any other potential remedy will not be as prompt, certain and full as is necessary to prevent such harm. I acknowledge that my breach of this non-compete agreement will cause GM a greater degree of harm than could be caused to me by living up to the terms because I am being compensated by GM at such a level so as to be able to sustain myself for the non-competition period and am also able to work in fields of business which are not competitive with GM, its affiliates or joint ventures. I further acknowledge that the non-competition provisions are reasonable in duration, geographical area and line of business.  By signing this compensation statement, I also acknowledge my responsibility to adhere to and believe I am in compliance with General Motors Corporation guidelines with respect to employee conduct as contained in the “Winning With Integrity — Our Values and Guidelines for Employee Conduct” materials.  I acknowledge that there are no oral or written understandings or agreements in effect regarding my salary, nature or duration of employment, or the other matters set forth in this Compensation Statement other than my initial employment agreement covering enhanced retirement (pension) benefits which remains in effect.  No modification or amendment of this Compensation Statement will be effective unless it is in writing and signed by both parties.                                         Employee    General Motors Corporation                            Date    Date            Retirement Programs  Non-Qualified Retirement Program — As approved by the Incentive and Compensation Committee, for each year of actual Part B credited service you accrue, you will acquire an additional year of credited service for purposes of calculating your non-qualified Supplemental Executive Retirement Program benefit. Additionally, you will be required to make an additional non-qualified retirement contribution equal to your qualified contribution. You will be notified of this amount. These additional years of credited service will not be used in calculating your qualified Salaried Retirement Program benefit        EX-10.(M) 10 k03376exv10wxmy.htm GM SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN    exv10wxmy       Exhibit 10(m)  GENERAL MOTORS SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM (As amended through October 18, 2005)       The Supplemental Executive Retirement Program (SERP) is an unfunded, non-tax-qualified benefit program. The Program is structured to qualify for certain exemptions from the eligibility, funding and other requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and, further, SERP benefits are computed without regard to compensation limits imposed under the Internal Revenue Code.  SECTION I. Purpose of the Program       The purpose of the General Motors Supplemental Executive Retirement Program (the Program) is to help provide eligible retiring salaried executive employees of General Motors Corporation (hereinafter referred to as the “Corporation”) as well as eligible retiring executive employees of GMAC, GMAM, and Saturn an overall level of monthly retirement benefits which are competitive with the benefits provided executives retiring from other major U.S. industrial companies. To achieve this goal, the monthly retirement benefits determined under the tax-qualified General Motors Retirement Program for Salaried Employees (hereinafter referred to as the “Retirement Program”) and the GM Benefit Equalization Plan (hereinafter referred to as the BEP-R), plus any benefits payable under certain other GM-provided benefit programs, may be supplemented by benefits provided under the formulas of this Program.  SECTION II. Administration of the Program     (a)   This Program shall at all times be maintained, considered, and administered as a non-qualified plan that is wholly separate and distinct from the Retirement Program and the BEP-R. Moreover, it shall be maintained as an unfunded Program providing deferred compensation for a select group of management or highly-compensated employees under Section 201(2) of ERISA.      (b)   Benefits under this Program are not guaranteed.      (c)   The Corporation is the Plan Administrator. The Plan Administrator has final discretionary authority to construe, interpret, apply, and administer the Program and serves as the final step of the Program appeal procedure. Any interpretation or determination regarding the Program made by the Plan Administrator shall be given full force and effect; unless it is proven that the interpretation or determination was arbitrary and capricious.      (d)   Any and all decisions of the Plan Administrator as to interpretation or application of this Program shall be final, conclusive and binding upon all parties, including the Corporation, the stockholders, and the participants and beneficiaries of the Program.      (e)   The Plan Administrator shall have the full power to engage and employ such legal, actuarial, auditing, tax, and other such agents, as it shall, in its sole discretion, deem to be in the best interest of the Corporation, the Program, and its participants and beneficiaries.      (f)   The expenses of administering this Program are borne by the Corporation and are not charged against its participants and beneficiaries.      (g)   Various aspects of Program administration have been delegated to the Program recordkeeper selected by the Plan Administrator. In carrying out its delegated responsibilities, the Program recordkeeper shall have discretionary authority to construe, interpret, apply, and administer the Program provisions. The discretionary                  authority delegated to the Program recordkeeper shall, however, be limited to the Program terms relevant to its delegated responsibilities and shall not permit the Program recordkeeper to render a determination or to make any representation concerning benefits which are not provided by the express terms of the Program. The Program recordkeeper’s actions shall be given full force and effect unless determined by the Plan Administrator to be contrary to the Program provisions or arbitrary and capricious.       (h)   For purposes of the Program, a Plan Year shall mean the 12-month period beginning January 1 and ending December 31.    SECTION III. Effective Date  The Corporation established this Program effective December 1, 1985. The Program has been amended from time to time.   SECTION IV. Eligibility      (a)   To be eligible for a benefit under this Program, an executive employee must meet the following requirements:         (1)   be a regular or Flexible Service U.S. or U.S. International Service Personnel executive employee at the date of retirement or death;        (2)   have at least 10 years of Retirement Program Part B or Part C credited service; and       (b)   To be eligible for a Regular SERP Benefit under the Regular SERP Formula, an executive employee must:         (1)   be at least 62 years old at retirement; or        (2)   be at least 55 years old at time of total and permanent disability retirement under the Retirement Program; or        (3)   be at least 55 years old at time of death.        (4)   General Motors Asset Management executives who are transferred to GMAM or hired or promoted into executive status on or after August 4, 2003 are only eligible for Regular Formula SERP benefits.       (c)   To be eligible for an Alternative SERP Benefit under the Alternative SERP Formula, an executive employee must:         (1)   Have been at work for GM on or after October 2, 1989, and        (2)   be at least 62 years old at retirement; or        (3)   be actively at work on or after November 1, 2005 and at least age 60 at time of death; or        (4)   be actively at work on or after November 1, 2005 and at least age 60 at time of total and permanent disability retirement under the Retirement Program.        (5)   Executives will not be eligible to grow into benefits based upon the Alternative SERP Formula from layoff status or any long-term leave of absence.        (6)   General Motors Asset Management executives who are transferred to GMAM or hired or promoted into executive status on or after August 4, 2003 are ineligible for Alternative Formula SERP benefits.       (d)   The following classes of individuals are ineligible to participate in the Program regardless of any other Program terms to the contrary, and regardless of whether the individual is a common-law employee of the Corporation:         (1)   Any individual who provides services to the Corporation where there is an agreement with a separate company under which the services are provided. Such individuals are commonly referred to by the Corporation as “contract employees” or “bundled-services employees;”                 (2)   Any individual who has signed an independent contractor agreement, consulting agreement, or other similar personal services contract with the Corporation;        (3)   Any individual that the Corporation, in good faith, classifies as an independent contractor, consultant, contract employee, or bundled-services employee during the period the individual is so classified by the Corporation.           The purpose of this provision is to exclude from participation in the Program all persons who actually may be common-law employees of the Corporation, but are not paid as though they are employees of the Corporation regardless of the reason they are excluded from the payroll, and regardless of whether the exclusion is correct.      (e)   Until age 70, any retired executive employee receiving an Alternative SERP benefit under the Alternative SERP Formula is prohibited from all activity that is competitive with the Corporation and/or otherwise acting in any manner inimical or contrary to the best interests of the Corporation. Alternative SERP benefits may be suspended if a retired executive does not respond to the Corporation’s request for information relating to this paragraph. If any such executive violates these conditions precedent, the executive and his/her beneficiaries thereafter lose eligibility for any benefits based upon the Alternative SERP Formula, commencing with the date of initial violation. While the conditions precedent identified above (i.e., prohibit working for a competitor and/or otherwise acting in any manner inimical or contrary to the best interests of the Corporation) are not now conditions to the receipt of Regular SERP benefits, the Corporation reserves the right to impose prohibitions and conditions precedent to the receipt of Regular SERP benefits at any time and without prior notice.      (f)   An executive who is subject to automatic retirement at age 65 under the terms of the Retirement Program must be approved by the Executive Compensation Committee of the Board of Directors to be eligible for SERP benefits under this Program for retirement at ages 62-64.    SECTION V. Amount of Benefits Under the Regular Formula of the Program     (a)   The monthly benefit under the Regular formula of this Program is an amount equal to two percent (2%) of average monthly base salary for the highest 60 of the 120 months immediately preceding retirement, multiplied by the years of credited service used to determine the Part B Supplementary benefit or the Part C benefit under the Retirement Program, less the sum of (1) all monthly benefits payable under the Retirement Program and BEP-R (if any), including the annuitized value of the Part C benefit, prior to reduction for the cost of any survivor coverage, (2) two percent (2%) of the maximum Primary Social Security benefit payable (regardless of actual receipt) in the year of retirement multiplied by the employee’s years of Part A or Part C credited service under the Retirement Program, and (3) any benefits payable under certain other GM-provided benefit programs, such as Extended Disability Benefits.      (b)   The “Special Benefit” provided under the GM Health Care Program is not taken into account in determining any monthly benefit amount payable hereunder.      (c)   For purposes of this Section V, average monthly base salary means the monthly average of base salary for the highest 60 of the 120 months immediately preceding retirement.      (d)   The monthly Social Security offset amount will be based upon the maximum Primary Social Security benefit in the year the executive retires, regardless of the executive’s age at retirement or availability to him/her of a                   Social Security benefit. The Social Security offset amount determined at retirement is not re-determined for any subsequent Social Security increase.       (e)   Any post-retirement increase under the Retirement Program does not reduce any monthly benefit payable under this Program. For purposes of this subsection, adjustments to the IRC Section 415 limits are not considered post-retirement increases.      (f)   Benefits payable under the Regular Formula to a surviving spouse are detailed in Section VIII.    SECTION VI. Amount of Benefits Under the Alternative Formula of the Program     (a)   Under the Program, of which this Alternative Formula is a part, an eligible retiring executive is entitled to the greater of the monthly benefit, if any, generated through either (1) the Alternative Formula, as described hereinafter, or (2) the Regular SERP formula described in Section V.      (b)   The effective date of this formula is for retirements with benefits payable commencing on or after November 1, 1989.      (c)   The monthly benefit level provided hereunder will equal 1.5% of average total direct compensation (monthly base salary plus average monthly annual incentive compensation, as defined in Section VI(e) below), multiplied by years of credited service (35-year maximum) used to determine the Part B supplementary benefit or the Part C benefit under the Retirement Program, less the sum of (1) all monthly benefits payable under the Retirement Program and BEP-R (if any), including the annuitized value of the Part C benefit, prior to reduction for the cost of any survivor coverage, (2) 100% of the maximum Primary Social Security benefit payable (regardless of actual receipt) in the year of retirement, and (3) any benefits payable under certain other GM-provided programs, such as Extended Disability Benefits.      (d)   The “Special Benefit” payable under the Health Care Program is not taken into account in determining any monthly benefit amount payable hereunder.      (e)   For purposes of this Section VI, average monthly base salary means the monthly average of base salary for the highest 60 of the 120 months immediately preceding retirement. Average monthly incentive compensation means an amount determined by dividing the total of the highest five of the last ten years of annual incentive awards, by 60. Each annual incentive award amount is the final award amount related to the performance period year for which it was awarded, not the amount that is subsequently paid. Awards related to the year of retirement will not be used in the calculation for retirements before October 1, 2005. For retirements on or after that date, awards related to the year of retirement may be included provided they are based on a full 12 month performance period, such as in the case of awards based on fiscal year performance periods ending other than on December 31. where the effective date of retirement is after that date but before year end. Moreover, neither Performance Achievement Plan awards, Stock Performance Program awards, Stock Incentive Plan grants, nor any other form of payment, are eligible for inclusion in determining an Alternative Formula monthly benefit amount. Non-consecutive years within the last ten years of employment may be used for determining the blended amount of average monthly (1) base salary, and (2) incentive compensation.      (f)   The monthly Social Security offset amount will be based upon the maximum Primary Social Security benefit in the year the executive retires, regardless of the executive’s age at retirement or availability to him/her of a Social Security benefit. The Social Security offset amount determined at retirement is not re-determined for any subsequent Social Security increase.                  (g)   Any post-retirement increase under the Retirement Program does not reduce any monthly benefit payable under this Program. For purposes of this subsection, adjustments to the IRC Section 415 limits are not considered post-retirement increases.      (h)   Benefits payable under the Alternative Formula to a surviving spouse are detailed in Section VIII.    SECTION VII. Payment of Benefits     (a)   Payment of benefits, in the monthly amount determined pursuant to Section V or VI of this Program, are payable in accordance with the terms and conditions established by the Plan Administrator.      (b)   The payment of benefits under this Program shall be reduced by the amount that a Participant owes the Corporation or any subsidiary, for any reason, including benefit overpayments, wage overpayments, and amounts due under all incentive compensation plans. The Participant will be relieved of liability in the amount of the reduction following the payment to the Corporation.    SECTION VIII. Surviving Spouse Benefits     (a)   In lieu of the monthly SERP benefit otherwise payable, an employee who retires, and is eligible for a SERP retirement benefit, shall be deemed to have elected automatically a reduced amount of monthly SERP benefit to provide that, if the designated spouse shall be living at the employee’s death after such election shall have become effective, a survivor benefit shall immediately be payable to such spouse commencing on the first of the month following the employee’s death and such survivor benefit shall be payable during the spouse’s further lifetime. Written consent of the spouse witnessed by a Notary Public is required if the employee rejects the SERP surviving spouse coverage.      (b)   If an executive employee who is eligible for benefits under this Program dies in service on or after having attained age 55, but prior to having attained age 62, and such executive would have been eligible to retire voluntarily under the terms of the Retirement Program on the date of his or her death, then the eligible surviving spouse1 of such executive shall be eligible to receive a 65% (60% for retirements prior to October 1, 1999) surviving spouse benefit based upon the Regular SERP Formula.      (c)   If an executive employee who is eligible for benefits under this Program dies in service on or after having attained age 60, but prior to having attained age 62, and such executive would have been eligible to retire voluntarily under the terms of the Retirement Program on the date of his or her death, then the eligible surviving spouse1 of such executive shall be eligible to receive a 65% surviving spouse benefit based upon the Alternative SERP Formula      (d)   No election of surviving spouse coverage may be made after retirement.      (e)   Any such survivor benefit will be equal to 65% (60% for retirements prior to October 1, 1999) of the reduced monthly SERP amount otherwise payable to the deceased retiree or employee. Any such reduction applicable to the retiree’s benefit is 5% if the age of the employee and the age of the spouse are within five years of each other. The 5% is increased by 1/2 percent (1/2%) for each full year over five years the spouse is younger than the               1   In order for a surviving spouse to be eligible to receive surviving spouse benefits under this Program, the surviving spouse must have been married to the executive employee on the date of his or her death for a period of not less than one year.           employee. The 5% is reduced by 1/2 percent (1/2%) for each full year over five years the spouse is older than the employee     (f)   In the event the spouse predeceases the executive, the cost for surviving spouse coverage will not be restored.      (g)   If a Program eligible retiree is not receiving a SERP benefit due to eligibility to receive benefits under the Retirement Program and other GM-provided plans which exceed the SERP target benefit level, the accrued cost of the surviving spouse benefit described in this Section VIII will be recovered in full before the retiree is first entitled to receive benefits under this Program.    SECTION IX. Amendment, Modification, Suspension, or Termination by Corporation      (a)   The Corporation reserves the right, by and through the Executive Compensation Committee of the Board of Directors or its delegate, to amend, modify, suspend, or terminate this Program in whole or in part, at any time. No oral statements can change the terms of this Program. This Program can only be amended, in writing, by the Board of Directors, the Executive Compensation Committee, or an appropriate individual or committee as designated by the Board of Directors or Executive Compensation Committee. Absent an express delegation of authority from the Board of Directors or the Executive Compensation Committee, no one has the authority to commit the Corporation to any benefit or benefits provision not provided for under this Program or to change the eligibility criteria or other provisions of this Program.      (b)   The Corporation may, from time-to-time and in its sole discretion, adopt limited early retirement provisions to provide retirements (i) during a specified period of time, (ii) at a specified level of benefits, and (iii) for identified executive employees. Any such early retirement provisions that may be adopted by the Corporation are made a part of this Program as though set out fully herein.      (c)   The Corporation may, from time-to-time and in its sole discretion, adjust the amount of an executive’s credited service used to determine the benefits under this Program, or the amount of benefits payable to an executive under this Program.    SECTION X. Claim Denial Procedures       The Plan Administrator will provide adequate notice, in writing, to any Participant or beneficiary whose claim for benefits under the Program has been denied, setting forth the specific reasons for such denial. The Participant or beneficiary will be given an opportunity for a full and fair review of a decision by the Plan Administrator denying a claim for benefits. An appeal may be filed with the Executive Compensation Committee of the Board of Directors, which has been delegated final discretionary authority to construe, interpret, apply, and administer the Program. Such appeal to the Executive Compensation Committee must be filed, in writing, within 60 days from the date of the written decision from the Plan Administrator denying the claim for benefits. Such an appeal may be initiated by forwarding the request to General Motors Corporation, 300 Renaissance Center, Mail Code 482-C32-C61, P.O. Box 300, Detroit, Michigan 48265-3000. As a part of this review, the Participant or beneficiary must submit any written comments that may support their position. The Executive Compensation Committee shall be the final review authority with respect to appeals, and its decision shall be final and binding upon the Corporation and the participant or beneficiary.  SECTION XI. Service of Legal Process  Service of legal process on General Motors Corporation may be made at any office of the CT Corporation. The CT Corporation, which maintains offices in 50 states, is the statutory agent for services of legal process on General          Motors Corporation. The procedure for making such service generally is known to practicing attorneys. Services of legal process also may be made upon General Motors Corporation, 400 Renaissance Center, Mail Code 482-038-210, Detroit, Michigan 48265-4000.  SECTION XII. Named Fiduciary   The Executive Compensation Committee of the Corporation’s Board of Directors shall be the Named Fiduciary with respect to the Program. The Executive Compensation Committee may delegate authority to carry out such of its responsibilities, as it deems proper, to the extent permitted by ERISA.  SECTION XIII. Non-Assignability  It is a condition of this Program, and all rights of each Participant shall be subject thereto, that to the full extent permissible by law no right or interest of any Participant in this Program or in his or her account shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other manner, and further excluding devolution by death or mental incompetency. No right or interest of any Participant in this Program or in their account shall be liable for, or subject to, any obligation or liability of such Participant except as provided in Section VII(b).          EX-10.(N) 11 k03376exv10wxny.htm GENERAL MOTORS BENEFIT EQUALIZATION PLAN FOR SALARIED EMPLOYEES    exv10wxny       Exhibit 10(n)  GENERAL MOTORS BENEFIT EQUALIZATION PLAN FOR SALARIED EMPLOYEES (Amended as of October 18, 2005)       General Motors Corporation established, effective December 31, 1976, the General Motors Benefit Equalization Plan for Salaried Employees (hereinafter referred to as the “Plan”. The Plan was last amended effective October 18, 2005.       The purpose of this Plan is to provide for the equalization of benefits available to highly compensated salaried employees of General Motors Corporation (the “Corporation”) under the General Motors Retirement Program for Salaried Employees (the “Retirement Program”) and the General Motors Savings-Stock Purchase Program for Salaried Employees (the “S-SPP”), when such employees’ contribution and benefit levels exceed the maximum limitations on contributions and benefits imposed by Section 2004 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as amended (the “Code”). It is intended that this Plan, in relevant part, qualify as an “excess benefit plan” under Section 3(36) of ERISA and, in relevant part, as a plan “providing deferred compensation for a select group of management or highly compensated employees” under Section 201(2) of ERISA.  ARTICLE I Administration of the Plan     (a)   This Plan shall at all times be maintained, considered, and administered as a plan wholly separate and distinct from the Retirement Program and the S-SPP, and shall be maintained as an unfunded plan without the intention of complying with the standards of a qualified plan that are required under the Code.      (b)   The Corporation is the Plan Administrator. The Plan Administrator may delegate various aspects of the Plan administration as it deems appropriate. The Plan Administrator’s address is General Motors Corporation, 300 Renaissance Center, P.O. Box 300, Mail Code 482-C26-A68, Detroit, MI 48265-3000.      (c)   The Executive Compensation Committee is the Named Fiduciary. Powers of the Named Fiduciary shall include, but are not limited to, discretionary authority in the interpretation, construction, and final determination of any and all disputes and questions that may arise under this Plan and the power to adopt Rules of Procedure.      (d)   Any and all decisions of the Named Fiduciary as to interpretation or application of this Plan shall be final, conclusive, and binding upon all parties, including the Corporation, the stockholders, and the participants and beneficiaries of the Plan.      (e)   The Named Fiduciary shall have the full power to engage and employ such legal, actuarial, auditing, tax, and other such agents, as it shall, in its sole discretion, deem to be in the best interest of the Corporation, the Plan, and its participants and beneficiaries.      (f)   The expenses of administering this Plan and the expenses resulting from the payment of any amounts pursuant to Article IV shall be borne by the Corporation.      (g)   For purposes of the Plan, a Plan Year shall mean the 12-month period beginning on January 1 and ending on December 31.               ARTICLE II Eligibility to Participate in the Plan     (a)   Eligibility to participate in the Plan shall be limited solely to those active executive level or separated executive level employees, or the designated beneficiaries of such active executive level or separated executive level employees, whose aggregate contributions and benefits under the Retirement Program and/or the S-SPP are in excess of the maximum limitations on contributions and benefits imposed by Sections 401(a)(17) and/or 415 of the Code.      (b)   For purposes of this Plan, the terms “designated beneficiary” or “designated beneficiaries” shall include surviving spouses and contingent annuitants. The term “Participant” shall refer to an eligible active executive level employee or a former executive level employee who has separated from service and is otherwise eligible for benefits under this Plan.      (c)   In no event shall executive level employees retiring on or after January 1, 2005 be entitled to retirement benefits payable under Article III (a).    ARTICLE III Amount of Benefits     (a)   A separated executive level employee, or the designated beneficiary of a deceased executive level employee, who is eligible to participate in the Plan, shall be eligible to receive as a retirement benefit under this Plan an amount which, when added to the benefit such employee or designated beneficiary is entitled to receive under the Retirement Program, and prior to the deduction of any and all withholdings, including, but not limited to, taxes and a Qualified Domestic Relations Order (QDRO), is exactly equal to the amount of the benefit such employee or designated beneficiary would be entitled to receive under the Retirement Program if the Retirement Program had no maximum benefit limitations imposed by Section 415 of the Code.      (b)   A separated executive level employee, or the designated beneficiary of a deceased executive level employee, who is eligible to participate in the Plan, shall be eligible to receive the value of the assets that would have been purchased with GM matching contribution amounts and the 1% GM Benefit Contribution, if eligible, plus related earnings on such assets, as though such amounts had been invested in the GM $1-2/3 par value Common Stock Fund under the S-SPP, but for the maximum benefit limitations imposed under Section 415(c)(1) of the Code and maximum compensation limits imposed under Section 401(a)(17) of the Code. The portion of the Plan that provides benefits in the event the maximum compensation limits under Section 401(a)(17) of the Code apply is an unfunded plan for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The value of assets described in this Article III(b) shall be separately accounted for each employee or designated beneficiary.    ARTICLE IV Payment of Benefits     (a)   Payment of benefits in the amount determined pursuant to Article III(a) of this Plan shall be payable in accordance with all the terms and conditions of payment as specified in the Retirement Program. If the payment of benefits under this Plan and the payment of benefits under the Retirement Program cannot be                      made coincidentally, then such benefit payments from this Plan shall be made after the benefit payments from the Retirement Program.      (b)   For assets accrued on or before December 31, 2004, payment of benefits in the amount determined pursuant to Article III(b) of this plan, shall be payable to the Participant in a lump-sum amount on the earlier of the Participant’s request or as soon as practicable following such Participant’s total distribution of their S-SPP account. Such distributions will be based on the market value on the Business Day on which the request is received or the day in which the participant’s S-SPP account is totally distributed, as confirmed by the GM Benefits & Services Center provided that the request is received or the S-SPP account is totally distributed before the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. (EST). A withdrawal request received and confirmed by the GM Benefits & Services Center after the close of business of the NYSE, or on a weekend or holiday observed by the NYSE, will be based on the market value on the next Business Day.      (c)   For assets accrued after December 31, 2004, payment of benefits, in the amount determined pursuant to Article III(b) of this Plan, shall be payable to the Participant in a lump-sum amount as soon as practicable following such Participant’s date of separation, but in no event later than March 15 of the following year. Such distributions will be based on the market value as of the tenth Business Day following the date of separation.      (d)   The payment of benefits under (a), (b) and (c) above shall be reduced by the amount that a Participant owes the Corporation or any subsidiary, for any reason, including benefit overpayments, wage overpayments, and amounts due under all incentive compensation plans. The Participant will be relieved of liability in the amount of the reduction following the payment to the Corporation.      (e)   In no event shall benefits be paid under this Plan to a key employee, as defined in Section 416(i) of the Code, before the expiration of six months following the date of separation from service (or death, if earlier).    ARTICLE V Non-Assignability       It is a condition of the Plan, and all rights of each Participant shall be subject thereto, that to the full extent permissible by law no right or interest of any Participant in the Plan or in his or her Account shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise including, but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other manner, and further excluding devolution by death or mental incompetency. No right or interest of any Participant in the Plan or in their Account shall be liable for, or subject to, any obligation or liability of such Participant except as provided in Article IV(d).  ARTICLE VI Amendment, Modification, Suspension, or Termination by Corporation     (a)   The Corporation reserves the right, by and through the Executive Compensation Committee, to amend, modify, suspend, or terminate this Plan in whole or in part, at any time, by action of its Executive Compensation Committee or other committee expressly authorized by the Board of Directors to take such action. No oral statements can change the terms of this Plan. This Plan can only be amended, in writing, by the Board of                      Directors, the Executive Compensation Committee, or an appropriate individual or committee as designated by the Board of Directors or Executive Compensation Committee. Absent an express delegation of authority from the Board of Directors or the Executive Compensation Committee, no one has the authority to commit the Corporation to any benefit or benefits provision not provided for under this Plan or to change the eligibility criteria or other provisions of this Plan.      (b)   Notwithstanding any provision of this Plan, no plan elections, modifications or distributions will be allowed or implemented if they would cause an otherwise eligible Participant to be subject to tax (including interest and penalties) under Internal Revenue Code Section 409(A).    ARTICLE VII Claim Denial Procedures       The Plan Administrator will provide adequate notice, in writing, to any Participant or beneficiary whose claim for benefits under the Plan has been denied, setting forth the specific reasons for such denial. The Participant or beneficiary will be given an opportunity for a full and fair review of a decision by the Plan Administrator denying a claim for benefits. An appeal may be filed with the Executive Compensation Committee of the Corporation, which has been delegated final discretionary authority to construe, interpret, apply, and administer the Plan. Such appeal to the Executive Compensation Committee must be filed, in writing, within 60 days from the date of the written decision from the Plan Administrator denying the claim for benefits. Such an appeal may be initiated by forwarding the request to General Motors Corporation, 300 Renaissance Center, P.O. Box 300, Mail Code 482-C26-A68, Detroit, MI 48265-3000. As a part of this review, the Participant or beneficiary must submit any written comments that may support their position. The Executive Compensation Committee shall be the final review authority with respect to appeals, and its decision shall be final and binding upon the Corporation and the Participant or beneficiary.  ARTICLE VIII Service of Legal Process       Service of legal process on General Motors Corporation may be made at any office of the CT Corporation. The CT Corporation, which maintains offices in 50 states, is the statutory agent for services of legal process on General Motors Corporation. The procedure for making such service generally is known to practicing attorneys. Service of legal process also may be made upon General Motors Corporation, 400 Renaissance Center, Mail Code 482-038-210, Detroit, Michigan 48265-4000 .  ARTICLE IX Named Fiduciary and Administration       The Executive Compensation Committee of the Corporation’s Board of Directors shall be the Named Fiduciary with respect to the Plan. The Executive Compensation Committee may delegate authority to carry out such of its responsibilities, as it deems proper, to the extent permitted by ERISA.       The Corporation shall be the Plan Administrator.               Various aspects of plan administration have been delegated to the Plan Administrator. In carrying out its delegated responsibilities, the Plan Administrator shall have discretionary authority to construe, interpret, apply, and administer the Plan provisions. The discretionary authority delegated to the Plan Administrator shall, however, be limited to the Plan terms relevant to its delegated responsibilities and shall not permit the Plan Administrator to render a determination or to make any representation concerning benefits which are not provided by the express terms of the Plan. The Plan Administrator’s actions shall be given full force and effect unless contrary to the Plan provisions or arbitrary and capricious.       The Executive Compensation Committee of the Corporation has final discretionary authority to construe, interpret, apply, and administer the Plan and serves as the final step of the Plan appeal procedure. Any interpretation or determination regarding the Plan made by the Executive Compensation Committee shall be given full force and effect, unless it is proven that the interpretation or determination was arbitrary and capricious.          EX-10.(O) 12 k03376exv10wxoy.htm DESCRIPTION OF EXECUTIVE AND BOARD COMPENSATION REDUCTIONS    exv10wxoy       Exhibit 10(o)  Description of Executive and Board Compensation Reductions  GM senior leadership team will reduce its salaries as follows: Fifty percent reduction for Chairman and Chief Executive Officer G. Richard Wagoner, Jr.; thirty percent reduction for Vice Chairmen John Devine, Robert Lutz, and Frederick Henderson; and ten percent reduction for Executive Vice President and General Counsel Thomas A. Gottschalk. The Board of Directors voluntarily reduced board member compensation by fifty percent. Non-employee directors will forego cash compensation and will retain some of the stock portion of their annual retainer. [From Exhibit 99.1 to Current Report on Form 8-K of General Motors Corporation filed on February 8, 2006]        EX-12 13 k03376exv12.htm COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES    exv12       Exhibit 12  GENERAL MOTORS CORPORATION AND SUBSIDIARIES  COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES                                      Years Ended December 31,         2005     2004     2003         (dollars in millions)       Income (loss)  from continuing operations   $ (10,458 )   $ 2,804     $ 2,899     Income tax expense (benefit)     (5,878 )     (916 )     710     (Income)/losses of and dividends from nonconsolidated associates     108       (429 )     (364 )   Amortization of capitalized interest     47       79       79                                                       Income (loss) before income taxes, undistributed income of nonconsolidated associates, and capitalized interest     (16,181 )     1,538       3,324                                                       Fixed charges included in income (loss)                           Interest and related charges on debt     15,768       12,015       9,522     Portion of rentals deemed to be interest     295       266       269                           Total fixed charges included in income (loss) from continuing operations     16,063       12,281       9,791                                                       Earnings (losses) available for fixed charges   $ (118 )   $ 13,819     $ 13,115                                                       Fixed charges                           Fixed charges included in income (loss)   $ 16,063     $ 12,281     $ 9,791     Interest capitalized in the period     45       38       33                           Total fixed charges   $ 16,108     $ 12,319     $ 9,824                                                       Ratios of earnings (losses) to fixed charges     (0.01)       1.12       1.33                                    EX-13 14 k03376exv13.htm GENERAL MOTORS ACCEPTANCE CORP ANNUAL REPORT    exv13    Table of Contents      UNITED STATES   SECURITIES AND EXCHANGE COMMISSION   Washington, D.C. 20549   FORM 10-K         [X]       ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE     SECURITIES EXCHANGE ACT OF 1934       For the fiscal year ended December 31, 2005, or       [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE     SECURITIES EXCHANGE ACT OF 1934       For the transition period from                      to                 .    Commission file number: 1-3754   GENERAL MOTORS ACCEPTANCE CORPORATION   (Exact name of registrant as specified in its charter)              Delaware (State or other jurisdiction of     incorporation or organization)    38-0572512 (I.R.S. Employer     Identification No.)     200 Renaissance Center   P.O. Box 200 Detroit, Michigan   48265-2000   (Address of principal executive offices)   (Zip Code)   (313) 556-5000   (Registrant’s telephone number, including area code)   Securities registered pursuant to Section 12(b) of the Act (all on the New York Stock Exchange):             Title of each class                     61/8     % Notes due January 22, 2008         7.30% Public Income NotES (PINES) due March 9, 2031         87/8     % Notes due June 1, 2010         7.35% Notes due August 8, 2032         6.00% Debentures due April 1, 2011         7.25% Notes due February 7, 2033         10.00% Deferred Interest Debentures due December 1, 2012         7.375% Notes due December 16, 2044         10.30% Deferred Interest Debentures due June 15, 2015          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ]   Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]   Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]   Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).          Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]   As of March 24, 2006, there were outstanding 10 shares of the issuer’s $.10 par value common stock. No stock of the registrant is held by non-affiliates of the registrant.   Documents incorporated by reference. None.   Reduced Disclosure Format   The registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format.         TABLE OF CONTENTS              Contents Part I Part II Part III Part IV     Table of Contents  INDEX   General Motors Acceptance Corporation                               Page         Part I                      Item 1.         Business     1           Item 1A.         Risk Factors     1           Item 1B.         Unresolved Staff Comments     9           Item 2.         Properties     9           Item 3.         Legal Proceedings     9           Item 4.         Submission of Matters to a Vote of Security Holders     *           Part II                      Item 5.         Market for Registrant’s Common Equity, Related Stockholder     Matters and Issuer Purchases of Equity Securities     11           Item 6.         Selected Financial Data     11           Item 7.         Management’s Discussion and Analysis of Financial Condition     and Results of Operations     11           Item 7A.         Quantitative and Qualitative Disclosures About Market Risk     11           Item 8.         Financial Statements and Supplementary Data     11              Statement of Responsibility for Preparation of Financial     Statements     65              Management’s Report on Internal Control over Financial     Reporting     66              Reports of Independent Registered Public Accounting Firm     68              Consolidated Statement of Income     70              Consolidated Balance Sheet     71              Consolidated Statement of Changes in Stockholder’s Equity     72              Consolidated Statement of Cash Flows     73              Notes to Consolidated Financial Statements     74              Supplementary Financial Data     117           Item 9.         Changes in and Disagreements With Accountants on Accounting and     Financial Disclosure     11           Item 9A.         Controls and Procedures     11           Item 9B.         Other Information     12           Part III                      Item 10.         Directors and Executive Officers of the Registrant     *           Item 11.         Executive Compensation     *           Item 12.         Security Ownership of Certain Beneficial Owners and Management     and Related Shareholder Matters     *           Item 13.         Certain Relationships and Related Transactions     *           Item 14.         Principal Accountant Fees and Services     12           Part IV                      Item 15.         Exhibits, Financial Statement Schedules     13      Signatures     14      Index of Exhibits     15             *       Item is omitted pursuant to the Reduced Disclosure Format, as     set forth on the cover page of this filing.     Table of Contents    Contents   General Motors Acceptance Corporation       Part I   Item 1. Business   Overview   General Motors Acceptance Corporation (referred to herein as GMAC, we, our or us), a direct wholly owned subsidiary of General Motors Corporation (General Motors or GM), was incorporated in 1997 under the Delaware General Corporation Law. On January 1, 1998, we merged with our predecessor, which was originally incorporated under New York banking law in 1919. We operate directly and through our subsidiaries and affiliates in which we or GM have equity investments.   Our global activities include Financing, Mortgage and Insurance operations:         •   Financing — We offer a wide variety of     automotive financial services to and through General Motors and     other automobile dealerships and to the customers of those     dealerships. We also provide commercial financing and factoring     services to businesses in other industries (e.g., manufacturing     and apparel).       •   Mortgage — We originate, purchase, service,     sell and securitize residential and commercial mortgage loans     and mortgage related products.       •   Insurance — We insure and reinsure automobile     service contracts, personal automobile insurance coverages     (ranging from preferred to non-standard risk) and selected     commercial insurance coverages.    Certain Regulatory Matters   We are subject to various regulatory, financial and other requirements of the jurisdictions in which our subsidiaries operate. Following is a description of some of the primary regulations that affect our business.   International Banks and Finance Companies   Certain of our foreign subsidiaries operate either as banks or regulated finance companies in the local markets in which they operate and are subject to regulatory restrictions. These regulatory restrictions, among other things, require that these subsidiaries meet certain minimum capital requirements and may restrict dividend distributions and the ownership of certain assets. As of the date of this Form 10-K, compliance with these various regulations has not had a material adverse effect on our consolidated financial condition, results of operations or cash flows. Total assets in these entities were approximately $12.9 billion and $13.3 billion as of December 31, 2005 and 2004, respectively.   Depository Institutions   We also have certain mortgage and financing subsidiaries that operate as depository institutions in the United States. These subsidiaries are subject to minimum aggregate capital requirements. Furthermore, other subsidiaries are required to maintain regulatory capital requirements under agreements with Freddie Mac, Fannie Mae, Ginnie Mae, the Department of Housing and Urban Development, the Utah State Department of Financial Institutions and the Federal Deposit Insurance Corporation. Assets in these depository institutions totaled $16.9 billion and $7.5 billion at December 31, 2005 and 2004, respectively.   Insurance Companies   Our Insurance operations are subject to certain minimum aggregated capital requirements, restricted net assets and dividend restrictions under applicable state insurance laws and the rules and regulations promulgated by the Financial Services Authority in England, the Office of the Superintendent of Financial Institution of Canada, the National Insurance and Bonding Commission of Mexico and the National Association of Securities Dealers. Under the various state insurance regulations, dividend distributions may be made only from statutory unassigned surplus, and the state regulatory authorities must approve such distributions if they exceed certain statutory limitations.   Other   We had 33,900 and 33,700 employees worldwide as of December 31, 2005 and 2004, respectively. A description of our lines of business, along with the products and services offered and the market competition is contained in the individual business operations sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations, which begins on page 18.   Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K (and amendments to such reports) are available on our internet website, free of charge, as soon as reasonably practicable after the reports are electronically filed with or furnished to the United States Securities and Exchange Commission (SEC). These reports are available at www.gmacfs.com, under United States, About GMAC, Investor Relations, GMAC Financial Statements and SEC Filings. These reports can also be found on the SEC’s website located at www.sec.gov.   Item 1A. Risk Factors   Because of the following factors, as well as other factors affecting our operating results and financial condition, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.   Risks Related to Our Business   We have recently experienced a series of credit rating actions, resulting in the downgrade of our credit ratings to historically low levels. Any further reduction of our credit ratings or failure to restore our credit ratings to  1    Table of Contents  Contents   General Motors Acceptance Corporation      higher levels could have a material adverse effect on our business.   Substantially all of our unsecured debt has been rated by four nationally recognized statistical rating organizations. Concerns over the competitive and financial strength of our parent company, General Motors, including whether it will experience a labor interruption and how it will fund its health care liabilities, have resulted in us experiencing a series of credit rating actions on our unsecured debt concurrent with a series of credit actions that downgraded the credit rating on GM’s debt, which commenced late in 2001. As a result, our unsecured borrowing spreads have widened significantly over the past several years, substantially reducing our access to the unsecured debt markets and impacting our overall cost of borrowing.   On May 5, 2005, Standard & Poor’s downgraded our senior debt to non-investment grade (to BB, from BBB-) while also downgrading our commercial paper rating to B-1, from A-3. On May 24, 2005, Fitch downgraded our senior debt to non-investment grade (to BB+, from BBB-) while also downgrading our commercial paper rating to B, from F3. Subsequently, on September 26, 2005, Fitch downgraded our senior unsecured debt rating to BB from BB+ and affirmed our commercial paper B rating. While maintaining an investment grade on our senior debt on August 2, 2005, DBRS downgraded our long-term debt to BBB (low) from BBB and our short-term rating was downgraded to R-2 (low) from R-2 (middle). On August 24, 2005, Moody’s downgraded our senior debt ratings to non-investment grade (to Ba1 from Baa2), while reducing our short term ratings to Not-Prime from Prime-2. On October 3, 2005, Standard & Poor’s placed our ratings on CreditWatch with negative implications. Subsequently, on October 10, 2005, Standard & Poor’s affirmed the CreditWatch for our ratings but changed the implications from negative to developing, which means that our ratings could be raised or lowered. Standard & Poor’s affirmed this status on October 17, 2005. On October 10, 2005, Moody’s placed our senior unsecured ratings under review for a possible downgrade. On October 17, 2005, Moody’s changed our review status to direction uncertain for our senior unsecured ratings and under review for a possible upgrade for our short-term rating. On January 26, 2006, Moody’s confirmed our rating. On March 16, 2006, Moody’s placed our senior unsecured ratings under review for a possible downgrade following GM’s announcement that it would delay filing its annual report on Form 10-K with the SEC. On October 11, 2005, DBRS placed our ratings under review with developing implications and on December 16, 2005, DBRS affirmed this status. On October 17, 2005, Fitch placed our ratings on Rating Watch Evolving.   Further downgrades of our credit ratings would increase borrowing costs and further constrain our access to unsecured debt markets, including capital markets for retail debt, and, as a result, would negatively affect our business. In addition, further downgrades of our credit ratings could increase the possibility of additional terms and conditions being added to any new or replacement financing arrangements as well as impact elements of certain existing secured borrowing arrangements.   Our business requires substantial capital, and if we are unable to maintain adequate financing sources, our profitability and financial condition will suffer and jeopardize our ability to continue operations.   Our liquidity and ongoing profitability are in large part dependent upon our timely access to capital and the costs associated with raising funds in different segments of the capital markets. Our primary sources of financing include public and private securitizations and whole loan sales. To a lesser extent, we also use institutional unsecured term debt, commercial paper and retail debt offerings. Reliance on any one source can change going forward.   We depend and will continue to depend on our ability to access diversified funding alternatives to meet future cash flow requirements and to continue to fund our operations. Negative credit events specific to us or our parent, General Motors, or other events affecting the overall debt markets have adversely impacted our funding sources, and continued or additional negative events could further adversely impact our funding sources, especially over the long term. As an example, an insolvency event for our parent would curtail our ability to utilize certain of our automotive wholesale loan securitization structures as a source of funding in the future. If we are unable to maintain adequate financing or if other sources of capital are not available, we could be forced to suspend, curtail or reduce certain aspects of our operations, which could harm our revenues, profitability, financial condition and business prospects.   Furthermore, we utilize asset and mortgage securitizations and sales as a critical component of our diversified funding strategy. Several factors could affect our ability to complete securitizations and sales, including conditions in the securities markets generally, conditions in the asset-backed or mortgage-backed securities markets, the credit quality and performance of our contracts and loans, our ability to service our contracts and loans and a decline in the ratings given to securities previously issued in our securitizations. Any of these factors could negatively affect the pricing of our securitizations and sales, resulting in lower proceeds from these activities.   Our indebtedness and other obligations are significant and could materially adversely affect our business.   We have a significant amount of indebtedness. As of December 31, 2005, we had $254.4 billion in principal amount of indebtedness outstanding. Interest and discount expense on our indebtedness constitute approximately 61% of our total revenues. In addition, under the terms of our current indebtedness, we have the ability to create additional unsecured indebtedness. If our debt payments increase, whether due to the increased cost of existing indebtedness or the incurrence of additional indebtedness, we may  2   Table of Contents  Contents   General Motors Acceptance Corporation      be required to dedicate a significant portion of our cash flow from operations to the payment of principal of, and interest on, our indebtedness, which would reduce the funds available for other purposes. Our indebtedness also could limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions.   The profitability and financial condition of our operations are dependent upon the operations of our parent, General Motors.   A significant portion of our customers are customers of GM, GM dealers and GM related employees. As a result, various aspects of GM’s business, including changes in the production or sales of GM vehicles, the quality or resale value of GM vehicles, the use of GM marketing incentives and other factors impacting GM or its employees could significantly affect our profitability and financial condition.   We provide vehicle financing through purchases of retail automotive and lease contracts with retail customers of primarily General Motors dealers. We also finance the purchase of new and used vehicles by GM dealers through wholesale financing, extend other financing to GM dealers, provide fleet financing for GM dealers to buy vehicles that they rent or lease to others, provide wholesale vehicle inventory insurance to GM dealers, provide automotive extended service contracts through GM dealers and offer other services to GM dealers. In 2005, our share of GM retail sales and sales to dealers were 36% and 82%, respectively, in markets where GM operates. As a result, General Motors’ level of automobile production and sales directly impacts our financing and leasing volume, the premium revenue for wholesale vehicle inventory insurance, the volume of automotive extended service contracts and also directly impacts the profitability and financial condition of the GM dealers to whom we provide wholesale financing, term loans and fleet financing. In addition, the quality of GM vehicles affects our obligations under automotive extended service contracts relating to such vehicles. Further, the resale value of General Motors’ vehicles, which may be impacted by various factors relating to GM’s business such as brand image or the number of new GM vehicles produced, affects the remarketing proceeds we receive upon the sale of repossessed vehicles and off-lease vehicles at lease termination.   General Motors utilizes various rate, residual value and other financing incentives from time to time. The nature, timing and extent of GM’s use of incentives has a significant impact on our consumer automotive financing volume and our share of GM’s retail sales, which we refer to as our penetration level. For example, GM’s introduction of an employee discount marketing program in June 2005 had the impact of reducing our consumer automotive financing penetration levels during its existence. Although GM has benefited from an increase in sales, our consumer automotive financing penetration levels have decreased as such programs do not provide consumers with additional incentives to finance with us. In addition, in limited circumstances, General Motors has provided financial assistance and incentives to its franchised dealers through guarantees, agreements to repurchase inventory, equity investments and subsidies that assist dealers in making interest payments to financing sources. These financial assistance and incentive programs are provided at the option of General Motors and they may be terminated in whole or in part at any time. While the financial assistance and incentives do not relieve the dealers from their obligations to us or their other financing sources, if General Motors were to reduce or terminate any of their financial assistance and incentive programs, the timing and amount of payments from GM franchised dealers to us may be adversely affected.   Through our relationship with General Motors, we are able to market our residential mortgage and insurance products directly to GM’s current employees and retirees and their families, as well as to GM dealers and suppliers and their families. This group comprised 4.4% and 5.6% of our residential mortgage originations at December 31, 2005 and in 2004, respectively. Also, this group comprised 25% of the personal automobile insurance policyholders in our insurance operations during the same periods. Any factors affecting GM’s business that result in a reduction in the number of current GM employees, GM dealers or GM suppliers would affect our residential mortgage and insurance marketing opportunities and could reduce the volume of our mortgage originations and personal automobile insurance policies written.   We have substantial credit exposure to General Motors.   As a wholly owned subsidiary of General Motors, we have entered into various operating and financing arrangements with GM. As a result of these arrangements we have substantial credit exposure to GM. This exposure relates to various financing arrangements (including revolving lines of credit, term loans and lease arrangements on real property; refer to Note 19 to our Consolidated Financial Statements) where we provide funding to GM. As a marketing incentive GM may sponsor residual support programs as a way to lower customer’s monthly payments. Under residual support programs the contractual residual value is adjusted above GMAC’s standard residual rates. To the extent that remarketing sales proceeds are less than the contractual residual value we have credit exposure to GM as they would be obligated to pay us under the residual support programs. Based on the December 31, 2005 outstanding U.S. operating lease portfolio, the amount that we would expect to be paid by GM under these lease residual support programs would be $2.5 billion. These projections would be paid over the remaining life of the lease portfolio (on average approximately 2 years) and are based on the expected remarketing performance of the vehicles. The maximum amount that could be paid under the residual support programs is approximately $4.4 billion and would only be paid in the unlikely event that the proceeds from all outstanding lease vehicles would be lower than both the contractual residual value and GMAC’s standard residual rates. Additionally, under certain pull ahead programs sponsored by GM, in which consumers are encouraged  3    Table of Contents  Contents   General Motors Acceptance Corporation      to terminate leases early in conjunction with the purchase or lease of a new GM vehicle, GM compensates us for the foregone revenue from any lease payment obligations waived in connection with the program.   Historically GM has made all payments related to such programs and arrangements on a timely basis. However, if GM is unable to pay, fails to pay or is delayed in paying these amounts, our profitability, financial condition and cash flow could be adversely affected.   On October 8, 2005, Delphi, GM’s largest supplier, filed a petition for Chapter 11 proceedings under the United States Bankruptcy Code. In connection with the split-off of Delphi from GM in 1999, GM entered into contracts with certain unions to provide contingent benefit guarantees for limited pension and post retirement health care and life insurance benefits to certain former GM employees who transferred to Delphi in connection with the split-off. GM is contractually responsible for such payments to the extent Delphi fails to pay these benefits at required levels. Furthermore, there can be no assurance that GM will be able to recover the full amount of any benefit guarantee payments as required by an indemnification arrangement between GM and Delphi, and any payment by Delphi may be significantly limited. Also, Delphi has significant financial obligations to GM. As a result of Delphi’s restructuring, Delphi’s obligation may be substantially compromised, which could have an adverse impact on GM.   The challenges faced by Delphi during its restructuring process could create operating and financial risks for GM. GM might be adversely affected by any disruption in the supply of automotive systems, components and parts which could potentially force the suspension of production at GM assembly facilities. Additionally, as a result of Delphi’s pursuit of a restructuring plan, there is the risk that negotiations could result in labor disruptions at Delphi. A material financial impact on GM resulting from obligations under the contingent benefit guarantees or because of labor disruptions at Delphi could adversely affect GM’s ability to pay amounts owed to us.   As a wholly owned subsidiary of GM, we are jointly and severally responsible with GM and its other subsidiaries for funding obligations under GM’s and its subsidiaries’ qualified U.S. defined benefit pension plans. Our financial condition and our ability to repay unsecured debt could be impaired if we were required to pay significant funding obligations for the GM plans.   Pursuant to the Employee Retirement Income Security Act of 1974, or ERISA, members of the GM control group — of which we are a member — are jointly and severally liable to the Pension Benefit Guaranty Corporation (PBGC) for certain GM IRS-qualified U.S. defined benefit pension plan liabilities and to any trustee appointed if one or more of these pension plans were to be terminated by PBGC in a distress termination. The liabilities with respect to a terminated plan would be limited to the liabilities of the plan on a termination date, if and to the extent that any liabilities of the terminated plan would be (i) the liability for certain contributions if missed and (ii) the liabilities of the plan on a termination date, if and to the extent not covered by the assets of the plan.   In 2003 and 2004, GM and its subsidiaries contributed a total of $18.7 billion to their IRS-qualified defined benefit pension plans in part to fund certain subsidiary ERISA minimum contribution requirements. In 2005, GM contributed $0.1 billion to its IRS-qualified U.S. defined benefit plans and is not expected to be required to make a material contribution to those plans in 2006.   GM’s future funding obligations for its IRS-qualified U.S. defined benefit pension plans depend upon, among other things, changes in the level of benefits provided for by the plans, the future performance of assets set aside in trusts for these plans, the level of interest rates used to determine minimum ERISA funding levels, actuarial assumptions and experience, and any changes in government laws and regulations. If GM is legally required to make minimum contributions to those plans in the future, those contributions could be significant. In addition, if GM or PBGC were to terminate any of the plans there would likely be considerable excess liabilities not covered by the assets of the plans. As a member of the GM controlled group, GMAC is jointly and severally liable to pay any plan deficiencies and could have a lien placed on its assets by the PBGC to collateralize this liability, not exceeding 30% of the collective net worth of the GM controlled group. Our financial condition and ability to repay unsecured debt could be materially adversely affected to the extent we are required to pay some or all of these obligations.   We are exposed to credit risk which could affect our profitability and financial condition.   We are subject to credit risk resulting from defaults in payment or performance by customers for our contracts and loans as well as contracts and loans that are securitized and in which we retain a residual interest. There can be no assurances that our monitoring of our credit risk as it impacts the value of these assets and our efforts to mitigate credit risk through our risk-based pricing, appropriate underwriting policies and loss mitigation strategies are or will be sufficient to prevent an adverse effect on our profitability and financial condition. As part of the underwriting process, we rely heavily upon information supplied by third parties. If any of this information is intentionally or negligently misrepresented and the misrepresentation is not detected prior to completing the transaction, the credit risk associated with the transaction may be increased.  4   Table of Contents  Contents   General Motors Acceptance Corporation      Our earnings may decrease because of increases or decreases in interest rates.   Our profitability is directly affected by changes in interest rates. The following are some of the risks we face relating to an increase in interest rates:         •       Rising interest rates will increase our cost of funds.       •       Rising interest rates may reduce our consumer automotive     financing volume by influencing consumers to pay cash for, as     opposed to financing, vehicle purchases.       •       Rising interest rates generally reduce our residential mortgage     loan production as borrowers become less likely to refinance and     the costs associated with acquiring a new home becomes more     expensive.       •       Rising interest rates will generally reduce the value of     mortgage and automotive financing loans and contracts and     retained interests and fixed income securities held in our     investment portfolio.    We are also subject to risks from decreasing interest rates. For example, a significant decrease in interest rates could increase the rate at which mortgages are prepaid, which could require us to write down the value of our retained interests. Moreover, if prepayments are greater than expected, the cash we receive over the life of our mortgage loans held for investment and our retained interests would be reduced. Higher-than-expected prepayments could also reduce the value of our mortgage servicing rights and, to the extent the borrower does not refinance with us, the size of our servicing portfolio. Therefore, any such changes in interest rates could harm our revenues, profitability, and financial condition.   Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates and could affect our profitability and financial condition.   We employ various economic hedging strategies to mitigate the interest rate and prepayment risk inherent in many of our assets. Our hedging strategies rely on assumptions and projections regarding our assets, liabilities and general market factors. If these assumptions and projections prove to be incorrect or our hedges do not adequately mitigate the impact of changes in interest rates or prepayment speeds, we may incur losses that could adversely affect our profitability and financial condition.   Our residential mortgage subsidiary’s ability to pay dividends and to prepay subordinated debt obligations to us is restricted by contractual arrangements.   On June 24, 2005, we entered into an operating agreement with GM and Residential Capital Corporation (ResCap), the holding company for our residential mortgage business, to create separation between GM and ourselves, on the one hand, and ResCap, on the other. The operating agreement restricts ResCap’s ability to declare dividends or prepay subordinated indebtedness to us. As a result of these arrangements, ResCap has obtained investment grade credit ratings for its unsecured indebtedness that are separate from our ratings and the ratings of GM.   The restrictions contained in the ResCap operating agreement include the requirements that ResCap’s stockholder’s equity be at least $6.5 billion in order for dividends to be paid to us or our other affiliates, and that the cumulative amount of any such dividends may not exceed 50% of ResCap’s cumulative consolidated net income, measured from July 1, 2005, through the time such dividend is paid, minus the cumulative amount of certain prepayments of our subordinated debt by ResCap if such prepayments exceed 50% of ResCap’s cumulative consolidated net income at the time a dividend is paid. At December 31, 2005, ResCap had consolidated stockholder’s equity of approximately $7.5 billion.   The ResCap operating agreement further restricts ResCap’s ability to prepay subordinated debt owed to us or any of our other affiliates. As of December 31, 2005, ResCap owed us $4.1 billion pursuant to a Subordinated Note Agreement, under which interest is payable quarterly and all outstanding principal is due at maturity on September 30, 2015.   A failure of or interruption in the communications and information systems on which we rely to conduct our business could adversely affect our revenues and profitability.   We rely heavily upon communications and information systems to conduct our business in each country and market in which we operate. Any failure or interruption of our information systems or the third-party information systems on which we rely could cause underwriting or other delays and could result in fewer applications being received, slower processing of applications and reduced efficiency in servicing. The occurrence of any of these events could have a material adverse effect on our business.   We use estimates and assumptions in determining the fair value of certain of our assets, in determining our allowance for credit losses, in determining lease residual values and in determining our reserves for insurance losses and loss adjustment expenses. If our estimates or assumptions prove to be incorrect, our cash flow, profitability, financial condition and business prospects could be materially adversely affected.   We use estimates and various assumptions in determining the fair value of many of our assets, including retained interests and securitizations of loans and contracts, mortgage servicing rights and other investments which do not have an established market value or are not publicly traded. We also use estimates and assumptions in determining our allowance for credit losses on our  5    Table of Contents  Contents   General Motors Acceptance Corporation      loan and contract portfolios, in determining the residual values of leased vehicles and in determining our reserves for insurance losses and loss adjustment expenses with respect to reported losses and losses incurred but not reported. It is difficult to determine the accuracy of our estimates and assumptions, and our actual experience may differ materially from these estimates and assumptions. A material difference between our estimates and assumptions and our actual experience may adversely affect our cash flow, profitability, financial condition and business prospects.   Our business outside the United States exposes us to additional risks that may cause our revenues and profitability to decline.   We conduct a significant portion of our business outside the United States. We intend to continue to pursue growth opportunities for our businesses outside the United States, which could expose us to greater risks. The risks associated with our operations outside the United States include:         •       multiple foreign regulatory requirements that are subject to     change;       •       differing local product preferences and product requirements;       •       fluctuations in foreign currency exchange rates and interest     rates;       •       difficulty in establishing, staffing and managing foreign     operations;       •       differing labor regulations;       •       consequences from changes in tax laws; and       •       political and economic instability, natural calamities, war and     terrorism.    The effects of these risks may, individually or in the aggregate, adversely affect our revenues and profitability.   Our business could be adversely affected by changes in currency exchange rates.   We are exposed to risks related to the effects of changes in foreign currency exchange rates. Changes in currency exchange rates can have a significant impact on our earnings from international operations. While we carefully watch and attempt to manage our exposure to fluctuation in currency exchange rates, these types of changes can have material adverse effects on our business and results of operations and financial condition.   General business and economic conditions of the industries and geographic areas in which we operate affect our revenues, profitability and financial condition.   Our revenues, profitability and financial condition are sensitive to general business and economic conditions in the United States and in the markets in which we operate outside the United States. A downturn in economic conditions resulting in increased unemployment rates, increased consumer and commercial bankruptcy filings or other factors that negatively impact household incomes could decrease demand for our financing and mortgage products and increase delinquency and loss. In addition, because our credit exposures are generally collateralized, the severity of losses is particularly sensitive to a decline in used vehicle and residential home prices.   Some further examples of these risks include the following:         •       A significant and sustained increase in gasoline prices could     decrease new and used vehicle purchases, thereby reducing the     demand for automotive retail financing and automotive wholesale     financing.       •       A general decline in residential home prices in the United     States could negatively affect the value of our mortgage loans     held for investment and our retained interests in securitized     mortgage loans. Such a decrease could also restrict our ability     to originate, sell or securitize mortgage loans and impact the     repayment of advances under our warehouse loans.       •       An increase in automotive labor rates or parts prices could     negatively affect the value of our automotive extended service     contracts.    Our profitability and financial condition may be materially adversely affected by decreases in the residual value of off-lease vehicles.   Our expectation of the residual value of a vehicle subject to an automotive lease contract is a critical element used to determine the amount of the lease payments under the contract at the time that it is entered into by the customer. As a result, to the extent that the actual residual value of the vehicle, as reflected in the sales proceeds received upon remarketing, is less than the expected residual value for the vehicle at lease inception, we incur a loss on the lease transaction. General economic conditions, the supply of off-lease vehicles and new vehicle market prices heavily influence used vehicle prices and thus the actual residual value of off-lease vehicles. GM’s brand image, consumer preference for GM products and GM’s marketing programs that influence the new and used vehicle market for GM vehicles also influence lease residual values. In addition, our ability to efficiently process and effectively market off-lease vehicles impacts the disposal costs and proceeds realized from the vehicle sales. While GM provides support for lease residual values including through residual support programs, this support by GM does not in all cases entitle us to full reimbursement for the difference between the remarketing sales proceeds for off-lease vehicles and the residual value specified in the lease contract. Differences between the actual residual values realized on leased vehicles and our expectations of such values at contract inception could have a negative impact on our profitability and financial condition.  6   Table of Contents  Contents   General Motors Acceptance Corporation      Fluctuations in valuation of investment securities or significant fluctuations in investment market prices could negatively affect revenues.   Investment market prices in general are subject to fluctuation. Consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value which could negatively affect our revenues. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments, national and international events and general market conditions.   Changes in existing U.S. government-sponsored mortgage programs, or disruptions in the secondary markets in the United States or in other countries in which our mortgage subsidiaries operate, could adversely affect the profitability and financial condition of our mortgage business.   The ability of our mortgage subsidiaries to generate revenue through mortgage loan sales to institutional investors in the United States depends to a significant degree on programs administered by government-sponsored enterprises such as Fannie Mae, Freddie Mac, Ginnie Mae and others that facilitate the issuance of mortgage-backed securities in the secondary market. These government-sponsored enterprises play a powerful role in the residential mortgage industry and our mortgage subsidiaries have significant business relationships with them. Proposals are being considered in Congress and by various regulatory authorities that would affect the manner in which these government-sponsored enterprises conduct their business, including proposals to establish a new independent agency to regulate the government-sponsored enterprises, to require them to register their stock with the Securities and Exchange Commission, to reduce or limit certain business benefits that they receive from the U.S. government and to limit the size of the mortgage loan portfolios that they may hold. Any discontinuation of, or significant reduction in, the operation of these government-sponsored enterprises could adversely affect our revenues and profitability. Also, any significant adverse change in the level of activity in the secondary market or the underwriting criteria of these government-sponsored enterprises could adversely affect our business.   We may be required to repurchase contracts and provide indemnification if we breach representations and warranties from our securitization and whole loan transactions, which could harm our profitability and financial condition.   When we sell retail contracts or leases through whole loan sales or securitize retail contracts, leases or wholesale loans to dealers, we are required to make customary representations and warranties about the contracts, leases or loans to the purchaser or securitization trust. Our whole loan sale agreements generally require us to repurchase retail contracts or provide indemnification if we breach a representation or warranty given to the purchaser. Likewise, we are required to repurchase retail contracts, leases or loans and may be required to provide indemnification if we breach a representation or warranty in connection with our securitizations.   Similarly, sales by our mortgage subsidiaries of mortgage loans through whole loan sales or securitizations require us to make customary representations and warranties about the mortgage loans to the purchaser or securitization trust. Our whole loan sale agreements generally require us to repurchase or substitute loans if we breach a representation or warranty given to the purchaser. In addition, our mortgage subsidiaries may be required to repurchase mortgage loans as a result of borrower fraud or if a payment default occurs on a mortgage loan shortly after its origination. Likewise, we are required to repurchase or substitute mortgage loans if we breach a representation or warranty in connection with our securitizations. The remedies available to a purchaser of mortgage loans may be broader than those available to our mortgage subsidiaries against the original seller of the mortgage loan. If a mortgage loan purchaser enforces its remedies against our mortgage subsidiaries, we may not be able to enforce the remedies we have against the seller of the loan or the borrower.   Significant indemnification payments or contract, lease or loan repurchase activity of retail contracts or leases or mortgage loans could harm our profitability and financial condition.   We and our mortgage subsidiaries have repurchase obligations in our respective capacities as servicers in securitizations and whole loan sales. If a servicer breaches a representation, warranty or servicing covenant with respect to an automotive receivable or mortgage loan, then the servicer may be required by the servicing provisions to repurchase that asset from the purchaser. If the frequency at which repurchases of assets occurs increases substantially from its present rate, the result could be a material adverse effect on our financial condition, liquidity and results of operations or those of our mortgage subsidiaries.   A loss of contractual servicing rights could have a material adverse effect on our financial condition, liquidity and results of operations.   We are the servicer for all of the receivables we have originated and transferred to other parties in securitizations and whole loan sales of automotive receivables. Our mortgage subsidiaries service the mortgage loans we have securitized, and we service the majority of the mortgage loans that we have sold in whole loan sales. In each case, we are paid a fee for our services, which fees in the aggregate constitute a substantial revenue stream for us. In each case, we are subject to the risk of termination under the circumstances specified in the applicable servicing provisions.  7    Table of Contents  Contents   General Motors Acceptance Corporation      In most securitizations and whole loan sales, the owner of the receivables or mortgage loans will be entitled to declare a servicer default and terminate the servicer upon the occurrence of specified events. These events typically include a bankruptcy of the servicer, a material failure by the servicer to perform its obligations, and a failure by the servicer to turn over funds on the required basis. The termination of these servicing rights, were it to occur, could have a material adverse effect on our financial condition, liquidity and results of operations and those of our mortgage subsidiaries. For the year ended December 31, 2005, our consolidated mortgage servicing fee income was $1,608 million.   The regulatory environment in which we operate could have a material adverse effect on our business and earnings.   Our domestic operations may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions relating to supervision and regulation by state and federal authorities. Such regulation and supervision are primarily for the benefit and protection of our customers, and not for the benefit of investors in our securities, and could limit our discretion in operating our business. Noncompliance with applicable statutes or regulations could result in the suspension or revocation of any license or registration at issue, as well as the imposition of civil fines and criminal penalties. In addition, changes in the accounting rules or their interpretation could have an adverse effect on our business and earnings.   Our operations are also heavily regulated in many jurisdictions outside the United States. For example, certain of our foreign subsidiaries operate either as a bank or a regulated finance company in their local market and our insurance operations are subject to various requirements in the foreign markets in which we operate. The varying requirements of these jurisdictions may be inconsistent with U.S. rules and may materially adversely affect our business or limit necessary regulatory approvals, or if approvals are obtained, we may not be able to continue to comply with the terms of the approvals or applicable regulations. In addition, in many countries the regulations applicable to the financial services industry are uncertain and evolving, and it may be difficult for us to determine the exact regulatory requirements.   Our inability to remain in compliance with regulatory requirements in a particular jurisdiction could have a material adverse effect on our operations in that market with regard to the affected product and on our reputation generally. No assurance can be given that applicable laws or regulations will not be amended or construed differently, that new laws and regulations will not be adopted or that we will not be prohibited by local laws from raising interest rates above certain desired levels, any of which could materially adversely affect our business, financial condition or results of operations.   The worldwide financial services industry is highly competitive. If we are unable to compete successfully or if there is increased competition in the automotive financing, mortgage and/or insurance markets or generally in the markets for securitizations or asset sales, our margins could be materially adversely affected.   The markets for automotive and mortgage financing, insurance and reinsurance are highly competitive. The market for automotive financing has grown more competitive as more consumers are financing their vehicle purchases, primarily in North America and Europe. Our mortgage business faces significant competition from commercial banks, savings institutions, mortgage companies and other financial institutions. Our insurance business faces significant competition from insurance carriers, reinsurers, third-party administrators, brokers, and other insurance-related companies. Many of our competitors have substantial positions nationally or in the markets in which they operate. Some of our competitors have lower cost structures, lower cost of capital and are less reliant on securitization and sale activities. We face significant competition in various areas, including product offerings, rates, pricing and fees and customer service. If we are unable to compete effectively in the markets in which we operate, our profitability and financial condition could be negatively affected.   The markets for asset and mortgage securitizations and whole loan sales are competitive, and other issuers and originators could increase the amount of their issuances and sales. In addition, lenders and other investors within those markets often establish limits on their credit exposure to particular issuers, originators and asset classes, or they may require higher returns to increase the amount of their exposure. Increased issuance by other participants in the market, or decisions by investors to limit their credit exposure to — or to require a higher yield for — us or to automotive or mortgage securitizations or whole loans, could negatively affect our ability and that of our subsidiaries to price our securitizations and whole loan sales at attractive rates. The result would be lower proceeds from these activities and lower profits for our subsidiaries and us.   Risks Related to Our Controlling Stockholder   GM is considering the sale of a controlling interest in us as well as exploring strategic and structural alternatives for ResCap. There is a risk that these initiatives may not occur, or if they do occur, they may not delink our credit rating from GM’s credit rating or maintain ResCap’s investment grade ratings.   As previously announced, GM is exploring the possible sale of a controlling interest in us, as well as exploring other strategic and structural alternatives with respect to ResCap. The extent of the effect on GMAC’s and ResCap’s ratings, if any, will depend on the structure and other terms of any potential transaction as well as the extent of our ongoing credit exposure to GM. We are uncertain at this time if any transaction with respect to us or ResCap will occur or, if any transaction were to occur, on what terms. Furthermore, even if a third party acquires a controlling interest in us, or if a transaction is completed with respect to ResCap, there  8   Table of Contents  Contents   General Motors Acceptance Corporation      is the possibility that these initiatives will not restore our credit rating or maintain ResCap’s credit rating at investment grade.   Failure to execute a strategic transaction will place further pressure on both GM’s and our credit profiles, potentially resulting in further downgrades with our ratings likely re-linked to those of GM. Moreover, any reduction in the automotive finance capacity of GMAC could materially adversely affect GM’s business, to the extent that third party financing is not available to fund GM’s automotive sales. In the absence of a transaction:         •       Our access to capital may be seriously constrained, as most     unsecured funding sources may decline, including bank funding;       •       The cost of funds related to borrowings that are secured by     assets (known as ’secured funding’) may increase and     this could lead to a reduction in liquidity for certain asset     classes.       •       It may be increasingly difficult to securitize assets, resulting     in reduced capacity to support overall automotive originations     as well as reduced advances on future securitizations;       •       Uncompetitive funding costs may result in a lower return on     capital and significantly lower earnings and dividends; and       •       We may need to consider divesting of certain businesses in order     to maintain adequate liquidity to fund new originations or     otherwise preserve the value of our business.    Item 1B. Unresolved Staff Comments   None.   Item 2. Properties   We own three properties in southeastern Michigan that were transferred from GM in 2000. GM leases these properties from us. Automobiles, office equipment and other real properties owned and in use by us are not significant in relation to our total assets. We primarily operate from leased office space.   Item 3. Legal Proceedings   We are subject to potential liability under various governmental proceedings, claims and legal actions that are pending or otherwise have been asserted against us.   We are named as defendants in a number of legal actions, and from time to time are involved in governmental proceedings arising in connection with our respective businesses. Some of the pending actions purport to be class actions. We establish reserves for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be higher or lower than any amounts reserved for such claims. Based on information currently available, advice of counsel, available insurance coverage and established reserves, it is the opinion of management that the eventual outcome of the actions against us, including those described below, will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of legal matters, if unfavorable, may be material to our consolidated financial condition, results of operations or cash flows. Furthermore, any claim or legal action against General Motors, our sole shareholder, that results in General Motors incurring significant liability could also have an adverse effect on our consolidated financial condition, results of operations or cash flows. For a discussion of pending cases against General Motors, see Item 3 in GM’s 2005 Annual Report on Form 10-K, filed separately with the SEC, which report is not deemed incorporated into any of our filings under the Securities Act of 1933, as amended (Securities Act) or the Securities Exchange Act of 1934, as amended (Exchange Act).   Pending legal proceedings, other than ordinary routine litigation incidental to the business, to which GMAC became, or was, a party during the year ended December 31, 2005, or subsequent thereto, but before the filing of this report are summarized as follows:   Shareholder Class Actions   On September 19, 2005, a purported class action complaint, Folksam Asset Management v. General Motors, et al., was filed in the U.S. District Court for the Southern District of New York, naming as defendants GM, GMAC, and GM’s Chairman and Chief Executive Officer, G. Richard Wagoner, Jr.; Vice Chairman, John Devine; Treasurer, Walter Borst; and Chief Accounting Officer, Peter Bible. Plaintiffs purported to bring the claim on behalf of purchasers of GM debt and/or equity securities during the period February 25, 2002 through March 16, 2005. The complaint alleges that defendants violated Section 10(b) and, with respect to the individual defendants, Section 20(a) of the Exchange Act. The complaint also alleges violations of Sections 11 and 12(a), and, with respect to the individual defendants, Section 15 of the Securities Act, in connection with certain registered debt offerings during the class period. In particular, the complaint alleges that GM’s cash flows during the class period were overstated based on the reclassification of certain cash items described in GM’s 2004 Form 10-K. The reclassification involves cash flows relating to the financing of GMAC wholesale receivables from dealers that resulted in no net cash receipts and GM’s decision to revise Consolidated Statements of Net Cash for the years ended 2002 and 2003. The complaint also alleges misrepresentations relating to forward-looking statements of GM’s 2005 earnings forecast that were later revised significantly downward. In October 2005, a substantially identical suit was filed and consolidated with the Folksam case, Galliani v. General Motors, et al. The consolidated suit is now called In re General Motors Securities Litigation.   On November 18, 2005, plaintiffs in the Folksam case filed an amended complaint, which adds several additional investors as plaintiffs, extends the end of the class period to November 9, 2005, and names as additional defendants three current and one former member of GM’s audit committee, as well as GM’s independent accountants, Deloitte & Touche LLP. In addition to the claims asserted in the original complaint, the amended complaint also adds allegations regarding GM’s Form SEC 8-K dated November 8, 2005, which reported that GM’s 2001 earnings would be restated and adds a claim against defendants Wagoner and  9   Table of Contents  Contents   General Motors Acceptance Corporation      Devine for rescission of their bonuses and incentive compensation during the class period. It also includes further allegations regarding GM’s accounting for pension obligations, restatement of income for 2001, and financial results for the first and second quarters of 2005. Neither the original complaint nor the amended complaint specify the amount of damages sought and the defendants have no means to estimate damages the plaintiffs will seek based upon the limited information available in the complaint. Defendants have not yet filed their response to the complaints, but intend to vigorously defend these actions. On January 17, 2006, the court made provisional designations of lead plaintiff and lead counsel, which designations were made final on February 6, 2006.   Motion for Consolidation and Transfer to the Eastern District of Michigan   On December 13, 2005, defendants in In re General Motors Securities Litigation (previously Folksam Asset Management v. General Motors, et al. and Galliani v. General Motors, et. al.) and in certain other litigation against GM filed a Motion with the Judicial Panel on Multidistrict Litigation to transfer and consolidate those cases for pretrial proceedings in the United States District Court for the Eastern District of Michigan.   On January 5, 2006, the defendants submitted to the Judicial Panel on Multidistrict Litigation an Amended Motion seeking to add to their original Motion several other lawsuits pending against GM for consolidated pretrial proceedings in the United States District Court for the Eastern District of Michigan. The Panel has set these motions for hearing on March 30, 2006.   Bondholder Class Actions   On November 29, 2005, Stanley Zielezienski filed a purported class action, Zielezienski, et al. v. General Motors, et al. The action was filed in the Circuit Court for Palm Beach County, Florida, against GM; GMAC; GM’s Chairman and Chief Executive Officer, G. Richard Wagoner, Jr.; GMAC’s Chairman, Eric A. Feldstein; and certain GM and GMAC officers, namely, William F. Muir, Linda K. Zukauckas, Richard J.S. Clout, John E. Gibson, W. Allen Reed, Walter G. Borst, John M. Devine, and Gary L. Cowger. The action also names certain underwriters of GMAC debt securities as defendants. The complaint alleges that defendants violated Section 11 of the Securities Act, and with respect to all defendants except GM, Section 12(a)(2) of the Securities Act. The complaint also alleges that GM violated Section 15 of the Securities Act. In particular, the complaint alleges material misrepresentations in certain GMAC financial statements incorporated by reference with GMAC’s 2003 Form S-3 Registration Statement and Prospectus. More specifically, the complaint alleges material misrepresentations in connection with the offering for sale of GMAC SmartNotes in certain GMAC financial statements contained in GMAC’s Forms 10-Q for the quarterly periods ended in March 31, 2004 and June 30, 2004 and the Form 8-K which disclosed financial results for the quarterly period ended in September 30, 2004, as evidenced by GMAC’s 2005 restatement of these quarterly results. In December 2005, the plaintiff filed an amended complaint making substantially the same allegations as were in the previous filing, with respect to additional debt securities issued by GMAC during the period April 23, 2004 — March 14, 2005, and adding approximately 60 additional underwriters as defendants. The complaint does not specify the amount of damages sought and the defendants have no means to estimate damages the plaintiffs will seek based upon the limited information available in the complaint. The defendants intend to vigorously defend this action. On January 6, 2006, defendants named in the original complaint removed this case to the U.S. District Court for the Southern District of Florida. On February 6, 2006, plaintiff filed a motion to remand the case to Florida state court, which is currently being briefed by the parties. On March 28, 2006, the parties submitted a proposed stipulated order withdrawing plaintiff’s motion to remand and transferring the case to the United States District Court for the Eastern District of Michigan. If this order is entered, the parties have agreed to seek to have this case consolidated with the J&R Marketing and Mager cases described below.   On December 28, 2005, J&R Marketing, SEP, filed a purported class action, J&R Marketing, et al. v. General Motors Corporation, et al. The action was filed in the Circuit Court for Wayne County, Michigan, against GM; GMAC; GM’s Chairman and Chief Executive Officer, G. Richard Wagoner, Jr.; GMAC’s Chairman, Eric Feldstein; William F. Muir; Linda K. Zukauckas; Richard J.S. Clout; John E. Gibson; W. Allen Reed; Walter G. Borst; John M. Devine; Gary L. Cowger; and several underwriters of GMAC debt securities. Similar to the original complaint filed in the Zielezienski case described above, the complaint alleges claims under Sections 11, 12(a), and 15 of the Securities Act based on alleged material misrepresentations or omissions in the Registration Statements for GMAC SmartNotes purchased between September 30, 2003 and March 16, 2005, inclusive. The complaint alleges inadequate disclosure of GM’s financial condition and performance as well as issues arising from GMAC’s 2005 restatement of quarterly results for the three quarters ended September 30, 2005. The complaint does not specify the amount of damages sought and the defendants have no means to estimate damages the plaintiffs will seek based upon the limited information available in the complaint. The defendants have not yet filed their response to the complaint, but intend to vigorously defend this action. On January 13, 2006 defendants removed this case to the U.S. District Court for the Eastern District of Michigan.   On February 17, 2006, Alex Mager filed a purported class action, Mager v. General Motors Corporation, et al. The action was filed in the U.S. District Court for the Eastern District of Michigan and is substantively identical to the J&R Marketing case described above. Defendants have not yet filed their response to the complaint, but intend to vigorously defend this action. On February 24, 2006, J&R Marketing filed a motion to consolidate the Mager case with its case (discussed above) and for  10   Table of Contents  Contents   General Motors Acceptance Corporation      appointment as lead plaintiff and the appointment of lead counsel. On March 8, 2006, the court entered an order consolidating the two cases.   All of the cases described herein are in preliminary phases. No determination has been made that the shareholder and bondholder cases can be maintained as class actions. As a result, the scope of the actions and whether they will be permitted to proceed is uncertain.      Part II   Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   We are a direct wholly owned subsidiary of General Motors and, accordingly, there is no market for our common stock. We did not sell, issue or repurchase any equity securities in 2005. We paid dividends to General Motors of $2.5 billion in 2005, $1.5 billion in 2004 and $1 billion in 2003.   Item 6. Selected Financial Data   Refer to the Financial Highlights on page 17.   Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations   Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) begins on page 18. The MD&A and other portions of this Form 10-K contains various forward-looking statements within the meaning of applicable federal securities laws, including the Private Securities Litigation Reform Act of 1995 that are based upon our current expectations and assumptions concerning future events. Such expectations and assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. The words “anticipate,” “estimate,” “believe,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “future” and “should” and any similar expressions are intended to identify forward-looking statements. Forward-looking statements involve a number of risks, uncertainties and other factors, including (but not limited to) the Risk Factors described in Item 1A of this 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: the ability of GM to complete a transaction with a strategic investor regarding a controlling interest in us while maintaining a significant stake in us, securing separate credit ratings and low cost funding to sustain growth for us and ResCap and maintaining the mutually beneficial relationship between us and GM; changes in economic conditions, currency exchange rates, significant terrorist attacks or political instability in the major markets where we operate; changes in the 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; and the threat of terrorism, the outbreak or escalation of hostilities between the United States and any foreign power or territory and changes in international political conditions may continue to affect both the United States and the global economy and may increase other risks.   Item 7A. Quantitative and Qualitative Disclosures About Market Risk   Refer to the discussion on Market Risk, beginning on page 60, included within the MD&A.   Item 8. Financial Statements and Supplementary Data   Our Consolidated Financial Statements, together with the notes thereto and the reports of Management and of Deloitte & Touche LLP dated March 28, 2006, begin on page 65. Unaudited supplementary financial data for each quarter within the two years ended December 31, 2005, is included on page 117.   Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure   None.   Item 9A. Controls and Procedures   Evaluation of Disclosure Controls and Procedures   We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), designed to ensure that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods. As of the end of the period covered by this report, our Principal Executive Officer and our Principal Financial Officer evaluated, with the participation of our management, the effectiveness of our disclosure controls and procedures.   Based on management’s evaluation and solely because of the material weakness related to our controls over the preparation, review, presentation and disclosure of our Consolidated Statement of Cash Flows as described below, our Principal Executive and Principal Financial Officers each concluded that our disclosure controls and procedures were not effective as of December 31, 2005.   Material Weakness in   Internal Control Over Financial Reporting   A material weakness is a control deficiency or a combination of control deficiencies that result in a more than remote likelihood that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected.   As we were preparing the Form 10-K, it was discovered that cash outflows related to certain mortgage loan originations and purchases were not appropriately classified as either operating  11    Table of Contents  Contents   General Motors Acceptance Corporation      cash flows or investing cash flows consistent with our original designation as loans held for sale or loans held for investment. In addition, proceeds from sales and repayments related to certain mortgage loans, which initially were classified as mortgage loans held for investment and subsequently transferred to mortgage loans held for sale, were reported as operating cash flows instead of investing cash flows in our Consolidated Statement of Cash Flows, as required by Statement of Financial Accounting Standards No. 102 Statement of Cash Flows — Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale. Finally, certain non-cash proceeds and transfers were not appropriately presented in the Consolidated Statement of Cash Flows or Supplemental disclosure to the Consolidated Statement of Cash Flows.   These matters impacted the Consolidated Statement of Cash Flows for the years ended December 31, 2004 and 2003 and the three, six and nine month periods included in our quarterly reports on Form 10-Q for the quarterly periods ended March 31, June 30, and September 30, 2005 and 2004, respectively. We have restated our Consolidated Statement of Cash Flows for the years ended December 31, 2004 and 2003 within this Form 10-K. We also intend to restate the Consolidated Statement of Cash Flows for the three, six and nine month periods included in our previously filed quarterly reports on Form 10-Q for the quarterly periods ended March 31, June 30, and September 30, 2005 and 2004, respectively, and have included disclosure about these interim period restatements in the Supplemental Financial Data section on page 117.   The restatement of this information does not change total cash and cash equivalents reflected in any of the previously reported Consolidated Statement of Cash Flows. Furthermore, the restatement has no effect on our Consolidated Statement of Income, Consolidated Balance Sheet or Consolidated Statement of Changes in Stockholder’s Equity for any period during 2005, 2004 or 2003. The annual cash flows on the aforementioned mortgage loans have been properly classified in our Consolidated Statement of Cash Flows for the year ended December 31, 2005 and for the restated years ended December 31, 2004 and 2003. However, our existing controls over the preparation, review, presentation and disclosure of our Consolidated Statement of Cash Flows were not sufficiently designed or operating effectively to prevent or detect a material misstatement, which resulted in the restatement of our Consolidated Statement of Cash Flows. Accordingly, management determined that this control deficiency constitutes a material weakness.   In order to address this material weakness in our internal control over financial reporting, we are working to design and implement enhanced controls to aid in the correct preparation, review, presentation and disclosures of our Consolidated Statement of Cash Flows. We will monitor, evaluate and test the operating effectiveness of these controls.   Changes in Internal Control Over Financial Reporting   There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our most recent fiscal quarter that may have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   Inherent Limitations   Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm thereon are set forth in Part II, Item 8 of this Annual Report on Form 10-K.   Item 9B. Other Information   None.      Part III   Item 14. Principal Accountant Fees and Services   We retained Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, Deloitte & Touche) to audit our Consolidated Financial Statements for the year ended December 31, 2005. We also retained Deloitte & Touche, as well as other accounting and consulting firms, to provide various other services in 2005.   The aggregate fees billed to us for professional services performed by Deloitte & Touche were as follows:                           December 31, ($ in millions)   2005   2004             Audit fees (a)    $ 29     $ 27           Audit-related fees (b)      1       2           Tax fees (c)      4       4                 Subtotal      34       33           All other fees (d)      —       1               Total principal accountant fees    $ 34     $ 34                (a)   Audit fees pertain to the audit of our annual     Consolidated Financial Statements, including reviews of the     interim financial statements contained in our Quarterly Reports     on Form 10-Q and     completion of statutory reports. Also included in this category     are $9 in 2005 and $7 in 2004 of fees for services such as     comfort letters to underwriters in connection with debt     issuances, attest services, consents to the incorporation of the     Deloitte & Touche audit report in publicly filed     documents and assistance with and review of documents filed with     the SEC.   12   Table of Contents  Contents   General Motors Acceptance Corporation           (b)   Audit-related fees pertain to assurance and related     services that are traditionally performed by the principal     accountant, including employee benefit plan audits, due     diligence related to mergers and acquisitions, accounting     consultations and audits in connection with proposed or     consummated acquisitions, internal control reviews, attest     services that are not required by statute or regulation and     consultation concerning financial accounting and reporting     standards.   (c)   Tax fees pertain to services performed for tax     compliance, tax planning and tax advice, including preparation     of tax returns and claims for refund and tax payment-planning     services. Tax planning and advice also includes assistance with     tax audits and appeals and tax advice related to specific     transactions.   (d)   All other fees pertain primarily to assistance with the     implementation of non-financial systems.    The services performed by Deloitte & Touche in 2005 were pre-approved in accordance with the pre-approval policy of the GM Audit Committee. This policy requires that during its first meeting of the fiscal year, the Audit Committee of our parent, General Motors, will be presented, for approval, a description of the Audit-related, Tax and Other services expected to be performed by the principal accountant during the fiscal year. Any requests for such services in excess of $1 million not contemplated during the first meeting must be submitted to the GM Audit Committee for specific pre-approval. Requests for services less than $1 million must be pre-approved by the Chairman of the GM Audit Committee, and reported to the full Committee at its next regularly scheduled meeting. Proposed fees for Audit services are presented to the GM Audit Committee for approval in May each year.   The GM Audit Committee determined that all services provided by Deloitte & Touche during 2005 were compatible with maintaining their independence as principal accountants.      Part IV   Item 15. Exhibits, Financial Statement Schedules   The exhibits listed on the accompanying Index of Exhibits are filed or incorporated by reference as a part of this report. Such Index is incorporated herein by reference. Certain financial statement schedules have been omitted because prescribed information has been incorporated into our Consolidated Financial Statements or notes thereto.  13   Table of Contents  Signatures   General Motors Acceptance Corporation     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 28th day of March, 2006.            General Motors Acceptance Corporation          (Registrant)              /s/ Eric A. Feldstein                      Eric A. Feldstein          Principal Executive Officer    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, this 28th day of March, 2006.                      /s/ Eric A. Feldstein Eric A. Feldstein     Chairman and Director        /s/ W. Allen Reed  W. Allen Reed     Director and GMAC Audit Committee Chairman            /s/ William F. Muir William F. Muir     President and Director        /s/ Walter G. Borst  Walter G. Borst     Director and GMAC Audit Committee Member            /s/ Sanjiv Khattri Sanjiv Khattri     Executive Vice President, Principal Financial Officer and     Director        /s/ Frederick A.     Henderson  Frederick A. Henderson     Director and GMAC Audit Committee Member            /s/ Mark F. Bole Mark F. Bole     Executive Vice President, International Operations and Director        /s/ Mark R. LaNeve  Mark R. LaNeve     Director            /s/ Barbara J. Stokel Barbara J. Stokel     Executive Vice President, North American Operations and Director        /s/ G. Richard     Wagoner, Jr.  G. Richard Wagoner, Jr.     Director                /s/ Linda K. Zukauckas Linda K. Zukauckas     Vice President, Controller and Principal Accounting Officer    14   Table of Contents  Index of Exhibits   General Motors Acceptance Corporation                        Exhibit   Description   Method of Filing         3.1          Certificate of Incorporation of GMAC Financial Services     Corporation dated February 20, 1997        Filed as Exhibit 3.1 to the Company’s Quarterly Report     on Form 10-Q for the period ended June 30, 2002     (File No. 1-3754); incorporated herein by reference.         3.2          Certificate of Merger of GMAC and GMAC Financial Services     Corporation dated December 17, 1997        Filed as Exhibit 3.2 to the Company’s Quarterly Report     on Form 10-Q for the period ended June 30, 2002     (File No. 1-3754); incorporated herein by reference.         3.3          By-Laws of General Motors Acceptance Corporation as amended     through April 1, 2004        Filed as Exhibit 3.3 to the Company’s Quarterly Report     on Form 10-Q for the period ended March 31, 2004     (File No. 1-3754); incorporated herein by reference.         4.1          Form of Indenture dated as of July 1, 1982 between the     Company and Bank of New York (Successor Trustee to Morgan     Guaranty Trust Company of New York), relating to Debt Securities        Filed as Exhibit 4(a) to the Company’s Registration     Statement No. 2-75115; incorporated herein by reference.         4.1.1          Form of First Supplemental Indenture dated as of     April 1, 1986 supplementing the Indenture designated     as Exhibit 4.1        Filed as Exhibit 4(g) to the Company’s Registration     Statement No. 33-4653; incorporated herein by reference.         4.1.2          Form of Second Supplemental Indenture dated as of     June 15, 1987 supplementing the indenture designated     as Exhibit 4.1        Filed as Exhibit 4(h) to the Company’s Registration     Statement No. 33-15236; incorporated herein by reference.         4.1.3          Form of Third Supplemental Indenture dated as of     September 30, 1996 supplementing the indenture     designated as Exhibit 4.1        Filed as Exhibit 4(i) to the Company’s Registration     Statement No. 333-33183; incorporated herein by reference.         4.1.4          Form of Fourth Supplemental Indenture dated as of     January 1, 1998 supplementing the Indenture designated     as Exhibit 4.1        Filed as Exhibit 4(j) to the Company’s Registration     Statement No. 333-48705; incorporated herein by reference.         4.1.5          Form of Fifth Supplemental Indenture dated as of     September 30, 1998 supplementing the indenture     designated as Exhibit 4.1        Filed as Exhibit 4(k) to the Company’s Registration     Statement No. 333-75463; incorporated herein by reference.         4.2          Form of Indenture dated as of September 24, 1996     between the Company and The Chase Manhattan Bank, Trustee,     relating to SmartNotes        Filed as Exhibit 4 to the Company’s Registration     Statement No. 333-12023; incorporated herein by reference.         4.2.1          Form of First Supplemental Indenture dated as of     January 1, 1998 supplementing the Indenture designated     as Exhibit 4.2        Filed as Exhibit 4(a)(1) to the Company’s Registration     Statement No. 333-48207; incorporated herein by reference.         4.3          Form of Indenture dated as of October 15, 1985 between     the Company and U.S. Bank Trust (Successor Trustee to     Comerica Bank), relating to Demand Notes        Filed as Exhibit 4 to the Company’s Registration     Statement No. 2-99057; incorporated herein by reference.         4.3.1          Form of First Supplemental Indenture dated as of     April 1, 1986 supplementing the Indenture designated     as Exhibit 4.3        Filed as Exhibit 4(a) to the Company’s Registration     Statement No. 33-4661; incorporated herein by reference.         4.3.2          Form of Second Supplemental Indenture dated as of     June 24, 1986 supplementing the Indenture designated     as Exhibit 4.3        Filed as Exhibit 4(b) to the Company’s Registration     Statement No. 33-6717; incorporated herein by reference.         4.3.3          Form of Third Supplemental Indenture dated as of     February 15, 1987 supplementing the Indenture     designated as Exhibit 4.3        Filed as Exhibit 4(c) to the Company’s Registration     Statement No. 33-12059; incorporated herein by reference.    15    Table of Contents  Index of Exhibits   General Motors Acceptance Corporation                        Exhibit   Description   Method of Filing             4.3.4          Form of Fourth Supplemental Indenture dated as of     December 1, 1988 supplementing the Indenture     designated as Exhibit 4.3        Filed as Exhibit 4(d) to the Company’s Registration     Statement No. 33-26057; incorporated herein by reference.         4.3.5          Form of Fifth Supplemental Indenture dated as of     October 2, 1989 supplementing the Indenture designated     as Exhibit 4.3        Filed as Exhibit 4(e) to the Company’s Registration     Statement No. 33-31596; incorporated herein by reference.         4.3.6          Form of Sixth Supplemental Indenture dated as of     January 1, 1998 supplementing the Indenture designated     as Exhibit 4.3        Filed as Exhibit 4(f) to the Company’s Registration     Statement No. 333-56431; incorporated herein by reference.         4.3.7          Form of Seventh Supplemental Indenture dated as of     June 15, 1998 supplementing the Indenture designated     as Exhibit 4.3        Filed as Exhibit 4(g) to the Company’s Registration     Statement No. 333-56431; incorporated herein by reference.         4.4          Form of Indenture dated as of December 1, 1993 between     the Company and Citibank, N.A., Trustee, relating to Medium-Term     Notes        Filed as Exhibit 4 to the Company’s Registration     Statement No. 33-51381; incorporated herein by reference.         4.4.1          Form of First Supplemental Indenture dated as of     January 1, 1998 supplementing the Indenture designated     as Exhibit 4.4        Filed as Exhibit 4(a)(1) to the Company’s Registration     Statement No. 333-59551; incorporated herein by reference.         10          Copy of Agreement dated as of October 22, 2001 between     General Motors Corporation and General Motors Acceptance     Corporation        Filed as Exhibit 10 to the Company’s Current Report on     Form 8-K dated as of October 23, 2001 (File     No. 1-3754); incorporated herein by reference.         12          Computation of ratio of earnings to fixed charges        Filed herewith.         23.1          Consent of Independent Registered Public Accounting Firm        Filed herewith.         31.1          Certification of Principal Executive Officer pursuant to     Rule 13a-14(a)/15d-14(a)        Filed herewith.         31.2          Certification of Principal Financial Officer pursuant to     Rule 13a-14(a)/15d-14(a)        Filed herewith.        The following exhibit shall not be deemed “filed” for     purposes of Section 18 of the Securities Exchange Act of     1934 or otherwise subject to the liability of that Section.     In addition, Exhibit No. 32 shall not be deemed     incorporated into any filing under the Securities Act of 1933 or     the Securities Exchange Act of 1934.     32          Certification of Principal Executive Officer and Principal     Financial Officer pursuant to 18 U.S.C. Section 1350        Filed herewith.    16   Table of Contents  Financial Highlights   General Motors Acceptance Corporation                                                   As of or for the year ended December 31,                       ($ in millions)   2005   2004   2003   2002   2001             Financing, mortgage, insurance and other revenue      $33,222       $30,155       $27,704       $24,510       $23,919           Interest and discount expense      (12,930 )     (9,535 )     (7,564 )     (6,834 )     (7,729 )         Provision for credit losses      (1,085 )     (1,953 )     (1,721 )     (2,153 )     (1,472 )             Total net revenue      19,207       18,667       18,419       15,523       14,718           Goodwill impairment (a)      (712 )     —       —       —       —           Noninterest expense      (14,896 )     (14,320 )     (14,035 )     (12,582 )     (11,919 )             Income before income tax expense      3,599       4,347       4,384       2,941       2,799           Income tax expense      (1,205 )     (1,434 )     (1,591 )     (1,071 )     (1,047 )         Cumulative effect of accounting change (b)      —       —       —       —       34           Net income      $2,394       $2,913       $2,793       $1,870       $1,786       Dividends paid      $2,500       $1,500       $1,000       $400       $—       Total assets      $320,516       $324,139       $288,163       $227,728       $192,855       Total debt (c)      $254,407       $268,960       $238,862       $183,232       $151,806       Stockholder’s equity      $21,778       $22,417       $20,236       $17,831       $16,134                (a)       Relates to goodwill impairments taken at our Commercial Finance     Group operating segment and our Commercial Mortgage reporting     segment.   (b)       Relates to the January 1, 2001 adoption of Statement of     Financial Accounting Standards 133, Accounting for     Derivatives Instruments and Hedging Activities.   (c)       Does not include $4,313 in Commercial Mortgage debt at     December 31, 2005, which was transferred to liabilities     associated with reporting segment held for sale in our     Consolidated Balance Sheet. Refer to Note 1 to our     Consolidated Financial Statements for further details.   17    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation              Overview      GMAC is a leading global financial services firm with approximately $320 billion of assets and operations in 43 countries. Founded in 1919 as a wholly owned subsidiary of General Motors Corporation, GMAC was originally established to provide GM dealers with the automotive financing necessary for the dealers to acquire and maintain vehicle inventories and to provide retail customers the means by which to finance vehicle purchases through GM dealers. Our products and services have expanded beyond automotive financing as we currently operate in three primary lines of business — Financing, Mortgage and Insurance. Refer to the separate business operations discussions in this MD&A for a description of our business activities and results of operations.   Operating Summary   Net income for our businesses is summarized as follows:                             Year ended December 31, ($ in millions)   2005   2004                 Financing (a)      $666     $ 1,476               Mortgage (b)      1,311       1,108               Insurance      417       329               Net income    $ 2,394     $ 2,913               Return on average equity      10.6 %     13.3 %                  (a)       Includes our North America and International automotive finance     reporting segments, separately identified in Note 23 to our     Consolidated Financial Statements, as well as our Commercial     Finance Group operating segment.   (b)       Includes our GMAC Residential, GMAC-RFC and GMAC Commercial     Mortgage reporting segments, separately identified in     Note 23 to our Consolidated Financial Statements.    We earned $2.4 billion in 2005, down $0.5 billion from record earnings of $2.9 billion earned in 2004. Earnings include non-cash goodwill impairment charges of $439 million (after-tax), which were recognized in the fourth quarter of 2005. The charges relate predominately to our Commercial Finance operating segment and primarily to the goodwill recognized in connection with the 1999 acquisition of the majority of this business. Excluding these impairment charges, which management considers to be non-recurring, we earned $2.8 billion. Earnings were driven by record results in our mortgage and insurance operations. Strong earnings were achieved despite a difficult environment that included higher market interest rates, a series of credit rating actions and the significant impact of Hurricane Katrina. We continue to maintain adequate liquidity, with cash reserve balances at December 31, 2005, of $20 billion, comprised of $15.8 billion in cash and cash equivalents and $4.2 billion invested in marketable securities. We continue to provide global support for the marketing of GM vehicles, as well as to provide a significant source of cash flow to GM through the payment of a $2.5 billion dividend in 2005, including $1 billion paid in the fourth quarter.   Results for our Financing operations, excluding goodwill impairment charges of $398 million (after-tax), were $1,064 million, down $412 million from $1,476 million earned in 2004. The decrease is primarily related to lower net interest margins as a result of increased borrowing costs due to widening credit spreads and a flattening yield curve. The decline in net interest margins was somewhat mitigated by lower consumer credit provisions, primarily as a result of lower asset levels and the impact of improved used vehicle prices on terminating leases.   Our Mortgage operations earned a record $1,352 million, excluding goodwill impairment charges of $41 million (after-tax), an increase of 22% from $1,108 million earned in 2004, reflecting increases in both our residential and commercial mortgage operations. Our residential mortgage businesses benefited from increased loan production, favorable credit experience, improved mortgage servicing results and gains on sales of mortgages. GMAC Commercial Mortgage also experienced an increase in earnings as compared to the prior year largely due to record loan origination volume, higher gains on sales of loans and increases in fee and investment income.   Our Insurance operations generated record net income of $417 million in 2005, up $88 million from the previous record of $329 million earned in 2004. The increase reflects a combination of strong results achieved through increased premium revenue, lower incurred losses, higher capital gains and improved investment portfolio performance. In addition, GMAC Insurance maintained a strong investment portfolio, with a market value of $7.7 billion at December 31, 2005, including net unrealized gains of $573 million (after-tax).   Our consolidated earnings for the fourth quarter of 2005 were $614 million, excluding goodwill impairment charges, representing a $69 million decline from 2004 fourth quarter earnings of $683 million. For the fourth quarter, net income from our Financing operations was $260 million, excluding goodwill impairment charges, down from $323 million earned in the fourth quarter of 2004. Our Mortgage operations earned $221 million, excluding goodwill impairment charges, down from $292 million earned in the fourth quarter of 2004. Our Insurance operations had record net income of $133 million in the fourth quarter of 2005, up significantly from the $68 million earned in the fourth quarter of 2004.   Outlook   With operating earnings of $2.8 billion, dividends of $2.5 billion and a cash reserve balance of $20 billion, we have been able to achieve our primary objectives of providing support for GM vehicle sales while also generating attractive returns and maintaining sufficient liquidity. Our 2005 performance was accomplished in a difficult environment with our credit ratings downgraded to below  18    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      investment grade and continued increases in short-term rates with the resulting flattening of the yield curve. We were able to achieve these strong results through continued emphasis on a diversified business model, as well as the continued evolution of our funding strategy. Management expects that many of the challenges experienced in 2005 will continue into 2006, possibly increasing in intensity. We believe that we are strategically positioned to address these challenges through continued initiatives to diversify both revenue and funding sources and leveraging our origination capability. However, we expect 2006 to be a much more challenging year. The following summarizes the key business issues that will be important focus areas in 2006:         •   Potential sale of GMAC — In the fourth quarter     of 2005, GM announced that it is exploring options to further     enhance our liquidity position and our ability to support GM/     GMAC synergies. GM stated that GM is exploring the possible sale     of a controlling interest in GMAC to a strategic partner while     also continuing to evaluate strategic and structural     alternatives to help ensure that its residential mortgage     business, Residential Capital Corporation (ResCap), retains its     investment grade rating. GM is currently in discussions with     potential interested parties, and the process is ongoing. As     this process continues, and recognizing there is some     uncertainty, management is preparing for a number of potential     outcomes with the focus on generating attractive returns,     supporting GM vehicle sales and maintaining sufficient     liquidity. Refer also to Risks Related to Our Controlling     Stockholder on page 8.       •   Funding and liquidity — Our ability to     adequately fund our operations at attractive rates is a key     component of our future profitability. We have experienced a     series of credit rating actions resulting in the downgrade of     our credit ratings to below investment grade. The negative     actions were due primarily to concerns regarding the financial     outlook of GM related to its overall market position in the     automotive industry and its burdensome health care obligations.     As a result, our unsecured borrowing spreads have widened     significantly over the past several years, impacting our overall     cost of borrowings, as well as significantly reducing our net     interest margins. In addition, these downgrades have limited our     access to traditional unsecured funding sources, which has     caused us to shift our funding to more secured sources, expand     our banking activities and restructure our Mortgage operations,     enabling ResCap to issue public debt that carries a rating     separate from our rating. Despite these challenges, we have     continued to meet funding demands and maintain a strong     liquidity profile. Refer to the Funding and Liquidity section in     this MD&A for further discussion.       •   Residential mortgage market — Despite     relatively stable overall U.S. residential mortgage     industry volume in 2005, as compared to 2004, our Mortgage     operations posted strong results. Our residential mortgage     operations have benefited from market share gains, which helped     to mitigate the impact of flat industry volumes. However, an     increasingly competitive pricing environment has resulted in     lower margins in 2005, as compared to 2004. Management expects     this trend to continue in 2006 as pricing pressures continue.     However, the impact of declines in U.S. industry volume is     largely expected to be mitigated through increased market share,     increased fee-based income (which is less sensitive to     origination volume) and international growth.       •   Consumer and commercial credit risk — We are     exposed to credit risk on the portfolio of consumer automotive     finance receivables and residential mortgage loans held for sale     and held for investment, as well as on the interests retained     from our securitization activities of these asset classes. In     addition, we are exposed to credit risk from various commercial     portfolios, including wholesale financing to individual dealers     or dealer groups, asset-based lending and equipment and     inventory financing, as well as construction and commercial     property lending. Credit losses in our consumer and commercial     portfolios are influenced by general business and economic     conditions of the industries and countries in which we operate.     We actively manage our credit risk and believe that as of     December 31, 2005, we are adequately reserved for     potential losses incurred in the portfolios. However, a negative     change in economic factors (particularly in the     U.S. economy) could adversely impact our future earnings.     As many of our credit exposures are collateralized by vehicles     and homes, the severity of losses is particularly sensitive to a     decline in used vehicle and residential home prices. In     addition, the overall frequency of losses would be negatively     influenced by an increase in macro-economic factors, such as     unemployment rates and bankruptcy filings (both consumer and     commercial).       •   Rising market interest rates — Historically,     our earnings have been negatively impacted by rising interest     rates, which management expects to continue in 2006. In     particular, for our automotive financing operations, a     flattening yield curve with debt repricing faster than earning     assets negatively impacts our net financing margins. A     flattening of the yield curve also impacts our mortgage     operations from both a funding perspective (similar to our     automotive finance business) as well as the value of mortgage     servicing rights, which we manage through an active hedging     program. Refer to the Market Risk section of this MD&A for     further discussion.   19    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation               Business Overview      We are a leading diversified global financial services company that has been in business since 1919. Today, we provide automotive finance, commercial finance, insurance, mortgage and real estate products and services in 43 countries.   We organize our business into three lines of business operations, which include Financing, Mortgage and Insurance. The following table reflects the primary products and services offered by each of our lines of businesses.                      GMAC             Financing Operations     Mortgage Operations    Insurance Operations                       GMAC   Financing Operations   Mortgage Operations   Insurance Operations    Consumer Financing   Automotive Retail Contracts     and    Leases Commercial Financing   Automotive Dealer     Financing  Automotive Fleet     Financing  Full-Service     Leasing  Asset Based     Lending  Equipment     Finance  Structured     Finance  Factoring    Residential Real Estate Finance   Residential Mortgage Banking Warehouse Lending      Other Real Estate Finance and  Related     Activities   Residential Construction     Finance  Residential Equity  Model     Home Finance  Residential Real Estate     Services  Real Estate Brokerage     Services  Relocation Services Commercial Mortgage Banking    Personal Lines   Physical Damage and     Liability    Insurance for     Vehicles  Homeowners Insurance Other Consumer Products   Extended Service Contracts Commercial Products   Automotive Dealer     Inventory    Insurance  Property     and Casualty    Reinsurance     Financing Operations   We are one of the world’s largest automotive financing companies with operations in 39 countries. Our automotive finance business extends automotive financing services primarily to franchised GM dealers and their customers through two operating segments, which include our North American Automotive Finance Operations and our International Automotive Finance Operations. In addition, through our commercial financing operations, we provide commercial financing and factoring to businesses in various industries. Net income, including a non-cash goodwill impairment charge, from our financing operations totaled $666 million, which accounted for approximately 28% of our net income in 2005.   Through our Financing operations, we:         •       Provide consumer automotive financing products and services,     including purchasing or originating, selling and securitizing     automotive retail contracts and leases with retail customers     primarily from GM and GM-affiliated dealers and performing     service activities such as collection and processing activities     related to those contracts;       •       Provide automotive dealer financing products and services,     including financing the purchases of new and used vehicles by     dealers, making loans or revolving lending facilities for other     purposes to dealers, selling and securitizing automotive dealer     receivables and loans, and servicing and monitoring such     financing;       •       Provide fleet financing to automotive dealers and others, which     finances their purchase of vehicles that they lease or rent to     others;       •       Provide full service individual leasing and fleet leasing     products, including maintenance, fleet and accident management     services as well as fuel programs, short-term vehicle rental and     title and licensing services;       •       Provide asset-based lending, equipment finance, structured     finance and factoring services to companies in the apparel,     textile, automotive supplier and other industries; and       •       Hold a portfolio of automotive retail contracts, leases and     automotive dealer finance receivables for investment and     retained interests from our securitization activities.    Mortgage Operations   We are a leading real estate finance company with two of our mortgage segments, GMAC Residential and GMAC-RFC, providing residential real estate products and services. Net income from the operations of GMAC Residential and GMAC-RFC together totaled $1,021 million, which accounted for approximately 43% of our net income in 2005. In addition, we offer commercial mortgage products and services through our third mortgage segment GMAC Commercial Mortgage. On March 23, 2006, we completed the sale of 78% of our equity in GMAC Commercial Mortgage. Please  20    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      refer to Note 25 of our Consolidated Financial Statements for further details. At December 31, 2005, the assets and liabilities of our Commercial Mortgage reporting segment have been classified as held for sale separately in our Consolidated Balance Sheet. Net income from operations at GMAC Commercial Mortgage totaled $290 million, which accounted for 12% of our net income in 2005.   Through our Mortgage operations, we:         •       Originate, purchase, sell and securitize residential and     commercial mortgage loans primarily in the United States, as     well as internationally;       •       Provide primary and master servicing to investors in our     residential mortgage loans and securitizations;       •       Provide collateralized lines of credit, which we refer to as     warehouse lending facilities, to other originators of     residential mortgage loans both in the United States and Mexico;       •       Hold a portfolio of residential mortgage loans for investment     and retained interests from our securitization activities;       •       Provide bundled real estate services, including real estate     brokerage services, full service relocation services, mortgage     closing services and settlement services; and       •       Provide specialty financing and equity capital to residential     land developers and homebuilders, resort and time share     developers and health care providers.    Insurance Operations   We insure and reinsure automobile service contracts, personal automobile insurance coverages (ranging from preferred to non-standard risk) and selected commercial insurance coverages. Net income from our insurance operations totaled $417 million, which accounted for approximately 17% of our net income in 2005.   Through our Insurance operations, we:         •       Provide automotive extended-service and maintenance contracts     through auto dealers, primarily GM dealers, in the United States     and Canada and similar products outside of the United States;       •       Provide dealer inventory insurance and other insurance products     to dealers;       •       Offer property/casualty reinsurance programs primarily to     regional direct insurance companies in the U.S.;       •       Offer vehicle and home insurance through a number of     distribution channels, including independent agents, affinity     groups and the internet and outside of the U.S. through auto     dealerships, primarily GM dealers; and       •       Invest proceeds from premiums and other revenue sources in an     investment portfolio from which claim payments are made as     claims are settled.             Financing Operations      Our Financing operations offer a wide range of financial services and products (directly and indirectly) to retail automotive consumers, automotive dealerships and other commercial businesses. Our Financing operations are comprised of two separate reporting segments — North American Automotive Finance Operations and International Automotive Finance Operations — and one reporting operating segment — Commercial Finance Group. The products and services offered by our Financing operations include the purchase of retail installment sales contracts and leases, extension of term loans, dealer floor plan financing and other lines of credit to dealers, fleet leasing and factoring of receivables. While most of our operations focus on prime financing to and through GM or GM affiliated dealers, our Nuvell operation, which is part of our North American Automotive Finance Operations, focuses on non-prime automotive financing to GM-affiliated and non-GM dealers. Our Nuvell operation also provides private-label automotive financing. In addition, our Financing operations utilize asset securitization and whole loan sales as a critical component of our diversified funding strategy. The Funding and Liquidity and the Off-Balance Sheet Arrangements sections of this MD&A provide additional information about the securitization and whole loan sales activities of our Financing operations.   Industry and Competition   The consumer automotive finance market is one of the largest consumer finance segments in the United States. The industry is generally segmented according to the type of vehicle sold (new versus used) and the buyer’s credit characteristics (prime, non-prime or sub-prime). In 2005, we purchased or originated $63.0 billion of consumer automotive retail or lease contracts.   The consumer automotive finance business is largely dependent on new vehicle sales volumes, manufacturers’ promotions and the overall macroeconomic environment. Competition tends to intensify when vehicle production decreases. Because of our relationship with GM, our penetration of GM volumes generally increases when GM uses subvented financing rates as a part of its promotion program.   The consumer automotive finance business is highly competitive. We face intense competition from large suppliers of consumer automotive finance, which include captive automotive finance companies, large national banks and consumer finance companies. In addition, we face competition from smaller suppliers, including regional banks, savings and loans associations and specialized providers, such as local credit unions. Some of our competitors which are larger than us have access to significant capital and resources. Smaller suppliers often have a dominant position in a  21   Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      specific region or niche segment, such as used vehicle finance or nonprime customers.   Commercial financing competitors are primarily comprised of other manufacturers’ affiliated finance companies, independent commercial finance companies and national and regional banks. Refer to Risk Factors — Risks Related to Our Business — The worldwide financial services industry is highly competitive for further discussion.   Consumer Automotive Financing   We provide two basic types of financing for new and used vehicles: retail automotive contracts and automotive lease contracts. In most cases, we purchase retail contracts and leases for new and used vehicles from GM-affiliated dealers when the vehicles are purchased by consumers. In a number of markets outside the United States, we are a direct lender to the consumer. Our consumer automotive financing operations generate revenue through lease payments or finance charges and fees paid by customers on the retail contracts and leases. In connection with lease contracts, we also recognize a gain or loss on the remarketing of the vehicle. For purposes of discussion in this Financing operations section of this MD&A, the loans related to our automotive lending activities are referred to as retail contracts. The following discussion centers on our operations in the United States, which are generally reflective of our global business practices; however, certain countries have unique statutory or regulatory requirements that impact business practices. The effects of such requirements are not significant to our consolidated financial condition, results of operations or cash flows.   The amount we pay a dealer for a retail contract is based on the negotiated purchase price of the vehicle plus any other products such as extended service contracts less any vehicle trade-in value and any down payment from the consumer. Under the retail contract, the consumer is obligated to make payments in an amount equal to the purchase price of the vehicle (less any trade-in or down payment) plus finance charges at a rate negotiated between the consumer and the dealer. In addition, the consumer is also responsible for charges related to past due payments. When the contract is purchased by us, it is normal business practice for the dealer to retain some portion of the finance charge as income for the dealership, such that some of the finance charges that the consumer pays are paid to us and the remainder is paid to the dealer. Our agreements with dealers place a limit on the amount of the finance charges that they are entitled to retain. While we do not own the vehicles we finance through retail contracts, we hold a perfected security interest in those vehicles.   With respect to consumer leasing, we purchase leases (and the associated vehicles) from dealerships. The purchase prices of the consumer leases are based on the negotiated price for the vehicle, less any vehicle trade-in and down payment from the consumer. Under the lease, the consumer is obligated to make payments in amounts equal to the amount by which the negotiated purchase price of the vehicle (less any trade-in value and any down payment) exceeds the projected residual value (including rate support) of the vehicle at lease termination, plus lease charges. The consumer is also responsible for charges for past due payments, excess mileage and excessive wear and tear. When the lease contract is entered into, we estimate the residual value of the leased vehicle at lease termination. We base our determination of the projected residual values on a guide published by an independent publisher of vehicle residual values, which is stated as a percentage of the manufacturer’s suggested retail price. These projected values may be upwardly adjusted as a marketing incentive, if GM considers an above-market residual appropriate to encourage consumers to lease vehicles, or for a low mileage lease program. Our standard leasing plan, SmartLease, requires a regular monthly payment by the consumer. We also offer an alternative leasing plan, SmartLease Plus, which requires one up-front payment of all lease amounts at the time the consumer takes possession of the vehicle.   In addition to the SmartLease plans, we offer the SmartBuy plan through dealerships to consumers. SmartBuy combines certain features of a lease contract with that of a traditional retail contract. Under the SmartBuy plan, the customer pays regular monthly payments that are generally lower than would otherwise be owed under a traditional retail contract. At the end of the contract, the customer has several options, including keeping the vehicle by making a final balloon payment or returning the vehicle to us and paying a disposal fee plus any applicable excess wear and excess mileage charges. Unlike a lease contract, during the course of the SmartBuy contract, the customer owns the vehicle and we hold a perfected security interest in the vehicle.   With respect to all financed vehicles, whether subject to a retail contract or a lease contract, we require that property damage insurance be maintained by the consumer. In addition, on lease contracts we require that bodily injury and comprehensive and collision insurance be maintained by the consumer.   Consumer automotive finance retail revenue accounted for $6.5 billion, $6.8 billion and $6.6 billion of our revenue in 2005, 2004 and 2003, respectively.  22    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      The following table summarizes our new vehicle consumer financing volume and share of GM retail sales in markets where we operate.                                                                 GMAC volume   Share of GM retail sales               Year ended December 31, (units in thousands)   2005   2004   2003   2005   2004   2003              GM vehicles                                                            North America                                                              Retail contracts      984       1,396       1,430       27%       36%       35%               Leases      574       489       418       15%       13%       10%                 Total North America      1,558       1,885       1,848       42%       49%       45%             International (retail contracts and leases)      527       534       415       26%       30%       34%                                 Total GM units financed      2,085       2,419       2,263       36%       43%       42%                                     Non-GM units financed      72       74       85                                                           Total consumer automotive financing volume      2,157       2,493       2,348                                                     General Motors Marketing Incentives   General Motors may elect to sponsor incentive programs (on both retail contracts and leases) by supporting financing rates below standard market rates at which we purchase retail contracts. Such marketing incentives are also referred to as rate support or subvention. When General Motors utilizes these marketing incentives, it pays us the present value of the difference between the customer rate and our standard rates, which we defer and recognize as a yield adjustment over the life of the contract.   GM may also provide incentives, referred to as residual support, on leases. As previously mentioned, we bear the risk of loss to the extent that the value of a leased vehicle upon remarketing is below the projected residual value of the vehicle at the time the lease contract is signed. However, these projected values may be upwardly adjusted as a marketing incentive if General Motors considers an above-market residual appropriate to encourage consumers to lease vehicles. Such residual support by GM results in a lower monthly lease payment by the consumer. General Motors reimburses us to the extent remarketing sales proceeds are less than the residual value set forth in the lease contract at lease termination. In addition to GM residual support, in some cases, GMAC may provide residual support on leases to further encourage consumers to lease certain vehicles.   In addition to the residual support arrangement, GM shares in residual risk on all off-lease vehicles sold by auction. We and GM share a portion of the loss when resale proceeds fall below the contract residual values on vehicles sold at auction. GM reimburses us for a portion of the difference between proceeds and the contract residual value (up to a specified limit).   Under what we refer to as pull ahead programs, consumers are encouraged to terminate leases early in conjunction with the acquisition of a new GM vehicle. As part of these programs, we waive the customer’s remaining payment obligation and, under most programs, GM compensates us for the foregone revenue from the waived payments. Additionally, since these programs generally accelerate our remarketing of the vehicle, the sale proceeds are typically higher than otherwise would have been realized had the vehicle been remarketed at lease contract maturity. The reimbursement from GM for the foregone payments is, therefore, reduced by the amount of this benefit.   The following table summarizes the percentage of our annual retail contracts and lease volume that includes GM-sponsored rate and residual incentives.                                 Year ended December 31,   2005   2004   2003              North America      78%       63%       78%           International      53%       58%       60%           Our consumer financing volume and penetration levels are significantly impacted by the nature, timing, and extent of GM’s use of rate, residual and other financing incentives for marketing purposes on consumer retail contracts and leases. Late in 2004 and through the early part of 2005, GM reduced its use of special rate financing programs and utilized marketing programs that provided up-front cash incentives to customers that use us to finance their purchase of a new GM vehicle. As a result, our North American penetration levels were positively impacted in the first quarter of 2005 as compared to 2004. However, GM’s Employee Discount for Everyone marketing program, that was introduced in June 2005 and ran through September 2005, had a negative impact on our penetration levels. Although GM benefited from an increase in sales, our penetration levels decreased as the program did not provide consumers with additional incentives to finance with us. As such, our penetration levels in 2005 were lower than what was experienced in 2004. In our International Automotive Finance Operations consumer penetration levels declined as compared to 2004, primarily as a result of a reduction in GM incentives on new vehicles in Brazil during the year, as well as the inclusion of GM vehicle sales in China in the penetration calculation, where we only recently commenced operations.   Consumer Credit Approval   Before purchasing a retail contract or lease from the dealer, we perform a credit review based on information provided by the  23    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      dealer. As part of this process we evaluate, among other things, the following factors:         •       the consumer’s credit history, including any prior     experience with us;       •       the asset value of the vehicle and the amount of equity (down     payment) in the vehicle; and       •       the term of the retail contract or lease.    We use a proprietary credit scoring system to support this credit approval process and to manage the credit quality of the portfolio. Credit scoring is used to differentiate credit applicants in terms of expected default rates, enabling us to better evaluate credit applications for approval and to tailor the pricing and financing structure based on this assessment of credit risk. Our credit scoring models are periodically reviewed and updated based on historical information and current trends. However, these actions by management do not eliminate credit risk. Improper evaluations of contracts for purchase and changes in the applicant’s financial condition subsequent to approval could negatively affect the quality of our receivables portfolio, resulting in credit losses.   Upon successful completion of our credit underwriting process, we purchase the retail financing contract or lease from the dealer.   Servicing   For a number of years, we have been consolidating our servicing centers in the United States in order to create a stand-alone servicing entity. This stand-alone servicing entity is our consolidated subsidiary, Semperian, Inc. (formerly Accutel, Inc.). In accordance with our policies and procedures, Semperian performs our servicing activities for U.S. retail contracts and consumer automotive leases from centers located throughout the United States. Our servicing activities consist of collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent, maintaining a perfected security interest in the financed vehicle and monitoring physical damage insurance coverage of the vehicle. In the event that a customer fails to comply with the terms of the retail contract or lease, we, after satisfying local legal requirements, are generally able to repossess and dispose of the vehicle.   Our customers have the option to remit payments based on monthly billing statements, coupon books or electronic funds transfers. Customer payments are processed by regional third-party processing centers that electronically transfer payment data to customers’ accounts. We also utilize regional customer service centers to handle customer questions or requests for changes of address, payoff quotes, copies of contracts and other requests.   Collection activity is typically initiated when a customer becomes 10 days past due. Accounts 10 days past due receive a reminder notice. When an account is approximately 15 days or more past due, but less than 48 days past due, attempts are made to contact the customer and make payment arrangements. Once an account becomes 48 days past due, one of our specialized collection centers begins collection follow-up, with the objective of tracking the account more closely and making appropriate decisions regarding repossession of the vehicle.   During the collection process, we may offer a payment extension to a customer experiencing temporary financial difficulty, enabling the customer to delay monthly payments for 30, 60 or 90 days, thereby deferring the maturity date of the contract by such period of delay. Extensions granted to a customer typically do not exceed 90 days in the aggregate over any twelve-month period or 180 days in aggregate over the life of the contract. If the customer’s financial difficulty is not temporary, and management believes the customer could continue to make payments at a lower payment amount, we may offer to rewrite the remaining obligation, extending the term and lowering the monthly payment obligation. Extensions and rewrites are techniques that help mitigate financial loss in those cases where management believes that the customer will recover from financial difficulty and resume regularly scheduled payments, or can fulfill the obligation with lower payments over a longer period of time. Before offering an extension or rewrite, collection personnel evaluate and take into account the capacity of the customer to meet the revised payment terms. While the granting of an extension could delay the eventual charge-off of an account, typically we are able to repossess and sell the related collateral, thereby mitigating the loss. As an indication of the effectiveness of our consumer credit practices, of the total amount outstanding in the United States traditional retail and lease portfolios as of December 31, 2002, only 7.4% of the extended or rewritten accounts were subsequently charged off, through December 31, 2005. A three-year period was utilized for this analysis as this approximates the weighted average remaining term of the portfolio. As of December 31, 2005, 5.8% of the total amount of accounts outstanding in the portfolio had been granted an extension or were rewritten.   Subject to legal considerations, we will normally begin repossession activity once an account becomes 60 days past due. Repossession may occur earlier if management determines that the customer is unwilling to pay, the vehicle is in danger of being damaged or hidden or if the customer voluntarily surrenders the vehicle. Repossessions are handled by approved third-party repossession firms. Normally, the customer is given a period of time to redeem the vehicle by paying off the account or bringing the account current. If the vehicle is not redeemed, it is sold at auction. If the proceeds are not sufficient to cover the unpaid balance, any accrued interest, unpaid finance charges and allowable expenses, the resulting deficiency is charged-off. Regional asset recovery centers pursue collections on accounts that have been charged-off, including those accounts that have been repossessed and skip accounts where the vehicle cannot be located.  24    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      We have historically serviced retail contracts and leases in our managed portfolio and will continue to do so in the future through our new subsidiary, Semperian. We have, however, a new focus of selling the retail contracts (on a whole loan basis) we purchase or underwrite. With respect to retail and lease contracts we sell, we retain the right to service such retail contracts and leases and earn a servicing fee for such servicing functions. As of December 31, 2005 and 2004, our total consumer automotive serviced portfolio was $124.1 billion and $131.4 billion, respectively. Our consumer automotive managed portfolio was $108.4 billion and $124.2 billion in 2005 and 2004.   Consumer Credit Risk Management   Credit losses in our consumer automotive retail contract and lease portfolio are influenced by general business and economic conditions, such as unemployment rates, bankruptcy filings and used vehicle prices. We analyze credit losses according to frequency (i.e., the number of contracts that default) and severity (i.e., the dollar magnitude of loss per occurrence of default). We manage credit risk through our contract purchase policy, credit review process (including our proprietary credit scoring system) and servicing capabilities.   In general, the credit quality of the off-balance sheet portfolio is representative of our overall managed consumer automotive retail contract portfolio. However, the process of creating a pool of retail finance receivables for securitization or sale typically involves excluding retail contracts that are greater than 30 days delinquent at such time. In addition, the process involves selecting from a pool of receivables that are currently outstanding and, therefore, represent “seasoned” contracts. A seasoned portfolio that excludes delinquent contracts historically results in better credit performance in the managed portfolio than in the on-balance sheet portfolio of retail finance receivables. In addition, the current off-balance sheet transactions are comprised mainly of subvented rate retail finance receivables, which generally attract higher quality customers (which would otherwise be cash purchasers) than customers typically associated with non-subvented receivables.   The managed portfolio includes retail receivables held on-balance sheet for investment and receivables securitized and sold that we continue to service and have a continued involvement in (i.e., in which we retain an interest or risk of loss in the underlying receivables), but excludes securitized and sold finance receivables that we continue to service but have no other continuing involvement (serviced-only portfolio). We believe that the disclosure of the credit experience of the managed portfolio presents a more complete presentation of our credit exposure because the managed basis reflects not only on-balance sheet receivables, but also securitized assets as to which we retain a risk of loss in the underlying assets (typically in the form of a subordinated retained interest).   The following tables summarize pertinent loss experience in the managed and on-balance sheet consumer automotive retail contract portfolio. Consistent with the presentation in our Consolidated Balance Sheet, retail contracts presented in the table represent the principal balance of the finance receivable discounted for any unearned rate support received from GM.                                                                       Average retail   Annual charge-offs,       Year ended December 31, ($ in millions)   assets   net of recoveries (a)   Net charge-off rate           Managed   2005   2005   2004   2003   2005   2004   2003             North America    $ 73,927     $ 735       $912       $912       0.99%       1.10%       1.07%           International      14,769       132       130       216       0.89%       0.94%       1.78%                                 Total managed    $ 88,696     $ 867     $ 1,042     $ 1,128       0.98%       1.08%       1.16%           On-balance sheet                                                                  North America    $ 68,353     $ 719       $890       $857       1.05%       1.18%       1.18%           International      14,769       132       130       216       0.89%       0.94%       1.78%                                 Total on-balance sheet    $ 83,122     $ 851     $ 1,020     $ 1,073       1.02%       1.14%       1.26%                (a)       Net charge-offs exclude amounts related to the lump-sum payments     on balloon finance contracts. These amounts totaled $1, $31 and     $117 for the years ended December 31, 2005, 2004 and 2003     respectively.   25    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      The following table summarizes pertinent delinquency experience in the consumer automotive retail contract portfolio.                                               Percent of retail contracts 30 days       or more past due (a)               Managed   On-balance sheet                   2005   2004   2005   2004                 North America      2.21%       2.11%       2.37%       2.30%           International      2.68%       2.82%       2.68%       2.82%           Total      2.33%       2.28%       2.46%       2.44%                (a)       Past due contracts are calculated on the basis of the average     number of contracts delinquent during a month and exclude     accounts in bankruptcy.    In addition to the preceding loss and delinquency data, the following table summarizes bankruptcies and repossession information for the United States consumer automotive retail contract portfolio (which represents approximately 65% of our on-balance sheet consumer automotive retail contract portfolio):                                                   Managed   On-balance sheet                       Year ended December 31,   2005   2004   2005   2004                 Average retail contracts in bankruptcy (in units) (a)      102,858       89,358       98,744       83,509               Bankruptcies as a percent of average number of contracts     outstanding      2.27 %     1.75 %     2.35 %     1.83 %             Retail contract repossessions (in units)      101,546       110,787       98,838       106,738               Repossessions as a percent of average number of contracts     outstanding      2.24 %     2.17 %     2.35 %     2.34 %                  (a)       Average retail contracts in bankruptcy are calculated using the     yearly average of the month end bankruptcies.    Our allowance for credit losses is intended to cover management’s estimate of incurred losses in the portfolio (refer to the Critical Accounting Estimates section of this MD&A and Note 1 to our Consolidated Financial Statements for further discussion). The following table summarizes activity related to the consumer allowance for credit losses for our Financing operations.                               Year ended December 31, ($ in millions)   2005   2004                 Allowance at beginning of year    $ 2,035     $ 2,084               Provision for credit losses      443       978               Charge-offs                                Domestic      (839 )     (1,010 )               Foreign      (192 )     (224 )                 Total charge-offs      (1,031 )     (1,234 )                 Recoveries                                Domestic      131       102                 Foreign      48       81                   Total recoveries      179       183                   Net charge-offs      (852 )     (1,051 )             Impacts of foreign currency translation      (12 )     20               Securitization activity      4       4                   Allowance at end of year    $ 1,618     $ 2,035               Allowance coverage (a)      2.26 %     2.19 %                  (a)       Represents the related allowance for credit losses as a     percentage of total on-balance sheet consumer automotive retail     contracts.    Our consumer automotive leases are operating leases and, therefore, exhibit different loss performance as compared to consumer automotive retail contracts. Credit losses on the operating lease portfolio are not as significant as losses on retail contracts because lease losses are limited to past due payments, late charges and fees for excess mileage and excessive wear and tear. Since some of these fees are not assessed until the vehicle is returned, credit losses on the lease portfolio are correlated with lease termination volume. As further described in the Critical Accounting Estimates section of this MD&A, credit risk is considered within the overall depreciation rate and the resulting net carrying value of the operating lease asset. North American operating lease accounts past due over 30 days represented 1.33% and 1.59% of the total portfolio at December 31, 2005 and 2004, respectively.   Credit fundamentals in our consumer automotive portfolio remain stable, with a slight deterioration in delinquencies and an improvement in consumer credit loss rates and loss severity, as compared to 2004. The decrease in loss severity is illustrated by a reduction in the average loss incurred per new vehicle repossessed in the United States traditional portfolio, which declined from $7,993 in 2004 to $7,825 in 2005. The decline in loss severity is attributable to the strengthening in the used vehicle market resulting from a lower supply of used vehicles. The increase in delinquency trends in the North American portfolio is the result of lower on-balance sheet prime retail asset levels, primarily as a result of an increase in whole loan sales, the negative impact of accounts affected by Hurricane Katrina and moderate weakening in the credit quality of the portfolio, as compared to recent years. Conversely, delinquency trends in the International portfolio have shown an improvement since 2004 as a result of a change in the mix of new and used  26    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      retail contracts in the portfolio, as well as a significant improvement in the credit performance in certain international countries.   Consumer credit loss rates in North America decreased in 2005 as compared to 2004. The decrease is reflective of the improvement in severity. The increase in the number of bankruptcies in the U.S. portfolio in 2005 is due to the change in bankruptcy law effective October 17, 2005, which makes it more difficult for some U.S. consumers to qualify for certain protections previously afforded to bankruptcy debtors. New bankruptcy filings in our U.S. portfolio increased dramatically in October, prior to the change in law, and decreased sharply in November and December.   The allowance for credit losses as a percentage of the total on-balance sheet consumer portfolio remained stable in comparison to December 2004 as the consumer allowance year over year decreased along with automotive retail asset levels.   Remarketing and Sales of Leased Vehicles   In a consumer lease, we assume ownership of the vehicle from the dealer. Neither the consumer nor the dealer is responsible for the value of the vehicle at the time of lease termination. Typically, the vehicle is returned to us for remarketing through an auction. We generally bear the risk of loss to the extent that the value of a leased vehicle upon remarketing is below the projected residual value determined at the time the lease contract is signed. However, General Motors shares this risk with us in certain circumstances as described previously at General Motors Marketing Incentives.   When vehicles are not purchased by customers or the receiving dealer at lease termination, we regain possession of the leased vehicles from the customers and sell the vehicles, primarily through physical and internet auctions. The following table summarizes our methods of vehicle sales in the United States at lease termination, stated as a percentage of total lease vehicle disposals.                                   Year Ended December 31,   2005   2004   2003             Auction                                    Physical      42%       43%       43%             Internet      39%       39%       35%           Sale to dealer      12%       12%       18%           Other (including option exercised by lessee)      7%       6%       4%           We primarily sell our off-lease vehicles through:         •   Physical auctions — We dispose of approximately     half of our off-lease vehicles not purchased at termination by     the lease consumer or dealer, through traditional official     General Motors-sponsored auctions. We are responsible for     handling decisions at the auction, including arranging for     inspections, authorizing repairs and reconditioning and     determining whether bids received at auction should be accepted.       •   Internet auctions — We offer off-lease vehicles     to GM dealers and affiliates through a proprietary internet site     (SmartAuction). This internet sales program was established in     2000 to increase the net sales proceeds from off-lease vehicles     by reducing the time between vehicle return and ultimate     disposition, which in turn would reduce holding costs, and     broaden the number of prospective buyers, thereby maximizing     proceeds. We maintain the internet auction site, set the pricing     floors on vehicles and administer the auction process. We earn a     service fee for every sale. Remarketing fee revenue, primarily     generated through SmartAuction, was $63.5 million,     $57.6 million and $50.8 million as of     December 31, 2005, 2004 and 2003, respectively.     The internet sales program has increased significantly since     inception and was the remarketing channel for nearly half of our     2005 off-lease vehicles disposed of through auction in the     United States.    Lease Residual Risk Management   We are exposed to residual risk on vehicles in the consumer lease portfolio. This lease residual risk represents the possibility that the actual proceeds realized upon the sale of returned vehicles will be lower than the projection of these values used in establishing the pricing at lease inception. The following factors most significantly influence lease residual risk:         •   Used vehicle market — We are at risk due to     changes in used vehicle prices. General economic conditions,     off-lease vehicle supply and new vehicle market prices (of both     GM and other manufacturers) most heavily influence used vehicle     prices.       •   Initial residual value projections — As     previously discussed, we establish residual values at lease     inception by consulting independently published guides. These     values are projections of expected values in the future     (typically between two and four years) based on current     assumptions for the respective make and model. Actual realized     values often differ.       •   Remarketing abilities — Our ability to     efficiently process and effectively market off-lease vehicles     impacts the disposal costs and the proceeds realized from     vehicle sales.       •   General Motors vehicle and marketing programs —     GM influences lease residual results in the following ways:             >   GM provides support to us for     certain residual deficiencies.              >   The brand image and consumer     preference of GM products impact residual risk, as our lease     portfolio consists primarily of GM vehicles.              >   GM marketing programs that may     influence the used vehicle market for GM vehicles, through     programs such as incentives on new vehicles, programs designed     to encourage lessees to terminate their leases early in     conjunction with the acquisition of a new GM vehicle (referred     to as pull ahead programs) and special rate used vehicle     programs.        27    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      The following table summarizes the volume of lease terminations and the average sales proceeds on 36-month scheduled lease terminations in the United States for the years indicated. 36 month terminations represent approximately 69% of our total terminations in 2005.                                 Year ended December 31,   2005   2004   2003             Off-lease vehicles remarketed (in units)      283,480       413,621       610,575           Sales proceeds on scheduled lease terminations (36-month)     ($ per unit)      $14,392       $14,182       $13,313           Our off-lease vehicle remarketing results improved in 2005, as compared to the past few years, primarily as a result of a decline in the volume of vehicles coming off-lease and the fact that the underlying contractual residual values (on the current portfolio) were lower than the residuals established on prior years’ volume. Additionally, we have continued aggressive use of the internet in disposing of off-lease vehicles. This initiative has improved efficiency, reduced costs and ultimately increased the net proceeds on the sale of off-lease vehicles. In 2006, continued improvement in remarketing results is expected as off-lease vehicle supply will continue to decline and the favorable effect of lower contractual residual values continues.   In recent years, the percentage of lease contracts terminated prior to the scheduled maturity date has increased primarily due to GM-sponsored pull ahead programs. Under these marketing programs, consumers are encouraged to terminate leases early in conjunction with the acquisition of a new GM vehicle. The sales proceeds per vehicle on scheduled lease terminations in the preceding table does not include the effect of payments related to the pull ahead programs.   Commercial Financing   Automotive Wholesale Dealer Financing   One of the most important aspects of our financing operations is supporting the sale of GM vehicles through wholesale or floor plan financing, primarily to finance purchases by dealers of new and used vehicles manufactured or distributed by General Motors and, less often, other vehicle manufacturers, prior to sale or lease to the ultimate customer. Wholesale financing represents the largest portion of our commercial financing business, and is the primary source of funding for GM dealers’ purchases of new and used vehicles. In 2005, we financed 6 million new GM vehicles (representing an 82% share of GM sales to dealers). In addition, we financed approximately 180,000 new non-GM vehicles. The following discussion centers on our operations in the United States, which are generally reflective of our global business practices; however, certain countries have unique statutory or regulatory requirements that impact business practices. The effects of such requirements are not significant to our consolidated financial condition, results of operations or cash flows.   Wholesale credit is arranged through lines of credit extended to individual dealers. In general, each wholesale credit line is secured by all vehicles owned by the dealer and, in some instances, by other assets owned by the dealer or the dealer’s personal guarantee. The amount we advance to dealers is equal to 100% of the wholesale invoice price of new vehicles, which includes destination and other miscellaneous charges and, with respect to vehicles manufactured by General Motors and other motor vehicle manufacturers, a price rebate, known as a holdback, from the manufacturer to the dealer in varying amounts stated as a percentage of the invoice price. The advances are made to dealers on the date that the financed vehicles are estimated to be delivered and at the same time interest begins to accrue. Interest on wholesale financing is generally payable monthly. Most wholesale financing is structured to yield interest at a floating rate indexed to the Prime Rate. The rate for a particular dealer is based on, among other things, competitive factors, the amount and status of the dealer’s creditworthiness and various incentive programs.   Under the terms of the credit agreement with the dealer, we may demand payment of interest and principal on wholesale credit lines at any time. However, unless we terminate the credit line or the dealer defaults, we generally require payment of the principal amount financed for a vehicle upon its sale or lease by the dealer to the customer. Ordinarily, a dealer has between one and five days, based on risk and exposure of the account, to satisfy the obligation.   Wholesale financing accounted for $1,120 million, $1,103 million and $878 million of our revenues in 2005, 2004 and 2003, respectively.  28    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      The following table summarizes our wholesale financing of new vehicles and share of GM sales to dealers in markets where we operate.                                                               GMAC volume   Shares of GM sales to dealers               Year ended December 31, (thousands of units)   2005   2004   2003   2005   2004   2003             GM vehicles                                                            North America      3,798       4,153       4,225       80%       81%       80%             International      2,462       2,207       1,892       84%       86%       96%                                 Total GM vehicles      6,260       6,360       6,117       82%       83%       84%                                     Non-GM vehicles      180       198       195                                                           Total wholesale volume      6,440       6,558       6,312                                                     Our wholesale financing continues to be the primary funding source for GM dealer inventories, as 2005 penetration levels in North America remained relatively consistent with 2004 levels, and continue to reflect traditionally strong levels. The decrease in our share of GM sales to dealers for the International portfolio is primarily due to including China and Chevrolet/ Daewoo, which has a comparably lower level of financings as a percentage of GM sales to dealers than other GM brands.   Credit Approval   Prior to establishing a wholesale line of credit, we perform a credit analysis of the dealer. During this analysis, we:         •       review credit reports, financial statements and may obtain bank     references;       •       evaluate the dealer’s marketing capabilities;       •       evaluate the dealer’s financial condition; and       •       assess the dealer’s operations and management.    Based on this analysis, we may approve the issuance of a credit line and determine the appropriate size. The credit lines represent guidelines, not limits. Therefore, the dealers may exceed them on occasion, an example being a dealer exceeding sales targets contemplated in the credit approval process. Generally, the size of the credit line is intended to be an amount sufficient to finance a 60-90 day supply of new vehicles and a 30-60 day supply of used vehicles. Our credit guidelines ordinarily require that advances to finance used vehicles be approved on a unit by unit basis.   Servicing and Monitoring   We service all of the wholesale credit lines in our portfolio as well as the wholesale finance receivables that we have securitized. A statement setting forth billing and account information is prepared by us and distributed on a monthly basis to each dealer. Interest and other non-principal charges are billed in arrears and are required to be paid immediately upon receipt of the monthly billing statement. Dealers remit payments directly to a GMAC office, typically within geographic proximity to the dealer.   Dealers are assigned a credit category based on various factors, including capital sufficiency, financial outlook and credit history. The credit category impacts the amount of the line of credit, the determination of further advances and the management of the account. We monitor the level of borrowing under each dealer’s account daily. When a dealer’s balance exceeds the credit line, we may temporarily suspend the granting of additional credit or increase the dealer’s credit line, following evaluation and analysis of the dealer’s financial condition and the cause of the excess.   Our personnel periodically inspect and verify the existence of dealer vehicle inventories. The timing of the verifications varies and no advance notice is given to the dealer. Among other things, verifications are intended to determine dealer compliance with the financing agreement and confirm the status of our collateral.   Other Commercial Financing   We provide other forms of commercial financing for the automotive industry as well as for companies in other industries. The following describes our other financing markets and products:         •   Automotive dealer term loans — We make loans to     dealers to finance other aspects of the dealership business.     These loans are typically secured by real estate, other     dealership assets and occasionally the personal guarantees of     the individual owner of the dealership. Automotive dealer loans     comprised 2% of our Financing operations’ assets as of     December 31, 2005 consistent with 2004.       •   Automotive fleet financing — Dealers, their     affiliates and other companies may obtain financing to buy     vehicles, which they lease or rent to others. These transactions     represent our fleet financing activities. We generally have a     security interest in these vehicles and in the rental payments.     However, competitive factors may occasionally limit the security     interest in this collateral. Automotive fleet financing     comprised less than 1% of our Financing operations’ assets     as of December 31, 2005 consistent with 2004.       •   Full service leasing products — We offer full     service individual and fleet leasing products in Europe, Mexico,     Australia and New Zealand. In addition to financing the     vehicles, we offer maintenance, fleet and accident management     services, as well   29    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation             as fuel programs, short-term     vehicle rental and title and licensing services. Full service     leasing products comprised 1% of our Financing operations’     assets as of December 31, 2005 consistent with 2004.            •   Specialty     lending —     Through our commercial finance operations, we provide     asset-based lending, equipment finance, structured finance and     factoring services in the United States, the United Kingdom and     Canada to companies in the apparel, textile, automotive supplier     and other industries. Assets related to our specialty lending     activities comprised 3% of our Financing operations’ assets     as of December 31, 2005 consistent with 2004.         Commercial Credit Risk Management   Our credit risk on the commercial portfolio is markedly different than that of our consumer portfolio. Whereas the consumer portfolio represents a homogeneous pool of retail contracts and leases that exhibit fairly predictable and stable loss patterns, the commercial portfolio exposures are less predictable. In general, the credit risk of the commercial portfolio is tied to overall economic conditions in the countries in which we operate. Further, our credit exposure is concentrated in automotive dealerships (primarily GM dealerships), as approximately 66% of the Financing operations’ commercial loan portfolio is related to this industry. Occasionally, GM provides payment guarantees on certain commercial loans and receivables we have outstanding. As of December 31, 2005, approximately $934 million in commercial loans and receivables were covered by a GM guarantee.   Credit risk is managed and guided by policies and procedures that are designed to ensure that risks are accurately assessed, properly approved and continuously monitored. Our individual business units approve significant transactions and are responsible for credit risk assessments (including the evaluation of the adequacy of the collateral). Our individual business units also monitor the credit risk profile of individual borrowers and the aggregate portfolio of borrowers — either within a designated geographic region or a particular product or industry segment. Corporate approval is required for transactions exceeding business unit approval limits. Credit risk monitoring is supplemented at the corporate portfolio level through a periodic review performed by our Chief Credit Officer.   To date, the only commercial receivables that have been securitized and accounted for as off-balance sheet transactions represent wholesale lines of credit extended to automotive dealerships, which historically experience low losses. Since only wholesale accounts have historically been securitized, the amount of losses on our managed portfolio is substantially the same as our on-balance sheet portfolio. As a result, only the on-balance sheet commercial portfolio credit experience is presented in the following table:                                                                           Total   Impaired   Average   Annual charge-offs,       loans   loans (a)   loans   net of recoveries                       Year ended December 31, ($ in millions)   2005   2005   2004   2005   2005   2004   2003                 Wholesale      $20,574       $299       $534       $23,403       $4       $2       $5                       1.45 %     1.91 %             0.02 %     0.01 %     0.02 %             Other commercial financing      10,412       475       664       11,450       33       71       194                       4.56 %     5.52 %             0.29 %     0.59 %     1.41 %                 Total on-balance sheet      $30,986       $774       $1,198       $34,853       $37       $73       $199                       2.50 %     3.00 %             0.11 %     0.18 %     0.53 %                  (a)       Includes loans where it is probable that we will be unable to     collect all amounts due according to the terms of the loan.    Net losses on the wholesale portfolio in 2005 remained at traditionally low levels. Charge-offs in the commercial portfolio decreased as compared to 2004 resulting from a lower amount of charge-offs at our Commercial Finance Group (included in other commercial financing in the preceding table). Impaired loans in the wholesale commercial loan portfolio have also decreased in comparison to December 2004 levels as a result of a decrease in the amounts outstanding in the wholesale lines of credit for certain dealer accounts. In addition, impaired loans have also declined in the other commercial financing portfolio since December 2004. The decrease in allowance coverage for commercial credit losses is consistent with the lower level of charge-offs and a lower amount of loans specifically identified as impaired.   Our allowance for credit losses is intended to cover management’s estimate of incurred losses in the portfolio (refer to the Critical Accounting Estimates section of this MD&A and Note 1 to our Consolidated Financial Statements for further discussion). The  30    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      following table summarizes activity related to the commercial allowance for credit losses for our Financing operations.                               Year ended December 31, (in millions)   2005   2004                 Allowance at beginning of year      $322       $391               Provision for credit losses      (24 )     (3 )             Charge-offs                                Domestic      (37 )     (75 )               Foreign      (13 )     (7 )                 Total charge-offs      (50 )     (82 )                 Recoveries                                Domestic      9       6                 Foreign      4       3                   Total recoveries      13       9                   Net charge-offs      (37 )     (73 )             Impacts of foreign currency translation      (14 )     6               Securitization activity      (2 )     1                   Allowance at end of year      $245       $322               Results of Operations   The following table summarizes the operating results of our Financing operations for the periods indicated. The amounts presented are before the elimination of balances and transactions with our other operating segments.                                         Year ended December 31,                   ($ in millions)   2005   2004   Change   %         Revenue                                          Consumer      $6,540       $6,796       ($256 )     (4 )         Commercial      1,805       1,686       119       7           Operating leases      7,037       6,566       471       7                     Total financing revenue      15,382       15,048       334       2           Interest and discount expense      (9,039 )     (7,175 )     (1,864 )     (26 )         Provision for credit losses      (419 )     (975 )     556       57                     Net financing revenue      5,924       6,898       (974 )     (14 )         Other income      3,440       2,827       613       22           Depreciation expense on operating leases      (5,244 )     (4,828 )     (416 )     (9 )         Noninterest expense      (2,528 )     (2,818 )     290       10           Goodwill impairment      (648 )     —       (648 )     —           Income tax expense      (278 )     (603 )     325       54                 Net income      $666       $1,476       ($810 )     (55 )         Total assets      $194,236       $225,565       ($31,329 )     (14 )         Financing operations earned $666 million, including non-cash goodwill impairment charges of $398 million (after-tax) relating to our Commercial Finance operating segment. Excluding the goodwill impairment charges, operating income for our Financing operations was $1,064 million, a decrease of 28% in comparison to 2004. Operating income decreased primarily due to lower net interest margins as a result of higher borrowing costs. The decline in net interest margins was slightly offset by lower consumer credit provisions, primarily as a result of lower asset levels and the impact of improved used vehicle prices on terminating leases. Net income from International operations remained strong at $408 million in 2005, as compared to $415 million earned in 2004, despite a decrease in net interest margins.   Total financing revenue increased 2% as compared to 2004. The commercial portfolio benefited from an increase in market interest rates as the majority of the portfolio is of a floating rate nature. Operating lease revenue increased year over year as the size of the operating lease portfolio increased by approximately 20% since December 2004. The increase in the portfolio is reflective of GM’s shift of some marketing incentives to consumer leases from retail contracts late in 2004.   The increase in interest and discount expense of $1,864 million is consistent with the overall increase in market interest rates during the year, but also reflective of the widening of our corporate credit spreads as we experienced a series of credit rating actions during the year. The impact of the increased spreads will continue to affect results, as our lower cost debt matures, leaving debt borrowed at higher spreads on the books. Refer to the Funding and Liquidity section of this MD&A for further discussion.   Despite the impact of Hurricane Katrina, the provision for credit losses decreased by 57% in 2005, resulting from a combination of lower consumer asset levels primarily due to an increase in whole loan sales, improved loss performance on retail contracts and improved performance on the non-automotive commercial portfolio. Refer to the Credit Risk discussion within this Financing Operations Section of the MD&A for further discussion.   During the fourth quarter we recognized a non-cash goodwill impairment charge of $398 million (after-tax). The charge relates to our Commercial Finance Group operating segment and, in particular, primarily to the goodwill recognized in connection with the 1999 acquisition of The Bank of New York’s commercial finance business. These charges resulted from annual impairment tests required to be made for all of our reporting units in accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142).  31    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation               Mortgage Operations      Our Mortgage operations are comprised of three separate operating and reporting segments: GMAC Residential Holding Corp. (GMAC Residential), GMAC-RFC Holding Corp. (GMAC-RFC) and GMAC Commercial Holding Corp. (GMAC Commercial Mortgage). The principal activities of the three segments involve the origination, purchase, servicing, sale and securitization of consumer (i.e., residential) and commercial mortgage loans and other mortgage related products (e.g., real estate services). Typically, mortgage loans are originated and sold to investors in the secondary market, including securitization sales.   In March 2005, we transferred ownership of GMAC Residential and GMAC-RFC to a newly formed wholly owned subsidiary holding company ResCap. For additional information please refer to ResCap’s annual report on Form 10-K for the period ended December 31, 2005, filed separately with the SEC, which report is not deemed incorporated into any of our filings under the Securities Act or the Exchange Act. As part of this transfer of ownership, certain agreements were put in place between us and ResCap that restrict ResCap’s ability to declare dividends or prepay subordinated indebtedness owed to us. While we believe that the restructuring of these operations and the agreements between us and ResCap will allow ResCap to access more attractive sources of capital, the agreements limit our ability to return funds for dividends and debt payments.   On August 3, 2005, we announced that we had entered into a definitive agreement to sell a majority equity interest in our commercial mortgage subsidiary, GMAC Commercial Mortgage, to an investor group comprised of Kohlberg Kravis Roberts & Co., Five Mile Capital Partners and Goldman Sachs Capital Partners. GMAC Commercial Mortgage provides a variety of financing products and services, including permanent, interim, mezzanine and construction lending, as well as equity capital and has a servicing portfolio of approximately $276 billion. On March 23, 2006, we completed the sale of 78% of our equity in GMAC Commercial Mortgage. Please refer to Note 25 to our Consolidated Financial Statements for further details.   Industry and Competition   Our Mortgage operations primarily operate in the residential real estate finance industry. The U.S. residential mortgage market has been a growth market for the last several decades. This growth has been driven by a variety of factors including low interest rates, increasing rates of homeownership, greater access to mortgage financing, the development of an efficient secondary market, home price appreciation and the tax advantage of mortgage debt compared to other forms of consumer debt. Origination of residential mortgage loans has expanded rapidly in recent years as a result of historically low interest rates, but slowed in 2004 as interest rates rose. In 2005, approximately $2.8 trillion in residential mortgage loans were funded in the U.S., consistent with 2004 levels and below the $3.8 trillion in 2003.   Prime credit quality mortgage loans are the largest component of the residential mortgage market in the U.S. with loans conforming to the underwriting standards of Fannie Mae and Freddie Mac, Veterans’ Administration-guaranteed loans and loans insured by the Federal Housing Administration representing a significant portion of all U.S. residential mortgage production. Prime credit quality loans that do not conform to the underwriting standards of the government-sponsored enterprises because their original principal amounts exceeded Fannie Mae or Freddie Mac limits or they otherwise did not meet the relevant documentation or property requirements represent a growing portion of the residential mortgage market. Home equity mortgage loans, which are typically mortgage loans secured by a second (or more junior) lien on the underlying property, continue to grow in significance within the U.S. residential real estate finance industry.   The development of an efficient secondary market for residential mortgage loans, including the securitization market, has played an important role in the growth of the residential real estate finance industry. Mortgage-backed and mortgage-related asset-backed securities are issued by private sector issuers as well as by government-sponsored enterprises, primarily Fannie Mae and Freddie Mac.   An important source of capital for the residential real estate finance industry is warehouse lending. These facilities provide funding to mortgage loan originators until the loans are sold to investors in the secondary mortgage loan market.   The global mortgage markets, particularly in Europe, are less mature than the U.S. mortgage market. The historic lack of available sources of liquidity make these markets a potential opportunity for growth. As a result, many of our competitors have recently entered the global mortgage markets.   Our mortgage business operates in a highly competitive environment and faces significant competition from commercial banks, savings institutions, mortgage companies and other financial institutions. In addition, our Mortgage operations earnings are subject to volatility due to seasonality inherent in the mortgage banking industry and volatility in interest rate markets.   U.S. Residential Real Estate Finance   Through our activities at GMAC Residential and GMAC-RFC, we are one of the largest residential mortgage producers and servicers in the U.S., producing approximately $159 billion in residential mortgage loans in 2005 and servicing approximately $355 billion in residential mortgage loans as of December 31, 2005. We are also one of the largest non-agency issuers of mortgage-backed and mortgage-related asset-backed  32    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      securities in the United States, issuing approximately $56.7 billion of these securities in 2005. The principal activities of our U.S. residential real estate finance business include originating, purchasing, selling and securitizing residential mortgage loans, servicing residential mortgage loans for ourselves and others, providing warehouse financing to residential mortgage loan originators and correspondent lenders to originate residential mortgage loans, creating a portfolio of mortgage loans and retained interests from our securitization activities, conducting limited banking activities through GMAC Bank and providing real estate closing services.   Our GMAC Residential segment comprises the portion of our residential real estate finance operations in the U.S. with a greater focus on the direct origination of mortgage loans primarily with consumers of prime credit quality. Most of these loans conform to the underwriting requirements of the Federal National Mortgage Association, which is commonly referred to as Fannie Mae, and the Federal Home Loan Mortgage Corporation, which is commonly referred to as Freddie Mac. Our GMAC-RFC segment comprises the portion of our residential real estate finance operations in the U.S. with a greater focus on the purchase of mortgage loans in the secondary market and the origination of loans through mortgage brokers. Mortgage loans produced in this segment cover a broad spectrum of the credit scale and generally do not conform to the underwriting standards of Fannie Mae or Freddie Mac.   We originate and acquire mortgage loans that generally fall into one of the following five categories:         •   Prime Conforming Mortgage Loans — These are     prime credit quality first-lien mortgage loans secured by     single-family residences that meet or conform to the     underwriting standards established by Fannie Mae or Freddie Mac     for inclusion in their guaranteed mortgage securities programs.       •   Prime Non-Conforming Mortgage Loans — These are     prime credit quality first-lien mortgage loans secured by     single-family residences that either (1) do not conform to     the underwriting standards established by Fannie Mae or Freddie     Mac, because they have original principal amounts exceeding     Fannie Mae and Freddie Mac limits ($359,650 in 2005 and $333,700     in 2004), which are commonly referred to as jumbo mortgage     loans, or (2) have alternative documentation requirements     and property or credit-related features (e.g., higher     loan-to-value or     debt-to-income ratios),     but are otherwise considered prime credit quality due to other     compensating factors.       •   Government Mortgage Loans — These are     first-lien mortgage loans secured by single-family residences     that are insured by the Federal Housing Administration or     guaranteed by the Veterans Administration.       •   Nonprime Mortgage Loans — These are first-lien     and certain junior lien mortgage loans secured by single-family     residences, made to individuals with credit profiles that do not     qualify for a prime loan, have credit-related features that fall     outside the parameters of traditional prime mortgage products or     have performance characteristics that otherwise expose us to     comparatively higher risk of loss.       •   Prime Second-Lien Mortgage Loans — These are     open- and closed-end mortgage loans secured by a second or more     junior lien on single-family residences, which include home     equity mortgage loans.    Our products are offered to customers through the following origination channels:         •   Direct Lending Network — Our direct lending     network consists of retail branches, internet and     telephone-based operations. Our retail network targets customers     desiring face-to-face service. Typical referral sources are     realtors, homebuilders, credit unions, small banks and affinity     groups.       •   Mortgage Brokerage Network — We also originate     residential mortgage loans through mortgage brokers. Loans     sourced by mortgage brokers are funded by us and generally     closed in our name. When originating loans through mortgage     brokers, the mortgage broker’s role is to identify the     applicant, assist in completing the loan application, gather     necessary information and documents and serve as our liaison     with the borrower through the lending process. We review and     underwrite the application submitted by the mortgage broker,     approve or deny the application, set the interest rate and other     terms of the loan and, upon acceptance by the borrower and     satisfaction of all conditions required by us, fund the loan. We     qualify and approve all mortgage brokers who generate mortgage     loans for us, and we continually monitor their performance.       •   Correspondent Lender and other Secondary Market     Purchases — Loans purchased from correspondent     lenders are originated or purchased by the correspondent lenders     and subsequently sold to us. As with our mortgage brokerage     network, we approve any correspondent lenders that participate     in our loan purchase programs.    We also purchase pools of residential mortgage loans from entities other than correspondent lenders, which we refer to as bulk purchases. These purchases are generally made from large financial institutions. In connection with these purchases, we typically conduct due diligence on all or a sampling of the mortgage pool and use our underwriting technology to determine if the loans meet the underwriting requirements of our loan programs.   Underwriting Standards   All mortgage loans that we originate and most of the mortgage loans we purchase are subject to our underwriting guidelines and loan origination standards. When originating mortgage loans directly through our retail branches, or by internet or telephone, or indirectly through mortgage brokers, we follow established lending  33    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      policies and procedures that require consideration of a variety of factors, including:         •       the borrower’s capacity to repay the loan;       •       the borrower’s credit history;       •       the relative size and characteristics of the proposed     loan; and       •       the amount of equity in the borrower’s property (as     measured by the borrower’s     loan-to-value ratio).    Our underwriting standards have been designed to produce loans that meet the credit needs and profiles of our borrowers, thereby creating more consistent performance characteristics for investors in our loans. When purchasing mortgage loans from correspondent lenders, we either re-underwrite the loan prior to purchase or delegate underwriting responsibility to the correspondent lender originating the mortgage loan.   To further ensure consistency and efficiency, much of our underwriting analysis is conducted through the use of automated underwriting technology. We also conduct a variety of quality control procedures and periodic audits to ensure compliance with our origination standards, including our responsible lending standards and legal requirements. Although many of these procedures involve manual reviews of loans, we seek to leverage our technology in further developing our quality control procedures. For example, we have programmed many of our compliance standards into our loan origination systems and continue to use and develop automated compliance technology to mitigate regulatory risk.   Sale and Securitization of Assets   We sell most of the mortgage loans we originate or purchase. In 2005, we sold $149.6 billion in mortgage loans. We typically sell our Prime Conforming Mortgage Loans in sales that take the form of securitizations guaranteed by Fannie Mae or Freddie Mac, and we typically sell our Government Mortgage Loans in securitizations guaranteed by the Government National Mortgage Association, or Ginnie Mae. In 2005, we sold $50.6 billion of mortgage loans to government-sponsored enterprises, or 34% of the total loans we sold, and $99.0 billion to other investors through whole loan sales and securitizations, including both on-balance sheet and off-balance sheet securitizations. We recognized gains on the sale and securitizations of loans of $1,201 million, $788 million and $2,155 million in 2005, 2004 and 2003, respectively. We hold the mortgage loans that we do not sell and the securities and subordinated interests that we retain in our securitizations as part of our investment portfolio. Our sale and securitization activities include developing asset sale or retention strategies, conducting pricing and hedging activities and coordinating the execution of whole loan sales and securitizations.   In addition to cash we receive in exchange for the mortgage loans we sell to the securitization trust, we often retain interests in the securitization trust as partial payment for the loans and generally hold these retained interests in our investment portfolio. These retained interests may take the form of mortgage-backed or mortgage-related asset-backed securities (including senior and subordinated interests), interest-only, principal-only, investment grade, non-investment grade or unrated securities.   Servicing Activities   Although we sell most of the residential mortgage loans that we produce, we generally retain the rights to service these loans. The mortgage servicing rights we retain consist of primary and master servicing rights. Primary servicing rights represent our right to service certain mortgage loans originated or purchased and later sold on a servicing-retained basis through our securitization activities and whole loan sales, as well as primary servicing rights we purchase from other mortgage industry participants. When we act as primary servicer, we collect and remit mortgage loan payments, respond to borrower inquiries, account for principal and interest, hold custodial and escrow funds for payment of property taxes and insurance premiums, counsel or otherwise work with delinquent borrowers, supervise foreclosures and property dispositions and generally administer the loans. Master servicing rights represent our right to service mortgage-backed and mortgage-related asset-backed securities and whole loan packages sold to investors. When we act as master servicer, we collect mortgage loan payments from primary servicers and distribute those funds to investors in mortgage-backed and mortgage-related asset-backed securities and whole loan packages. Key services in this regard include loan accounting, claims administration, oversight of primary servicers, loss mitigation, bond administration, cash flow waterfall calculations, investor reporting and tax reporting compliance. In return for performing primary and master servicing functions, we receive servicing fees equal to a specified percentage of the outstanding principal balance of the loans being serviced and may also be entitled to other forms of servicing compensation, such as late payment fees or prepayment penalties. Our servicing compensation also includes interest income, or the float earned on collections that are deposited in various custodial accounts between their receipt and our distribution of the funds to investors.   The value of our mortgage servicing rights is sensitive to changes in interest rates and other factors (see further discussion in the Critical Accounting Estimates section of this MD&A). We have developed and implemented an economic hedge program to, among other things, mitigate the overall risk of impairment loss due to a change in the fair value of our mortgage servicing rights. In accordance with this economic hedge program, we designate hedged risk as the change in the total fair value of our capitalized mortgage servicing rights. The success or failure of this economic hedging program may have a material effect on our results of operations.  34    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      Warehouse Lending   We are one of the largest providers of warehouse lending facilities to correspondent lenders and other mortgage originators in the United States. These facilities enable those lenders and originators to finance residential mortgage loans until they are sold in the secondary mortgage loan market. We provide warehouse lending facilities for a full complement of residential mortgage loans, including mortgage loans that we acquire through our correspondent lenders. Advances under our warehouse lending facilities are generally fully collateralized by the underlying mortgage loans and bear interest at variable rates. As of December 31, 2005, we had total warehouse line of credit commitments of approximately $17.8 billion, against which we had advances outstanding of approximately $9.0 billion. We purchased approximately 15% of the mortgage loans financed by our warehouse lending facilities in 2005.   Other Real Estate Finance and Related Activities   We are a specialty lender in residential construction finance, residential equity, model home finance, resort finance and health capital. The residential construction finance, residential equity and model home finance businesses all provide capital to residential land developers and homebuilders to finance residential real estate projects for sale, using a variety of capital structures. The resort finance business provides debt capital to resort and timeshare developers and the health capital business provides debt capital to health care providers, primarily in the health care services sector. The success of this business is dependent upon strong underwriting, servicing and risk management capabilities. We have historically retained and serviced most of the specialty loans and investments that we originate. We generated $403 million in revenue in 2005 from these specialty lending activities.   We also provide bundled real estate services to consumers, including real estate brokerage services, full service relocation services, mortgage closing services and settlement services. Through GMAC Bank, which commenced operations in North America in August 2001, GMAC Residential offers a variety of personal investment products to its customers, including consumer deposits, consumer loans and other investment services. GMAC Bank also provides collateral pool certification and collateral document custodial services to third-party customers. With more than $4.1 billion in customer deposits at December 31, 2005, GMAC Bank provides access to additional funding sources. We provide real estate brokerage and full-service relocation to consumers as well as real estate closing services, such as obtaining flood and tax certifications, appraisals, credit reports and title insurance.   Outside the United States, our mortgage operations in the United Kingdom, The Netherlands, Germany, Canada and Mexico provide us with geographic diversity. We originate, acquire, sell and securitize residential mortgage loans in those jurisdictions. We have the largest international presence among our competitors and we are one of the top originators of mortgage loans in the United Kingdom. We generated $783 and $269 million in revenue and income, respectively, in 2005 from our international mortgage business.   Commercial Mortgage   Commercial mortgage products are offered primarily through GMAC Commercial Mortgage. GMAC Commercial Mortgage performs a number of domestic and international commercial mortgage banking activities, including originating, financing, servicing and selling commercial mortgage loans, as well as issuing, purchasing and selling commercial mortgage-backed securities. The lending activities of GMAC Commercial Mortgage include long-term, interim and construction financing for commercial real estate projects and specialized financing products for customers in the health care and hospitality industries. GMAC Commercial Mortgage also performs investment advisory services for third-party institutional investors, such as life insurance companies and public and private pension funds. In addition, through its wholly owned subsidiary, GMAC Commercial Holding Capital Markets Corp (a registered broker-dealer and member of the National Association of Securities Dealers, Inc.), GMAC Commercial Mortgage is engaged in the business of underwriting, private placement, trading and selling of various securities, including tax exempt municipal securities. Finally, GMAC Commercial Mortgage is involved in direct and indirect real estate investment, tax credit syndication activities and asset management services. At December 31, 2005, GMAC Commercial Mortgage provided services through 105 offices in the United States and had operations in Europe, Asia, Canada and Mexico.   Through GMAC Commercial Mortgage Bank, which commenced operations in April 2003, GMAC Commercial Mortgage offers commercial and multifamily mortgage loans and ultimately sells the loans in the secondary market or to an affiliate for final sale or securitization. With approximately $3.5 billion in time deposits at December 31, 2005, GMAC Commercial Mortgage Bank provides access to additional funding sources.  35    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      Mortgage Loan Production, Sales and Servicing   The following summarizes mortgage loan production for the periods indicated.                                       Year ended December 31,       ($ in millions)   2005   2004   2003             Consumer:                                    Principal amount by product type:                                      Prime conforming      $50,047       $45,593       $89,259               Prime non-conforming      55,811       43,473       38,093               Government      4,251       4,834       4,929               Nonprime      35,874       27,880       29,763               Prime second-lien      13,079       11,247       9,176                   Total U.S. production      159,062       133,027       171,220               International      16,539       14,013       7,999                 Total      $175,601       $147,040       $179,219                 Principal amount by origination channel:                                        Retail and direct channels      $36,325       $34,221       $60,292                 Correspondent and broker channels      122,737       98,806       110,928                   Total U.S. production      159,062       133,027       171,220               International      16,539       14,013       7,999                 Total      $175,601       $147,040       $179,219               Number of loans (in units):                                    Retail and direct channels      288,273       282,503       482,270             Correspondent and broker channels      686,887       645,030       729,914                   Total U.S. production      975,160       927,533       1,212,184               International      85,970       75,969       47,805                 Total      1,061,130       1,003,502       1,259,989               Commercial:                                    Principal amount      $29,921       $22,646       $23,719             Number of loans (in units)      2,520       2,356       2,262           The following summarizes the Mortgage operations servicing portfolio for the periods indicated.                                     Year ended December 31,               ($ in millions)   2005   2004   2003             Consumer:                                    Principal amount by product type:                                      Prime conforming      $186,405       $165,577       $153,693               Prime non-conforming      76,980       55,585       43,951               Government      18,098       18,328       17,594               Nonprime      56,373       51,139       45,747               Prime second-lien      17,073       13,718       9,522                   Total U.S. production      354,929       304,347       270,507               International      23,711       19,438       11,721                 Total      $378,640       $323,785       $282,228                 Principal amount by investor composition:                                      Agency      43 %     49 %     54 %             Private investor      51 %     46 %     41 %             Owned and other      6 %     5 %     5 %           Number of loans (in units)      2,965,048       2,769,094       2,610,905             Average loan size ($ per loan)      $129,001       $117,749       $107,592             Weighted average service fee (basis points)      37       38       32               Commercial:                                    Principal by investor composition:                                      Agency      $24,560       $21,061       $19,363               Private investor      240,103       217,280       223,024               Owned and other      11,307       9,113       8,877                 Total      $275,970       $247,454       $251,264                 Number of loans (in units)      59,994       62,065       66,478             Average loan size ($ per loan)      $4,599,960       $3,987,014       $3,779,656             Weighted average service fee (basis points)      6       6       7           Credit Risk Management   As previously discussed, we often sell mortgage loans to third parties in the secondary market subsequent to origination or purchase. While loans are held in mortgage inventory prior to sale in the secondary market, we are exposed to credit losses on the loans. In addition, we bear credit risk through investments in subordinate loan participations or other subordinated interests related to certain consumer and commercial mortgage loans sold to third parties through securitizations. Management estimates credit losses for mortgage loans held for sale and subordinate loan participations and records a valuation allowance when losses are considered probable and estimable. The valuation allowance is included as a component of the fair value and carrying amount of mortgage loans held for sale. As previously discussed, certain loans that are sold in the secondary market are subject to recourse in the event of borrower default. Management closely monitors historical experience, borrower payment activity, current economic trends and other risk factors, and establishes an  36    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      allowance for foreclosure losses that it believes is sufficient to cover incurred foreclosure losses in the portfolio.   We periodically acquire or originate certain finance receivables and loans held for investment purposes. Additionally, certain loans held as collateral for securitization transactions (treated as financings) are also classified as mortgage loans held for investment. We have the intent and ability to hold these finance receivables and loans for the foreseeable future. We bear all or a material portion of the risk of credit loss on finance receivables and loans held for investment throughout the holding period. Credit risk on finance receivables and mortgage loans held for investment is managed and guided by policies and procedures that are designed to ensure that risks are accurately assessed, properly approved and continuously monitored. In particular, we use risk-based loan pricing and appropriate underwriting policies and loan-collection methods to manage credit risk. Management closely monitors historical experience, borrower payment activity, current economic trends and other risk factors, and establishes an allowance for credit losses which is considered sufficient to cover incurred credit losses in the portfolio of loans held for investment.   In addition to credit exposure on the mortgage loans held for sale and held for investment portfolios, we also bear credit risk related to investments in certain asset- and mortgage-backed securities, which are carried at estimated fair value (or at amortized cost for those classified as held to maturity) in our Consolidated Balance Sheet. Typically, our non-investment grade and unrated asset- and mortgage-backed securities provide credit support and are subordinate to the higher-rated senior certificates in a securitization transaction. We hold a substantial portion of the first loss position associated with collateral related to securitized mortgages, collateralized debt obligations and tax-exempt bonds totaling $15.6 billion, $3.6 billion and $1.1 billion, respectively, at December 31, 2005.   We are also exposed to risk of default by banks and financial institutions that are counterparties to derivative financial instruments. These counterparties are typically rated single A or above. This credit risk is managed by limiting the maximum exposure to any individual counterparty and, in some instances, holding collateral, such as cash deposited by the counterparty.   Consumer Credit   The following table summarizes the nonperforming assets in our on-balance sheet held for sale and held for investment residential mortgage loan portfolios for each of the periods presented. Nonperforming assets are nonaccrual loans, foreclosed assets and restructured loans. Mortgage loans are generally placed on nonaccrual status when they are 60 days or more past due, or when the timely collection of the principal of the loan, in whole or in part, is doubtful. Management’s classification of a loan as nonaccrual does not necessarily indicate that the principal of the loan is uncollectible in whole or in part. In certain cases, borrowers make payments to bring their loans contractually current and, in all cases, our mortgage loans are collateralized by residential real estate. As a result, our experience has been that any amount of ultimate loss is substantially less than the unpaid balance of a nonperforming loan.                               Year ended December 31, ($ in millions)   2005   2004                 Nonperforming loans:                                Prime conforming      $10       $17                 Prime non-conforming      361       198                 Government      —       26                 Nonprime (a)      5,731       4,327                 Prime second-lien      85       46                     Total nonperforming loans      6,187       4,614                 Foreclosed assets      501       456                   Total nonperforming assets      $6,688       $5,070               As a % of total loan portfolio      9.70 %     8.79 %                  (a)       Includes $374 and $909 for 2005 and 2004, respectively, of loans     that were purchased as distressed assets, and as such, were     considered nonperforming at the time of purchase.    The following table summarizes the delinquency information for our mortgage loans held for investment portfolio:                                               2005   2004               December 31,       Percent       Percent   ($ in millions)   Amount   of Total   Amount   of Total             Current      $56,576       83.3%       $48,815       86.3%           Past due                                            30 to 59 days      4,773       7.0%       3,348       5.9%             60 to 89 days      1,528       2.2%       1,133       2.0%             90 days or more      2,258       3.3%       1,043       1.8%           Foreclosures pending      1,356       2.0%       1,280       2.3%           Bankruptcies      1,520       2.2%       984       1.7%                                 Total unpaid principal balances      68,011               56,603                   Net premiums      948               1,105                                         Total      $68,959               $57,708                   Our allowance for credit losses is intended to cover management’s estimate of incurred losses in the portfolio (refer to the Critical Accounting Estimates section of this MD&A and Note 1 to our Consolidated Financial Statements for further discussion). The  37   Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      following table summarizes the activity related to the consumer allowance for credit losses for our Mortgage operations.                               Year ended December 31, ($ in millions)   2005   2004                 Allowance at beginning of year      $916       $449               Provision for credit losses      574       957               Charge-offs                                Domestic      (463 )     (459 )               Foreign      (2 )     (45 )                 Total charge-offs      (465 )     (504 )                 Recoveries                                Domestic      37       10                   Net charge-offs      (428 )     (494 )             Impacts of foreign currency translation      3       —               Securitization activity      —       4                   Allowance at end of year      $1,065       $916               Allowance coverage (a)      1.54 %     1.59 %                  (a)       Represents the related allowance for credit losses as a     percentage of total     on-balance sheet     residential mortgage loans.    Our Residential mortgage operations continue to experience increases in non-performing loans and delinquencies as the overall consumer mortgage portfolio continues to season. Credit seasoning of the portfolio refers to the loss pattern that occurs within a pool of mortgage loans as they age. Historical data indicates that loss events generally increase during the first two-to-three years after origination, and thereafter stabilize at a more consistent level. Credit seasoning can vary depending on a variety of factors, including the product mix within the portfolio. The growth and seasoning of the consumer mortgage portfolio is impacted by the use of securitization transactions accounted for as secured financings. Starting in 2001, we structured many of our securitization transactions as secured financings as opposed to our historical use of off-balance sheet transactions. As a result, our on-balance sheet mortgage portfolio has become more seasoned. In addition to the credit seasoning of the portfolio, the level of non-performing loans and delinquencies has also been negatively impacted by specific accounts effected by Hurricane Katrina. During 2005, a provision of $47 million was recorded for mortgage loans held for investment for customers impacted by Hurricane Katrina.   While underlying delinquencies and nonaccrual loans have increased, the provision for credit losses declined in 2005 as compared to the prior year as the rate of increase was less in 2005 than in 2004. In addition, the provision benefited from favorable loss severity and frequency as compared to previous estimates primarily due to the favorable impact of home price appreciation.   Credit Concentrations   We originate and purchase mortgage loans that have contractual features that may increase our exposure to credit risk and thereby result in a concentration of credit risk. These mortgage loans include loans that may subject borrowers to significant future payment increases, create the potential for negative amortization of the principal balance or result in high loan-to-value ratios. These loan products include interest only mortgages, option adjustable rate mortgages, high loan-to-value mortgage loans and teaser rate mortgages. Our total loan production related to these products and our combined exposure related to these products recorded in finance receivables and loans and loans held for sale for the years ended and as of December 31, 2005 and 2004 is summarized as follows:                                                 Unpaid principal       Loan production   as of       for the year   December 31,               ($ in millions)   2005   2004   2005   2004             Interest only mortgages    $ 43,298     $ 15,782     $ 19,361     $ 8,375           Option adjustable rate mortgages      5,077       6       1,114       12           High loan-to-value (100% or more) mortgages      6,610       9,473       13,364       15,076           Below market initial rate (teaser) mortgages      537       638       411       704           Mezzanine loans (characterized by high LTV, IO payments, and     deferred interest)      65       216       154       142                 •   Interest-only mortgages — Allow interest-only     payments for a fixed period of time. At the end of the     interest-only period, the loan payment includes principal     payments and increases significantly. The borrower’s new     payment once the loan becomes amortizing (i.e., includes     principal payments) will be greater than if the borrower had     been making principal payments since the origination of the loan.       •   Option adjustable rate mortgages — Permit a     variety of repayment options. The repayment options include     minimum, interest-only, fully amortizing 30-year and fully     amortizing 15-year payments. The minimum payment option sets the     monthly payment at the initial interest rate for the first year     of the loan. The interest rate resets after the first year, but     the borrower can continue to make the minimum payment. The     interest-only option sets the monthly payment at the amount of     interest due on the loan. If the interest-only option payment     would be less than the minimum payment, the interest-only option     is not available to the borrower. Under the fully amortizing     30-year and 15-year payment options, the borrower’s monthly     payment is set based on the interest rate, loan balance and     remaining loan term.       •   High loan-to-value mortgages — Defined as     first-lien loans with loan-to-value ratios in excess of 100%, or     second-lien loans that when combined with the underlying     first-lien mortgage loan result in a loan-to-value ratio in     excess of 100%.   38    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation            •   Below market rate mortgages — Contain     contractual features that limit the initial interest rate to a     below market interest rate for a specified time period with an     increase to a market interest rate in a future period. The     increase to the market interest rate could result in a     significant increase in the borrower’s monthly payment     amount.       •   Mezzanine loans — Represents a hybrid of debt     and equity financing. Mezzanine financing is typically used to     finance the expansion of existing companies, and it is basically     debt capital that gives the lender the rights to convert to an     ownership or equity interest in the company if the loan is not     paid back in time and in full. It is generally subordinated to     debt provided by senior lenders such as banks and venture     capital companies.    All of the mortgage loans we originate and most of the mortgages we purchase (including the higher risk loans in the preceding table), are subject to our underwriting guidelines and loan origination standards. This includes guidelines and standards that we have tailored for these products and include a variety of factors, including the borrower’s capacity to repay the loan, their credit history and the characteristics of the loan, including certain characteristics summarized in the table that may increase our credit risk. When we purchase mortgage loans from correspondent lenders, we either re-underwrite the loan prior to purchase or delegate underwriting responsibility to the correspondent originating the loan. We believe our underwriting procedures adequately consider the unique risks which may come from these products. We conduct a variety of quality control procedures and periodic audits to ensure compliance with our origination standards, including our criteria for lending and legal requirements. We leverage technology in performing both our underwriting process and our quality control procedures.   Commercial Credit   The primary commercial credit exposures come from our commercial mortgage operations as well as the warehouse and construction lending activities of our residential mortgage operations. Commercial mortgage loans are primarily offered through GMAC Commercial Mortgage. At GMAC Commercial Mortgage, credit risk primarily arises from direct and indirect relationships with borrowers who may default and potentially cause us to incur a loss if we are unable to collect amounts due through loss mitigation strategies. The portion of the allowance for estimated losses on commercial mortgage loans not specifically identified for impairment is based on periodic reviews and analysis of the total portfolio and considers past loan experience, the current credit composition of the total portfolio, historical credit migration, property type diversification, default and loss severity statistics and other relevant factors.   The amount of impaired loans in GMAC Commercial Mortgage’s on-balance sheet held for investment and held for sale commercial loan portfolios amounted to $144 million and $208 million at December 31, 2005 and 2004, respectively. Interest income is not recorded on impaired loans. The reduction in impaired loans from December 31, 2004 to December 31, 2005 is the result of the resolution of certain assets in the portfolio as of December 31, 2004. Actual net charge-offs in GMAC Commercial Mortgage’s on-balance sheet held for investment commercial loan portfolio remained low with $15 million recognized in 2005 and $1 million recognized in 2004.   Our residential mortgage operations have commercial credit exposure through warehouse and construction lending related activities. The following table summarizes the nonperforming assets and net charge-offs in GMAC Residential and GMAC-RFC on-balance sheet held for investment lending receivables portfolio for each of the periods presented. Non-performing lending receivables are nonaccrual loans, foreclosed assets and restructured loans. Lending receivables are generally placed on nonaccrual status when they are 90 days or more past due or when timely collection of the principal of the loan, in whole or in part, is doubtful. Management’s classification of a receivable as nonaccrual does not necessarily indicate that the principal amount of the loan is uncollectible in whole or in part.                               Year ended December 31, ($ in millions)   2005   2004                 Nonperforming lending receivables:                                Warehouse    $ 42       $ 5                 Construction      8       —                 Other      17       2                   Total nonperforming lending receivables      67       7               Foreclosed assets      5       8                   Total nonperforming lending assets    $ 72       $15               As a % of total lending receivables portfolio      0.54 %     0.16 %                                                   Year ended December 31, ($ in millions)   2005   2004   2003                 Charge-offs (recoveries)                                        Lending receivables:                                          Warehouse    $ 1     ($ 3 )   ($ 16 )                 Construction      2       19       3                   Other      4       —       8                     Total net charge-offs    $ 7     $ 16     ($ 5 )             Our allowance for credit losses is intended to cover management’s estimate of incurred losses in the portfolio (refer to the Critical Accounting Estimates section of this MD&A and Note 1 to our Consolidated Financial Statements for further discussion). The allowance for credit losses of the on-balance sheet commercial mortgage loan and mortgage lending receivables portfolios was $216 million and $149 million at December 31, 2005 and 2004, respectively.  39    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      Results of Operations   Net income for our Mortgage operations is summarized as follows:                             Year ended December 31, ($ in millions)   2005   2004                 GMAC Residential      $300       $275               GMAC-RFC      715       629               GMAC Commercial Mortgage      290       204               Other (a)      6       —               Net Income    $ 1,311     $ 1,108                    (a)         Represents certain corporate activities of ResCap, reflected in     Other as described in Note 23 to our Consolidated Financial     Statements.    Our Mortgage operations earned a record $1,352 million, excluding goodwill impairment charges of $41 million (after-tax), an increase of 22% from the $1,108 earned in 2004. These record results reflect increases in both residential and commercial loan production, favorable credit provision, improved mortgage servicing results and higher gains on sales of mortgages. The following describes the results of operations for each of our three mortgage reporting segments, GMAC Residential, GMAC-RFC and GMAC Commercial Mortgage.   GMAC Residential   The following table summarizes the operating results for GMAC Residential for the periods indicated. The amounts presented are before the elimination of balances and transactions with our other operating segments.                                         Year ended December 31,                   ($ in millions)   2005   2004   Change   %         Revenue                                          Total financing revenue      $712       $534       $178       33           Interest and discount expense      (674 )     (272 )     (402 )     (148 )         Provision for credit losses      (3 )     5       (8 )     (160 )                   Net financing revenue      35       267       (232 )     (87 )         Mortgage servicing fees      973       867       106       12           MSR amortization and impairment      (539 )     (775 )     236       30           MSR risk management activities      93       211       (118 )     (56 )                   Net loan servicing income      527       303       224       74           Gains on sale of loans      448       492       (44 )     (9 )         Other income      933       662       271       41           Noninterest expense      (1,421 )     (1,223 )     (198 )     (16 )         Income tax expense      (222 )     (226 )     4       2                 Net income      $300       $275       $25       9               Investment securities      $3,187       $1,735       $1,452       84           Loans held for sale      7,425       6,520       905       14           Loans held for investment, net      7,641       2,372       5,269       222           Mortgage servicing rights, net      3,056       2,683       373       14           Other assets      1,960       1,925       35       2                 Total assets      $23,269       $15,235       $8,034       53           GMAC Residential earned $300 million, representing an increase over the $275 million earned in the prior year. GMAC Residential’s earnings benefited from improved servicing results and higher origination volumes despite increased funding costs and lower industry margins. Production increased despite a relatively flat U.S. residential mortgage market as GMAC Residential continued to increase market share in the U.S.   Total financing revenue increased due to higher asset levels (primarily loans held for investment) as GMAC Residential continued to expand the use of GMAC Bank. The increases in total financing revenue was more than offset by increases in short-term interest rates and the resulting increase in interest and discount expense. Despite increases in loan production volume, GMAC Residential experienced a decline in gains on sale of loans reflecting the impact of lower industry pricing margins.   Net servicing results were favorable as a result of increased mortgage servicing fees due to growth in GMAC Residential’s servicing portfolio in 2005 as compared to 2004. In addition, net servicing income benefited from a reduction in amortization and impairment due to the favorable impact of slower than expected prepayments consistent with observed trends in the portfolio and rising interest rates.   The increase in other income at GMAC Residential relates to interest earned on investments in U.S. Treasury securities, which we utilize as economic hedges for our mortgage servicing rights asset. Noninterest expense was higher as compared to the prior year primarily due to an increase in salaries and commissions related to an increase in loan production and employees and occupancy costs due to opening new locations.   GMAC-RFC   The following table summarizes the operating results for GMAC-RFC for the periods indicated. The amounts presented are before the elimination of balances and transactions with our other operating segments.                                         Year ended December 31,                   ($ in millions)   2005   2004   Change   %         Revenue                                          Total financing revenue      $4,514       $4,300       $214       5           Interest and discount expense      (3,185 )     (2,133 )     (1,052 )     (49 )         Provision for credit losses      (623 )     (983 )     360       37                     Net financing revenue      706       1,184       (478 )     (40 )         Mortgage servicing fees      446       429       17       4           MSR amortization and impairment      (223 )     (240 )     17       7           MSR risk management activities      (33 )     31       (64 )     (206 )                   Net loan servicing income      190       220       (30 )     (14 )         Gains on sale of loans      588       198       390       197           Other income      795       552       243       44           Noninterest expense      (1,183 )     (1,148 )     (35 )     (3 )         Income tax expense      (381 )     (377 )     (4 )     (1 )               Net income      $715       $629       $86       14               Investment securities      $1,782       $2,229       (447 )     (20 )         Loans held for sale      12,135       7,496       4,639       62           Loans held for investment, net      73,653       63,779       9,874       15           Mortgage servicing rights, net      959       683       276       40           Other assets      5,143       4,519       624       14                 Total assets    $ 93,672     $ 78,706     $ 14,966       19          40    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      GMAC-RFC earned $715 million in 2005, representing an increase from the $629 million earned in 2004. Valuation gains on the investment portfolio, favorable trends in credit loss provisions and higher gains on sales of loans mitigated the negative impacts of lower net interest margins and losses related to Hurricane Katrina.   GMAC-RFC’s results were negatively impacted by an increase in interest and discount expense as a result of an increase in short-term interest rates. However, the increase in interest and discount expense was partially offset by a favorable change in the provision for credit losses. The lower provision for loan loss is primarily due to favorable loss severity and frequency of loss as compared to previous estimates primarily resulting from the effects of home price appreciation. Additionally, despite higher delinquency and non-accrual balances in 2005 when compared to 2004, the rate of increase in delinquency and non-accrual balances during 2005 has slowed from the prior year which results in a lower provision expense. Finally, we repurchased significantly fewer loans from gain-on-sale securitization transactions due to credit performance in 2005 when compared to 2004 resulting in lower provision requirements for these loans. These positive impacts on the provision for credit losses were partially offset by the higher provision required for Hurricane Katrina.   Net loan servicing income remained relatively flat as the favorable impact of higher mortgage servicing fees and lower MSR amortization and impairment was offset slightly by negative hedging results. The increase in gains on sales of loans at GMAC-RFC is due to higher overall loan production and the increased volume of off-balance sheet securitizations versus on-balance sheet secured financings. The increase in other income in 2005 is primarily related to the favorable net impact on the valuation of retained interests from updating estimates of future credit losses resulting from favorable credit loss experience and favorable changes in market rates, offset by the reduction in valuation of residual assets affected by Hurricane Katrina. In addition, other income includes an increase in other investment income, primarily related to certain equity investments.   GMAC Commercial Mortgage   The following table summarizes the operating results for GMAC Commercial Mortgage for the periods indicated. The amounts presented are before the elimination of balances and transactions with our other operating segments.                                         Year ended December 31,                   ($ in millions)   2005   2004   Change   %         Revenue                                          Total financing revenue      $710       $461       $249       54           Interest and discount expense      (598 )     (377 )     (221 )     (59 )         Provision for credit losses      (40 )     —       (40 )     —                     Net financing revenue      72       84       (12 )     (14 )         Mortgage servicing fees      195       196       (1 )     —           MSR amortization      (108 )     (97 )     (11 )     (11 )                   Net loan servicing income      87       99       (12 )     (12 )         Gains on sale of loans      164       98       66       67           Other income      1,032       817       215       26           Noninterest expense      (894 )     (823 )     (71 )     (9 )         Goodwill impairment      (64 )     —       (64 )     —           Income tax expense      (107 )     (71 )     (36 )     (51 )               Net income      $290       $204       $86       42               Investment securities      $2,295       $2,119       $176       8           Loans held for sale      9,019       5,918       3,101       52           Loans held for investment, net      2,990       3,776       (786 )     (21 )         Mortgage servicing rights, net      632       524       108       21           Other assets      4,094       3,333       761       23                 Total assets    $ 19,030     $ 15,670     $ 3,360       21           GMAC Commercial Mortgage earned $290 million in 2005, up from the $204 million in net income in 2004. Higher earnings resulted from record loan production and higher asset levels and were achieved despite goodwill impairment charges of $41 million (after-tax).   Net financing revenue was $72 million, down slightly from $84 million in 2004. Increases in loan production and asset levels resulted in higher financing revenue which was offset by higher interest expense and higher provision for credit losses. The increase in credit loss provision was due to specific reserves taken on certain impaired loans.   The increase in gains on sales of loans was primarily due to negative credit-related adjustments recognized in 2004. Other income was favorably impacted by higher gains on certain real estate equity investment sales in 2005, as well as higher investment income and mortgage processing fees. Goodwill charges related to impairment at our affordable housing partnership business. Noninterest expenses also increased primarily due to a higher level of compensation expense.  41    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation               Insurance Operations      Industry and Competition   We operate in a highly competitive environment and face significant competition from insurance carriers, reinsurers, third-party administrators, brokers and other insurance-related companies. Competitors in the property and casualty markets in which we operate consist of large multiline companies and smaller specialty carriers. Our competitors sell directly to customers through the mail or the internet, or use agency sales forces. None of the companies in this market, including us, holds a dominant overall position in these markets.   Through our insurance operations, we provide automobile and homeowners insurance, automobile mechanical protection, reinsurance and commercial insurance. We primarily operate in the United States; however, we also have operations in the United Kingdom, Canada, Mexico, Europe and Latin America.   Factors affecting our personal lines business include overall demographic trends that impact the volume of vehicle owners requiring insurance policies, as well as claims behavior. Since the business is highly regulated in the U.S. by state insurance agencies and primarily by national regulators outside the U.S. differentiation is largely a function of price and service quality. In addition to pricing policies, profitability is a function of claims costs as well as investment income. Although the industry does not experience seasonal trends, it can be negatively impacted by extraordinary weather conditions that can affect frequency and severity of automobile claims.   The Insurance Operations are subject to market pressures which can result in price erosion in personal auto and commercial insurance. In addition, future performance can be impacted by extraordinary weather that can affect frequency and severity of automobile and other contract claims.   While we expect that contract volumes will grow, we are unable to predict if market pricing pressures will not adversely impact future performance.   Our automotive extended service contract business is dependent on new vehicle sales and market penetration.   On January 4, 2006, our Insurance operations purchased MEEMIC Insurance Company, a Michigan-based seller of automotive and homeowner’s insurance to educators, for $325 million. This acquisition was completed for several strategic reasons, including:         •       opportunity to leverage MEEMIC’s business model in other     states.       •       provide access to a successful, hybrid affinity-tailored     distribution mechanism that we can leverage with our existing     affinity groups.    We believe that this acquisition will be complementary to our existing Insurance operations.   Extended Service Contracts   We are a leading provider of automotive extended service contracts with mechanical breakdown and maintenance coverages. Our automotive extended service contracts offer vehicle owners and lessees mechanical repair protection and roadside assistance for new and used vehicles beyond the manufacturer’s new vehicle warranty. These extended service contracts are marketed through automobile dealerships, on a direct response basis and through independent agents in the U.S. and Canada. The extended service contracts cover virtually all vehicle makes and models; however, our flagship extended service contract product is the General Motors Protection Plan. A significant portion of our overall vehicle service contracts is through the General Motors Protection Plan and cover vehicles manufactured by General Motors and its subsidiaries.   Other Consumer Products   We underwrite and market nonstandard, standard and preferred risk physical damage and liability insurance coverages for passenger automobiles, motorcycles, recreational vehicles and commercial automobiles through independent agency, direct response and internet channels. Additionally, we market private-label insurance through a long-term agency relationship with Homesite Insurance, a national provider of home insurance products. We currently operate in 48 states and the District of Columbia in the United States, with a significant amount of our business written in California, Florida, Michigan, New York and North Carolina.   As of December 31, 2005, we had approximately 1.7 million personal lines policy holders. Our personal lines policies are offered on a direct response basis through affinity groups, worksite programs, the internet and through an extensive network of independent agencies. As an example, a significant number (approximately 420,000 as of December 31, 2005) of our policyholders are GM or GM-related persons. Through our relationship with GM, we utilize direct response and internet channels to reach GM’s current employees and retirees, as well as their families and GM dealers and suppliers and their families. We have similar programs that utilize relationships with affinity groups. In addition, we reach a broader market of customers through independent agents and internet channels.   While we underwrite most of the personal lines products we offer, we do not underwrite the homeowners insurance offered through the GMAC Insurance Homeowners Program. The GMAC Insurance Homeowners Program was formed in 2000 through a long-term agency relationship between GMAC Insurance and Homesite  42    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      Insurance, a national provider of home insurance products. The relationship provides for Homesite Insurance to be the exclusive underwriter of homeowners insurance for our direct auto and home insurance customer base, with Homesite Insurance assuming all underwriting risk and administration responsibilities. We receive a commission based on the policies written through this program.   ABA Seguros, one of Mexico’s largest automobile insurers is a subsidiary of GMAC Insurance. ABA Seguros underwrites personal automobile insurance and certain commercial business coverages exclusively in Mexico. In Europe, selected motor insurance risks are assumed by us through programs with Vauxhall, Opel and SAAB vehicle owner relationships. We also sell auto insurance in Ontario and Quebec, Canada.   Our other products include Guaranteed Asset Protection (GAP) Insurance, which allows the recovery of a specified economic loss beyond the insured value. Internationally, our U.K. based Car Care Plan subsidiary sells GAP products and provides automotive extended service contracts to customers via direct and dealer distribution channels, and is a leader in the extended service contract market in Europe. Car Care Plan also operates in Mexico, Brazil and Australia.   Commercial Products   We provide commercial insurance, primarily covering dealers’ wholesale vehicle inventory, and reinsurance products. Internationally, ABA Seguros provides certain commercial business insurance exclusively in Mexico.   We are a market leader with respect to wholesale vehicle inventory insurance. Our wholesale vehicle inventory insurance provides physical damage protection for dealers’ floorplan vehicles. It includes coverage for both GMAC and non-GMAC financed inventory and is available in the U.S. to virtually all new car franchise dealerships.   We also conduct reinsurance operations primarily in the United States market through our subsidiary, GMAC RE, which underwrites diverse property and casualty risks. Reinsurance coverage is primarily insurance for insurance companies, designed to stabilize their results, protect against unforeseen events and facilitate business growth. We primarily provide reinsurance through broker treaties and direct treaties with other insurers, but we also provide facultative reinsurance. Facultative reinsurance allows the reinsured party the option of submitting individual risks and allows the reinsurer the option of accepting or declining individual risks.   Underwriting and Risk Management   We determine the premium rates for our insurance policies and pricing for our extended service contracts based upon an analysis of expected losses using historical experience and anticipated future trends. For example, in pricing our extended service contracts, we make assumptions as to the price of replacement parts and repair labor rates in the future.   In underwriting our insurance policies and extended service contracts, we assess the particular risk involved and determine the acceptability of the risk as well as the categorization of the risk for appropriate pricing. We base our determination of the risk on various assumptions, including, with respect to extended service contracts, assumptions regarding the quality of the vehicles produced and new model introductions.   In some instances, ceded reinsurance is used to reduce the risk associated with volatile businesses such as catastrophe risk in United States dealer floor plan businesses or smaller businesses such as Canadian automobile or European dealer floor plan insurance. In 2005, we ceded approximately 11% of our personal lines insurance premiums to government managed pools of risk. Our personal lines business is covered by traditional catastrophe protection, aggregate stop loss protection and an extension of catastrophe coverage for hurricane events. In addition, loss control techniques such as hail nets or monitoring storm paths to assist dealers in preparing for severe weather help to mitigate loss potential.   We mitigate losses by the active management of claim settlement activities using experienced claims personnel and the evaluation of current period reported claims. Losses for these events may be compared to prior claims experience, expected claims or loss expenses from similar incidents to assess the reasonableness of incurred losses.   Loss Reserves   In accordance with industry and accounting practices and applicable insurance laws and regulatory requirements, we maintain reserves for both reported losses and losses incurred but not reported, as well as loss adjustment expenses. These reserves are based on various estimates and assumptions and are maintained both for business written on a current basis and policies written and fully earned in prior years, to the extent that there continues to be outstanding and open claims in the process of resolution (refer to the Critical Accounting Estimates section of this MD&A and Note 1 to our Consolidated Financial Statements for further discussion). The estimated values of our prior reported loss reserves and changes to the estimated values are routinely monitored by credentialed actuaries. Our reserve estimates are regularly reviewed by management. However, since this analysis requires a high degree of judgment, the ultimate liability may differ from the amount estimated.   Regulatory Matters   As previously disclosed on a Form 8-K filed October 27, 2005, SEC and federal grand jury subpoenas have been served on our entities in connections with industry-wide investigations into practices in the insurance industry relating to loss mitigation insurance products such as finite risk insurance. We are cooperating with the investigation.  43    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      Investments   A significant aspect of our insurance operations is the investment of proceeds from premiums and other revenue sources. We will use these investments to satisfy our obligations with respect to future claims at the time such claims are settled. Investment securities are classified as available for sale and carried at fair value. Holding period losses on investment securities that are considered by management to be other than temporary are recognized in earnings, through a write-down in the carrying value to the current fair value of the investment. Unrealized gains or losses (excluding other than temporary impairments) are included in other comprehensive income, a component of shareholder’s equity. Fair value of fixed income and equity securities is based upon quoted market prices where available.   Our Insurance operations have a Finance Committee, which develops guidelines and strategies for these investments. The guidelines established by this finance committee reflect our risk tolerance, liquidity requirements, regulatory requirements and rating agencies considerations, among other factors. Our investment portfolio is managed by General Motors Asset Management (GMAM). GMAM directly manages certain portions of our insurance investment portfolio and selects, oversees and evaluates specialty asset managers in other areas.   As of December 31, 2005, we had a total insurance investment portfolio with a market value of $7,663 million. Approximately $5,301 million of this amount was invested in fixed income securities and approximately $2,362 of this amount was invested in equity securities.   Financial Strength Ratings   Substantially all of our U.S. insurance operations have a Financial Strength Rating (FSR) and an Issuer Credit Rating (ICR) from A. M. Best Company. The FSR is intended to be an indicator of the ability of the insurance company to meet its senior most obligations to Policyholders. Lower ratings generally result in fewer opportunities to write business as insureds, particularly large commercial insureds and insurance companies purchasing reinsurance, have guidelines requiring high FSR ratings.   On May 10, 2005, A. M. Best downgraded the FSR of our U.S. insurance companies to A- and revised the outlook to negative and on October 14, 2005, indicated the rating was under review with negative implications. These latest actions are a result of concerns over the financial strength of GM and the possible sale of a controlling interest in us to a strategic partner.   Results of Operations   The following table summarizes the operating results of GMAC Insurance for the periods indicated. The amounts presented are before the elimination of balances and transactions with our other operating segments.                                         Year ended December 31,                   ($ in millions)   2005   2004   Change   %         Revenue                                          Insurance premiums and service revenue earned      $3,729       $3,502       $227       6           Investment income      408       345       63       18           Other income      122       136       (14 )     (10 )                   Total revenue      4,259       3,983       276       7           Insurance losses and loss adjustment expenses      (2,355 )     (2,371 )     16       1           Acquisition and underwriting expense      (1,186 )     (1,043 )     (143 )     (14 )         Premium tax and other expense      (86 )     (83 )     (3 )     (4 )                   Income before income taxes      632       486       146       30           Income tax expense      (215 )     (157 )     (58 )     (37 )               Net income      $417       $329       $88       27           Total assets      $12,624       $11,744       $880       7           Insurance premiums and service revenue written      $4,039       $3,956       $83       2                 Combined ratio (a)      93.6 %     95.7 %                              (a)       Management uses combined ratio as a primary measure of     underwriting profitability, with its components measured using     accounting principles generally accepted in the United States of     America. Underwriting profitability is indicated by a combined     ratio under 100% and is calculated as the sum of all reported     losses and expenses (excluding interest and income tax expense)     divided by the total of premiums and service revenues earned and     other income.    Our Insurance operations generated record net income of $417 million in 2005, up $88 million or 27% over the previous record earnings in 2004 of $329 million. The higher net income is evidenced by a decrease in the combined ratio to 93.6% from the prior year of 95.7%, primarily driven by lower incurred losses. The increase reflects a combination of strong results achieved through increased premium revenue, higher capital gains and improved investment portfolio performance. The favorable impact of these items during 2005 was partially mitigated by increased acquisition and underwriting expenses and higher income taxes, commensurate with increased volumes and revenues.   The 6% increase over the prior year insurance premiums and service revenue earned was driven by business growth across our major product lines (domestic and international). Our personal lines operations experienced higher volumes in a highly competitive market, partly driven by the acquisition of several fleet contracts in Mexico. In addition, automotive extended service contracts experienced volume growth, with strong growth outside of the traditional General Motors Protection Plan. Increased earnings were also driven by multi-year extended service contracts and the GAP product written in prior years entering higher earning rate periods.  44    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      This was partially offset by lower revenues for the auto dealer physical damage product due to lower dealer inventories.   The increase in investment income was attributable to higher interest and dividends from a larger portfolio balance through the majority of the year, as well as a higher yield on the fixed income portfolio. In addition, a higher amount of capital gains was realized in comparison to 2004. Certain securities were liquidated in December 2005 in anticipation of the acquisition of MEEMIC Insurance Company, completed on January 4, 2006 with a purchase price of $325 million (refer to Note 25 to our Consolidated Financial Statements).            Critical Accounting Estimates      Accounting policies are integral to understanding our Management’s Discussion and Analysis of Financial Condition and Results of Operations. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) requires management to make certain judgments and assumptions, based on information available at the time of the financial statements in determining accounting estimates used in the preparation of such statements. Our significant accounting policies are described in Note 1 to our Consolidated Financial Statements; critical accounting estimates are described in this section. Accounting estimates are considered critical if the estimate requires management to make assumptions about matters that were highly uncertain at the time the accounting estimate was made and if different estimates reasonably could have been used in the reporting period, or changes in the accounting estimate are reasonably likely to occur from period to period that would have a material impact on our financial condition, results of operations, or cash flows. Our management has discussed the development, selection and disclosure of these critical accounting estimates with the Management Audit Committee of the Board of Directors and the Management Audit Committee has reviewed our disclosure relating to these estimates.   Determination of the Allowance for Credit Losses   The allowance for credit losses is management’s estimate of incurred losses in our consumer and commercial finance receivable and loan portfolios held for investment. Management periodically performs detailed reviews of these portfolios to determine if impairment has occurred and to assess the adequacy of the allowance for credit losses, based on historical and current trends and other factors affecting credit losses. Additions to the allowance for credit losses are charged to current period earnings through the provision for credit losses; amounts determined to be uncollectible are charged directly against the allowance for credit losses, while amounts recovered on previously charged-off accounts increase the allowance. Determination of the allowance for credit losses requires management to exercise significant judgment about the timing, frequency and severity of credit losses which could materially affect the provision for credit losses and, therefore, net income. The methodology for determining the amount of the allowance differs for consumer and commercial portfolios.   The consumer portfolios consist of smaller-balance, homogeneous contracts and loans, divided into two broad categories — automotive retail contracts and residential mortgage loans. Each of these portfolios is further divided by our business units into several pools (based on contract type, underlying collateral, geographic location, etc.), which are collectively evaluated for impairment. Due to the homogenous nature of the portfolios, the allowance for credit losses is based on the aggregated characteristics of the portfolio. The allowance for credit losses is established through a process that begins with estimates of incurred losses in each pool based upon various statistical analyses, including migration analysis, in which historical loss experience believed by management to be indicative of the current environment is applied to the portfolio to estimate incurred losses. In addition, management considers the overall portfolio size and other portfolio indicators (i.e., delinquencies, portfolio credit quality, etc.) as well as general economic and business trends that management believes are relevant to estimating incurred losses.   The commercial loan portfolio is comprised of larger-balance, non-homogeneous exposures within both our Financing and Mortgage operations. These loans are evaluated individually and are risk-rated based upon borrower, collateral and industry-specific information that management believes is relevant to determining the occurrence of a loss event and measuring impairment. Management establishes specific allowances for commercial loans determined to be individually impaired. The allowance for credit losses is estimated by management based upon the borrower’s overall financial condition, financial resources, payment history, and, when applicable, the estimated realizable value of any collateral. In addition to the specific allowances for impaired loans, we maintain allowances that are based on a collective evaluation for impairment of certain commercial portfolios. These allowances are based on historical loss experience, concentrations, current economic conditions and performance trends within specific geographic and portfolio segments.   The determination of the allowance for credit losses is influenced by numerous assumptions. The critical assumptions underlying the allowance for credit losses include: (1) segmentation of loan pools based on common risk characteristics, (2) identification and estimation of portfolio indicators and other factors that management believes are key to estimating incurred credit losses, and (3) evaluation by management of borrower, collateral and geographic information. Management monitors the adequacy of the allowance for credit losses and makes adjustments as the  45    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      assumptions in the underlying analyses change to reflect an estimate of incurred credit losses as of the reporting date, based upon the best information available at that time.   Management has consistently applied the estimation methodologies discussed herein for each of the three years in the period ended December 31, 2005. At December 31, 2005, the allowance for credit losses was $3.1 billion compared to $3.4 billion at December 31, 2004. The provision for credit losses was $1.1 billion for the year ended December 31, 2005, as compared to $2.0 billion for 2004 and $1.7 billion for 2003. Our allowance for credit losses and the provision for credit losses decreased primarily due to a decrease in finance receivables and loans as a result of an increase in whole loan sales, improved loss performance on our consumer portfolio and improved performance on the non-automotive commercial portfolio at our Financing operations.   The $3.1 billion allowance established for credit losses as of December 31, 2005, represents management’s estimate of incurred credit losses in the portfolios based on assumptions management believes are reasonably likely to occur. However, since this analysis involves a high degree of judgment, the actual level of credit losses will vary depending on actual experiences in relation to these assumptions. Accordingly, management estimates a range of reasonably possible incurred credit losses within the consumer and commercial portfolios. Management maintains an allowance for credit losses that it believes represents the best estimate of the most likely outcome within that range.   Valuation of Automotive Lease Residuals   Our Financing operations have significant investments in vehicles in our operating lease portfolio. In accounting for operating leases, management must make a determination at the beginning of the lease of the estimated realizable value (i.e., residual value) of the vehicle at the end of the lease. Residual value represents an estimate of the market value of the vehicle at the end of the lease term, which typically ranges from two to four years. We establish residual values at contract inception by using independently published residual values (as further described in the Lease Residual Risk discussion within the Financing operations section of this MD&A). The customer is obligated to make payments during the term of the lease down to contract residual. However, since the customer is not obligated to purchase the vehicle at the end of the contract, we are exposed to a risk of loss to the extent that the value of the vehicle is below the residual value estimated at contract inception. Management periodically performs a detailed review of the estimated realizable value of leased vehicles to assess the appropriateness of the carrying value of lease assets.   To account for residual risk, we depreciate automotive operating lease assets to estimated realizable value at the end of the lease on a straight-line basis over the lease term. The estimated realizable value is initially based on the residual value established at contract inception. Over the life of the lease, management evaluates the adequacy of the estimate of the realizable value and may make adjustments to the extent the expected value of the vehicle at lease termination changes. Any such adjustments would result in a change in the depreciation rate of the lease asset, thereby impacting the carrying value of the operating lease asset. Overall business conditions (including the used vehicle market), our remarketing abilities and GM’s vehicle and marketing programs may cause management to adjust initial residual projections (as further described in the Lease Residual Risk Management discussion in the Financing operations section of this MD&A). In addition to estimating the residual value at lease termination, we must also evaluate the current value of the operating lease assets and test for the impairment to the extent necessary in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). Impairment is determined to exist if the undiscounted expected future cash flows (including the expected residual value) are lower than the carrying value of the asset.   Our depreciation methodology on operating lease assets considers management’s expectation of the value of the vehicles upon lease termination, which is based on numerous assumptions and factors influencing used automotive vehicle values. The critical assumptions underlying the estimated carrying value of automotive lease assets include: (1) estimated market value information obtained and used by management in estimating residual values, (2) proper identification and estimation of business conditions, (3) our remarketing abilities, and (4) GM’s vehicle and marketing programs. Changes in these assumptions could have a significant impact on the value of the lease residuals. For example, a change in the estimated realizable value of 1% on the U.S. operating lease portfolio could result in a cumulative after-tax earnings impact of $41 million as of December 31, 2005, to be recognized over the remaining term of the lease portfolio. This example does not reflect the myriad of the variables and the impact caused through their interaction, but provides an indication of the magnitude that assumption changes can have on our operating results.   Management has consistently applied the estimation methodology described herein for each of the three years in the period ended December 31, 2005. Our net investment in operating leases totaled $31.2 billion (net of accumulated depreciation of $8.2 billion) at December 31, 2005, as compared to $26.1 billion (net of accumulated depreciation of $7.3 billion) at December 31, 2004. Depreciation expense for the year ended December 31, 2005, was $5.2 billion, as compared to $4.8 billion for 2004 and 2003. During the year, we did not make any material adjustments to the assumptions underlying the automotive operating lease depreciation methodology. The average per unit net sales proceeds on the sale of scheduled off-lease vehicles on 36-month leases in the United States increased to $14,392 for the year ended December 31, 2005, from $14,182 in 2004, and $13,313 in 2003. The improvement in remarketing performance is the result of a decline in the supply of off-lease vehicles and the  46    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      fact that the underlying contractual residual values (on the current portfolio) were lower than the residual values on prior years’ volume (further described in the Lease Residual Risk Management discussion in the Financing operations section of this MD&A).   Valuation of Mortgage Servicing Rights   Mortgage servicing rights represent the capitalized value associated with the right to receive future cash flows in connection with the servicing of mortgage loans. Mortgage servicing rights constitute a significant source of value derived from originating or acquiring mortgage loans. Because residential mortgage loans typically contain a prepayment option, borrowers often elect to prepay their mortgages, refinancing at lower rates during declining interest rate environments. When this occurs, the stream of cash flows generated from servicing is terminated. As such, the market value of residential mortgage servicing rights is very sensitive to changes in interest rates, and tends to decline as market interest rates decline and increase as interest rates rise. Commercial mortgage loans typically restrict prepayment or contain prepayment penalties; therefore, prepayment activity is minimal. As such, commercial mortgage servicing rights are not dependent on prepayment assumptions and are generally not interest rate sensitive. We do not consider commercial mortgage servicing rights valuation a critical accounting estimate and therefore, the following discussion will focus on residential mortgage servicing rights.   We capitalize originated mortgage servicing rights based upon the relative fair market value of the servicing rights inherent in the underlying mortgage loans at the time the loans are sold or securitized. Purchased mortgage servicing rights are capitalized at cost (which approximates the fair market value of such assets) and assumed mortgage servicing rights are recorded at fair market value as of the date the servicing obligation is assumed. The carrying value of mortgage servicing rights is dependent upon whether the asset is hedged or not. Mortgage servicing rights that are hedged with derivatives which receive hedge accounting treatment, as prescribed by Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133), are carried at fair value. Changes in fair value are recognized in current period earnings, generally offset by changes in the fair value of the underlying derivative, if the changes in the value of the asset and derivative are highly correlated. The majority of our mortgage servicing rights are hedged as part of our risk management program. Mortgage servicing rights that are not hedged are carried at the lower of cost or fair value.   Accounting principles generally accepted in the United States of America require that the value of mortgage servicing rights be determined based upon market transactions for comparable servicing assets, or in the absence of representative trade information, based upon other available market evidence and modeled market expectations of the present value of future estimated net cash flows that market participants would expect to be derived from servicing. When benchmark transaction data is not available, management relies on estimates of the timing and magnitude of cash inflows and outflows to derive an expected net cash flow stream, and then discounts this stream using an appropriate market discount rate. Servicing cash flows primarily include servicing fees, float income and late fees, less operating costs to service the loans. Cash flows are derived based on internal operating assumptions which management believes would be used by market participants, combined with market-based assumptions for loan prepayment rates, interest rates, required yields and discount rates. Management considers the best available information and exercises significant judgment in estimating and assuming values for key variables in the modeling and discounting process.   Our approach to estimating the fair value of mortgage servicing rights relies upon internal operating assumptions that we believe market participants would use, such as our specific cost to service a loan and other related cash flows, combined with market-based assumptions for interest rates, discount rates, anticipated yields and loan prepayment speed. Key assumptions utilized in the valuation approach are described as follows:         •   Prepayments — The most significant driver of     mortgage servicing rights value is actual and anticipated     portfolio prepayment behavior. Prepayment speed represents the     rate at which borrowers repay the mortgage loans prior to     scheduled maturity. When mortgage loans are paid or expected to     be paid sooner than originally estimated, the expected future     cash flows associated with servicing the loans are reduced. Our     models project residential mortgage loan payoffs using     prepayment models developed by third-party vendors and measures     model performance by comparing prepayment predictions against     actual portfolio prepayments for the entire portfolio and by     product type.       •   Discount rate — In computing the fair value of     mortgage servicing rights, the cash flows are discounted at an     appropriate risk adjusted rate. We generally establish a     discount rate on the basis of an appropriate option adjusted     spread margin by evaluating the leverage-adjusted spread needed     to generate an acceptable return on the mortgage servicing     rights asset. The option adjusted spread margin is added to a     cost of funds assumption to derive the asset yield. This is     similar in nature to deriving a discount rate assumption based     upon a required risk premium added to a risk-free rate.       •   Base mortgage rate — The base mortgage rate is     intended to represent the current market rate for originated     mortgage loans. It is a key component in estimating prepayment     speeds because the difference between the current base mortgage     rate and the borrower’s loan rate is an indication of an     individual borrower’s incentive (i.e., likelihood) to     refinance. The base mortgage rate assumption is developed     separately for each product based on   47    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation             an analysis of the relationship     between the risk-free interest rate and mortgage rates over time.            •   Cost to     service —     The cost to service is the expected annual expense required by a     market participant to service the loans in the portfolio. In     general, cost to service assumptions are derived by dividing the     sum of all expenses related to servicing loans by the number of     loans serviced. The assumptions used to estimate cost to service     include all default-related costs such as foreclosure,     delinquency, loss mitigation and bankruptcy costs.            •   Volatility —     The volatility assumption utilized in the valuation model is     intended to place a band around the potential interest rate     movements from one period to the next. In order to perform the     valuation, an implied volatility assumption for the mortgage     servicing rights is used. Implied volatility is defined as the     expected volatility implied from the prices at which options on     interest rate swaps, or swaptions, are trading. The volatility     assumption is updated monthly for the change in implied swaption     volatility during the period, adjusted by the ratio of     historical mortgage to swaption volatility.         To ensure that our mortgage servicing rights valuation process results in a fair value that approximates fair values assumed by other market participants in accordance with GAAP, we consider available market and third-party data in arriving at our final estimate of value. We periodically perform a series of reasonableness tests as management deems appropriate, including the following:         •       At a detailed level, reconciliation of actual monthly cash flows     to those projected in the mortgage servicing rights valuation.     Based upon the results of this reconciliation, we assess the     need to modify the individual assumptions used in the monthly     valuation. For 2005 actual servicing cash flows differed from     modeled cash flows by an immaterial amount.       •       Comparison of forecast operations results for the next twelve     month period to net income projected per the discounted cash     flow forecast.       •       Review and comparison of recent bulk acquisition activity.     Market trades are evaluated for reliability and relevancy and     then considered, as appropriate, by evaluating our estimate of     fair value of each significant deal to the traded price.     Currently, there is a lack of comparable transactions between     willing buyers and sellers in the bulk acquisition market, which     are the best indicators of fair value. However, management     continues to monitor and track market activity on an ongoing     basis.       •       Review and comparison of recent flow servicing trades. As with     bulk servicing trades, there are distinct reasons why fair     values of flow market transactions will differ from our fair     value estimate. Some reasons include age/seasoning of product,     perceived profit margin/discount assumed by aggregators, economy     of scale benefits and cross-sell benefits. However, management     continues to monitor and track market activity on an ongoing     basis.       •       Comparison of our fair value price/multiples to peer fair value     price/multiples quoted in external surveys produced by third     parties.    We generally expect our valuation to be within a reasonable range of that implied by each reasonableness test. In the event that management deems the valuation has exceeded these reasonableness tests, we may adjust the mortgage servicing rights valuation accordingly. Mortgage servicing rights are included as an asset in our Consolidated Balance Sheet, with changes in the estimated fair value of mortgage servicing rights included as a component of Mortgage banking income in our Consolidated Statement of Income. At December 31, 2005, we had $4.6 billion outstanding in mortgage servicing rights, including $0.6 billion at GMAC Commercial Mortgage, as compared to $3.9 billion at December 31, 2004. Amortization and impairment of $0.9 billion, $1.1 billion, and $2.0 billion were recognized in 2005, 2004 and 2003, respectively. The decrease in amortization and impairment is the result of an increase in market interest rates in 2005, as compared to the volatile interest rate environment in 2004, resulting in a decrease in actual and expected prepayments.   We evaluate mortgage servicing rights for impairment by stratifying our portfolio on the basis of the predominant risk characteristics (loan type and interest rate). To the extent that the carrying value of an individual stratum exceeds its estimated fair value, the mortgage servicing rights asset is considered to be impaired. Impairment that is considered to be temporary is recognized through the establishment of (or an increase in) a valuation allowance, with a corresponding unfavorable effect on earnings. If it is later determined that all or a portion of the temporary impairment no longer exists for a particular stratum, the valuation allowance is reduced, with a favorable effect on earnings.   We perform an evaluation of the mortgage servicing rights asset to determine the amount of the valuation allowance unlikely to be recovered through future interest rate increases. Based on the results of these evaluations, we recognized other than temporary impairment on the mortgage servicing rights asset of $55 million in 2005. This amount was based on a statistical analysis of historical changes in mortgage and other market interest rates to determine the amount of mortgage servicing rights asset value increase with only a remote probability of occurring. The $55 million in other than temporary impairment was reflected by a reduction in both the gross carrying value of the mortgage servicing rights asset and the corresponding valuation allowance. The reduction to the valuation allowance related to the other than temporary impairment reduces the maximum potential future increase to the mortgage servicing rights carrying value (under lower of cost or market accounting). However, the recognition of other than temporary impairment has no impact on the net carrying value of the asset or on earnings.  48    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      The assumptions used in modeling expected future cash flows of mortgage servicing rights have a significant impact on the fair value of mortgage servicing rights and potentially a corresponding impact to earnings. For example, a 10% increase in the constant prepayment assumptions would have negatively impacted the fair value of the residential mortgage servicing rights asset by $183 million or approximately 5% as of December 31, 2005. This sensitivity is hypothetical and is designed to highlight the magnitude a change in assumptions could have. The calculation assumes that a change in the constant prepayment assumption would not impact other modeling assumptions. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities. In addition, the factors that may cause a change in the prepayment assumption may also positively or negatively impact other areas (i.e., decreasing interest rates while increasing prepayments would likely have a positive impact on mortgage loan production volume and gains recognized on the sale of mortgage loans).   At December 31, 2005, based upon the market information obtained, we determined that our mortgage servicing rights valuations and assumptions were reasonable and consistent with what an independent market participant would use to value the asset.   Valuation of Interests in Securitized Assets   When we securitize automotive retail contracts, wholesale finance receivables, mortgage loans and mortgage-backed securities, we typically retain an interest in the sold assets. These interests may take the form of asset- and mortgage-backed securities (including senior and subordinated interests), interest-only, principal-only, investment grade, non-investment grade, or unrated securities. We retain an interest in these transactions to provide a form of credit enhancement for the more highly rated securities, or because it is more economical to hold these interests as opposed to selling. In addition to the primary securitization activities, our mortgage operations purchase mortgage-backed securities, interest-only strips and other interests in securitized mortgage assets. In particular, we have mortgage broker-dealer operations that are in the business of underwriting, private placement, trading and selling of various mortgage-backed securities. As a result of these activities, we may hold investments (primarily with the intent to sell or securitize) in mortgage-backed securities similar to those retained by us in securitization activities. Interests in securitized assets are accounted for as investments in debt securities pursuant to Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115). Our estimate of the fair value of these interests requires management to exercise significant judgment about the timing and amount of future cash flows of the securities.   Interests in securitized assets that are classified as trading or available for sale are valued on the basis of external dealer quotes, where available. External quotes are not available for a significant portion of these assets (approximately 70% to 80%), given the relative illiquidity of such assets in the market. In these circumstances, valuations are based on internally-developed models, which consider recent market transactions, experience with similar securities, current business conditions, analysis of the underlying collateral and third-party market information, as available. In conjunction with the performance of such valuations, management determined that the assumptions and the resulting valuations of asset- and mortgage-backed securities were reasonable and consistent with what an independent market participant would use to value the positions. In addition, we have certain interests in securitized assets (approximating $92 million) that are classified as held to maturity. Investments classified as held to maturity are carried at amortized cost and are periodically reviewed for impairment. At December 31, 2005 and 2004, the total interests in securitized assets approximated $5.0 billion and $5.4 billion, respectively.   Estimating the fair value of these securities requires management to make certain assumptions based upon current market information. The following describes the significant assumptions impacting future cash flow, and therefore the valuation of these assets.         •   Prepayment Speeds — Prepayment speeds are     primarily impacted by changes in interest rates. As interest     rates rise, prepayment speeds generally slow and as interest     rates decrease, prepayment speeds generally accelerate. Similar     to mortgage servicing rights, estimated prepayment speeds     significantly impact the valuation of our residential     mortgage-backed securities because increases in actual and     expected prepayment speed significantly reduce expected cash     flows from these securities. For certain securities, management     is able to obtain market information from parties involved in     the distribution of such securities to estimate prepayment     speeds. In other cases, management estimates prepayment speeds     based upon historical and expected future prepayment rates. In     comparison to residential mortgage-backed securities, prepayment     speeds on the automotive asset-backed securities are not as     volatile and do not have as significant an earnings impact due     to the relative short contractual term of the underlying     receivables and the fact that many of these receivables have     below-market contractual rates due to     GM-sponsored special     rate incentive programs.       •   Credit Losses — Expected credit losses on     assets underlying the asset- and mortgage-backed securities     also significantly impact the estimated fair value of the     related residual interests we retain. Credit losses can be     impacted by many economic variables including unemployment,     housing valuation and regional factors. The type of loan product     and the interest rate environment are also key variables     impacting the credit loss assumptions. For certain securities,     market information for similar investments is available to     estimate credit losses and collateral defaults     (e.g., dealer-quoted credit spreads). For other securities,     future credit losses are estimated using internally-developed     credit loss models, which   49    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation             generate indicative credit losses     on the basis of our historical credit loss frequency and     severity.            •   Discount     Rate —     Discount rate assumptions are primarily impacted by changes in     the assessed risk on the sold assets or similar assets and     market interest rate movements. Discount rate assumptions are     determined using data obtained from market participants, where     available, or based on current relevant treasury rates plus a     risk-adjusted spread, based on analysis of historical spreads on     similar types of securities.            •   Interest     Rates —     Estimates of interest rates on variable- and adjustable-rate     contracts are based on spreads over the applicable benchmark     interest rate using market-based yield curves. The movement in     interest rates can have a significant impact on the valuation of     retained interests in floating-rate securities.         Asset- and mortgage-backed securities are included as a component of investment securities in our Consolidated Balance Sheet. Changes in the fair value of asset- and mortgage-backed securities held for trading are included as a component of investment income in our Consolidated Statement of Income. For the year ended December 31, 2005, net increases in the fair value of asset- and mortgage-backed securities held for trading totaled $131 million, compared to net increases of $35 million for the year ended December 31, 2004. The changes in the fair value of asset- and mortgage-backed securities available for sale is recorded in other comprehensive income, a component of shareholder’s equity in our Consolidated Balance Sheet. In the event that management determines that other than temporary impairment should be recognized related to asset- and mortgage-backed securities available for sale, such amounts are recognized in investment income in our Consolidated Statement of Income. We recognized $16 million, $12 million, and $57 million in other than temporary impairment on interests in securitized assets for the years ended 2005, 2004 and 2003, respectively.   Similar to mortgage servicing rights, changes in model assumptions can have a significant impact on the carrying value of interests in securitized assets. Note 8 to our Consolidated Financial Statements summarizes the impact on the fair value due to a change in key assumptions for the significant categories of interests in securitized assets as of December 31, 2005. The processes and assumptions used to determine the fair value of interest in securitized assets have been consistently applied and are considered by management to result in a valuation that fairly states the assets and which is not inconsistent with what a market participant would use to value the positions.   Determination of Reserves for Insurance Losses and Loss Adjustment Expenses   Our Insurance operations include an array of insurance underwriting, including personal lines, automotive extended service contracts, assumed reinsurance and commercial coverages, that creates a liability for unpaid losses incurred (which is further described in the Insurance operations section of this MD&A). The reserve for insurance losses and loss adjustment expenses represents an estimate of our liability for the unpaid cost of insured events that have occurred as of a point in time. More specifically, it represents the accumulation of estimates for reported losses and an estimate for losses incurred but not reported, including claims adjustment expenses.   The techniques and methods we use in estimating insurance loss reserves are generally consistent with prior years and are based on a variety of methodologies. GMAC Insurance’s claim personnel estimate reported losses based on individual case information or average payments for categories of claims. An estimate for current incurred but not reported claims is also recorded based on the expected loss ratio for a particular product which also considers significant events that might change the expected loss ratio, such as severe weather events and the estimates for reported claims. These estimates of the reserves are reviewed regularly by the product line management, by actuarial and accounting staffs and ultimately by senior management.   GMAC Insurance’s actuaries assess reserves for each business at the lowest meaningful level of homogeneous data within each type of insurance, such as general or product liability and auto physical damage. The purpose of these assessments is to confirm the reasonableness of the reserves carried by each of the individual subsidiaries and product lines, and thereby, the insurance operations overall carried reserves. The selection of an actuarial methodology is judgmental and depends on variables such as the type of insurance, its expected payout pattern and the manner in which claims are processed. Special characteristics such as deductibles, reinsurance recoverable, or special policy provisions are considered in the reserve estimation process. Estimates for salvage and subrogation recoverable are recognized at the time losses are incurred and netted against the provision for losses. Our reserves include a liability for the related costs that are expected to be incurred in connection with settling and paying the claim. These loss adjustment expenses are generally established as a percentage of loss reserves. Our reserve process considers the actuarially indicated reserves based on prior patterns of claim incurrence and payment as well as the degree of incremental volatility associated with the underlying risks for the types of insurance and represents management’s best estimate of the ultimate liability. Since the reserves are based on estimates, the ultimate liability may be more or less than our reserves. Any necessary adjustments, which may be significant, are included in earnings in the period in which they are deemed necessary. Such changes may be material to the results of the operations and financial condition and could occur in a future period.   Our determination of the appropriate reserves for insurance losses and loss adjustment expense for significant business components  50    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      is based on numerous assumptions that vary based on the underlying business and related exposure:         •   Personal Auto — Auto insurance losses are     principally a function of the number of occurrences     (i.e., accidents or thefts) and the severity     (e.g., the ultimate cost of settling the claim) for each     occurrence. The number of incidents is generally driven by the     demographics and other indicators or predictors of loss     experience of the insured customer base, including geographic     location, number of miles driven, age, sex, type and cost of     vehicle and types of coverage selected. The severity of each     claim, within the limits of the insurance purchased, is     generally random and settles to an average over a book of     business, assuming a broad distribution of risks. Changes in the     severity of claims have an impact on the reserves established at     a point in time. Changes in bodily injury claim severity are     driven primarily by inflation in the medical sector of the     economy. Changes in auto physical damage claim severity are     caused primarily by inflation in auto repair costs, auto parts     prices and used car prices. However, changes in the level of the     severity of claims paid may not necessarily match or track     changes in the rate of inflation in these various sectors of the     economy.       •   Extended Service Contracts — Extended service     contract losses in the U.S. and abroad are generally reported     and settled quickly through dealership service departments,     resulting in a relatively small balance of outstanding claims at     any point in time relative to the volume of claims processed     annually. Mechanical service contract claims are primarily     comprised of parts and labor for repair, or replacement of the     affected components or systems. Changes in the cost of     replacement parts and labor rates will impact the cost of     settling claims. Considering the short time frame between a     claim being incurred and paid, changes in key assumptions     (e.g., part prices, labor rates) will have a minimal impact     on the loss reserve as of a point in time. The loss reserve     amount is influenced by the estimate of the lag between vehicles     being repaired at dealerships and the claim being reported by     the dealership.       •   Assumed Reinsurance — The assumed reinsurance     losses generally are from contracts with regional insurers and     facultative excess of loss agreements with national writers     within the United States and personal auto in Europe. The     reserve analysis is performed at a group level. A group can be     an individual contract or a group of similar contracts,     depending mostly upon contract size and the type of business     being insured and coverages provided. Some considerations that     can impact reserve estimates are changes in claim severity     (e.g., building costs, auto repair costs, wage inflation,     medical costs) as well as changes in the legal and regulatory     environment.    At December 31, 2005 and 2004, our reserve for insurance losses and loss adjustment expenses totaled $2.5 billion. Insurance losses and loss adjustment expenses totaled $2.4 billion for the years ended December 31, 2005 and 2004 and was a slight increase from $2.3 billion in 2003. As of December 31, 2005, we concluded that our insurance loss reserves were reasonable and appropriate based on the assumptions and data used in determining the estimate. However, as insurance liabilities are based on estimates, the actual claims ultimately paid may vary from such estimates.            Funding and Liquidity      Funding Sources and Strategy   Our liquidity and our ongoing profitability is, in large part, dependent upon our timely access to capital and the costs associated with raising funds in different segments of the capital markets. Over the past several years, our funding strategy has focused on the development of diversified funding sources across a global investor base, both public and private and, as appropriate, the extension of debt maturities. In addition, we maintain a large cash reserve ($20 billion at December 31, 2005) including certain marketable securities that can be utilized to meet our obligations in the event of any market disruption. As part of our cash management strategy, from time to time we repurchase previously issued debt but do so in a manner that does not compromise overall liquidity. This multifaceted strategy, combined with a continuous prefunding of requirements, is designed to enhance our ability to meet our obligations.   The diversity of our funding sources enhances funding flexibility, limits dependence on any one source of funds and results in a more cost effective strategy over the longer term. In developing this approach, management considers market conditions, prevailing interest rates, liquidity needs and the desired maturity profile of our liabilities. This strategy has helped us maintain liquidity during periods of weakness in the capital markets, changes in our business or changes in our credit ratings. Despite our diverse funding sources and strategies, our ability to maintain liquidity may be affected by certain risk factors (see Risk Factors described in Item 1A, beginning on page 1).  51    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      The following table summarizes outstanding debt by funding source, including Commercial Mortgage, which has been classified as reporting segment held for sale in our Consolidated Balance Sheet, for the periods indicated:                                   Outstanding           December 31, ($ in millions)   2005   2004                 Commercial paper      $524       $8,395               Institutional term debt      83,076       105,894               Retail debt programs      34,482       38,706               Secured financings      124,657       91,957               Bank loans and other      15,979       22,734                     Total debt (a)      258,718       267,686               Customer deposits (b)      11,013       5,755               Off-balance sheet securitizations: (c)                                Retail finance receivables      3,165       5,057                 Wholesale loans      20,724       20,978                 Mortgage loans      91,860       65,829                     Total funding      385,480       365,305               Less: cash reserves (d)      (19,976 )     (22,718 )                   Net funding      $365,504       $342,587                   Leverage ratio per covenant (e)      7.5:1       8.6:1                   Funding Commitments                            ($ in billions)                                Bank liquidity facilities (f)      $47.0       $59.4                 Secured funding facilities (g)      $126.8       $59.3                    (a)         Excludes fair value adjustment as described in Note 13 to     our Consolidated Financial Statements.   (b)         Includes consumer and commercial bank deposits and dealer     wholesale deposits.   (c)         Represents net funding from securitizations of retail and     wholesale automotive receivables and mortgage loans accounted     for as sales further described in Note 8 to our     Consolidated Financial Statements.   (d)         Includes $15.8 cash and cash equivalents and $4.2 invested in     marketable securities at December 31, 2005.   (e)         As described in Note 13 to our Consolidated Financial     Statements, our liquidity facilities and certain other funding     facilities contain a leverage ratio covenant of 11.0:1, which     excludes from debt, securitization transactions that are     accounted for on-balance sheet as secured financings (totaling     $94,346 and $75,230 at December 31, 2005 and     December 31, 2004, respectively). Our debt to equity     ratio was 11.9:1 and 12.0:1, at December 31, 2005 and     December 31, 2004, respectively, as determined by     accounting principles generally accepted in the United States of     America, which was the former basis for the leverage ratio     covenant.   (f)         Represents both committed and uncommitted bank liquidity     facilities. Refer to Note 13 to our Consolidated Financial     Statements for details.   (g)         Represents both committed and uncommitted secured funding     facilities. Includes commitments with third-party asset-backed     commercial paper conduits as well as forward flow sale     agreements with third parties and repurchase facilities. Refer     to Note 13 to our Consolidated Financial Statements for     details.    In the second and third quarters of 2005, our unsecured debt ratings (excluding ResCap) were lowered to a non-investment grade rating by three of the four nationally recognized rating agencies that rate us (refer to the discussion in this section on Credit Ratings of this MD&A for further information). These downgrades were a continuation of a series of credit rating actions over the past few years caused by concerns as to the financial outlook of GM, including its overall market position in the automotive industry and its burdensome health care obligations, as well as the uncertainty surrounding the auto parts supplier Delphi and its impact on GM’s financial condition. As a result of these rating actions, our unsecured credit spreads widened to unprecedented levels in 2005. In anticipation of, and as a result of, these credit rating actions, we modified our diversified funding strategy to focus on secured funding and automotive whole loan sales. These funding sources are generally not directly affected by ratings on unsecured debt and therefore offer both stability in spread and access to the market. In 2005, secured funding and whole loan sales represented 90% of our U.S. automotive term funding in comparison to 46% in 2004. The increased use of whole loan sales is part of the migration to an originate and sell model for the U.S. automotive finance business. In 2005, we executed $15 billion in full risk transfer transactions, predominately whole loan sales, and entered into two long-term commitment arrangements. Under these commitment arrangements, we are obligated to sell $33 billion in retail automotive receivables with commitments from third parties to purchase up to $64 billion over the next five years.   In addition, through our banking activities in our mortgage and automotive operations, bank deposits (certificates of deposits and brokered deposits) have become an important funding source for us. We have also been able to diversify our unsecured funding through the formation of ResCap. ResCap, a direct wholly owned subsidiary, was formed as the holding company of our residential mortgage businesses and in the second quarter of 2005 successfully achieved an investment grade rating (separate from GMAC) and issued $4 billion of unsecured debt. Following the bond offering, ResCap closed a $3.5 billion syndication of its bank facilities in July 2005. This syndication consisted of a $1.75 billion syndicated term loan, an $875 million syndicated line of credit committed through July 2008 and an $875 million syndicated line of credit committed through July 2006. In addition, in the fourth quarter of 2005 ResCap filed a $12 billion shelf registration statement in order to offer senior and/or subordinated debt securities and has issued $3 billion (including $1.75 billion issued in February 2006) in unsecured debt to investors with a portion of the proceeds from the notes used to repay a portion of intercompany borrowings. These facilities are intended to be used primarily for general corporate and working capital purposes, as well as to repay affiliate borrowings, thus providing additional liquidity.   As previously disclosed, on March 23, 2006, we completed the sale of 78% of our equity in GMAC Commercial Mortgage. Under the terms of the transaction, we received $8.8 billion at closing which is comprised of sale proceeds and repayment of  52    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      intercompany debt, thereby increasing our liquidity position and reducing the amount of funding required. Please refer to Note 25 to our Consolidated Financial Statements for further details.   The change of focus in the funding strategy has allowed us to maintain adequate access to capital and a sufficient liquidity position despite reductions in and limited access to traditional unsecured funding sources (i.e., commercial paper, term debt, bank loans and lines of credit) due to the deterioration in our unsecured credit rating. Unsecured sources most impacted by the reduction in our credit rating have been our commercial paper programs, the term debt markets, certain bank loan arrangements primarily in Mortgage and International Automotive operations, as well as Fannie Mae custodial borrowing arrangements at GMAC Residential.   A further reduction of our credit ratings could increase borrowing costs and further constrain our access to unsecured debt markets, including capital markets for retail debt. In addition, a further reduction of our credit ratings could increase the possibility of additional terms and conditions contained in any new or replacement financing arrangements as well as impacting elements of certain existing secured borrowing arrangements. However, our funding strategy has increased our focus on expanding and developing diversified secured funding sources and increased use of automotive whole loan sales that are not directly impacted by ratings on our unsecured debt.   With limited access to traditional unsecured funding sources, management will continue to diversify and expand our use of asset-backed funding and we believe that our funding strategy will provide sufficient access to the capital markets to meet our short- and medium-term funding needs. Notwithstanding the foregoing, management believes that the current ratings situation and outlook increases the level of risk to our long-term ability to sustain the current level of asset originations. Management continuously assesses this matter and is seeking to mitigate the increased risk by exploring whether actions could be taken that would provide a basis for rating agencies to evaluate our financial performance in order to provide us with ratings separate of those assigned to GM. On October 17, 2005, GM made an announcement that it is exploring the possible sale of a controlling interest in us to a strategic partner, with the goal of strengthening our credit grade rating and renewing our access to low-cost financing. Currently, Moody’s, DBRS, Fitch and Standard & Poor’s assign a different credit rating to us than they do to GM, with all four agencies having outlooks on our rating as evolving, developing or possible downgrade. There can be no assurance that any such actions by GM or us would be taken or that such actions, if taken, would be successful in achieving or maintaining, in some cases, a split rating from the rating agencies.   As described in Footnote 1 to our Consolidated Financial Statements and in the Supplementary Financial Data section of this document, we have restated our Consolidated Statement of Cash Flows for the specified periods, which resulted in certain reclassifications between operating and investing cash flows. These restatements have no effect on our financial condition or results of operations and we believe that the restatements will not adversely affect our outstanding indebtedness or our ability to access our liquidity facilities in any material respects. While it is possible that a lender could attempt to impose additional conditions or challenge our access to certain of our liquidity facilities citing these cash flow restatements, we believe that any such challenge would be unsuccessful.   Credit Ratings   The cost and availability of unsecured financing is influenced by credit ratings, which are intended to be an indicator of the creditworthiness of a particular company, security, or obligation. Lower ratings generally result in higher borrowing costs as well as reduced access to capital markets. This is particularly true for certain term debt institutional investors whose investment guidelines require investment grade term ratings and for short-term institutional investors (money market investors in particular) whose investment guidelines require the two highest rating categories for short-term debt. Substantially all of our debt has been rated by nationally recognized statistical rating organizations. Concerns over the competitive and financial strength of GM, including how it will fund its burdensome health care liabilities and uncertainties at Delphi, have resulted in a series of credit rating actions, which commenced late in 2001. In the second and third quarters of 2005, Standard & Poor’s, Fitch and Moody’s downgraded GMAC’s (excluding ResCap) senior debt to a non-investment grade rating with DBRS continuing to maintain an investment grade rating on our senior debt. On October 3, 2005, Standard & Poor’s placed our ratings on CreditWatch with negative implications. Subsequently, on October 10, 2005, Standard & Poor’s affirmed the CreditWatch for our ratings but the implications changed from negative to developing which means that the ratings could be raised or lowered. On October 10, 2005, Moody’s placed our senior unsecured ratings under review for a possible downgrade and on October 17, 2005, Moody’s announced a change in the review status to direction uncertain from review for possible downgrade. In addition, Moody’s placed our Non-Prime short term rating on review for possible upgrade. On March 16, 2006, Moody’s placed our senior unsecured ratings under review for a possible downgrade following GM’s announcement that it would delay filing its annual report on Form 10-K with the SEC. On October 17, 2005, Fitch placed our ratings on Rating Watch Evolving. On October 11, 2005, DBRS placed our ratings under review with developing implications and affirmed the review status on October 17, 2005. These latest ratings actions are a result of GM’s announcement on October 17 that it is exploring the possible sale of a controlling interest in us to a strategic partner. On March 16, 2006, Moody’s placed our senior unsecured ratings under review for a possible downgrade following GM’s announcement that it will delay filing its annual report on Form 10-K with the SEC.  53   Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      The following table summarizes our current ratings, outlook and the date of last rating or outlook change by the respective nationally recognized rating agencies.                                 Commercial   Senior           Rating Agency   Paper   Debt   Outlook   Date of Last Action             Fitch         B        BB        Evolving     September 26, 2005 (a)           Moody’s         Not-Prime        Ba1        Possible downgrade     August 24, 2005 (b)           S&P         B-1        BB        Developing     May 5, 2005 (c)           DBRS         R-2 (low)        BBB (low)        Developing     August 2, 2005 (d)                (a)       Fitch downgraded our senior debt to BB from BB+, affirmed the     commercial paper rating of B, and on October 17, 2005,     placed the ratings on Rating Watch Evolving.   (b)       Moody’s lowered our senior debt to Ba1 from Baa2,     downgraded the commercial paper rating to Not-Prime from     Prime-2, on     October 17, 2005, changed the review status of the     long-term debt ratings to direction uncertain and on     March 16, 2006, changed the review status of the senior     debt ratings to possible downgrade.   (c)       Standard & Poor’s downgraded our senior debt to BB     from BBB–, downgraded the commercial paper rating to     B-1 from     A-3, and on     October 10, 2005, changed the outlook to CreditWatch with     developing implications.   (d)       DBRS downgraded our senior debt to BBB (low) from BBB,     downgraded the commercial paper rating to     R-2 (low) from     R-2 (middle), and on     October 11, 2005, placed the ratings under review with     developing implications and affirmed the review status on     October 17, 2005.    In addition, ResCap, our indirect wholly owned subsidiary, has investment grade ratings (separate from GMAC) from the nationally recognized rating agencies. The following table summarizes ResCap’s current ratings, outlook and the date of the last rating or outlook change by the respective agency.                                 Commercial   Senior           Rating Agency   Paper   Debt   Outlook   Date of Last Action             Fitch         F3        BBB-        Evolving     September 26, 2005 (a)           Moody’s         P3        Baa3        Possible downgrade     August 24, 2005 (b)           S&P         A-3        BBB-        Developing     June 9, 2005 (c)           DBRS         R-2 (middle)        BBB        Developing     June 9, 2005 (d)                (a)       Fitch downgraded the senior debt of ResCap to BBB- from BBB,     downgraded the commercial paper rating to F3 from F2, and on     October 17, 2005, placed the ratings on Rating Watch     Evolving.   (b)       Moody’s downgraded the senior debt of ResCap to Baa3 from     Baa2, downgraded the commercial paper rating to P3 from P2, on     October 17, 2005, changed the review status of the     long-term debt ratings to direction uncertain and on     March 16, 2006, changed the review status of the senior     debt ratings to possible downgrade.   (c)       Standard & Poor’s initial ratings for ResCap were     assigned, and on October 10, 2005, S&P changed the     outlook to CreditWatch with developing implications.   (d)       DBRS initial ratings for ResCap were assigned, and on     October 11, 2005, DBRS placed the ratings under review     with developing implications and affirmed the review status on     October 17, 2005.    Derivative Financial Instruments   In managing the interest rate and foreign exchange exposures of a multinational finance company, we utilize a variety of interest rate and currency derivative financial instruments. As an end user of these financial instruments, we are in a better position to expand our investor base and to minimize our funding costs, enhancing our ability to offer attractive, competitive financing rates to our customers. Our derivative financial instruments consist primarily of interest rate swaps, futures and options, currency swaps, and forwards used to hedge related assets or funding obligations. The use of these instruments is further described in Note 16 to our Consolidated Financial Statements.   Derivative financial instruments involve, to varying degrees, elements of credit risk in the event a counterparty should default, and market risk, as the instruments are subject to rate and price fluctuations. Credit risk is managed through periodic monitoring and approval of financially sound counterparties and through limiting the potential credit exposures to individual counterparties to predetermined exposure limits. Market risk is inherently limited by the fact that the instruments are used for risk management purposes only, and therefore, generally designated as hedges of assets or liabilities. Market risk is also managed on an ongoing basis by monitoring the fair value of each financial instrument position and further by measuring and monitoring the volatility of such positions, as further described in the Market Risk section of this MD&A.            Off-balance Sheet     Arrangements      We use off-balance sheet entities as an integral part of our operating and funding activities. The arrangements include the use of qualifying special purpose entities (QSPEs) and variable interest entities (VIEs) for securitization transactions, mortgage warehouse facilities and other mortgage-related funding programs. The majority of our off-balance sheet arrangements consist of securitization transactions similar to those used by many other financial institutions.  54   Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      The following table summarizes assets carried off-balance sheet in these entities.                           December 31, ($ in billions)   2005   2004             Securitization (a)                            Retail finance receivables      $6.0       $5.6             Wholesale loans      21.4       21.3             Mortgage loans      93.7       71.2             Collateralized debt obligations (b)      3.5       3.3             Tax-exempt related securities      1.1       1.1               Total securitization      125.7       102.5           Other off-balance sheet activities                            Mortgage warehouse      0.6       0.3             Other mortgage      0.2       3.5           Total off-balance sheet activities      $126.5       $106.3                (a)       Includes only securitizations accounted for as sales under     SFAS 140, as further described in Note 8 to our     Consolidated Financial Statements.   (b)       Includes securitization of mortgage-backed securities, some of     which are backed by securitized mortgage loans as reflected in     the above table.    Securitization   As part of our ongoing operations and overall funding and liquidity strategy, we securitize consumer automotive finance retail contracts, wholesale loans, mortgage loans, commercial mortgage securities, asset-backed securities, real estate investment trust debt and tax-exempt related securities. Securitization of assets allows us to diversify funding sources by enabling us to convert assets into cash earlier than what would have occurred in the normal course of business and to support the core activities of our Financing and Mortgage operations relative to originating and purchasing loans. Termination of our securitization activities would reduce funding sources for both our Financing and Mortgage operations and disrupt the core mortgage banking activity, adversely impacting our operating profit. As an example, an insolvency event for our parent would curtail our ability to utilize certain of our automotive wholesale loan securitization structures as a source of funding in the future.   Information regarding our securitization program is further described in Note 8 to our Consolidated Financial Statements. As part of this program, assets are generally sold to our bankruptcy-remote subsidiaries. These bankruptcy-remote subsidiaries are separate legal entities that assume the risk and reward of ownership of the receivables. Neither we nor these subsidiaries are responsible for the other entities’ debts, and the assets of the subsidiaries are not available to satisfy the claims of us or our creditors. In turn, the bankruptcy-remote subsidiaries establish separate trusts to which they transfer the assets in exchange for the proceeds from the sale of asset- or mortgage-backed securities issued by the trust. The trusts’ activities are generally limited to acquiring the assets, issuing asset- or mortgage-backed securities, making payments on the securities and periodically reporting to the investors. Due to the nature of the assets held by the trusts and the limited nature of each trust’s activities, most trusts are QSPEs in accordance with Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS 140). In accordance with SFAS 140, assets and liabilities of the QSPEs are generally not consolidated in our Consolidated Balance Sheet and therefore, we account for the transfer of assets into the QSPE as a sale.   Certain of our securitization transactions, while similar in legal structure to the transactions described in the foregoing (i.e., the assets are legally sold to a bankruptcy-remote subsidiary), do not meet the isolation and control criteria of SFAS 140 and, are therefore, accounted for as secured financings. As secured financings, the underlying automotive finance retail contracts or mortgage loans remain in our Consolidated Balance Sheet with the corresponding obligation (consisting of the debt securities issued) reflected as debt. We recognize income on the finance receivables and loans, and interest expense on the securities issued in the securitization and provide for credit losses as incurred over the life of the securitization. Approximately $98.7 billion and $81.1 billion of finance receivables, automotive leases and loans were related to secured financings at December 31, 2005 and 2004, respectively. Refer to Note 13 to our Consolidated Financial Statements for further discussion.   The increase in the amount of mortgage loans carried in off-balance sheet facilities since December 2004, reflects GMAC-RFC’s increased use of securitization transactions accounted for as sales versus those accounted for as secured financings in order to take advantage of certain market conditions which make it more economical to securitize a portion of the credit risk on nonprime and home equity products than to retain them on-balance sheet.   As part of our securitization program, we typically agree to service the transferred assets for a fee and we may earn other related ongoing income. We may also retain a portion of senior and subordinated interests issued by the trusts; for transactions accounted for as sales, these interests are reported as investment securities in our Consolidated Balance Sheet and are disclosed in Note 6 to our Consolidated Financial Statements. Subordinate interests typically provide credit support to the more highly rated senior interests in a securitization transaction and may be subject to all or a portion of the first loss position related to the sold assets. The amount of the fees earned and the levels of retained interests that we maintain are disclosed in Note 8 to our Consolidated Financial Statements.   We also purchase derivative financial instruments in order to facilitate securitization activities, as further described in Note 16 to our Consolidated Financial Statements.  55    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      Our exposure related to the securitization trusts is generally limited to cash reserves held for the benefit of investors in the trusts’ retained interests and certain purchase obligations. The trusts have a limited life and generally terminate upon final distribution of amounts owed to investors or upon exercise by us, as servicer, of its cleanup call option when the servicing of the sold contracts becomes burdensome. In addition, the trusts do not invest in our equity or any of our affiliates. In certain transactions, limited recourse provisions exist that allow holders of the asset- or mortgage-backed securities to put those securities back to us.   Our tax-exempt related securitizations include GMAC Commercial Mortgage’s tender option bond (TOB) and tax exempt conduit (TEC) programs. Under either program, we acquire long-term bonds, deposit them into a QSPE (TOB or TEC Trust), securitize them with a put option and resell the newly created short-term notes or certificates to third-party investors. The put option generally allows the holder of the short-term notes or certificates to put back its interest to the liquidity bank or remarketing agent for cash at any time (TOB) or upon failed remarketing (TEC). We are not obligated to repurchase or redeem the short-term notes or certificates before maturity. However, should the remarketing agent be unable to remarket the short-term notes or certificates, the Trustee would liquidate the TOB or TEC Trust assets, which could result in losses to us.   We generally do not guarantee any securities issued by the trusts. However, we have guaranteed repayment of principal and interest associated with certain commercial mortgage securitization transactions. We typically have also retained an investment related to such securitizations that is subordinate to the guarantees. Guarantee losses would be incurred in the event that losses on the underlying collateral exceed our subordinated investment (see Note 24 to our Consolidated Financial Statements and the Guarantees section in this MD&A for further information). Expiration dates range from 2006 through the expected life of the asset pool.   We have also entered into agreements to provide credit loss protection for certain high loan-to-value (HLTV) mortgage loan securitization transactions. We are required to perform on our guaranty obligation when the security credit enhancements are exhausted and losses are passed through to investors. The guarantees terminate the first calendar month during which the security aggregate note amount is reduced to zero (see Note 24 to our Consolidated Financial Statements and the Guarantees section in this MD&A for further information).   Other Off-Balance Sheet Activities   We also use other off-balance sheet entities for operational and liquidity purposes, which are in addition to the securitization activities that are part of the transfer and servicing of financial assets under SFAS 140 (as described in the previous section). The purposes and activities of these entities vary, with some entities classified as QSPEs under SFAS 140 and others, whose activities are not sufficiently limited to meet the QSPE criteria of SFAS 140, considered to be VIEs and accounted for in accordance with FASB Interpretation No. 46R, Consolidation of Variable Interest Entities (FIN 46R).   We may also act as a counterparty in derivative financial instruments with these entities to facilitate transactions. Although representing effective risk management techniques, these derivative financial instrument positions do not qualify for hedge accounting treatment as the assets or liabilities that are economically hedged are carried off-balance sheet. As such, these derivative financial instruments are reported in our Consolidated Balance Sheet at fair value, with valuation adjustments reflected in our Consolidated Statement of Income on a current period basis and are disclosed in Note 16 to our Consolidated Financial Statements. Included in our derivative financial instrument positions are credit basis swaps held by third-party banks covering $0 and $183 million in mortgage loans at December 31, 2005 and 2004, respectively.   We do not guarantee debt issued in connection with any of our off-balance sheet facilities, nor guarantee liquidity support (to the extent applicable) that is provided by third-party banks. Further, there are limited recourse provisions that would permit holders to put debt obligations back to us. In the event that liquidity banks fail to renew their commitment (which commitments may be subject to periodic renewal) and we are unable to find replacement liquidity support or alternative financing, the outstanding commercial paper would be paid with loans from participating banks, and proceeds from the underlying assets would be used to repay the banks. Finally, none of these entities related to our off-balance sheet facilities owns stock in us or any of our affiliates.   Our more significant off-balance sheet entities are described as follows:         •   Interests in real estate partnerships — Our     Mortgage operations syndicate investments in real estate     partnerships to unaffiliated investors and, in certain     partnerships, guarantee the timely payment of a specified return     to those investors. Returns to investors in the partnerships we     syndicate are derived from tax credits and tax losses generated     by underlying operating partnership entities that develop, own     and operate affordable housing properties throughout the United     States. We have variable interests in the underlying operating     partnerships (primarily in the form of limited partnership     interests) where we are not the primary beneficiary of and, as a     result, are not required to consolidate these entities under     FIN 46R. Assets outstanding in these partnerships     approximated $6.5 billion at December 31, 2005.     Our maximum exposure to loss related to these partnerships is     $682 million.       •   New Center Asset Trust (NCAT) — NCAT is a QSPE     that was established for the purpose of purchasing and holding     privately issued asset-backed securities created in our     automotive finance asset securitization program, as previously     described. NCAT   56    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation             funds the activity through the     issuance of asset-backed commercial paper. NCAT acquires the     asset-backed securities from special purpose trusts established     by our limited purpose bankruptcy-remote subsidiaries. As of     December 31, 2005, NCAT had $10.9 billion in     asset-backed securities, which were fully supported by     commercial paper. We act as administrator of NCAT to provide for     the administration of the trust. NCAT maintains a     $18.5 billion revolving credit agreement characterized as a     liquidity and receivables purchase facility to support its     issuance of commercial paper (see Note 13 to our     Consolidated Financial Statements). The assets underlying the     NCAT securities are retail finance receivables, wholesale loans     and operating leases that are securitized as a part of our     automotive finance funding strategies. As such, the     $10.9 billion of NCAT securities outstanding at     December 31, 2005, are considered in the non-mortgage     securitization amounts presented in the table on page 52.         Purchase Obligations and Options   Certain of the structures related to securitization transactions and other off-balance sheet activities contain provisions, which are standard in the securitization industry, where we may (or, in limited circumstances, are obligated to) purchase specific assets from the entities. Our purchase obligations relating to off-balance sheet transactions are as follows:         •   Representations and warranties obligations — In     connection with certain asset sales and securitization     transactions, we typically deliver standard representations and     warranties to the purchaser regarding the characteristics of the     underlying transferred assets. These representations and     warranties conform to specific guidelines, which are customary     in securitization transactions. These clauses are intended to     ensure that the terms and conditions of the sales contracts are     met upon transfer of the assets. Prior to any sale or     securitization transaction, we perform due diligence with     respect to the assets to be included in the sale to ensure that     they meet the purchaser’s requirements, as expressed in the     representations and warranties. Due to these procedures, we     believe that the potential for loss under these arrangements is     remote. Accordingly, no liability is reflected in our     Consolidated Balance Sheet related to these potential     obligations. The maximum potential amount of future payments we     could be required to make would be equal to the current balances     of all assets subject to such securitization or sale activities.     We do not monitor the total value of assets historically     transferred to securitization vehicles or through other asset     sales. Therefore, we are unable to develop an estimate of the     maximum payout under these representations and warranties.    Representations and warranties made by us in off-balance sheet arrangements relate to the required characteristics of the receivables (e.g., contains customary and enforceable provisions, is secured by an enforceable lien, has an original term of no less than x months and no greater than y months, etc.) as of the initial sale date. Purchasers rely on these representations and warranties, which are common in the securitization industry, when purchasing the receivables. In connection with mortgage assets, it is common industry practice to include assets in a sale of mortgage loans before we have physically received all of the original loan documentation from a closing agent, recording office, or third-party register. In these cases, the loan origination process is completed through the disbursement of cash and the settlement process with the consumer; however, all of the loan documentation may not have been received by us and, in some cases, delivered to custodians that hold them for investors. When the documentation process is not yet complete, a representation is given that documents will be delivered within a specified number of days after the initial sale date.   Loans for which there are trailing or defective legal documents generally perform as well as loans without such administrative complications. Such loans merely fail to conform to the requirements of a particular sale. Upon discovery of a breach of a representation, the loans are either corrected in a manner conforming to the provisions of the sale agreement, replaced with a similar mortgage loan that conforms to the provisions, or investors are made whole by us through the purchase of the mortgage loan at a price determined by the related transaction documents, consistent with industry practice.   We purchased $29 million in mortgage assets and $0 of automotive receivables under these provisions in 2005 and $564 million of mortgage assets and $1 million of automotive receivables under these provisions in 2004. The majority of purchases under representations and warranties occurring in 2005 and 2004 resulted from the inability to deliver underlying mortgage documents within a specified number of days after the initial sale date. The remaining purchases occurred due to a variety of non-conformities (typically related to clerical errors discovered after sale in the post-closing review).         •    Administrator or servicer actions — In our     capacity as servicer, we covenant, in certain automotive     securitization transaction documents, that we will not amend or     modify certain characteristics of any receivable after the     initial sale date (e.g., amount financed, annual percentage     rate, etc.). In addition, we are required to service sold     receivables in the same manner in which we service owned     receivables. In servicing our owned receivables, we may make     changes to the underlying contracts at the request of the     borrower, for example, because of errors made in the origination     process or in order to prevent imminent default as a result of     temporary economic hardship (e.g., borrower requested deferrals     or extensions). When we would otherwise modify an owned     receivable in accordance with customary servicing practices,     therefore, we are required to modify a sold and serviced     receivable, also in accordance with customary servicing     procedures. If the modification is not otherwise permitted by     the securitization transaction documents,   57    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation             we are required to purchase such     serviced receivable that has been sold. We purchased     $76 million and $75 million in automotive receivables     under these provisions in 2005 and 2004, respectively.            •   Limited recourse     obligations —     Under certain commercial mortgage facilities, there are     eligibility criteria relating to the post-sale delinquency     status of an asset and the length of time permitted between the     date of sale to the mortgage warehouse facility and the ultimate     date of securitization. If these criteria are not met, the     beneficial interest holder may have the option to put the     affected assets back to one of our consolidated     bankruptcy-remote affiliates, based on terms provided in the     facilities’ legal documentation. We purchased $0 and     $212 million of commercial mortgage assets under these     provisions in 2005 and 2004, respectively.         Our purchase options relating to off-balance sheet transactions are as follows:         •   Asset performance conditional calls  — In our     mortgage off-balance sheet transactions, we typically retain the     option (but not an obligation) to purchase specific assets that     become delinquent beyond a specified period of time, as set     forth in the transaction legal documents (typically     90 days). We report affected assets when the purchase     option becomes exercisable. Assets are purchased after the     option becomes exercisable when it is in our best economic     interest to do so. We purchased $364 million and     $137 million of mortgage assets under these provisions in     2005 and 2004, respectively.       •   Third-party purchase calls — Unrelated third     parties acquire mortgage assets through the exercise of     third-party purchase call options. Prior to September 30,     2004, at the point when the third-party agreed to purchase     affected assets, we recorded the assets in our Consolidated     Balance Sheet and became obligated to exercise the call, deliver     the mortgages to the purchaser and to deliver the     purchasers’ funds for the benefit of holders of beneficial     interests which were supported by the affected mortgage loans.     Sale treatment was previously recognized under paragraph 9     of SFAS 140 for the transactions to which these calls     apply. This third-party purchase call was exercised on     approximately $8.5 billion and $30.3 billion of     mortgage assets in 2005 and 2004, respectively. Effective     September 30, 2004, we modified our accounting treatment     for assets transferred subject to a third-party purchase call     (refer to Note 1 to our Consolidated Financial Statements     for further details).       •   Cleanup calls — In accordance with     SFAS 140, we retain a cleanup call option in securitization     transactions that allows the servicer to purchase the remaining     transferred financial assets, once such assets or beneficial     interests reach a minimal level and the cost of servicing those     assets or beneficial interests become burdensome in relation to     the benefits of servicing (defined as a specified percentage of     the original principal balance). We purchased $2.9 billion     and $4.1 billion in assets under these cleanup call     provisions in 2005 and in 2004, respectively.    When purchases of assets from off-balance sheet facilities occur, either as a result of an obligation to do so, or upon us obtaining the ability to acquire sold assets through an option, any resulting purchase is executed in accordance with the legal terms in the facility or specific transaction documents. In most cases, we record no net gain or loss as the provisions for the purchase of specific assets in automotive receivables and mortgage asset transactions state that the purchase price is equal to the unpaid principal balance (i.e., par value) of the receivable, plus any accrued interest thereon. An exception relates to cleanup calls, which may result in a net gain or loss. In these cases, we record assets when the option to purchase is exercisable, as determined by the legal documentation. Any difference between the purchase price and amounts paid to discharge third-party beneficial interests is remitted to us through the recovery on the related retained interest. Any resulting gain or loss is recognized upon the exercise of a cleanup call option.  58    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation               Guarantees      We have entered into arrangements that contingently require payments to non-consolidated third parties that are defined as guarantees. The following table summarizes primary categories of guarantees, with further qualitative and quantitative information in Note 24 to our Consolidated Financial Statements:                                 Carrying       Maximum   value of   December 31, 2005 ($ in millions)   liability   liability             Securitizations and sales      $2,318       $20           Agency loan program      6,196       —           Agency/construction lending      847       2           Guarantees for repayment of     third-party debt      393       —           Repurchase guarantees      256       —           Standby letters of credit      135       3           Other guarantees      108       3                 •   Agency loan program — Our Mortgage operations     deliver loans to certain agencies that allow streamlined loan     processing and limited documentation requirements. In the event     any loans delivered under these programs reach a specified     delinquency status, we may be required to provide certain     documentation or, in some cases, repurchase the loan or     indemnify the investor for any losses sustained.       •   Securitizations and sales — Under certain     mortgage securitization and sales transactions, we have agreed     to guarantee specific amounts depending on the performance of     the underlying assets. In particular, these guarantees relate to     particular commercial mortgage securitizations, agency loans     sold with recourse, high     loan-to-value     securitizations, and sales of mortgage-related securities.       •   Agency/construction lending — We guarantee the     repayment of principal and interest on certain construction     loans and on long-term fixed rate agency loans.       •   Guarantees for repayment of third-party debt —     Under certain arrangements, we guarantee the repayment of     third-party debt obligations in the case of default. Some of     these guarantees are collateralized by letters of credit.       •   Repurchase guarantees — We have issued     guarantees to buyers of certain mortgage loans whereby in the     event that a closing condition or document deficiency is     identified by an investor after the closing, we may be required     to indemnify the investor in the event the loan becomes     delinquent.       •   Standby letters of credit — Letters of credit     are issued by our Financing and Mortgage operations that     represent irrevocable guarantees of payment of specified     financial obligations of a client and which are generally     collateralized by assets.    In addition to these guarantees, we have standard indemnification clauses in some of our funding arrangements that would require us to pay lenders for increased costs due to certain changes in laws or regulations. Furthermore, our Mortgage operations sponsor certain agents who originate mortgage loans under government programs and we have guaranteed uninsured losses resulting from the actions of the agents. As the nature of these exposures is unpredictable and not probable, management is not able to estimate a liability for the guarantees in these arrangements.            Aggregate Contractual     Obligations      The following table provides aggregated information about our outstanding contractual obligations, including Commercial Mortgage, as of December 31, 2005, that are disclosed elsewhere in our Consolidated Financial Statements.                                                         Payments due by period                   Less than       More than   December 31 2005, ($ in millions)   Total   1 Year   1-3 Years   3-5 Years   5 Years             Description of obligation:                                                    Debt                                                      Unsecured (a)      $134,591       $43,546       $38,118       $16,400       $36,527               Secured      124,657       42,932       21,902       2,433       57,390             Mortgage purchase and sale commitments      28,152       24,619       3,463       —       70             Lending commitments      25,875       18,500       2,213       669       4,493             Commitments to remit excess cash flows on certain loan portfolios      4,305       —       —       —       4,305             Commitments to sell retail automotive receivables      33,000       9,000       12,000       12,000       —             Lease commitments      824       201       304       161       158             Commitments to provide capital to equity method investees      1,037       553       90       107       287             Purchase obligations      231       141       77       13       —                   Total      $352,672       $139,492       $78,167       $31,783       $103,230                (a)       Amount reflects the remaining principal obligation and excludes     fair value adjustment of $2 and unamortized discount of $530.   59   Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      The foregoing table does not include our reserves for insurance losses and loss adjustment expenses, which total $2.5 billion as of December 31, 2005. While payments due on insurance losses are considered contractual obligations because they relate to insurance policies issued by us, the ultimate amount to be paid for an insurance loss is an estimate, subject to significant uncertainty. Furthermore, the timing on payment is also uncertain; however, the majority of the balance is expected to be paid out in less than five years.   The following provides a description of the items summarized in the preceding table of contractual obligations:         •   Debt — Amounts represent the scheduled maturity     of debt at December 31, 2005, assuming that no early     redemptions occur. For debt issuances without a stated maturity     date (i.e., Demand Notes) the maturity is assumed to occur     within one year. The maturity of secured debt may vary based on     the payment activity of the related secured assets. Debt     issuances that are redeemable at or above par, during the     callable period, are presented at the stated maturity date. The     amounts presented are before the effect of any unamortized     discount or fair value adjustment. Refer to Note 13 to our     Consolidated Financial Statements for additional information on     our debt obligations.       •   Mortgage purchase and sale commitments — As     part of our Mortgage operations, we enter into commitments to     originate, purchase, and sell mortgages and mortgage-backed     securities. Refer to Note 24 to our Consolidated Financial     Statements for additional information on our mortgage purchase     and sale commitments.       •   Lending commitments — Both our Financing and     Mortgage operations have outstanding revolving lending     commitments with customers. The amounts presented represent the     unused portion of those commitments, as of     December 31, 2005, that the customers may draw upon in     accordance with the lending arrangement. Refer to Note 24     to our Consolidated Financial Statements for additional     information on our lending commitments.       •   Commitments to remit excess cash flows on certain loan     portfolios — We are committed to remitting, under     certain shared execution arrangements, cash flows that exceed a     required rate of return less credit loss reimbursements. This     commitment is accounted for as a derivative. Refer to     Note 24 to our Consolidated Financial Statements for     additional information on our shared execution arrangements.       •   Commitments to sell retail automotive     receivables — We have entered into agreements with     third-party banks to sell automotive retail receivables in which     we transfer all credit risk to the purchaser (retail automotive     portfolio sales transactions). Refer to Note 24 to our     Consolidated Financial Statements for additional information on     our commitments to remit excess cash flows on certain loan     portfolios.       •   Lease commitments — We have obligations under     various operating lease arrangements (primarily for real     property) with noncancelable lease terms that expire after     December 31, 2005. Refer to Note 24 to our     Consolidated Financial Statements for additional information on     our lease commitments.       •   Commitments to provide capital to equity method     investees — As part of arrangements with specific     private equity funds, we are obligated to provide capital to     equity method investees. Refer to Note 24 to our     Consolidated Financial Statements for additional information on     our commitments to provide capital to equity method investees.       •   Purchase obligations — We enter into multiple     contractual arrangements for various services. The amounts     represent fixed payment obligations under our most significant     contracts and primarily relate to contracts with information     technology providers. Refer to Note 24 to our Consolidated     Financial Statements for additional information on our purchase     obligations.             Market Risk      Our financing, mortgage, and insurance activities give rise to market risk, representing the potential loss in the fair value of assets or liabilities caused by movements in market variables, such as interest rates, foreign exchange rates and equity prices. We are primarily exposed to interest rate risk arising from changes in interest rates related to our financing, investing and cash management activities. More specifically, we have entered into contracts to provide financing, to retain mortgage servicing rights and to retain various assets related to securitization activities all of which are exposed, in varying degrees, to changes in value due to movements in interest rates. Interest rate risk arises from the mismatch between assets and the related liabilities used for funding. We enter into various financial instruments, including derivatives, to maintain the desired level of exposure to the risk of interest rate fluctuations (refer to Note 16 to our Consolidated Financial Statements).   We are exposed to foreign currency risk arising from the possibility that fluctuations in foreign exchange rates will impact future earnings or asset and liability values related to our global operations. Our most significant foreign currency exposures relate to the Euro, the Canadian dollar, the British pound sterling, and the Australian dollar.   We are also exposed to equity price risk, primarily in our Insurance operations, which invests in equity securities that are subject to price risk influenced by capital market movements. Our equity securities are considered investments and we do not enter  60    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      into derivatives to modify the risks associated with our Insurance investment portfolio.   While the diversity of our activities from our complementary lines of business naturally mitigates market risk, we also actively manage this risk. We maintain risk management control systems to monitor interest rate, foreign currency exchange rate and equity price risks and related hedge positions. Positions are monitored using a variety of analytical techniques including market value, sensitivity analysis and value at risk models.   Additional principle risks include credit risk and lease residual risk which are discussed in Item 7.   Value at Risk   One of the measures we use to manage market risk is Value at Risk (VaR), which gauges the dollar amount of potential loss in fair value from adverse interest rate and currency movements in an ordinary market. The VaR model uses a distribution of historical changes in market prices to assess the potential for future losses. In addition, VaR takes into account correlations between risks and the potential for movements in one portfolio to offset movements in another.   We measure VaR using a 95% confidence interval and an assumed one month holding period, meaning that we would expect to incur changes in fair value greater than those predicted by VaR in only one out of every 20 months. Currently, our VaR measurements do not include all of our market risk sensitive positions. The VaR estimates encompass the majority (approximately 90%) of our market risk sensitive positions, which management believes are representative of all positions. The following table represents the maximum, average, and minimum potential VaR losses measured for the years indicated.                           Year ended December 31, ($ in millions)   2005   2004             Value at Risk                            Maximum    $ 239     $ 276             Average      129       166             Minimum      66       122           While no single risk statistic can reflect all aspects of market risk, the VaR measurements provide an overview of our exposure to changes in market influences. Less than 2% of our assets are accounted for as trading activities (i.e., those in which changes in fair value directly affect earnings). As such, our VaR measurements are not indicative of the impact to current period earnings caused by potential market movements. The actual earnings impact would differ as the accounting for our financial instruments is a combination of historical cost, lower of cost or market, and fair value (as further described in the accounting policies in Note 1 to our Consolidated Financial Statements).   Sensitivity Analysis   While VaR reflects the risk of loss due to unlikely events in a normal market, sensitivity analysis captures our exposure to isolated hypothetical movements in specific market rates. The following analyses, which include GMAC Commercial Mortgage’s financial instruments that are exposed to changes in interest rates, foreign exchange rates and equity prices, are based on sensitivity analyses performed assuming instantaneous, parallel shifts in market exchange rates, interest rate yield curves and equity prices.                                                 2005   2004               Non-   Trading   Non-   Trading   December 31, (in millions)   trading (a)   (b)   trading (a)   (b)             Financial instruments exposed     to changes in:                                            Interest rates                                              Estimated fair value      ($26,343)       $4,580       ($32,025)       $3,545               Effect of 10% adverse change in rates      (1,662)       (127)       (1,463)       (33)             Foreign exchange rates                                              Estimated fair value      ($7,177)       $254       ($10,213)       $577               Effect of 10% adverse change in rates      (718)       (25)       (1,021)       (58)             Equity prices                                              Estimated fair value      $2,367       $—       $2,230       $—               Effect of 10% decrease in prices      (236)       —       (222)       —                (a)         Includes our available for sale and held to maturity investment     securities. Refer to Note 6 to our Consolidated Financial     Statements for additional information on our investment     securities portfolio.   (b)         Includes our trading investment securities. Refer to Note 6     to our Consolidated Financial Statements for additional     information on our investment securities portfolio.    There are certain shortcomings inherent to the sensitivity analysis data presented. The models assume that interest rate and foreign exchange rate changes are instantaneous parallel shifts. In reality, changes are rarely instantaneous or parallel, and therefore, the sensitivities summarized in the foregoing table may be overstated. While this sensitivity analysis is our best estimate of the impacts of the scenarios described, actual results could differ from those projected.   Because they do not represent financial instruments, our operating leases are not required to be included in the interest rate sensitivity analysis. This exclusion is significant to the overall analysis and any resulting conclusions. While the sensitivity analysis shows an estimated fair value change for the debt which funds our operating lease portfolio, a corresponding change for our operating lease portfolio (which had a carrying value of $31.2 billion and $26.1 billion at December 31, 2005 and 2004, respectively) was excluded from the foregoing analysis. As a result, the overall impact to the estimated fair value of financial instruments from hypothetical changes in interest and foreign currency exchange rates is greater than what we would experience in the event of such market movements.  61   Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation               Operational Risk      We define operational risk as the risk of loss resulting from inadequate or failed processes or systems, human factors, or external events. Operational risk is an inherent risk element in each of our businesses and related support activities. Such risk can manifest in various ways, including breakdowns, errors, business interruptions and inappropriate behavior of employees, and can potentially result in financial losses and other damage to us.   To monitor and control such risk, we maintain a system of policies and a control framework designed to provide a sound and well-controlled operational environment. The goal is to maintain operational risk at appropriate levels in view of our financial strength, the characteristics of the businesses and the markets in which we operate, and the related competitive and regulatory environment. While each operating unit is responsible for risk management, we supplement this decentralized model with a centralized enterprise risk management function. This risk management function is responsible for ensuring that each business unit has proper policies and procedures for managing risk and for identifying, measuring and monitoring risk across our enterprise. We utilize an enterprise-wide control self-assessment process. The focus of the process has been to identify key risks specific to areas impacting financial reporting and disclosure controls and procedures.   Notwithstanding these risk and control initiatives, we may incur losses attributable to operational risks from time to time, and there can be no assurance that such losses will not be incurred in the future.            Accounting and Reporting     Developments      Statement of Position 05-1 — In September 2005 the AICPA issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (SOP 05-1). SOP 05-1 provides guidance on accounting for deferred acquisition costs on internal replacements of insurance contracts. SOP 05-1 defines an internal replacement, and specifies the conditions that determine whether the replacement contract is substantially or unsubstantially changed from the replaced contract. An internal replacement determined to result in a substantially changed contract should be accounted for as an extinguishment of the replaced contract, and unamortized deferred acquisition costs and unearned revenue liabilities of the replaced contract should be no longer be deferred. An internal replacement determined to result in an unsubstantially changed contract should be accounted for as a continuation of the replaced asset. SOP 05-01 introduces the terms integrated and non-integrated contract features and specifies that non-integrated features do not change the base contract and are to be accounted for in a manner similar to a separately issued contract. Integrated features are evaluated in conjunction with the base contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. Management is assessing the potential impact on our financial condition or results of operations.   Statement of Financial Accounting Standards No. 154 — In May 2005 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (SFAS 154), that addresses accounting for changes in accounting principle, changes in accounting estimates, changes required by an accounting pronouncement in the instance that the pronouncement does not include specific transition provisions and error correction. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle and error correction unless impracticable to do so. SFAS 154 states an exception to retrospective application when a change in accounting principle, or the method of applying it, may be inseparable from the effect of a change in accounting estimate. When a change in principle is inseparable from a change in estimate, such as depreciation, amortization or depletion, the change to the financial statements is to be presented in a prospective manner. SFAS 154 and the required disclosures are effective for accounting changes and error corrections in fiscal years beginning after December 15, 2005.   Statement of Financial Accounting Standards No. 155 — In February 2006 the Financial Accounting Standards Board issued Statement of Financial Standards No. 155 Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140 (SFAS 155). This standard permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. SFAS 155 allows an entity to make an irrevocable election to measure such a hybrid financial instrument at fair value on an instrument-by-instrument basis. The standard eliminates the prohibition on a QSPE from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 also clarifies which interest-only and principal-only strips are not subject to the requirements of SFAS 133 as well as determines that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of the fiscal year that begins after September 15, 2006. Management is assessing the potential impact on our financial condition or results of operations.   Statement of Financial Accounting Standards No. 156 — In March 2006 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets (SFAS 156), which provides the following: 1) revised guidance on when a servicing asset and servicing liability should be recognized; 2) requires all separately  62    Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable; 3) permits an entity to elect to measure servicing assets and servicing liabilities at fair value each reporting date and report changes in fair value in earnings in the period in which the changes occur; 4) upon initial adoption, permits a onetime reclassification of available-for-sale securities to trading securities for securities which are identified as offsetting the entity’s exposure to changes in the fair value of servicing assets or liabilities that a servicer elects to subsequently measure at fair value; and 5) requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional footnote disclosures. SFAS 156 is effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006 with the effects of initial adoption being reported as a cumulative-effect adjustment to retained earnings, however, SFAS 156 permits early adoption. We plan to early adopt SFAS 156 as of January 1, 2006 and are currently in the process of quantifying the financial impact. It is not anticipated that adoption will have a material impact on our financial condition or results of operations.   Emerging Issues Task Force No. 04-5 — In July 2005 the Emerging Issues Task Force released Issue 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (EITF 04-5). EITF 04-5 provides guidance in determining whether a general partner controls a limited partnership by determining the general partner’s substantive ability to dissolve (liquidate) the limited partnership as well as assessing the substantive participating rights of the general partner within the limited partnership. EITF 04-5 states that if the general partner has substantive ability to dissolve (liquidate) or has substantive participating rights then the general partner is presumed to control that partnership and would be required to consolidate the limited partnership. EITF 04-5 is effective for all new limited partnerships and existing partnerships for which the partnership agreements are modified on June 29, 2005. This EITF is effective in fiscal periods beginning after December 15, 2005, for all other limited partnerships. We are currently reviewing the potential impact of EITF 04-5. It is not anticipated that adoption will have a material impact on our financial condition or results of operations.   FASB Staff Position (FSP) Nos. FAS 115-1 and FAS 124-1 — In November 2005 the FASB issued FSP Nos. FAS 115-1 and 124-1 to address the determination as to when an investment is considered impaired, whether that impairment is other than temporary and the measurement of an impaired loss. This FSP nullified certain requirements of Emerging Issues Task Force 03-1 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (EITF 03-1), and references existing guidance on other than temporary guidance. Furthermore, this FSP creates a three step process in determining when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. The FSP is effective for reporting periods beginning after December 15, 2005. It is not anticipated that adoption will have a material impact on our financial condition or results of operations.            Consolidated Operating     Results      Comparison of 2005 to 2004   The following section provides a discussion of our consolidated results of operations as displayed in our Consolidated Statement of Income presented on page 70. A further discussion of the operating results can be found within the foregoing individual business segment sections of this MD&A.   Revenues   Total revenue increased by 5% primarily due to increases in commercial interest income, operating lease income and revenue from mortgages held for sale. The increase in commercial revenue was primarily the result of higher market interest rates as the majority of the portfolio is of a floating rate nature. Operating lease revenue increased due to a 20% growth of the portfolio compared to 2004 and mortgage loans held for sale revenue increased due to an increase in mortgage production.   Interest and discount expense increased by 36%, consistent with the overall increase in market interest rates during the year, but also reflective of the widening of our corporate credit spreads as we experienced a series of credit rating actions during the year. The provision for credit losses decreased by 44% as compared to 2004, despite the impact of loss reserves recorded in the third quarter of 2005 related to accounts impacted by Hurricane Katrina. The decrease in provision for credit losses was attributable to both our Financing and Residential mortgage operations. The decrease in provision at our Financing operations was due to a combination of lower consumer asset levels due to an increase in whole loan sales, improved loss performance on retail contracts and improved performance on the non-automotive commercial portfolio. Lower provision for credit losses at our Residential mortgage operations was primarily due to favorable loss severity and frequency of loss as compared to previous estimates primarily as a result of the effects of home price appreciation. Insurance premiums and service revenue earned increased by 6% as a result of contract growth across the major product lines (domestic and international).   Mortgage banking income increased by 28% as compared to 2004. The increase is primarily due to favorable net loan servicing income and higher gains on sales of loans. The increase in gains on sales of loans is primarily due to higher overall loan production and increased volume of off-balance sheet securitization versus on-balance sheet secured financings at our residential mortgage operations. Net loan servicing income increased due to higher servicing fees consistent with increases in the servicing portfolio as well as a reduction in amortization and impairment of mortgage servicing rights due to  63   Table of Contents  Management’s Discussion and Analysis   General Motors Acceptance Corporation      slower than expected prepayments consistent with observed trends in the portfolio and rising interest rates.   Investment and other income increased by 30% as compared to 2004. The increase is primarily due to interest income from cash and investments in U.S. Treasury securities, the favorable impact on the valuation of retained securitization interests at our residential mortgage operation, higher investment income at Commercial Mortgage and higher capital gains at our Insurance operations.   Expenses   The 9% increase in noninterest expense is primarily due to the increase in depreciation expense on operating lease assets and compensation and benefits expense. Depreciation on operating leases assets increased as a result of higher average operating lease asset levels as compared to 2004. In addition, compensation and benefits expense increased reflecting increased compensation expense at our Mortgage operations consistent with the increase in loan production and higher supplemental compensation resulting from increased profitability. Insurance losses and loss adjustment expenses and other operating expenses were relatively stable as compared to 2004.   Our effective tax rate was 33.5%, consistent with the 33.0% rate experienced in 2004.   Noninterest expense was also negatively impacted by non-cash goodwill impairment charges of $712 million, which were recognized in the fourth quarter of 2005. The charges relate predominately to our Commercial Finance operating segment and primarily to the goodwill recognized in connection with the 1999 acquisition of the majority of this business.   Comparison of 2004 to 2003   Revenues   Total revenue increased by 12% or $2,159 million to $20,341 million in 2004. The majority of the increase in revenue ($1,917 million) occurred at our Mortgage operations primarily due to the continued use of secured financing structures for consumer mortgage loans, which resulted in increased consumer finance receivables. The increase in commercial revenue was primarily the result of both higher earning rates caused by the overall increase in market rates in 2004 and higher wholesale receivable balances (which are primarily floating rate), as a result of increases in dealer inventories.   Interest and discount expense increased, consistent with the increase in secured debt collateralized by mortgage loans, but also the result of continued increases in our cost of borrowings due to declines in our credit ratings, as well as an overall increase in market interest rates during the year. The provision for credit losses was favorably impacted by lower credit loss provisions at our Financing operations, but negatively impacted by an increase in loss provisions in our mortgage loan portfolio due to the growth in on-balance sheet consumer mortgage loans, resulting in a net $232 million increase in 2004 as compared to 2003.   The 11% increase in insurance premiums and service revenue earned in 2004 was due primarily to volume and rate increases at our Insurance operations. Mortgage banking income decreased by $659 million in 2004. The decrease in mortgage banking income was the result of decreased loan production, which resulted in decreases in gains from the sales of loans, mitigated by a decline in amortization and impairment of mortgage servicing rights due to the favorable impact of the increase in market interest rates.   The increase in investment income in 2004 was due primarily to increases in investment income in our Insurance operations investment portfolio. Capital gains on the portfolio were recognized in 2004, as compared to net capital losses (as the result of the recognition of other than temporary impairments) recognized in 2003. Additional increases in investment income were due to increases in the value of mortgage-related residual interests due to lower prepayments as a result of interest rate increases.   Other income increased by $387 million during the year to $3,516 million and included the following significant items, contributing to the net change:         •       Increased amount of interest earned on cash and cash     equivalents, resulting from an increase in the balance of cash     and the overall increase in market interest rates during the     year.       •       Increased revenue from the International automotive full service     leasing business.       •       A reduction in the unfavorable impact of market adjustments on     our non-hedge derivative financial instrument positions.       •       Increased real estate service fees within our Mortgage     operations as a result of continued growth in that portion of     the business.    Expenses   Total noninterest expense increased by $285 million or 2% in 2004 as compared to 2003 reflecting increased advertising expenses at our Financing operations related to joint marketing programs with General Motors, mitigated by the impact of favorable remarketing results on off-lease vehicles. Compensation and benefits expense in 2004 was consistent with 2003 levels, increasing by $78 million or 3%. The $83 million increase in insurance losses and loss adjustment expenses was consistent with the higher written premium and service revenue volumes experienced at our Insurance operations in 2004. Depreciation expense on operating lease assets was comparable to 2003, consistent with stable operating lease asset levels.   Other operating expenses increased by $140 million in 2004 as compared to 2003, as a result of increased shared advertising and marketing expenses with GM, mitigated by the favorable impact of higher remarketing gains on the disposal of off-lease vehicles. Our effective tax rate was 33.0% in 2004, which was lower than the 36.3% rate experienced in 2003. During the year, we benefited from several favorable tax items within our Financing operations, including favorable tax settlements with various authorities and reduced reserve requirements.  64    Table of Contents  Statement of Responsibility for Preparation   of Financial Statements  General Motors Acceptance Corporation      Our Consolidated Financial Statements, Financial Highlights and Management’s Discussion and Analysis of Financial Condition and Results of Operations of General Motors Acceptance Corporation and subsidiaries (GMAC) were prepared by management, who is responsible for their integrity and objectivity. Where applicable, this financial information has been prepared in conformity with the Securities Exchange Act of 1934, as amended, and accounting principles generally accepted in the United States of America. The preparation of this financial information requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of our Consolidated Financial Statements and the reported amounts of revenues and expenses during the periods presented. The critical accounting estimates that may involve a higher degree of judgment, and complexity are included in Management’s Discussion and Analysis.   Deloitte & Touche LLP, an independent registered public accounting firm, has audited the Consolidated Financial Statements of GMAC; and their report is included herein. The audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States).   The General Motors Board of Directors, through its Audit Committee (composed entirely of independent directors), is responsible for overseeing management’s fulfillment of its responsibilities in the preparation of the Consolidated Financial Statements. The GM Audit Committee annually recommends to the Board of Directors the selection of independent auditors in advance of General Motor’s Annual Meeting of Stockholders and submits the selection for ratification at the Meeting. In addition, the GM Audit Committee reviews the scope of the audits and the accounting principles being applied in financial reporting. The independent auditors, representatives of management, and the internal auditors meet regularly (separately and jointly) with the GM Audit Committee to review the activities of each, and to ensure that each is properly discharging its responsibilities. To reinforce complete independence, Deloitte & Touche LLP has full and free access to meet with the GM Audit Committee without management representatives present, to discuss the results of the audit, the adequacy of internal control, and the quality of financial reporting. Certain aspects of these responsibilities are delegated to GMAC’s Audit Committee, comprised of General Motors’ Chief Financial Officer, Treasurer and President of GM Asset Management.                  /s/ Eric A. Feldstein             /s/ Sanjiv Khattri                     Eric A. Feldstein     Chairman     March 28, 2006        Sanjiv Khattri     Executive Vice President and     Chief Financial Officer     March 28, 2006    65   Table of Contents  Management’s Report on Internal Control over   Financial Reporting  General Motors Acceptance Corporation      General Motors Acceptance Corporation’s management is responsible for establishing and maintaining effective internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chairman and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with accounting principles generally accepted in the United States of America.   The Company’s internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Consolidated Financial Statements.   Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   Management conducted, under the supervision of the Company’s Chairman and Chief Financial Officer, an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, commonly referred to as the “COSO” criteria.   A material weakness is a control deficiency or a combination of control deficiencies that result in a more than remote likelihood that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected. Management identified the following material weakness in its assessment as of December 31, 2005.   The Company did not sufficiently design and maintain effective controls over the preparation, review, presentation and disclosure of our Consolidated Statement of Cash Flows, specifically cash outflows related to certain mortgage loan originations and purchases that were not appropriately classified as either operating cash flows or investing cash flows consistent with our original designation as loans held for sale or loans held for investment. In addition, proceeds from sales and repayments related to certain mortgage loans, which initially were classified as mortgage loans held for investment and subsequently transferred to mortgage loans held for sale, were reported as operating cash flows instead of investing cash flows in our Consolidated Statement of Cash Flows, as required by Statement of Financial Accounting Standards No. 102 Statement of Cash Flows — Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale. Finally, certain non-cash proceeds and transfers were not appropriately presented in the Consolidated Statement of Cash Flows or the Supplemental disclosure to the Consolidated Statement of Cash Flows.   These matters impacted the Consolidated Statement of Cash Flows for the years ended December 31, 2004 and 2003 and the three, six and nine month periods ended March 31, June 30, and September 30, 2005 and 2004, respectively. The Company has restated our Consolidated Statement of Cash Flows for the years ended December 31, 2004 and 2003 within this Form 10-K. The restatement of this information does not change total cash and cash equivalents reflected in any of the previously reported Consolidated Statement of Cash Flows. Furthermore, the restatement has no effect on our Consolidated Statement of Income, Consolidated Balance Sheet or Consolidated Statement of Changes in Stockholder’s Equity for any period during 2005, 2004 or 2003. The annual cash flows on the aforementioned mortgage loans have been properly classified in our Consolidated Statement of Cash Flows for the year ended December 31, 2005 and for the restated years ended December 31, 2004 and 2003. However, the existing controls over the preparation, review, presentation and disclosure of our Consolidated Statement of Cash Flows were not sufficiently designed or operating effectively to prevent or detect a material misstatement, which resulted in the restatement of our Consolidated Statement of Cash Flows. Accordingly, management determined that this control deficiency constitutes a material weakness.  66   Table of Contents  Management’s Report on Internal Control over   Financial Reporting  General Motors Acceptance Corporation       Based on the assessment performed and solely as a result of the material weakness described above, management concluded that as of December 31, 2005, GMAC’s internal control over financial reporting was not effective based upon the COSO criteria.   Management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2005 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing on the following page, which expresses an unqualified opinion on management’s assessment and an adverse opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005.                  /s/ Eric A. Feldstein             /s/ Sanjiv Khattri                     Eric A. Feldstein     Chairman     March 28, 2006        Sanjiv Khattri     Executive Vice President and     Chief Financial Officer     March 28, 2006    67   Table of Contents  Report of Independent Registered Public Accounting Firm     General Motors Acceptance Corporation:   We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that General Motors Acceptance Corporation and subsidiaries (the “Company”) did not maintain effective internal control over financial reporting as of December 31, 2005, because of the effect of the material weakness identified in management’s assessment based on the criteria established in the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.   We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.   A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.   Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.   A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in management’s assessment: management did not sufficiently design and maintain controls over the preparation, review, presentation and disclosure of amounts related to cash flows reflected in the Consolidated Statements of Cash Flows which resulted in misstatements therein. This material weakness has caused the restatement of the Consolidated Statements of Cash Flows for the years ended December 31, 2004, and 2003 and for the three, six and nine month periods ended March 31, June 30 and September 30, 2005 and 2004, respectively. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2005, of the Company and this report does not affect our report on such financial statements.   In our opinion, management’s assessment that the Company did not maintain effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established in the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2005, based on the criteria established in the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.   We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Financial Statements as of and for the year ended December 31, 2005, of the Company and our report dated March 28, 2006, expressed an unqualified opinion on those Consolidated Financial Statements and included an explanatory paragraph regarding the restatement described in Note 1 to the Consolidated Financial Statements.   /s/ Deloitte & Touche LLP        Deloitte & Touche LLP   Detroit, Michigan   March 28, 2006  68   Table of Contents  Report of Independent Registered Public Accounting Firm     General Motors Acceptance Corporation:   We have audited the accompanying Consolidated Balance Sheet of General Motors Acceptance Corporation and subsidiaries (the “Company”) as of December 31, 2005 and 2004, and the related Consolidated Statements of Income, Changes in Stockholder’s Equity, and Cash Flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.   We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.   In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.   As discussed in Note 1 to the Consolidated Financial Statements, the accompanying 2004 and 2003 Consolidated Statements of Cash Flows have been restated.   As discussed in Note 1 to the Consolidated Financial Statements, effective July 1, 2003, the Company began consolidating certain variable interest entities to conform to Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities.   We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 28, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of a material weakness.   /s/ Deloitte & Touche LLP        Deloitte & Touche LLP   Detroit, Michigan   March 28, 2006  69   Table of Contents  Consolidated Statement of Income   General Motors Acceptance Corporation                                     Year ended December 31, ($ in millions)   2005   2004   2003         Revenue                                  Consumer      $9,945       $10,332       $8,597           Commercial      2,685       2,177       1,950           Loans held for sale      1,652       1,269       1,024           Operating leases      7,032       6,563       6,611                 Total revenue      21,314       20,341       18,182           Interest and discount expense      12,930       9,535       7,564                 Net revenue before provision for credit losses      8,384       10,806       10,618           Provision for credit losses      1,085       1,953       1,721                 Net revenue      7,299       8,853       8,897           Insurance premiums and service revenue earned      3,762       3,528       3,178           Mortgage banking income      2,462       1,925       2,584           Investment income      1,216       845       631           Other income      4,468       3,516       3,129                 Total net revenue      19,207       18,667       18,419       Expense                                  Depreciation expense on operating lease assets      5,244       4,828       4,844           Compensation and benefits expense      3,163       2,916       2,838           Insurance losses and loss adjustment expenses      2,355       2,371       2,288           Other operating expenses      4,134       4,205       4,065           Goodwill impairment      712       —       —                 Total noninterest expense      15,608       14,320       14,035       Income before income tax expense      3,599       4,347       4,384           Income tax expense      1,205       1,434       1,591           Net income      $2,394       $2,913       $2,793           The Notes to the Consolidated Financial Statements are an integral part of these statements.  70    Table of Contents  Consolidated Balance Sheet   General Motors Acceptance Corporation                             December 31, ($ in millions)   2005   2004         Assets                          Cash and cash equivalents      $15,424       $22,718           Investment securities      18,207       14,960           Loans held for sale      21,865       19,934           Reporting segment held for sale      19,030       —           Finance receivables and loans, net of unearned income                            Consumer      140,411       150,449             Commercial      44,574       53,210           Allowance for credit losses      (3,116 )     (3,422 )               Total finance receivables and loans, net      181,869       200,237           Investment in operating leases, net      31,211       26,072           Notes receivable from General Motors      4,565       4,921           Mortgage servicing rights, net      4,015       3,890           Premiums and other insurance receivables      1,873       1,763           Other assets      22,457       29,644               Total assets      $320,516       $324,139           Liabilities                          Debt                            Unsecured      $133,269       $177,003             Secured      121,138       91,957                 Total debt      254,407       268,960           Interest payable      3,057       3,394           Liabilities related to reporting segment held for sale      10,941       —           Unearned insurance premiums and service revenue      5,054       4,727           Reserves for insurance losses and loss adjustment expenses      2,534       2,505           Accrued expenses and other liabilities      18,381       18,382           Deferred income taxes      4,364       3,754               Total liabilities      298,738       301,722       Stockholder’s equity                          Common stock, $.10 par value (10,000 shares     authorized, 10 shares issued and outstanding) and paid-in     capital      5,760       5,760           Retained earnings      15,190       15,491           Accumulated other comprehensive income      828       1,166               Total stockholder’s equity      21,778       22,417               Total liabilities and stockholder’s equity      $320,516       $324,139           The Notes to the Consolidated Financial Statements are an integral part of these statements.  71    Table of Contents  Consolidated Statement of Changes in Stockholder’s Equity   General Motors Acceptance Corporation                                   Year ended December 31, ($ in millions)   2005   2004   2003         Common stock and paid-in capital                                  Balance at beginning of year      $5,760       $5,641       $5,641           Increase in paid-in capital      —       119       —               Balance at end of year      5,760       5,760       5,641           Retained earnings                                  Balance at beginning of year      15,491       14,078       12,285           Net income      2,394       2,913       2,793           Dividends paid      (2,500 )     (1,500 )     (1,000 )         Repurchase transaction (a)      (195 )     —       —               Balance at end of year      15,190       15,491       14,078           Accumulated other comprehensive income (loss)                                  Balance at beginning of year      1,166       517       (95 )         Other comprehensive (loss) income      (338 )     649       612               Balance at end of year      828       1,166       517           Total stockholder’s equity                                  Balance at beginning of year      22,417       20,236       17,831           Increase in paid-in capital      —       119       —           Net income      2,394       2,913       2,793           Dividends paid      (2,500 )     (1,500 )     (1,000 )         Repurchase transaction (a)      (195 )     —       —           Other comprehensive (loss) income      (338 )     649       612               Total stockholder’s equity at end of year      $21,778       $22,417       $20,236           Comprehensive income                                  Net income      $2,394       $2,913       $2,793           Other comprehensive (loss) income      (338 )     649       612               Comprehensive income      $2,056       $3,562       $3,405                (a)       In October 2005 we repurchased operating lease assets and     related deferred tax liabilities from GM. Refer to Note 19     to our Consolidated Financial Statements for further details.    The Notes to the Consolidated Financial Statements are an integral part of these statements.  72    Table of Contents  Consolidated Statement of Cash Flows   General Motors Acceptance Corporation                                               (As restated   (As restated           See Note 1)   See Note 1)   Year ended December 31, ($ in millions)   2005   2004   2003         Operating activities                                  Net income      $2,394       $2,913       $2,793           Reconciliation of net income to net cash (used in) provided by     operating activities:                                    Depreciation and amortization      5,964       5,433       5,340             Goodwill impairment      712       —       —             Amortization and valuation adjustments of mortgage servicing     rights      782       1,384       1,602             Provision for credit losses      1,085       1,953       1,721             Net gains on sales of finance receivables and loans      (1,695 )     (1,312 )     (2,462 )           Net (gains) losses on investment securities      (104 )     (52 )     71             Capitalized interest income      (23 )     (30 )     (44 )           Net change in:                                      Trading securities      (1,155 )     614       233               Loans held for sale (d)      (29,119 )     (2,312 )     (4,124 )             Deferred income taxes      351       (118 )     (463 )             Interest payable      (290 )     311       358               Other assets      (2,366 )     2,468       (555 )             Other liabilities      49       (2,800 )     (790 )           Other, net      315       1,011       1,040               Net cash (used in) provided by operating activities      (23,100 )     9,463       4,720           Investing activities                                  Purchases of available for sale securities      (19,165 )     (12,783 )     (15,529 )         Proceeds from sales of available for sale securities      5,721       3,276       7,615           Proceeds from maturities of available for sale securities      8,887       7,250       9,413           Net increase in finance receivables and loans      (96,028 )     (125,183 )     (145,187 )         Proceeds from sales of finance receivables and loans      125,836       108,147       107,505           Purchases of operating lease assets      (15,496 )     (14,055 )     (10,728 )         Disposals of operating lease assets      5,164       7,668       9,179           Change in notes receivable from General Motors      1,053       (1,635 )     299           Purchases of mortgage servicing rights, net      (267 )     (326 )     (513 )         Acquisitions of subsidiaries, net of cash acquired      (2 )     9       (144 )         Other, net      (1,549 )     260       (1,664 )             Net cash provided by (used in) investing activities      14,154       (27,372 )     (39,754 )         Financing activities                                  Net change in short-term debt      (9,970 )     4,123       658           Proceeds from issuance of long-term debt      77,890       72,753       82,606           Repayments of long-term debt      (69,520 )     (57,743 )     (38,944 )         Other financing activities      6,168       4,723       1,319           Dividends paid      (2,500 )     (1,500 )     (1,000 )             Net cash provided by financing activities      2,068       22,356       44,639               Effect of exchange rate changes on cash and cash equivalents      (45 )     295       268               Net (decrease) increase in cash and cash equivalents      (6,923 )     4,742       9,873           Cash and cash equivalents at beginning of year      22,718       17,976       8,103               Cash and cash equivalents at end of year (a)      $15,795       $22,718       $17,976           Supplemental disclosures                                  Cash paid for:                                    Interest      $13,025       $8,887       $6,965             Income taxes      1,339       2,003       3,479           Non-cash items:                                    Finance receivables and loans held for sale (b)      —       6,849       3,487             (Decrease) increase in stockholder’s equity (c)      (195 )     119       —             Loans held for sale transferred to finance receivables and loans      20,084       4,332       4,546             Finance receivables and loans transferred to loans held for sale      3,904       3,506       932             Finance receivables and loans transferred to other assets      1,017       388       327             Transfer of investment securities classified as trading to     investment securities classified as available for sale      257       561       7             Various assets and liabilities acquired through consolidation of     variable interest entities      325       —       —             Increase in other assets and liabilities relating to syndication     activities      —       —       259                (a)       2005 includes $371 of cash and cash equivalents classified as     reporting segment held for sale (refer to Note 1 to our     Consolidated Financial Statements).   (b)       Represents the consolidation of certain assets related to an     accounting change under SFAS 140 in 2004 (refer to     Note 1 to our Consolidated Financial Statements) and the     adoption of FIN 46 in 2003; there was a corresponding     increase in secured debt.   (c)       For 2005 represents the repurchase of operating lease assets and     related deferred tax liabilities from GM. For 2004 represents     the consolidation of Banco GM under FIN 46R beginning     January 1, 2004; in the fourth quarter, we purchased Banco     GM (refer to Note 19 to our Consolidated Financial     Statements).   (d)       Includes origination of mortgage servicing rights of $1,272,     $1,228 and $2,044 for 2005, 2004 and 2003, respectively.    The Notes to the Consolidated Financial Statements are an integral part of these statements.  73   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                      1      Significant Accounting     Policies     General Motors Acceptance Corporation (referred to herein as GMAC, we, our, or us), a direct wholly owned subsidiary of General Motors Corporation (General Motors or GM), was incorporated in 1997 under the Delaware General Corporation Law. On January 1, 1998, we merged with our predecessor, which was originally incorporated under New York banking law in 1919. We are a financial services organization providing a diverse range of services to a global customer base.   Consolidation and Basis of Presentation   The consolidated financial statements include our accounts and those of our majority-owned subsidiaries after eliminating all significant intercompany balances and transactions, as well as all variable interest entities in which we are the primary beneficiary. Refer to Note 22 to our Consolidated Financial Statements for further details on our variable interest entities. Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (GAAP). Certain amounts in prior periods have been reclassified to conform to the current period’s presentation.   We operate our international subsidiaries in a similar manner as in the United States of America (U.S. or United States), subject to local laws or other circumstances that may cause us to modify our procedures accordingly. The financial statements of subsidiaries which operate outside of the U.S. generally are measured using the local currency as the functional currency. All assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates. Income and expense items are translated at average exchange rates prevailing during the reporting period. The resulting translation adjustments are recorded as other comprehensive income, a component of shareholder’s equity.   Effective September 30, 2004, as a result of reconsidering particular transaction provisions, we began to include in our Consolidated Balance Sheet the transfer of certain mortgage assets, that historically had been recognized inappropriately as sales, in order to reflect the transactions as secured borrowings under Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS 140). As of September 30, 2004, the impact resulted in a $6.8 billion increase in assets ($3.3 billion in loans held for sale and $3.5 billion in commercial finance receivables) with a corresponding increase in secured debt. Historically, these assets (and related obligations) were included in our off-balance sheet disclosures as mortgage warehouse and other mortgage funding facilities. This change did not have a material impact on our annual results of operations or cash flows for any periods presented.   On August 3, 2005, we announced that we had entered into a definitive agreement to sell a majority equity interest in GMAC Commercial Holding Corp. (GMAC Commercial Mortgage). For the fiscal year ended December 31, 2005, GMAC Commercial Mortgage’s earnings and cash flows are fully consolidated in our Consolidated Statement of Income and Statement of Cash Flows. As a result of this previous definitive agreement, the assets and liabilities of our Commercial Mortgage reporting segment has been classified as held for sale separately in our Consolidated Balance Sheet at December 31, 2005. On March 23, 2006, we completed the sale of 78% of our equity in GMAC Commercial Mortgage. Please refer to Note 25 to our Consolidated Financial Statements for further details. The following table presents GMAC Commercial Mortgage’s major classes of asset and liabilities as held for sale and presented as of December 31, 2005.                 December 31, 2005 ($ in millions)   2005         Assets                  Cash and cash equivalents      $371           Investment Securities      2,295           Loans held for sale      9,019           Finance receivables and loans, net of unearned income and     allowance for credit losses      2,990           Mortgage servicing rights, net      632           Other assets      3,723               Total assets of reporting segment held for sale    $ 19,030           Liabilities                  Unsecured debt      $794           Secured debt      3,519               Total debt      4,313           Accrued expenses and other liabilities      6,628               Total liabilities of reporting segment held for sale    $ 10,941           Restatement of Cash Flow Information   As we were preparing our 2005 Form 10-K, it was discovered that cash outflows related to certain mortgage loan originations and purchases were not appropriately classified as either operating cash flows or investing cash flows consistent with our original designation as loans held for sale or loans held for investment. In addition, proceeds from sales and repayments related to certain mortgage loans, which initially were classified as mortgage loans held for investment and subsequently transferred to mortgage loans held for sale, were reported as operating cash flows instead of investing cash flows in our Consolidated Statement of Cash Flows, as required by Statement of Financial Accounting Standards No. 102 Statement of Cash Flows — Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale. Finally, certain non-cash proceeds and transfers were not appropriately presented in the Consolidated Statement of Cash Flows or Supplemental disclosures to the Consolidated Statements of Cash Flows.   We have restated our Consolidated Statement of Cash Flows for the years ended December 31, 2004 and 2003 for these matters.  74   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      The restatement of this information does not change total cash and cash equivalents reflected in any of the previously reported Consolidated Statement of Cash Flows. Furthermore, the restatement has no effect on our Consolidated Statement of Income, Consolidated Balance Sheet or Consolidated Statement of Changes in Stockholder’s Equity for any period during 2005, 2004 or 2003. The annual cash flows on the aforementioned mortgage loans have been properly classified in our Consolidated Statement of Cash Flows for the year ended December 31, 2005 and for the restated years ended December 31, 2004 and 2003. The effect of the restatement on the Company’s previously reported Consolidated Statement of Cash Flows for the years ended December 31, 2004 and 2003 is as follows:                           Years ended December 31,           ($ in millions)   2004   2003             Net cash provided by operating activities                            As previously reported      $13,258     $ 11,497             As restated      9,463       4,720           Net cash used in investing activities                            As previously reported      (31,167 )     (46,531 )           As restated      (27,372 )     (39,754 )         Net cash provided by financing activities                            As previously reported      22,356       44,639             As restated      22,356       44,639           Use of Estimates and Assumptions   The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expenses during the reporting period. In developing the estimates and assumptions, management uses all available evidence. However, because of uncertainties associated with estimating the amounts, timing, and likelihood of possible outcomes, actual results could differ from estimates.   Cash and Cash Equivalents   Cash equivalents are generally defined as short-term, highly liquid investments with original maturities of 90 days or less. Certain securities with original maturities less than 90 days that are held as a portion of longer term investment portfolios, primarily relating to GMAC Insurance Holdings, Inc., are classified as investments.   Investment Securities   Our portfolio of investment securities includes bonds, equity securities, asset- and mortgage-backed securities, notes, interests in securitization trusts and other investments. Investment securities are classified based on management’s intent. Our trading securities primarily consist of retained and purchased interests in certain securitizations. The retained interests are carried at fair value with changes in fair value recorded in current period earnings. Debt securities which management has the intent and ability to hold to maturity are classified as held to maturity and reported at amortized cost. All other investment securities are classified as available for sale and carried at fair value, with unrealized gains and losses (excluding other than temporary impairments) included in other comprehensive income, a component of shareholder’s equity, on an after-tax basis. Investments classified as available for sale or held to maturity are considered to be impaired when a decline in fair value is judged to be other than temporary. We employ a systematic methodology that considers available evidence in evaluating potential impairment of its investments. In the event that the cost of an investment exceeds its fair value, we evaluate, among other factors, the magnitude and duration of the decline in fair value; for equity and debt securities, the financial health of and business outlook for the issuer; the performance of the underlying assets for interests in securitized assets; and our intent and ability to hold the investment. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded in investment income and a new cost basis in the investment is established. Realized gains and losses on investment securities are reported in investment income and are determined using the specific identification method.   Loans Held for Sale   Loans held for sale may include automotive, residential and commercial mortgage receivables and loans and are carried at the lower of aggregate cost or estimated fair value, or, if such loans qualify for hedge accounting pursuant to Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133), they are reported at fair value. Fair value is based on contractually established commitments from investors or is based on current investor yield requirements. Revenue recognition on consumer automotive finance receivables is suspended when finance receivables and loans are placed on nonaccrual status. Retail automotive receivables are placed on nonaccrual status when contractually delinquent for 120 days. Interest on residential and commercial mortgage loans held for sale is accrued until such loans become 60 days delinquent.   Finance Receivables and Loans   Finance receivables and loans are reported at the principal amount outstanding, net of unearned income. Unearned income, which includes deferred origination fees reduced by origination costs and unearned rate support received from GM, is amortized to consumer or commercial revenue over the contractual life of the related finance receivable or loan using the interest method. Loan commitment fees are generally deferred and amortized into commercial revenue over the commitment period. Other credit-related fees, including letter and line of credit fees, are recognized as other income when earned.   Acquired Loans   We acquire certain loans individually and in groups or portfolios, which have experienced deterioration of credit quality between origination and our acquisition. The amount paid for these loans reflects our determination that it is probable that we will be unable to collect all amounts due according to the loan’s contractual terms. These acquired loans are accounted for under American  75   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      Institute of Certified Public Accountants Statement of Position 03-3 Accounting for Certain Loans or Debt Securities Acquired in a Transfer (SOP 03-3). We recognize the accretable yield to the excess of our estimate of undiscounted expected principal, interest and other cash flows (expected at acquisition to be collected) over our initial investment in the acquired asset.   Over the life of the loan or pool, we update the estimated cash flows we expect to collect. At each balance sheet date, we evaluate whether the expected cash flows of these loans has changed. We adjust the amount of accretable yield for any loans or pools where there is an increase in expected cash flows. We record a valuation allowance for any loans or pools for which there is a decrease in expected cash flows. In accordance with Statement of Financial Accounting Standards No. 114 Accounting by Creditors for Impairment of a Loan (SFAS 114), we measure such impairments based upon the present value of the expected future cash flows discounted using the loan’s effective interest rate or, as a practical expedient when reliable information is available, through the fair value of the collateral less expected costs to sell. The present value of any subsequent increase in the loan’s or pool’s actual cash flows or cash flows expected to be collected is used first to reverse any existing valuation allowance for that loan or pool.   Nonaccrual loans   Consumer and commercial revenue recognition is suspended when finance receivables and loans are placed on nonaccrual status. Retail automotive receivables are placed on nonaccrual status when delinquent for 120 days. Commercial automotive receivables and loans and commercial and industrial loans are placed on nonaccrual status when delinquent for 90 days. Residential mortgages and commercial real estate loans are placed on nonaccrual status when delinquent for 60 days. Warehouse, construction, and other lending receivables are placed on nonaccrual status when delinquent for 90 days. Revenue accrued but not collected at the date finance receivables and loans are placed on nonaccrual status is reversed and subsequently recognized only to the extent it is received in cash. Finance receivables and loans are restored to accrual status only when contractually current and the collection of future payments is reasonably assured.   Impaired loans   Commercial loans are considered impaired when it is probable that we will be unable to collect all amounts due according to the terms of the loan agreement and the recorded investment in the loan exceeds the fair value of the underlying collateral. We recognize income on impaired loans as discussed previously for nonaccrual loans. If the recorded investment in impaired loans exceeds the fair value, a valuation allowance is established as a component of the allowance for credit losses. In addition to commercial loans specifically identified for impairment, we have portfolios of homogeneous loans consisting of smaller balances that are collectively evaluated for impairment, as discussed within the allowance for credit losses accounting policy.   Allowance for Credit Losses   The allowance for credit losses is management’s estimate of incurred losses in the lending portfolios. Portions of the allowance for credit losses are specified to cover the estimated losses on commercial loans specifically identified for impairment. The unspecified portion of the allowance for credit losses covers estimated losses on the homogeneous portfolios of finance receivables and loans collectively evaluated for impairment. Additions to the allowance for credit losses are made by charges to the provision for credit losses. Amounts determined to be uncollectible are charged against the allowance for credit losses. Additionally, losses arising from the sale of repossessed assets collateralizing automotive finance receivables and loans are charged to the allowance for credit losses. Recoveries of previously charged-off amounts are credited at time of repossession to the allowance for credit losses.   We perform periodic and systematic detailed reviews of our lending portfolios to identify inherent risks and to assess the overall collectibility of those portfolios. The allowance relates to portfolios collectively reviewed for impairment, generally consumer finance receivables and loans, and is based on aggregated portfolio evaluations by product type. Loss models are utilized for these portfolios which consider a variety of factors including, but not limited to, historical loss experience, current economic conditions, anticipated repossessions or foreclosures based on portfolio trends, delinquencies and credit scores, and expected loss factors by receivable and loan type. Loans in the commercial portfolios are generally reviewed on an individual loan basis and, if necessary, an allowance is established for individual loan impairment. Loans subject to individual reviews are analyzed based on factors including, but not limited to, historical loss experience, current economic conditions, collateral performance, performance trends within specific geographic and portfolio segments, and any other pertinent information, which result in the estimation of specific allowances for credit losses. The allowance related to specifically identified impaired loans is established based on discounted expected cash flows, observable market prices, or for loans that are solely dependent on the collateral for repayment, the fair value of the collateral. The evaluation of these factors for both consumer and commercial finance receivables and loans involves complex, subjective judgments.   Securitizations and Other Off-balance Sheet Transactions   We securitize, sell and service retail finance receivables, wholesale loans, commercial investment securities, and residential and commercial mortgage loans. Interests in the securitized and sold loans are generally retained in the form of interest-only strips, senior or subordinated interests, cash reserve accounts and servicing rights. Our retained interests are generally subordinate to investors’ interests. The investors and the securitization trusts generally have no recourse to our other assets for failure of debtors to pay when due.   We retain servicing responsibilities for all of our retail finance receivable and wholesale loan securitizations and for the majority of our residential and commercial mortgage loan securitizations.  76   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      We may receive servicing fees based on the securitized loan balances and certain ancillary fees, all of which are recorded in other income for retail finance receivables and wholesale loans, and mortgage banking income for residential and commercial mortgage loans. We also retain the right to service the residential mortgage loans sold as a result of mortgage-backed security transactions with Ginnie Mae, Fannie Mae, and Freddie Mac and for the sale of automotive finance receivables. We also serve as the collateral manager in the securitizations of commercial investment securities.   Gains or losses on securitizations and sales depend on the previous carrying amount of the assets involved in the transfer and are allocated between the assets sold and the retained interests based on relative fair values at the date of sale. Since quoted market prices are generally not available, we estimate the fair value of retained interests by determining the present value of future expected cash flows using modeling techniques that incorporate management’s best estimates of key variables, including credit losses, prepayment speeds, weighted average life and discount rates commensurate with the risks involved and, if applicable, interest or finance rates on variable and adjustable rate contracts. Credit loss assumptions are based upon historical experience, market information for similar investments, and the characteristics of individual receivables and loans underlying the securities. Prepayment speed estimates are determined utilizing data obtained from market participants, where available, or based on historical prepayment rates on similar assets. Discount rate assumptions are determined using data obtained from market participants where available, or based on current relevant treasury rates plus a risk adjusted spread based on analysis of historical spreads on similar types of securities. Estimates of interest rates on variable and adjustable contracts are based on spreads over the applicable benchmark interest rate using market-based yield curves. Gains on securitizations and sales are reported in other income for retail finance receivables and wholesale loans, and mortgage banking income for residential and commercial mortgage loans. Retained interests are recorded at fair value with any declines in fair value below the carrying amount reflected in other comprehensive income, a component of shareholder’s equity, or in earnings, if declines are determined to be other than temporary or if the interests are classified as trading. Retained interest-only strips and senior and subordinated interests are generally included in available for sale investment securities, or in trading investment securities, depending on management’s intent at the time of securitization. Retained cash reserve accounts are included in other assets.   We use certain off-balance sheet warehouse structures as funding sources for commercial mortgage loans originated by us. The originated loans are first sold to either a bankruptcy-remote special purpose entity or a third-party bank, which then issues both senior and subordinated loan participations. The senior loan participations are purchased by a third-party bank or its commercial paper conduit, and the subordinate participation is either purchased or retained by us. We retain the associated subordinate loan participations within a bankruptcy-remote subsidiary. Subordinate loan participations are classified either as loans held for investment or loans held for sale. Loans held for sale are recorded at the lower of aggregated cost or fair value, in accordance with Statement of Financial Accounting Standards No. 65, Accounting for Certain Mortgage Banking Activities (SFAS 65). The amount by which the cost of such loans exceeds fair value is recorded as a valuation allowance, thereby reducing the carrying value of the loan. The determination of fair value is based on current market yield requirements, which consider the likelihood of default, and recent trading activity. The returns on these commercial mortgage assets have limited prepayment risk, either because the loans cannot be prepaid without penalty or because the expected returns assume the loans will be prepaid immediately upon the expiration of the penalty period, if limited. Securities that are either retained from securitizations or purchased for investment are classified as available for sale, trading, or held to maturity and are accounted for under Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115), with consideration given to SFAS 140, which considers the prepayment risk, if any, associated with the investments. Interest-only strips are either purchased or retained, are classified as either available for sale or trading, and are accounted for in accordance with SFAS 115, with further guidance provided by SFAS 140, and Emerging Issues Task Force 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets (EITF 99-20), which considers the prepayment risk, if any, associated with the investments.   In some instances, we transfer commercial mortgage loans and securities to trusts that issue various classes of commercial mortgage backed securities (CMBS) to investors. Recently, regulators and accounting standard setters have had discussions with industry participants and public accounting firms regarding certain features of CMBS structures, particularly the qualifying status, as discussed in SFAS 140, of the issuing trust in consideration of the related servicing activities. The regulators and accounting standard setters are currently considering the publication of new clarifying guidance and such guidance may result in material changes in our accounting for these asset transfers. The new guidance may require us to reverse, through a cumulative change in accounting principle, certain sales and realized gains reported in prior periods and consolidate certain assets currently excluded from our Consolidated Balance Sheet. We cannot predict with certainly whether any such guidance will be issued and what the transitional provisions for implementing such guidance will be. Management is currently in the process of reviewing the potential impact if an adjustment were to be required.   Investment in Operating Leases   Investment in operating leases is reported at cost, less accumulated depreciation and net of origination fees or costs. Income from operating lease assets, which includes lease origination fees net of lease origination costs, is recognized as operating lease revenue on a straight-line basis over the scheduled lease term. Depreciation of vehicles is generally provided on a straight-line basis to an estimated residual value over a period of time  77    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      consistent with the term of the underlying operating lease agreement. We evaluate our depreciation policy for leased vehicles on a regular basis.   We have significant investments in the residual values of assets in our operating lease portfolio. The residual values represent an estimate of the values of the assets at the end of the lease contracts and are initially recorded based on residual values established at contract inception by consulting independently published residual value guides. Realization of the residual values is dependent on our future ability to market the vehicles under the prevailing market conditions. Over the life of the lease, we evaluate the adequacy of our estimate of the residual value and may make adjustments to the extent the expected value of the vehicle (including any support payments from GM) at lease termination changes. In addition to estimating the residual value at lease termination, we also evaluate the current value of the operating lease asset and test for impairment to the extent necessary based on market considerations and portfolio characteristics. Impairment is determined to exist if the undiscounted expected future cash flows are lower than the carrying value of the asset. When a lease vehicle is returned to us, the asset is reclassified from investment in operating leases to other assets at the lower of cost or estimated fair value, less costs to sell.   Mortgage Servicing Rights   We capitalize the value expected to be realized from performing specified residential and commercial mortgage servicing activities for others as mortgage servicing rights (MSRs). Such capitalized servicing rights are purchased or retained upon sale or securitization of mortgages. These rights are amortized in proportion to, and over the period of, the estimated future net servicing cash flow stream of the related mortgage loans. Pursuant to our risk management program, the majority of the MSRs are hedged to mitigate the effect of changes in MSRs fair value resulting from changes in interest rates. If the changes in the fair value of the hedged MSRs are highly correlated to changes in the fair value of the derivative financial instruments, the carrying values of hedged MSRs are adjusted for the change in fair value and the resultant gain or loss is recognized in earnings. MSRs that do not meet the criteria for hedge accounting treatment (as specified by SFAS 133) are carried at the lower of cost or fair value.   We evaluate MSRs for impairment by stratifying the portfolio on the basis of the predominant risk characteristics (loan type and interest rate). To the extent that the carrying value of an individual stratum exceeds its fair value, the mortgage servicing rights asset is considered to be impaired. Impairment that is considered to be temporary is recognized through the establishment of (or an increase in) a valuation allowance, with a corresponding unfavorable effect on earnings. If it is later determined that all or a portion of the temporary impairment no longer exists for a particular stratum, the valuation allowance is reduced, with a favorable effect on earnings.   Each quarter, we evaluate our MSRs and consider the amount of valuation allowance unlikely to be recovered through future interest rate increases. To estimate this amount, we analyze historical changes in mortgage and other applicable market interest rates to determine the magnitude of interest rate and corresponding MSR value increases with only remote probability of occurring. To the extent recoverability is remote, both the gross MSR asset and the related valuation allowance are reduced by such amount, which is characterized as other than temporary impairment.   Since quoted market prices for MSRs are generally not available, we estimate the fair value of MSRs by determining the present value of future expected cash flows using modeling techniques that incorporate management’s best estimates of key variables, including expected cash flows, credit losses, prepayment speeds and return requirements commensurate with the risks involved. Cash flow assumptions are based on actual performance, and where possible, the reasonableness of assumptions is periodically validated through comparisons to other market participants. Credit loss assumptions are based upon historical experience and the characteristics of individual loans underlying the MSRs. Prepayment speed estimates are determined utilizing data obtained from market participants. Return requirement assumptions are determined using data obtained from market participants, where available, or based on current relevant interest rates, plus a risk adjusted spread. Since many factors can affect the estimate of the fair value of mortgage servicing rights, we regularly evaluate the major assumptions and modeling techniques used in our estimate and review such assumptions against market comparables, if available. Also, we closely monitor the actual performance of our MSRs by regularly comparing actual cash flow, credit and prepayment experience to modeled estimates. In addition to the use of derivative financial instruments, we periodically invest in available for sale securities (i.e., U.S. Treasury Securities) to mitigate the effect of changes in fair value from the interest rate risk inherent in the mortgage servicing rights.   Reinsurance   We assume and cede insurance risk under various reinsurance agreements. We seek to reduce the loss that may arise from catastrophes or other events that cause unfavorable underwriting results by reinsuring certain levels of risk with other insurance enterprises. We remain liable with respect to any reinsurance ceded if the assuming companies are unable to meet their obligations under these reinsurance agreements. We also assume insurance risks from other insurance companies, receiving a premium as consideration for the risk assumption. Amounts recoverable from reinsurers on paid losses and loss adjustment expenses are included in premiums and other insurance receivables. Amounts recoverable from reinsurers on unpaid losses, including incurred but not reported losses, and loss adjustment expenses pursuant to reinsurance contracts are estimated and reported with premiums and other insurance receivables. Amounts paid to reinsurers relating to the unexpired portion of reinsurance contracts are reported as prepaid reinsurance premiums within premiums and other insurance receivables.   Repossessed and Foreclosed Assets   Assets are classified as repossessed and foreclosed and included in other assets when physical possession of the collateral is taken,  78    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      regardless of whether foreclosure proceedings have taken place. Repossessed and foreclosed assets are carried at the lower of the outstanding balance at the time of repossession or foreclosure, or fair value of the asset less estimated costs to sell. Losses on the revaluation of repossessed and foreclosed assets are charged to the allowance for credit losses at the time of repossession. Subsequent holding period losses and losses arising from the sale of repossessed assets collateralizing automotive finance receivables and loans are expensed as incurred in other operating expenses.   Goodwill and Other Intangibles   Goodwill and other intangible assets, net of accumulated amortization, are reported in other assets. In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142), goodwill represents the excess of the cost of an acquisition over the fair value of net assets acquired. Goodwill is reviewed for impairment utilizing a two step process. The first step of the impairment test requires us to define the reporting units, which for us represents the operating segments as disclosed in Note 23 and compare the fair value of each of these reporting units to the respective carrying value. The fair value of the reporting units is determined based on various analyses, including discounted cash flow projections. If the carrying value is less than the fair value, no impairment exists and the second step does not need to be completed. If the carrying value is higher than the fair value, there is an indication that impairment may exist and a second step must be performed to compute the amount of the impairment. SFAS 142 requires goodwill to be tested for impairment annually at the same time every year, and when an event occurs or circumstances change such that it is reasonably possible that an impairment may exist. We conclude on our annual impairment test in the fourth quarter.   Other intangible assets, which include customer lists, trademarks and other identifiable intangible assets, are amortized on a straight-line basis over an estimated useful life of 3 to 10 years.   Impairment of Long Lived Assets   The carrying value of long-lived assets (including premises and equipment and investment in operating leases as well as certain identifiable intangibles) are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable from the estimated undiscounted future cash flows expected to result from its use and eventual disposition. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment is measured as the amount by which the carrying amount of the assets exceeds the fair value as estimated by discounted cash flows. In the 2005 review, no material impairment was recognized.   Premises and Equipment   Premises and equipment, stated at cost net of accumulated depreciation and amortization, are reported in other assets. Included in premises and equipment are certain capitalized software costs. The capitalized software is generally amortized on a straight-line basis over its useful life for a period not to exceed three years. Capitalized software that is not expected to provide substantive service potential or for which development costs significantly exceed the amount originally expected is considered impaired and written down to fair value.   Deferred Policy Acquisition Costs   Commissions and other costs of acquiring insurance, and compensation paid to producers of extended service contracts that are primarily related to and vary with the production of business are deferred and recorded in other assets. These costs are subsequently amortized as a component of other operating expenses over the terms of the related policies and service contracts on the same basis as premiums and revenue are earned, except for direct response advertising costs which are amortized over a three year period, based on the anticipated future benefit.   Unearned Insurance Premiums and Service Revenue   Insurance premiums, net of premiums ceded to reinsurers and service revenue are earned over the terms of the policies. The portion of premiums and service revenue written applicable to the unexpired terms of the policies is recorded as unearned insurance premiums or unearned service revenue. For short duration contracts, premiums and unearned service revenue are earned on a pro rata basis. For extended service and maintenance contracts, premiums and service revenues are earned on a basis proportionate to the anticipated loss emergence.   Reserves for Insurance Losses and Loss Adjustment Expenses   Reserves for insurance losses and loss adjustment expenses are established for the unpaid cost of insured events that have occurred as of a point in time. More specifically, the reserves for insurance losses and loss adjustment expenses represent the accumulation of estimates for reported losses and a provision for losses incurred but not reported, including claims adjustment expenses, relating to direct insurance and assumed reinsurance agreements. Estimates for salvage and subrogation recoverable are recognized at the time losses are incurred and netted against insurance losses and loss adjustment expenses. Reserves are established for each business at the lowest meaningful level of homogeneous data based on actuarial analysis and volatility considerations. Since the reserves are based on estimates, the ultimate liability may be more or less than such reserves. Adjustments in such estimated reserves are included in the results of operations in the period in which the adjustments are considered necessary. Such adjustments may be material to the results of the operations and financial condition and could occur in a future period.   Derivative Instruments and Hedging Activities   In accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (SFAS 133), all derivative financial instruments, whether designated for hedging relationships or not,  79    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      are required to be recorded on the balance sheet as assets or liabilities, carried at fair value and periodically adjusted. At inception of the derivative contract, we designate each qualifying derivative financial instrument as a hedge of the fair value of a recognized asset or liability (fair value hedge) or a hedge of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). We also use derivative financial instruments which, although acquired for risk management purposes, do not qualify as hedges under GAAP. Changes in the fair value of derivative financial instruments that are designated and qualify as fair value hedges, along with the gain or loss on the hedged asset or liability attributable to the hedged risk, are recorded in current period earnings. For qualifying cash flow hedges, the effective portion of the change in the fair value of the derivative financial instruments is recorded in other comprehensive income, a component of shareholder’s equity, and recognized in the income statement when the hedged cash flows affect earnings. Changes in the fair value of derivative financial instruments held for risk management purposes that do not meet the criteria to qualify as hedges under GAAP are reported in current period earnings. The ineffective portions of fair value and cash flow hedges are immediately recognized in earnings as offsets to income and expenses related to the hedged assets or liabilities. The hedge accounting treatment described herein is no longer applied if a derivative financial instrument is terminated or the hedge designation is removed. For these terminated fair value hedges, any changes to the hedged asset or liability remain as part of the basis of the asset or liability and are recognized into income over the original hedge period. For these terminated cash flow hedges, any changes in fair value of the derivative financial instrument remain in other comprehensive income, a component of shareholder’s equity, and are reclassified into earnings in the same period during which the hedged asset or liability affects income.   Loan Commitments   We enter into commitments to make loans whereby the interest rate on the loan is set prior to funding (i.e., interest rate lock commitments). Interest rate lock commitments for loans to be originated or purchased for sale, and for loans to be purchased and held for investment (including commitments to acquire senior interests in mortgage loan pools from off-balance sheet facilities), are derivative financial instruments in accordance with SFAS 133 and Staff Accounting Bulletin No. 105, Application of Accounting Principles to Loan Commitments (SAB 105). SAB 105 summarizes the views of the United States Securities and Exchange Commission (SEC) staff regarding the application of GAAP to loan commitments accounted for as derivative instruments. SAB 105 was effective for commitments to originate or purchase loans to be held for sale and for commitments to purchase loans to be held for investment (also referred to as interest rate lock commitments, or IRLCs) that were entered into after March 31, 2004. SAB 105 provides specific guidance on the measurement of loan commitments accounted for at fair value, specifying that fair value measurement exclude any expected future cash flows related to the customer relationship or loan servicing.   Prior to April 1, 2004, upon entering into the commitment, we recognized loan commitments at fair value based on expected future gain on sale, including an estimate of the future MSRs. For certain products, the future gain on sale (exclusive of MSR value) was known based on transparent pricing in an active secondary market and was included in current period earnings. Any additional value associated with the loan commitments (including the future value of the MSR) was deferred and recognized in earnings at the time of the sale (or securitization) of the loan. As a result of SAB 105, effective April 1, 2004, we no longer recognize the value of the commitment at the time of the rate lock. However, subsequent changes in value from the time the locks are recognized as assets or liabilities, with a corresponding adjustment to current period earnings, but exclude any future MSR value. Upon sale of the loan, the initial estimated value associated with the rate lock, along with the MSR, is recognized as part of the gain on sale (or securitization). The impact of adopting the provisions of SAB 105 resulted in a deferral in the timing of recognizing the value of certain loan commitments, but did not have a material impact on our financial condition or results of operations.   Income Taxes   We (including our domestic subsidiaries) join with GM in filing a consolidated U.S. federal income tax return. Certain of our other subsidiaries file tax returns in local jurisdictions. The portion of the consolidated tax recorded by us and our subsidiaries included in the consolidated tax return generally is equivalent to the liability that we would have incurred on a separate return basis and is settled as GM’s tax payments are due. Deferred tax assets and liabilities are recognized for the future tax consequences of events that have been recognized in the financial statements or tax returns, based upon enacted tax laws and rates. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. We also establish reserves related to disputed items with various tax authorities when the item becomes probable and the costs can be reasonably estimated.   Recently Issued Accounting Standards   FASB Interpretation No. 46R — In December 2003 the Financial Accounting Standards Boards (FASB) released a revision to Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46R), to clarify some of the provisions of the original interpretation (FIN 46) and to exempt certain entities from its requirements. We adopted FIN 46 effective July 1, 2003, and FIN 46R for the period ended March 31, 2004. Among other matters, FIN 46R changed the primary beneficiary analysis of variable interest entities as it relates to fees paid to decision makers. However, these changes did not impact the conclusions of our primary beneficiary analysis previously reached under FIN 46 and, as such, the adoption of FIN 46R did not impact our financial condition or results of operations.   Statement of Position 05-1 — In September 2005 the AICPA issued Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (SOP 05-1).  80    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      SOP 05-1 provides guidance on accounting for deferred acquisition costs on internal replacements of insurance contracts. SOP 05-1 defines an internal replacement, and specifies the conditions that determine whether the replacement contract is substantially or unsubstantially changed from the replaced contract. An internal replacement determined to result in a substantially changed contract should be accounted for as an extinguishment of the replaced contract, and unamortized deferred acquisition costs and unearned revenue liabilities of the replaced contract should be no longer be deferred. An internal replacement determined to result in an unsubstantially changed contract should be accounted for as a continuation of the replaced asset. SOP 05-01 introduces the terms integrated and non-integrated contract features and specifies that non-integrated features do not change the base contract and are to be accounted for in a manner similar to a separately issued contract. Integrated features are evaluated in conjunction with the base contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. Management is assessing the potential impact on our financial condition or results of operations.   Statement of Financial Accounting Standards No. 154 — In May 2005 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (SFAS 154), that addresses accounting for changes in accounting principle, changes in accounting estimates, changes required by an accounting pronouncement in the instance that the pronouncement does not include specific transition provisions and error correction. SFAS 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle and error correction unless impracticable to do so. SFAS 154 states an exception to retrospective application when a change in accounting principle, or the method of applying it, may be inseparable from the effect of a change in accounting estimate. When a change in principle is inseparable from a change in estimate, such as depreciation, amortization or depletion, the change to the financial statements is to be presented in a prospective manner. SFAS 154 and the required disclosures are effective for accounting changes and error corrections in fiscal years beginning after December 15, 2005.   Statement of Financial Accounting Standards No. 155 — In February 2006 the Financial Accounting Standards Board issued Statement of Financial Standards No. 155 Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140 (SFAS 155). This standard permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. SFAS 155 allows an entity to make an irrevocable election to measure such a hybrid financial instrument at fair value on an instrument-by-instrument basis. The standard eliminates the prohibition on a QSPE from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 also clarifies which interest-only and principal-only strips are not subject to the requirements of SFAS 133 as well as determines that concentrations of credit risk in the form of subordination are not embedded derivatives. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of the fiscal year that begins after September 15, 2006. Management is assessing the potential impact on our financial condition or results of operations.   Statement of Financial Accounting Standards No. 156 — In March 2006 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 156, Accounting for Servicing of Financial Assets (SFAS 156), which provides the following: 1) revised guidance on when a servicing asset and servicing liability should be recognized; 2) requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable; 3) permits an entity to elect to measure servicing assets and servicing liabilities at fair value each reporting date and report changes in fair value in earnings in the period in which the changes occur; 4) upon initial adoption, permits a onetime reclassification of available-for-sale securities to trading securities for securities which are identified as offsetting the entity’s exposure to changes in the fair value of servicing assets or liabilities that a servicer elects to subsequently measure at fair value; and 5) requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional footnote disclosures. SFAS 156 is effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006 with the effects of initial adoption being reported as a cumulative-effect adjustment to retained earnings, however, SFAS 156 permits early adoption. We plan to early adopt SFAS 156 as of January 1, 2006 and are currently in the process of quantifying the financial impact. It is not anticipated that adoption will have a material impact on our financial condition or results of operations.   Emerging Issues Task Force No. 04-5 — In July 2005 the Emerging Issues Task Force released Issue 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (EITF 04-5). EITF 04-5 provides guidance in determining whether a general partner controls a limited partnership by determining the general partner’s substantive ability to dissolve (liquidate) the limited partnership as well as assessing the substantive participating rights of the general partner within the limited partnership. EITF 04-5 states that if the general partner has substantive ability to dissolve (liquidate) or has substantive participating rights then the general partner is presumed to control that partnership and would be required to consolidate the limited partnership. EITF 04-5 is effective for all new limited partnerships and existing partnerships for which the partnership agreements are modified on or after June 29, 2005. This EITF is effective in fiscal periods beginning after December 15, 2005, for all other limited partnerships. We are currently reviewing the potential impact of EITF 04-5. It is not anticipated that adoption will have a material impact on our financial condition or results of operations.  81   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      FASB Staff Position (FSP) Nos. FAS 115-1 and FAS 124-1 — In November 2005 the FASB issued FSP Nos. FAS 115-1 and 124-1 to address the determination as to when an investment is considered impaired, whether that impairment is other than temporary and the measurement of an impaired loss. This FSP nullified certain requirements of Emerging Issues Task Force 03-1 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments (EITF 03-1), and references existing other than temporary guidance. Furthermore, this FSP creates a three step process in determining when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. The FSP is effective for reporting periods beginning after December 15, 2005. It is not anticipated that adoption will have a material impact on our financial condition or results of operations.                       2      Insurance Premiums and Service Revenue     Earned     The following table is a summary of insurance premiums and service revenue written and earned:                                                               2005   2004   2003                   Year ended December 31, ($ in millions)   Written   Earned   Written   Earned   Written   Earned             Insurance premiums                                                            Direct      $2,493       $2,644       $2,400       $2,604       $2,295       $2,511             Assumed      634       595       611       630       607       577               Gross insurance premiums      3,127       3,239       3,011       3,234       2,902       3,088             Ceded      (401 )     (387 )     (348 )     (347 )     (406 )     (379 )             Net insurance premiums      2,726       2,852       2,663       2,887       2,496       2,709           Service revenue      1,345       910       1,319       641       1,336       469               Insurance premiums and service revenue      $4,071       $3,762       $3,982       $3,528       $3,832       $3,178           Prior to 2002, substantially all of GMAC Insurance’s vehicle service contract business resulted from contracts between GM and the retail consumer, as GM, in turn, would insure its business risk through a contractual liability policy purchased from GMAC Insurance (while GM remained the direct obligor to the customer). Under this arrangement, GMAC Insurance recognized insurance premium revenue in accordance with Statement of Financial Accounting Standards No. 60, Accounting and Reporting by Insurance Enterprises (SFAS 60). Beginning in 2002, the business model changed, with substantially all vehicle service contracts being sold directly by GMAC Insurance to the retail customers. The change was designed to concentrate all business related to service contracts with GMAC Insurance (where the activities are managed), rather than splitting the business between GM and GMAC Insurance. This new relationship resulted in GMAC Insurance being the direct obligor of the vehicle service contracts and the use of the gross method of accounting in accordance with Emerging Issues Task Force 99-19, Recording Revenue Gross as a Principal versus Net as an Agent (EITF 99-19). Under this method of accounting, GMAC Insurance recognizes the gross contract price billed to the customer as revenue, and expenses the amount of commissions paid to dealers. This change in the business model relative to the role of GMAC Insurance in directly providing vehicle service contracts to consumers results in a current and prospective increase in GMAC Insurance’s unearned insurance revenue, a decrease in unearned premium, and an increase in deferred policy acquisition costs and related amortization. This trend will continue until service contracts with GM terminate (and premiums are fully earned from such contracts written prior to 2002), and GMAC Insurance’s new role, as direct obligor, reaches a steady state.                         3      Mortgage Banking Income     The following table presents the components of mortgage banking income:                                 Year ended December 31,               ($ in millions)   2005   2004   2003             Mortgage servicing fees      $1,608       $1,488       $1,402           Amortization and impairment of mortgage servicing rights (a)      (869 )     (1,112 )     (2,048 )         Net gains on derivatives related to MSRs (b)      61       243       507               Net loan servicing income (loss)      800       619       (139 )         Gains from sales of loans      1,201       788       2,155           Mortgage processing fees      202       143       285           Other      259       375       283               Mortgage banking income (c)      $2,462       $1,925       $2,584                (a)       Includes additions to the valuation allowance representing     impairment considered to be temporary.   (b)       Includes SFAS 133 hedge ineffectiveness, amounts excluded     from the hedge effectiveness calculation and the change in value     of derivative financial instruments not qualifying for hedge     accounting.   (c)       Excludes net gains realized upon the sale of investment     securities used to manage risk associated with mortgage     servicing rights which are reflected as a component of     investment income.   82    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                          4      Other Income     Details of other income were as follows:                                     Year ended December 31,               ($ in millions)   2005   2004   2003             Automotive receivable securitizations and sales:                                    Gains (losses) on sales:                                      Wholesale securitizations      $543       $497       $488               Retail automotive portfolio sales transactions      (86 )     53       51               Retail automotive securitizations      (2 )     9       37           Interest on cash reserves deposits      102       60       45           Service fees      122       59       40           Other      72       83       99               Total automotive receivable securitizations and sales      751       761       760           Real estate services      712       464       410           Interest and service fees on transactions with GM (a)      568       370       384           Interest on cash equivalents      480       244       143           Other interest revenue      450       297       298           Full service leasing fees      170       153       137           Late charges and other administrative fees      164       164       111           Insurance service fees      111       136       119           Factoring commissions      74       77       77           Specialty lending fees      59       60       62           Fair value adjustment on certain derivatives (b)      (36 )     (26 )     (103 )         Other      965       816       731               Total other income      $4,468       $3,516       $3,129                 (a)       Refer to Note 19 to our Consolidated Financial Statements     for a description of interest and service fees on transactions     with GM.           (b)       Refer to Note 16 to our Consolidated Financial Statements     for a description of our derivative activities.                        5      Other Operating Expenses     Details of other operating expenses were as follows:                                 Year ended December 31, ($ in millions)   2005   2004   2003             Insurance commissions expense      $901       $928       $830           Technology and communications expense      591       569       508           Professional services      452       474       361           Advertising and marketing      359       537       261           Premises and equipment depreciation      288       294       279           Rent and storage      272       253       223           Full service leasing vehicle maintenance costs      236       215       171           Lease and loan administration      196       175       273           Auto remarketing and repossession expenses      187       136       239           Amortization of intangible assets      23       11       11           Operating lease disposal gain      (304 )     (192 )     (43 )         Other      933       805       952               Total other operating expenses      $4,134       $4,205       $4,065          83    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                          6      Investment Securities     Our portfolio of securities includes bonds, equity securities, asset- and mortgage-backed securities, notes, interests in securitization trusts and other investments. The cost, fair value and gross unrealized gains and losses on available for sale and held to maturity securities were as follows:                                                                                 2005   2004                       Gross           Gross               unrealized           unrealized                   Fair           Fair   December 31, ($ in millions)   Cost (a)   gains   losses   value   Cost (a)   gains   losses   value         Available for sale securities                                                                          Debt securities                                                                            U.S. Treasury and federal agencies      $2,945       $5       ($46 )     $2,904       $2,198       $18       ($8 )     $2,208             States and political subdivisions      863       27       (1 )     889       556       40       —       596             Foreign government securities      844       11       (2 )     853       792       14       (1 )     805             Mortgage-backed securities:                                                                              Residential      119       —       (2 )     117       103       5       (5 )     103               Commercial      19       —       —       19       973       9       (3 )     979             Asset-backed securities      956       —       —       956       506       3       —       509             Interest-only strips      122       29       (3 )     148       252       80       (3 )     329             Principal-only strips      —       —       —       —       1       —       —       1             Collateralized debt obligations      —       —       —       —       153       —       —       153             Corporate debt securities      5,124       27       (30 )     5,121       2,117       65       (5 )     2,177             Other      909       16       (5 )     920       1,160       32       (2 )     1,190               Total debt securities (b)      11,901       115       (89 )     11,927       8,811       266       (27 )     9,050           Equity securities      1,510       874       (17 )     2,367       1,505       731       (6 )     2,230                 Total available for sale securities (c)      $13,411       $989       ($106 )     $14,294       $10,316       $997       ($33 )     $11,280           Held to maturity securities                                                                          Total held to maturity securities (c)      $16       $—       $—       $16       $135       $4       ($1 )     $138                (a)       Net of $16 and $17 of losses in value determined to be other     than temporary for the years ended December 31, 2005     and 2004, respectively.   (b)       In connection with certain borrowings and letters of credit     relating to certain assumed reinsurance contracts $1,098 and     $1,242 of primarily U.S. Treasury securities were pledged     as collateral as of December 31, 2005 and 2004,     respectively.   (c)       At December 31, 2005, $1,536 of investment securities     classified as available for sale and $76 of investment     securities classified as held to maturity at GMAC Commercial     Mortgage were transferred to reporting segment held for sale in     our Consolidated Balance Sheet. Refer to Note 1 to our     Consolidated Financial Statements for further details.    The fair value, unrealized gains (losses) and amount pledged as collateral for our portfolio of trading securities were as follows:                             December 31, ($ in millions)   2005   2004         Trading securities                          Fair value                            Mortgage-backed securities:                              Residential      $1,042       $1,141               Commercial      —       366             Mortgage residual interests      764       780             Interest-only strips      265       448             Principal-only strips      651       201             Corporate debt securities      —       249             Debt and other      1,175       360               Total trading securities (a)      $3,897       $3,545               Net unrealized gains (b)      $131       $35           Pledged as collateral      $2,697       $2,910                (a)       At December 31, 2005, $683 of investment securities     classified as trading securities at GMAC Commercial Mortgage     were transferred to reporting segment held for sale in our     Consolidated Balance Sheet. Refer to Note 1 to our     Consolidated Financial Statements for further details.   (b)       Unrealized gains and losses are included in investment income on     a current period basis. Net unrealized losses totaled $341 at     December 31, 2003.   84    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      The maturity distribution of available for sale and held to maturity debt securities outstanding is summarized in the following table. Actual maturities may differ from those scheduled as a result of prepayments by issuers.                                             Available   Held to       for sale   maturity               December 31, 2005       Fair       Fair   ($ in millions)   Cost   value   Cost   value             Due in one year or less      $1,718       $1,718       $11       $11           Due after one year through five years      6,000       5,975       5       5           Due after five years through ten years      1,983       1,991       —       —           Due after ten years      972       987       —       —           Mortgage-backed securities and interests in securitization trusts      1,228       1,256       —       —               Total securities      $11,901       $11,927       $16       $16           The following table presents gross gains and losses realized upon the sales of available for sale securities.                                 Year ended December 31,               ($ in millions)   2005   2004   2003             Gross realized gains      $186       $138       $270           Gross realized losses      (66 )     (49 )     (202 )             Net realized gains      $120       $89       $68           The gross unrealized losses and fair value of the investments in securities in an unrealized loss position that are not deemed to be other-than-temporarily impaired are summarized in the following table. In the opinion of management, these securities are not considered to be other than temporarily impaired.                                                                                 2005   2004                   Less than 12 months   12 months or longer   Less than 12 months   12 months or longer                       Year ended December 31,       Unrealized       Unrealized       Unrealized       Unrealized   ($ in millions)   Fair Value   Loss   Fair Value   Loss   Fair Value   Loss   Fair Value   Loss         Available for sale securities:                                                                          Debt securities                                                                            U.S. Treasury and federal agencies    $ 1,590     $ 32     $ 520     $ 15     $ 971     $ 8     $ —     $ —             States and political subdivision      79       1       —       —       —       —       —       —             Foreign government securities      179       1       —       —       208       1       —       —             Mortgage-backed securities:                                                                              Residential      36       1       76       2       67       5       —       —               Commercial      —       —       —       —       343       2       14       1             Asset-backed securities      —       —       —       —       —       —       —       —             Interest-only strips      81       3       —       —       27       3       —       —             Principal-only strips      —       —       —       —       —       —       —       —             CDO related securities      —       —       —       —       —       —       —       —             Corporate debt securities      1,865       20       331       10       547       5       —       —             Other debt securities      175       3       21       1       35       2       —       —               Total temporarily impaired securities      4,005       61       948       28       2,198       26       14       1           Equity securities available for sale      137       15       19       2       88       6       —       —               Total available for sale securities (a)    $ 4,142     $ 76     $ 967     $ 30     $ 2,286     $ 32     $ 14     $ 1       Held-to-maturity securities                                                                          Total held-to-maturity securities (a)    $ —     $ —     $ —     $ —     $ 15     $ 1     $ —     $ —                (a)       GMAC Commercial Mortgage investments that were in an unrealized     loss position had a fair value of $558 and gross unrealized     losses of $15 as of December 31, 2005. Assets that were in     an unrealized loss position for less than twelve months had a     fair value of $391 and gross unrealized losses of $11. GMAC     Commercial Mortgage’s investment securities have been     transferred to reporting segment held for sale in our     Consolidated Balance Sheet. Refer to Note 1 to our     Consolidated Financial Statements for further details.    In the fourth quarter of 2004, we transferred a $102 million subordinate investment security from the held to maturity to the available for sale classification, due to a change in our intent to no longer hold the security to maturity. The change in our intent was  85    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      due to significant deterioration in the credit quality of the underlying collateral supporting the investment. The amortized cost of the security approximated its fair value on the date of transfer due to impairment charges taken in previous years. This security was included in collateralized debt obligations under available for sale securities as of December 31, 2004. The amortized cost of this security was $93 million at December 31, 2003. In 2003 there was $34 million of realized losses related to this security.                       7      Finance Receivables and Loans     The composition of finance receivables and loans outstanding was as follows:                                                                 2005   2004               December 31, ($ in millions)   Domestic   Foreign   Total   Domestic   Foreign   Total         Consumer                                                            Retail automotive      $53,789       $17,663       $71,452       $73,911       $18,829       $92,740             Residential mortgages      65,040       3,919       68,959       54,643       3,066       57,709               Total consumer      118,829       21,582       140,411       128,554       21,895       150,449       Commercial                                                            Automotive                                                              Wholesale      13,202       7,372       20,574       19,154       8,752       27,906               Leasing and lease financing      461       767       1,228       466       1,000       1,466               Term loans to dealers and others      2,397       719       3,116       2,890       787       3,677             Commercial and industrial      14,908       2,028       16,936       12,019       2,184       14,203             Real estate construction      2,558       119       2,677       2,658       152       2,810             Commercial mortgages (a)      43       —       43       2,024       1,124       3,148               Total commercial      33,569       11,005       44,574       39,211       13,999       53,210               Total finance receivables and loans (b) (c)      $152,398       $32,587       $184,985       $167,765       $35,894       $203,659                (a)       At December 31, 2005, $3,018 ($2,069 domestic and $949     foreign) in GMAC Commercial Mortgage’s finance receivables     and loans were transferred to reporting segment held for sale in     our Consolidated Balance Sheet. Refer to Note 1 to our     Consolidated Financial Statements for further details.   (b)       Net of unearned income of $5,868 and $7,562 at     December 31, 2005 and 2004, respectively.   (c)       The aggregate amount of finance receivables and loans maturing     in the next five years is as follows: $62,363 in 2006; $23,309     in 2007; $16,879 in 2008; $10,589 in 2009; $6,547 in 2010 and     $71,166 in 2011 and thereafter. Prepayments may cause actual     maturities to differ from scheduled maturities.   86    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      The following table presents an analysis of the activity in the allowance for credit losses on finance receivables and loans.                                                                                         2005   2004   2003   Year ended December 31,               ($ in millions)   Consumer   Commercial   Total   Consumer   Commercial   Total   Consumer   Commercial   Total             Allowance at beginning of year      $2,951       $471       $3,422       $2,533       $509       $3,042       $2,347       $644       $2,991             Provision for credit losses (a)      1,017       68       1,085       1,935       18       1,953       1,643       78       1,721             Charge-offs                                                                                      Domestic      (1,302 )     (45 )     (1,347 )     (1,469 )     (96 )     (1,565 )     (1,246 )     (199 )     (1,445 )             Foreign      (194 )     (26 )     (220 )     (269 )     (7 )     (276 )     (278 )     (25 )     (303 )               Total charge-offs      (1,496 )     (71 )     (1,567 )     (1,738 )     (103 )     (1,841 )     (1,524 )     (224 )     (1,748 )               Recoveries                                                                                      Domestic      168       9       177       112       10       122       108       21       129               Foreign      48       4       52       81       3       84       32       7       39                 Total recoveries      216       13       229       193       13       206       140       28       168                 Net charge-offs      (1,280 )     (58 )     (1,338 )     (1,545 )     (90 )     (1,635 )     (1,384 )     (196 )     (1,580 )           Transfers to reporting segment held for sale (b)      —       (28 )     (28 )     —       —       —       —       —       —             Impacts of foreign currency translation      (9 )     (15 )     (24 )     20       6       26       (7 )     (18 )     (25 )           Securitization activity      4       (5 )     (1 )     8       28       36       (66 )     1       (65 )             Allowance at end of year      $2,683       $433       $3,116       $2,951       $471       $3,422       $2,533       $509       $3,042                (a)       Includes approximately $149 for credit losses directly related     to Hurricane Katrina. This provision was established based on     management’s best estimate of Hurricane Katrina’s     impact on the finance receivables and loan portfolio using     currently available information.   (b)       At December 31, 2005, $3,018 in GMAC Commercial Mortgage     finance receivables and loans and the related allowance of $28     were transferred to reporting segment held for sale in our     Consolidated Balance Sheet. Refer to Note 1 to our     Consolidated Financial Statements for further details.    The following table presents information about commercial finance receivables and loans specifically identified for impairment.                         December 31, ($ in millions)   2005   2004             Impaired loans (a)      $887       $1,337           Related allowance (a)      184       235           Average balance of impaired loans during the year (a)      1,120       1,376                (a)       At December 31, 2005 GMAC Commercial Mortgage’s     impaired loans of $144 million and related allowance of     $18 million were transferred to reporting segment held for     sale in our Consolidated Balance Sheet. Refer to Note 1 to     our Consolidated Financial Statements for further details.    We have loans that were acquired in a transfer, which at acquisition, had evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected.   The carrying amount of these loans, included in the balance sheet amounts of finance receivables and loans, was as follows:                                 December 31,               ($ in millions)   2005   2004   2003             Consumer      $1,658       $1,824       $1,589           Commercial      680       580       438               Total outstanding balance      2,338       2,404       2,027           Allowance      (103 )     (99 )     (129 )             Total carrying amount      $2,235       $2,305       $1,898           For loans acquired after January 1, 2005, SOP 03-3 requires us to record revenue using an accretable yield method. The following table represents accretable yield activity.                 Year ended December 31,       ($ in millions)   2005             Accretable yield at beginning of year      $121           Additions      285           Accretion      (131 )         Reclassification from (to) nonaccretable difference      11           Disposals      (79 )             Accretable yield at end of year      $207          87    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      Loans acquired during each year for which it was probable at acquisition that all contractually required payments would not be collected are as follows:                 Year ended December 31,       ($ in millions)   2005             Contractually required payments receivable at acquisition:                  Consumer      $3,158           Commercial      1,848               Total payments      $5,006           Cash flows expected to be collected at acquisition      2,333           Basis in acquired loans at acquisition      1,900                               8      Off-Balance Sheet     Securitizations     We securitize automotive and mortgage financial assets as a funding source. We sell retail finance receivables, wholesale loans, residential mortgage loans, commercial mortgage loans and commercial mortgage securities. The following discussion and related information presented relates only to the transfers of finance receivables and loans that qualify as off-balance sheet securitizations under the requirements of SFAS 140.   We retain servicing responsibilities for and subordinated interests in all of our securitizations of retail finance receivables and wholesale loans. Servicing responsibilities are retained for the majority of our residential and commercial mortgage loan securitizations and we may retain subordinated interests in some of these securitizations. We also hold subordinated interests and act as collateral manager in our collateralized debt obligation (CDO) securitization program.   As servicer, we generally receive a monthly fee stated as a percentage of the outstanding sold receivables. Typically, for retail automotive finance receivables where we are paid a fee, we have concluded that the fee represents adequate compensation as a servicer and, as such, no servicing asset or liability is recognized. Considering the short-term revolving nature of wholesale loans, no servicing asset or liability is recognized upon securitization of the loans. As of December 31, 2005, the weighted average basic servicing fees for our primary servicing activities were 100 basis points, 100 basis points, 40 basis points and 7 basis points of the outstanding principal balance for sold retail finance receivables, wholesale loans, residential mortgage loans and commercial mortgage loans, respectively. Additionally, we retain the rights to cash flows remaining after the investors in most securitization trusts have received their contractual payments. In certain retail securitization transactions, retail receivables are sold on a servicing retained basis, but with no servicing compensation and, as such, a servicing liability is established and recorded in other liabilities. As of December 31, 2005 and December 31, 2004, servicing liabilities of $32 million and $30 million, respectively, were outstanding related to such retail securitization transactions. In addition, in 2005 we completed a retail automotive securitization where the servicing fee received is considered greater than adequate compensation requiring the recording of a servicing asset. As of December 31, 2005, the fair value of the servicing asset was $30 million. For mortgage servicing, we capitalize the value expected to be realized from performing specified residential and commercial mortgage servicing activities as mortgage servicing rights (refer to Note 10 to our Consolidated Financial Statements).   We maintain cash reserve accounts at predetermined amounts for certain securitization activities in the unlikely event that deficiencies occur in cash flows owed to the investors. The amounts available in such cash reserve accounts totaled $52 million, $1,012 million, $88 million, and $7 million as of December 31, 2005, related to securitizations of retail finance receivables, wholesale loans, residential mortgage loans, and commercial mortgage loans, respectively, and $118 million, $1,046 million, $44 million and $10 million as of December 31, 2004, respectively.  88    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      The following table summarizes pre-tax gains on securitizations and certain cash flows received from and paid to securitization trusts for transfers of finance receivables and loans that were completed during 2005:                                                       2005               Retail       Mortgage loans   Commercial       finance   Wholesale       mortgage   Year ended December 31, ($ in millions)   receivables   loans   Residential   Commercial   securities             Pre-tax gains on securitizations      ($2 )     $543       $513       $68       $8       Cash inflows:                                                    Proceeds from new securitizations      4,874       7,705       41,987       3,990       741             Servicing fees received      65       179       245       21       —             Other cash flows received on retained interests      249       503       583       262       42             Proceeds from collections reinvested in revolving securitizations      —       102,306       —       —       —             Repayments of servicing advances      43       —       1,115       198       —       Cash outflows:                                                    Servicing advances      (46 )     —       (1,163 )     (188 )     —       Purchase obligations and options:                                                    Representations and warranties obligations      —       —       (29 )     —       —             Administrator or servicer actions      (76 )     —       —       —       —             Asset performance conditional calls      —       —       (99 )     —       —             Cleanup calls      (715 )     —       (2,202 )     —       —           The following table summarizes pre-tax gains on securitizations and certain cash flows received from and paid to securitization trusts for transfers of finance receivables and loans that were completed during 2004 and 2003:                                                                                               2004   2003                   Retail       Mortgage loans   Commercial   Retail       Mortgage loans   Commercial       finance   Wholesale       mortgage   finance   Wholesale       mortgage   Year ended December 31, ($ in millions)   receivables   loans   Residential   Commercial   securities   receivables   loans   Residential   Commercial   securities             Pre-tax gains on securitizations      $9       $497       $602       $54       $11       $37       $488       $522       $75       $14       Cash inflows:                                                                                            Proceeds from new securitizations      1,824       9,188       29,412       2,108       935       1,604       3,625       29,566       3,342       1,870             Servicing fees received      105       174       208       20       —       228       164       250       20       —             Other cash flows received on retained interests      340       808       729       216       68       753       174       955       317       69             Proceeds from collections reinvested in revolving securitizations      —       91,360       —       —       —       862       97,829       —       5       —             Repayments of servicing advances      75       —       947       147       —       114       —       1,208       116       —       Cash outflows:                                                                                            Servicing advances      (64 )     —       (1,035 )     (169 )     —       (118 )     —       (1,242 )     (117 )     —       Purchase obligations and options:                                                                                            Representations and warranties obligations      (1 )     —       (66 )     —       —       (25 )     —       (154 )     —       —             Administrator or servicer actions      (75 )     —       —       —       —       (146 )     —       —       —       —             Asset performance conditional calls      —       —       (137 )     —       —       —       —       (122 )     —       —             Clean up calls      (269 )     —       (3,797 )     —       —       (885 )     —       (1,919 )     —       —          89    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      Key economic assumptions used in measuring the estimated fair value of retained interests of sales completed during 2005 and 2004, as of the dates of such sales, were as follows:                             Retail   Mortgage loans   Commercial       finance       mortgage   Year ended December 31,   receivables (a)   Residential (b)   Commercial   securities         2005                      Key assumptions (c) (rates per annum):                          Annual prepayment rate (d)     0.9-1.2%    0.0-60.0%    0.0-50.0%    0.0%         Weighted average life (in years)     1.6-1.7    1.1-8.5    0.3-8.6    5.9-9.9         Expected credit losses     0.4-1.6    0.0-4.9%    0.0%    0.0%         Discount rate     9.5-15.0%    6.5-21.4%    4.2-10.7%    10.0-12.0%         2004                      Key assumptions (c) (rates per annum):                          Annual prepayment rate (d)         0.9-1.0%        0.0-51.3%        0.0-50.0%        0.0-19.9%         Weighted average life (in years)         1.6-1.8        1.1-6.0        0.4-8.8        2.5-17.4         Expected credit losses         0.4%        0.2-10.9%        0.0%        0.0-3.1%         Discount rate         9.5%        6.5-24.8%        4.3-15.0%        8.2-11.7%              (a)       The fair value of retained interests in wholesale     securitizations approximates cost because of the short-term and     floating rate nature of wholesale loans.   (b)       Included within residential mortgage loans are home equity loans     and lines, high     loan-to-value loans and     residential first and second mortgage loans.   (c)       The assumptions used to measure the expected yield on variable     rate retained interests are based on a benchmark interest rate     yield curve plus a contractual spread, as appropriate. The     actual yield curve utilized varies depending on the specific     retained interests.   (d)       Based on the weighted average maturity (WAM) for finance     receivables and constant prepayment rate (CPR) for mortgage     loans and commercial mortgage securities.    The following table summarizes the key economic assumptions and the sensitivity of the fair value of retained interests at December 31, 2005, to immediate 10% and 20% adverse changes in those assumptions.                               2005                   Mortgage loans   Commercial       Retail finance       mortgage   Year ended December 31, ($ in millions)   receivables (a)   Residential   Commercial   securities             Carrying value/fair value of retained interests     $314    $1,057    $250    $182         Weighted average life (in years)     0.1-1.2    1.0-6.2    0.0-17.7    2.4-16.1         Annual prepayment rate     0.7-1.2%WAM    0.0-60.0%CPR    0.0-50.0%CPR    1.2-16.0%CPR           Impact of 10% adverse change     ($1)    ($46)    ($1)    —           Impact of 20% adverse change     (2)    (82)    (1)    —               Loss assumption     0.4%(b)    0.0-16.9%    0.0-3.4%    0.0-6.7%           Impact of 10% adverse change     ($2)    ($43)    ($6)    ($3)           Impact of 20% adverse change     (4)    (81)    (10)    (6)             Discount rate     9.5-12.0%    6.5-40.0%    0.1-33.5%    5.3-21.1%           Impact of 10% adverse change     ($2)    ($34)    ($5)    ($9)           Impact of 20% adverse change     (5)    (65)    (10)    (17)             Market rate (d)     3.9-5.1%    (c)    (c)    (c)           Impact of 10% adverse change     ($7)    ($11)    $—    $—           Impact of 20% adverse change     (15)    (26)    —    —              (a)       The fair value of retained interests in wholesale     securitizations approximates cost of $690 because of the     short-term and floating rate nature of wholesale receivables.   (b)       Net of a reserve for expected credit losses totaling $14 at     December 31, 2005. Such amounts are included in the     fair value of the retained interests, which are classified as     investment securities.   (c)       Forward benchmark interest rate yield curve plus contractual     spread.   (d)       Represents the rate of return paid to the investors.     90    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% and 20% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which may magnify or counteract the sensitivities. Additionally, we hedge interest rate and prepayment risks associated with certain of the retained interests; the effects of such hedge strategies have not been considered herein.   Expected static pool net credit losses include actual incurred losses plus projected net credit losses divided by the original balance of the outstandings comprising the securitization pool. The following table displays the expected static pool net credit losses on our securitization transactions.                     December 31, (a)   2005   2004   2003             Retail automotive     0.4%        0.4%        0.4%         Residential mortgage     0.0-16.9%        0.0-26.1%        0.0-26.1%         Commercial mortgage     0.0-3.4%        0.0-4.2%        0.0-6.6%         Commercial mortgage securities     0.0-6.7%        0.0-39.5%        0.9-33.7%              (a)       Static pool losses not applicable to wholesale finance     receivable securitizations because of their short-term nature.    The following table presents components of securitized financial assets and other assets managed, along with quantitative information about delinquencies and net credit losses.                                                               Total finance   Amount 60 days or           receivables and loans   more past due   Net credit losses                   December 31, ($ in millions)   2005   2004   2005   2004   2005   2004             Retail automotive      $77,197       $98,146       $892       $806       $867       $1,044           Residential mortgage      167,584       129,550       8,682       6,686       885       944                 Total consumer      244,781       227,696       9,574       7,492       1,752       1,988               Wholesale      41,994       49,197       73       51       4       2           Commercial mortgage      43       21,353       —       410       4       130           Other automotive and commercial      23,996       22,155       575       544       33       71                 Total commercial (a)      66,033       92,705       648       1,005       41       203               Total managed portfolio (b)      310,814       320,401       $10,222       $8,497       $1,793       $2,191                                 Securitized finance receivables and loans      (103,947 )     (96,801 )                                           Loans held for sale (unpaid principal)      (21,882 )     (19,941 )                                                                     Total finance receivables and loans      $184,985       $203,659                                                                        (a)       Excludes $26,320 in GMAC Commercial Mortgage’s managed     assets. At December 31, 2005, Commercial Mortgage had $281     in accounts past due and net credit losses of $228. Refer to     Note 1 to our Consolidated Financial Statements for further     details.   (b)       Managed portfolio represents finance receivables and loans on     the balance sheet or that have been securitized, excluding     securitized finance receivables and loans that we continue to     service but have no other continuing involvement (i.e., in which     we retain an interest or risk of loss in the underlying     receivables).                          9      Investment in Operating     Leases     Investments in operating leases were as follows:                         December 31, ($ in millions)   2005   2004             Vehicles and other equipment, at cost      $39,443       $33,390           Accumulated depreciation      (8,232 )     (7,318 )             Investment in operating leases, net      $31,211       $26,072           The future lease payments due from customers for equipment on operating leases at December 31, 2005, totaled $13,857 million and are due as follows: $6,238 million in 2006, $4,420 million in 2007, $2,478 million in 2008, $693 million in 2009 and $28 million in 2010 and after.   Our investments in operating lease assets represents the expected future cash flows we expect to realize under the operating leases and includes both customer payments and the expected residual value upon remarketing the vehicle at the end of the lease. As described in Note 19 GM may sponsor residual support programs that result in the contractual residual value being in excess of our standard residual value. In evaluating the realizability of our residual values we consider any payments that GM may be required to make under these residual support programs. Based on the December 31, 2005 portfolio the amount that we would expect to be paid by GM under the lease residual support programs would be $2.5 billion as more fully discussed in Note 19.  91    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                          10      Mortgage Servicing Rights     We capitalize the present value of expected future cash flows associated with performing specified mortgage servicing activities for others. Such capitalized servicing rights are purchased or retained upon sales or securitizations of mortgages. The following table summarizes mortgage servicing rights activity and related amortization.                                 Year ended December 31,               ($ in millions)   2005   2004   2003             Balance at beginning of year      $4,819       $4,869       $4,601           Originations and purchases, net of sales      1,546       1,554       2,639           Amortization      (1,106 )     (879 )     (1,118 )         SFAS 133 hedge valuation adjustments      86       (272 )     446           Transfers to reporting segment held for sale(a)      (632 )     —       —           Other than temporary impairment      (55 )     (453 )     (1,699 )             Balance at end of year      $4,658       $4,819       $4,869           Valuation allowance      (643 )     (929 )     (1,149 )             Carrying value at end of year      $4,015       $3,890       $3,720               Estimated fair value at end of year      $4,021       $3,990       $3,798                (a)       At December 31, 2005, $632 in GMAC Commercial Mortgage     net mortgage servicing rights, were transferred to reporting     segment held for sale in our Consolidated Balance Sheet. Refer     to Note 1 to our Consolidated Financial Statements for     further details.    The following table summarizes the change in the valuation allowance for mortgage servicing rights:                                 Year ended December 31,               ($ in millions)   2005   2004   2003             Valuation allowance at beginning of period      $929       $1,149       $1,918           Additions (deductions) (a)      (237 )     233       930           Other excess service fee securitization      6       —       —           Other than temporary impairment      (55 )     (453 )     (1,699 )             Valuation allowance at end of year      $643       $929       $1,149                (a)       Changes to the valuation allowance are reflected as a component     of mortgage banking income.    During 2005 and 2004, we recorded other than temporary mortgage servicing rights impairment of $55 million and $453 million, respectively, reducing both the mortgage servicing rights gross carrying value and valuation allowance by this amount. This amount was based on a statistical analysis of historical changes in mortgage and other market interest rates to determine the amount that the mortgage servicing rights asset value will increase with only a remote probability of occurring. The adjustment to the valuation allowance reduces the maximum potential future increase to the mortgage servicing rights carrying value (under lower of cost or market accounting), but it has no impact on the net carrying value of the asset or on earnings.   We have an active risk management program to hedge the value of mortgage servicing rights. The mortgage servicing rights risk management program contemplates the use of derivative financial instruments and treasury securities that experience changes in value offsetting those of the mortgage servicing rights, in response to changes in market interest rates. Refer to Note 16 to our Consolidated Financial Statements for a discussion of the derivative financial instruments used to hedge mortgage servicing rights. Treasury securities used in connection with this risk management strategy are designated as available for sale or trading. At December 31, 2005, there was approximately $2.1 billion of such treasury securities outstanding related to this risk management activity, which were reflected as investment securities.   Key economic assumptions and the sensitivity of the current fair value of mortgage servicing rights to immediate 10% and 20% adverse changes in those assumptions are as follows:                                         December 31,           GMAC       2005   GMAC   GMAC-   Commercial       ($ in millions)   Residential   RFC   Mortgage(a)   Total             Estimated fair value      $3,056       $965       $731       $4,752               Weighted average prepayment speed (CPR)      20.40 %     28.16 %     2%-8 %(b)                 Impact on fair value of 10% adverse change      ($155 )     ($28 )     ($2 )     ($185 )         Impact on fair value of 20% adverse change      (294 )     (50 )     (5 )     (349 )             Weighted average discount rate      9.12 %     12.65 %     9.73 %                 Impact on fair value of 10% adverse change      ($77 )     ($29 )     ($7 )     ($113 )         Impact on fair value of 20% adverse change      (150 )     (55 )     (13 )     (218 )              (a)       At December 31, 2005, GMAC Commercial Mortgage net mortgage     servicing rights were transferred to reporting segment held for     sale in our Consolidated Balance Sheet. Refer to Note 1 to     our Consolidated Financial Statements for further details.   (b)       The majority of commercial mortgage loans are subject to     prepayment penalties during a rate lockout period. Therefore,     prepayment speed assumptions will change as loans mature from 2%     during the rate lockout period to 8% once the lockout period has     expired.    These sensitivities are hypothetical and should be used with caution. As the figures indicate, changes in fair value based on a 10% and 20% variation in assumptions generally cannot be extrapolated because the relationship of the change in assumption  92    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      to the change in fair value may not be linear. Also, in this table, the effect that a change in a particular assumption may have on the fair value is calculated without changing any other assumption. In reality, changes in one factor may result in changes in another, which might magnify or counteract the sensitivities.                       11      Premiums and Other Insurance     Receivables     Premiums and other insurance receivables consisted of the following:                         December 31, ($ in millions)   2005   2004             Prepaid reinsurance premiums      $359       $344           Reinsurance recoverable on unpaid losses      762       775           Reinsurance recoverable on paid losses (a)      87       56           Premiums receivable (b)      665       588               Total premiums and other insurance receivables      $1,873       $1,763                (a)       Net of $1 and $5 allowance for uncollectible reinsurance     recoverable on paid losses at December 31, 2005 and 2004,     respectively.   (b)       Net of $8 and $5 allowance for uncollectible premiums receivable     at December 31, 2005 and 2004, respectively.                    12      Other Assets     Other assets consisted of:                           December 31, ($ in millions)   2005   2004             Premises and equipment at cost      $2,899       $3,083           Accumulated depreciation      (1,145 )     (1,228 )             Net premises and equipment      1,754       1,855           Fair value of derivative contracts in receivable position      3,000       9,489           Cash reserve deposits held for securitization trusts (a)      2,907       1,835           Goodwill, net of accumulated amortization      2,446       3,274           Restricted cash collections for securitization trusts (b)      1,871       2,217           Deferred policy acquisition cost      1,696       1,444           Real estate investments      1,320       1,473           Accrued interest and rent receivable      1,163       1,174           Receivables related to taxes      774       —           Debt issuance costs      726       754           Repossessed and foreclosed assets, net      689       615           Equity investments      535       1,751           Investment in used vehicles held for sale      503       530           Servicer advances      499       769           Intangible assets, net of accumulated amortization (c):                            Customer lists and contracts      16       33             Trademarks and other      15       20           Other assets      2,543       2,411               Total other assets (d)      $22,457       $29,644                (a)       Represents credit enhancement in the form of cash reserves for     various securitization transactions we have executed.   (b)       Represents cash collection from customer payments on securitized     receivables. These funds are distributed to investors as the     related secured debt matures.   (c)       Aggregate amortization expense on intangible assets was $17 and     $11, including $8 and $2 for GMAC Commercial Mortgage, for the     years ended December 31, 2005 and 2004, respectively.     Amortization expense is expected to average $5 per year     over the next five fiscal years.   (d)       At December 31, 2005, $3,723 in GMAC Commercial Mortgage     other assets was transferred to reporting segment held for sale     in our Consolidated Balance Sheet. Refer to Note 1 to our     Consolidated Financial Statements for further details.   93    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      The changes in the carrying amounts of goodwill for the periods indicated were as follows:                                                                             North   Commercial                               American   Finance   International   GMAC   GMAC-   GMAC           ($ in millions)   Operations   Group   Operations   Residential   RFC   Commercial   Insurance   Total             Goodwill at beginning of 2004      $14       $1,458       $504       $327       $111       $138       $671       $3,223           Goodwill acquired      —       —       1       11       1       3       —       16           Impairment losses      —       —       —       —       —       —       —       —           Other      —       —       —       —       —       —       —       —           Foreign currency translation effect      —       25       10       —       5       —       (5 )     35               Goodwill at beginning of 2005      $14       $1,483       $515       $338       $117       $141       $666       $3,274           Goodwill acquired      —       —       3       5       11       —       3       22           Impairment losses (a)      —       (648 )     —       —       —       (64 )     —       (712 )         Other      —       —       —       —       (4 )     (18 )     —       (22 )         Foreign currency translation effect      —       (36 )     (14 )     —       (7 )     —       —       (57 )         Transfers to reporting segment held for sale (b)      —       —       —       —       —       (59 )     —       (59 )             Goodwill at end of 2005      $14       $799       $504       $343       $117       $—       $669       $2,446                (a)       During the fourth quarter of 2005, we completed our goodwill     impairment analysis of our Commercial Finance Group (CFG)     reporting unit in accordance with SFAS 142. The CFG     reporting unit’s goodwill relates primarily to its 1999     acquisition of The Bank of New York’s commercial finance     business. With the assistance of a third party, management     performed an assessment of the fair value of the CFG reporting     unit. The fair value of the CFG reporting unit was determined     using the average of an internally developed discounted cash     flow methodology and a valuation derived from recent market     precedent transactions. Based on this assessment, it was     determined that indicators of impairment existed as the carrying     amount of the CFG reporting unit including goodwill exceeded its     fair value. These indicators were largely attributed to current     competitive conditions in the industry in which CFG operates,     the relative level of liquidity in its market and the CFG     reporting unit experiencing declining margins and a more     difficult environment for growth than anticipated in previous     forecasts. Because the carrying amount of the CFG reporting     unit, including goodwill, as a whole exceeded its fair value,     management assessed the fair value of the CFG reporting     unit’s individual assets, including identifiable intangible     assets and liabilities, in order to derive an implied fair value     of the CFG reporting unit’s goodwill. Based on this     assessment, we recorded an impairment charge of     $648 million in the fourth quarter of 2005 as it was     determined that the carrying value of the CFG reporting     unit’s goodwill was greater than its implied fair value.   (b)       At December 31, 2005, $59 in GMAC Commercial Mortgage     goodwill was transferred to reporting segment held for sale in     our Consolidated Balance Sheet. Refer to Note 1 to our     Consolidated Financial Statements for further details.                        13      Debt     The presentation of debt in the following table is classified between domestic and foreign based on the location of the office recording the transaction.                                                                               Weighted                               average interest               rates (a)   2005   2004                   December 31, ($ in millions)   2005   2004   Domestic   Foreign   Total   Domestic   Foreign   Total         Short-term debt                                                                            Commercial paper                      $227       $297       $524       $4,330       $4,065       $8,395             Demand notes                      5,928       119       6,047       8,802       354       9,156             Bank loans and overdrafts                      1,165       5,487       6,652       4,555       7,294       11,849             Repurchase agreements and other (b)                      22,330       5,954       28,284       23,569       2,058       25,627               Total short-term debt      4.6%       2.8%       29,650       11,857       41,507       41,256       13,771       55,027       Long-term debt                                                                          Senior indebtedness                                                                            Due within one year      4.9%       3.9%       31,286       10,443       41,729       26,757       10,537       37,294             Due after one year      5.2%       4.9%       147,307       23,862       171,169       152,680       22,685       175,365               Total long-term debt (c)      5.2%       4.7%       178,593       34,305       212,898       179,437       33,222       212,659           Fair value adjustment (d)                      —       2       2       1,205       69       1,274               Total debt (e)                      $208,243       $46,164       $254,407       $221,898       $47,062       $268,960                (a)       The weighted average interest rates include the effects of     derivative financial instruments designated as hedges of debt.   (b)       Repurchase agreements consist of secured financing arrangements     with third parties at our mortgage operations. Other primarily     includes non-bank secured borrowings, as well as Notes payable     to GM. Refer to Note 19 to our Consolidated Financial     Statements for further details.   (c)       We have issued warrants to subscribe for up to $300 aggregate     principal amount of 6.5% notes due     October 15, 2009. The warrants entitle the holder to     purchase from us the aggregate principal amount at par plus any     accrued interest. The warrants are exercisable up to and     including October 15, 2007. In December 2003 and     February 2004, $125 of the warrants were exercised each     year, resulting in $50 aggregate principal amount of these     warrants remaining outstanding.   (d)       To adjust designated fixed rate debt to fair value in accordance     with SFAS 133.   (e)       At December 31, 2005, $4,313 in GMAC Commercial Mortgage     debt was transferred to liabilities related to reporting segment     held for sale in our Consolidated Balance Sheet. Of the $4,313,     $3,118 was domestic and $1,195 was foreign; $2,974 was     short-term and $1,339 was long-term. Refer to Note 1 to our     Consolidated Financial Statements for further details. Includes     secured debt, as depicted by asset class in the following table.   94    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      The following summarizes assets that are restricted as collateral for the payment of the related debt obligation primarily arising from securitization transactions accounted for as secured borrowings and repurchase agreements:                                             2005   2004                       Related       Related           secured       secured   December 31, ($ in millions)   Assets   debt (a)   Assets   debt (a)             Loans held for sale      $16,147       $12,647       $13,536       $11,213           Mortgage assets held for sale or held for investment      78,820       71,083       60,796       57,304           Retail automotive finance receivables      20,427       18,888       18,163       17,474           Investment securities      3,631       4,205       4,522       3,597           Investment in operating leases, net      13,136       11,707       1,098       1,032           Real estate investments and other assets      4,771       2,608       2,204       1,337               Total      $136,932       $121,138       $100,319       $91,957                (a)       Included as part of secured debt are repurchase agreements of     $9,897 and $8,827 where we have pledged assets, reflected as     investment securities, as collateral for approximately the     same amount of debt at December 31, 2005 and 2004,     respectively. As of December 31, 2005, $3,304 and $215 in     GMAC Commercial Mortgage Repurchase Agreements and on-balance     sheet debt from secured financing, respectively, were     transferred to liabilities related to reporting segment held for     sale in our Consolidated Balance Sheet. Refer to Note 1 to     our Consolidated Financial Statements for details.    The following table presents the scheduled maturity of long-term debt at December 31, 2005, assuming that no early redemptions will occur. The actual payment of secured debt may vary based on the payment activity of the related secured assets.                                 Year ended December 31, ($ in millions)   Secured   Unsecured   Total             2006      $13,637       $28,092       $41,729           2007      10,665       23,269       33,934           2008      11,120       14,458       25,578           2009      1,436       8,532       9,968           2010      989       7,848       8,837           2011 and thereafter      56,855       36,527       93,382               Long-term debt (a) (b)      94,702       118,726       213,428           Unamortized discount      —       (530 )     (530 )             Total long-term debt      $94,702       $118,196       $212,898                (a)       Debt issues totaling $16,395 are redeemable at or above par, at     our option anytime prior to the scheduled maturity dates, the     latest of which is November 2049.   (b)       Our debt includes $22 in fixed rate notes and $0 in variable     rate notes which provide the holders the option to put the debt     to us at specific dates prior to the scheduled maturity. In     addition, our debt includes $25,084 of notes containing a     survivor’s option enabling the holder to put the debt back     to us at par prior to maturity in the event of the holder’s     death. We repurchased $275 and $39 of these puttable notes     containing a survivor’s option prior to maturity during     2005 and 2004, respectively. The latest maturity date of these     notes is March 2025.    To achieve the desired balance between fixed and variable rate debt, we utilize interest rate swap and interest rate cap agreements. The use of such derivative financial instruments had the effect of synthetically converting $75,413 million of our $139,485 million of fixed rate debt into variable rate obligations and $29,097 million of our $115,459 million of variable rate debt into fixed rate obligations at December 31, 2005. In addition, certain of our debt obligations are denominated in currencies other than the currency of the issuing country. Foreign currency swap agreements are used to hedge exposure to changes in the exchange rates of these obligations.  95    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      Liquidity facilities   Liquidity facilities represent additional funding sources, if required. The financial institutions providing the uncommitted facilities are not legally obligated to fund those facilities. The following table summarizes the liquidity facilities maintained by us.                                                                                           Unused       Committed   Uncommitted   Total liquidity   liquidity       facilities   facilities   facilities   facilities                       December 31, (in billions)   2005   2004   2005   2004   2005   2004   2005   2004             Automotive operations:                                                                            Syndicated multicurrency global credit facility (a)      $7.4       $8.9       $—       $—       $7.4       $8.9       $7.4       $8.9           Mortgage operations (b)      3.9       —       3.6       7.6       7.5       7.6       4.4       3.9           Other:                                                                            U.S. asset-backed commercial paper liquidity and     receivables facilities (c)      21.5       22.9       —       —       21.5       22.9       21.5       22.9             Other foreign facilities (d)      3.1       5.0       7.5       15.0       10.6       20.0       2.0       8.4               Total bank liquidity facilities (e)      35.9       36.8       11.1       22.6       47.0       59.4       35.3       44.1               Secured funding facilities (f)      114.9       47.3       11.9       12.0       126.8       59.3       87.7       30.9               Total      $150.8       $84.1       $23.0       $34.6       $173.8       $118.7       $123.0       $75.0                (a)       The entire $7.4 is available for use in the U.S., $0.8 is     available for use by GMAC (UK) plc and $0.8 is available     for use by GMAC International Finance B.V. in Europe.   (b)       In July 2005 ResCap closed a $3.5 syndication of its bank     facilities, consisting of a $1.75 syndication term loan, an     $875 million syndication line of credit committed through     July 2008 and $875 million syndicated line of credit     committed through July 2006.   (c)       Relates to New Center Asset Trust (NCAT) and Mortgage     Interest Networking Trust (MINT), which are special purpose     entities administered by us for the purpose of funding assets as     part of our securitization and mortgage warehouse funding     programs. These entities fund assets primarily through the     issuance of asset-backed commercial paper and represent an     important source of liquidity to us. At     December 31, 2005, NCAT commercial paper outstanding     of $10.9, which is not consolidated in our Consolidated Balance     Sheet. At December 31, 2005, MINT had commercial paper     outstanding of $2.0, which is reflected as secured debt in our     Consolidated Balance Sheet.   (d)       Consists primarily of credit facilities supporting operations in     Canada, Europe, Latin America and Asia-Pacific.   (e)       The decline in total bank liquidity facilities from     December 31, 2004 to December 31, 2005, is     primarily the result of (i) reductions by facility     providers in response to the series of credit ratings actions     taken by rating agencies on our unsecured debt ratings and     (ii) the strengthening of the U.S. dollar during 2005.         (f)       Consists of committed and uncommitted secured funding facilities     with third parties, including commitments with third-party     asset-backed commercial paper conduits, as well as forward flow     sale agreements with third parties and repurchase facilities.     Amounts include five year commitments that we entered into in     2005 with remaining capacity to sell up to $64 of retail     automotive receivables to third-party purchasers through 2010.    The syndicated multicurrency global facility includes a $4.35 billion five-year facility (expires June 2008) and a $3.0 billion 364-day facility (expires June 2006). The 364-day facility includes a term loan option, which, if exercised by us prior to expiration, carries a one-year term. Additionally, a leverage covenant in the liquidity facilities and certain other funding facilities restricts the ratio of consolidated unsecured debt to total stockholder’s equity to no greater than 11.0:1, under certain conditions. More specifically, the covenant is only applicable on the last day of any fiscal quarter (other than the fiscal quarter during which a change in rating occurs) during such times that we have senior unsecured long-term debt outstanding, without third-party enhancement, which is rated BBB+ or less (by Standard & Poor’s), or Baa1 or less (by Moody’s). Our leverage covenant ratio was 7.5:1 at December 31, 2005, and we are, therefore, in compliance with this covenant. The leverage covenant calculation excludes from debt those securitization transactions accounted for as on-balance sheet secured financings.  96    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                          14      Reserves for Insurance Losses and Loss     Adjustment Expense     The following table provides a reconciliation of the activity in the reserves for insurance losses and loss adjustment expenses.                                   Year ended December 31,               ($ in millions)   2005   2004   2003             Balance at beginning of year    $ 2,505     $ 2,340     $ 2,140           Reinsurance recoverables      (775 )     (871 )     (812 )             Net balance at beginning of year      1,730       1,469       1,328           Incurred related to                                    Current year      2,471       2,344       2,252             Prior years (a)      (116 )     27       36               Total incurred (b)      2,355       2,371       2,288           Paid related to                                    Current year      (1,682 )     (1,567 )     (1,579 )           Prior years      (619 )     (558 )     (582 )             Total paid      (2,301 )     (2,125 )     (2,161 )         Other (c)      (12 )     15       14               Net balance at end of year (d)      1,772       1,730       1,469           Reinsurance recoverables      762       775       871               Balance at end of year    $ 2,534     $ 2,505     $ 2,340                (a)         Incurred losses and loss adjustment expenses during 2005 related     to events of prior year are attributable to decreases in reserve     estimates primarily for private passenger auto in both the     United States and internationally and certain reinsurance     coverages, which are based on additional knowledge available to     us during 2005. During 2004, incurred losses related to events     of prior years are attributed to changes in reserve estimates     for claims, which are based on additional knowledge available to     us during 2004. In addition, also includes $29 related to     reinsurance agreements we decided to commute during 2004. During     2003, incurred losses related to events of prior year are     attributed to the development of additional information     indicating probable additional ultimate losses on U.S. assumed     auto reinsurance and U.S. direct auto business.   (b)         Reflected net of reinsurance recoveries totaling $342, $312 and     $374 for the years ended December 31, 2005, 2004 and     2003, respectively.   (c)         Effects of exchange rate changes for the years ended     December 31, 2005, 2004 and 2003.   (d)         Includes exposure to asbestos and environmental claims from the     reinsurance of general liability, commercial multiple peril,     homeowners and workers’ compensation claims. Reported claim     activity to date has not been significant. Net reserves for loss     and loss adjustment expenses for such matters were $6, $8 and     $10 at December 31, 2005, 2004 and 2003, respectively.                        15      Accrued Expenses and Other     Liabilities     Accrued expenses and other liabilities consisted of:                           December 31, ($ in millions)   2005   2004             Deposits                            Consumer      $4,574       $2,909             Commercial      2,437       3,248           Fair value of derivative contracts in payable position      2,444       953           Employee compensation and benefits      1,574       1,790           Mortgage escrow deposits      1,356       1,321           Factored client payables      819       1,430           Securitization trustee payable      703       514           GM payable, net      152       200           Taxes payable      —       58           Accounts payable and other liabilities      4,322       5,959               Total accrued expenses and other liabilities (a)      $18,381       $18,382                (a)       At December 31, 2005, $6,756 in Commercial Mortgage accrued     expenses and other liabilities were transferred to liabilities     related to reporting segment held for sale in our Consolidated     Balance Sheet. Refer to Note 1 to our Consolidated     Financial Statements for further details.                        16      Derivative Instruments and Hedging     Activities     We enter into interest rate and foreign currency futures, forwards, options, and swaps in connection with our market risk management activities. Derivative financial instruments are used to manage interest rate risk relating to specific groups of assets and liabilities, including investment securities, loans held for sale, mortgage servicing rights, debts and deposits, as well as off-balance sheet securitizations. In addition, foreign exchange contracts are used to hedge foreign currency denominated debt and foreign exchange transactions.   Our primary objective for utilizing derivative financial instruments is to manage market risk volatility associated with interest rate and foreign currency risks related to the assets and liabilities of the automotive and mortgage operations. Managing this volatility enables us to price our finance and mortgage offerings at competitive rates and to minimize the impact of market risk on our earnings. These strategies are applied on a decentralized basis by the respective automotive financing and mortgage operations, consistent with the level at which market risk is managed, but are subject to various limits and controls at both the local unit and consolidated level. One of the key goals of our strategy is to modify the asset and liability and interest rate mix, including the assets and liabilities associated with securitization transactions that may be recorded in off-balance sheet special purpose entities. In addition, we use derivative financial instruments to mitigate the risk of changes in the fair values of loans held for sale and mortgage servicing rights. Derivative financial instruments are also utilized to  97    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      manage the foreign currency exposure related to foreign currency denominated debt. The following summarizes our derivative activity based on the accounting hedge designation:   Fair Value Hedges   Our fair value hedges primarily include hedges of fixed-rate debt, mortgage servicing rights, and loans held for sale:         •   Debt obligations — Interest rate swaps are used     to modify our exposure to interest rate risk by converting fixed     rate debt to a floating rate. Generally, individual swaps are     designated as hedges of specific debt at the time of issuance     with the terms of the swap matching the terms of the underlying     debt. As the terms of the swap are designed to match the terms     of the debt, the vast majority of our interest rate swaps     receive short-cut treatment under SFAS 133, resulting in no     hedge ineffectiveness. However, certain of our fair value hedges     of debt do not receive short-cut treatment, because of     differences in option features between the interest rate swap     and the companion debt, in which case, hedge ineffectiveness is     measured based on the difference in the fair value movement of     the swap and the related debt.       •   Mortgage servicing rights — In determining the     portion of mortgage servicing rights to hedge, we take into     account both natural offsets from mortgage loan production and     any available for sale investment securities (e.g.,     U.S. Treasury notes) used to manage the interest rate risk     inherent in mortgage servicing rights. Derivative financial     instruments approved for use under our risk management program     include: call and put options on treasuries or swaps;     mortgage-backed security futures, treasury futures and LIBOR     futures; interest rate caps and floors; swaptions; and swaps. We     designate a fair value hedging relationship for derivative     financial instruments used to hedge the change in the fair value     of mortgage servicing rights. For purposes of hedge designation,     the loans underlying the mortgage servicing rights asset are     aggregated into groups of similar assets. In doing so,     management considers characteristics such as loan type, interest     rate type (i.e., fixed or variable), coupon interest rate     (for fixed) and scheduled maturity. If the changes in the     fair value of the hedged mortgage servicing rights are highly     correlated to changes in the fair value of the derivative     financial instruments, the hedged mortgage servicing rights are     adjusted for the change in fair value of the risk being hedged,     and the resultant gain or loss is recorded in our Consolidated     Statement of Income. We close hedge periods based upon     derivative rebalancing or interest rate moves, which resulted in     hedge periods closing on average every two business days during     2005. Effectiveness is assessed using historical hedge period     data. We measure hedge effectiveness employing a     statistical-based approach, which must meet threshold for     R-squared, slope and     F-statistic.       •   Loans held for sale — We use derivative     financial instruments to hedge exposure to risk associated with     our mortgage loans held for sale. After loans are funded, they     are generally sold into the secondary market to various     investors, often as mortgage-backed securities sponsored by     Fannie Mae, Freddie Mac or Ginnie Mae. Mortgage loans     that are not eligible for agency sponsored securitization are     sold through public or private securitization transactions or in     whole loan sales. The primary risk associated with closed loans     awaiting sale is a change in the fair value of the loans due to     fluctuations in interest rates. Our primary strategies to     protect against this risk are selling loans or mortgage-backed     securities forward to investors using mandatory and optional     forward commitments and the use of interest rate swaps. Hedge     periods are closed daily, representative of daily hedge     portfolio rebalancing due to new loan fundings and sales.     Effectiveness is measured using historical daily hedge period     data. We measure hedge effectiveness employing a     statistical-based approach, which must meet thresholds for     R-squared, slope, and     F-statistic.    Cash Flow Hedges   We enter into derivative financial instrument contracts to hedge exposure to variability in cash flows related to floating rate and foreign currency financial instruments. Interest rate swaps are used to modify exposure to variability in expected future cash flows attributable to variable rate debt. Currency swaps and forwards are used to hedge foreign exchange exposure on foreign currency denominated debt by converting the funding currency to the same currency of the assets being financed. Similar to our fair value hedges, the swaps are generally concurrent with the debt issuance, with the terms of the swap matching the terms of the underlying debt.   We use derivative financial instruments to hedge exposure to variability in expected cash flows associated with the future issuance of bonds payable related to securitizations of mortgage loans held for investment. The primary risk associated with these transactions is the variability on the issuance price of the debt securities. Our primary strategy to protect against this risk is selling loans or mortgage-backed securities forward, using mandatory and optional forward commitments. Upon issuance of the debt securities, the hedging relationship terminates and the changes in fair value of the hedging instrument are reclassified out of other comprehensive income, a component of shareholder’s equity, and into earnings over the term of the debt securities, as an adjustment to yield.   Economic Hedges not Designated as Accounting Hedges   We utilize certain derivative financial instruments to manage interest rate, price and foreign exchange risks, which do not qualify or are not designated as hedges under SFAS 133. As these derivatives are not designated as accounting hedges, changes in the fair value of the derivative instruments are recognized in earnings each period. Similar to the fair value hedging activities described in the previous section, we utilize certain derivatives that do not qualify as accounting hedges under SFAS 133, to economically hedge the value of mortgage servicing rights and mortgage loans.  98    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      In addition, the following describes other uses of derivatives that do not qualify for hedge accounting:         •   Off-balance sheet securitization activities —     We enter into interest rate swaps to facilitate securitization     transactions where the underlying receivables are sold to a     non-consolidated     qualified special purpose entity (QSPE). As the underlying     assets are carried in a     non-consolidated     entity, the interest rate swaps do not qualify for hedge     accounting treatment. The use of swaps enables efficient     execution of the securitization transaction as it allows the     QSPE to issue asset-backed securities with different     characteristics than the underlying assets.       •   Foreign currency debt — We have elected not to     treat currency swaps that are used to convert foreign     denominated debt back into the functional currency at a floating     rate as hedges for accounting purposes. While these currency     swaps are similar to the foreign currency cash flow hedges     described in the foregoing, we have not designated them as     hedges as the changes in the fair values of the currency swaps     are substantially offset by the foreign currency revaluation     gains and losses of the underlying debt.       •   Mortgage related securities — We use interest     rate options, futures, swaps, caps and floors to mitigate risk     related to mortgage related securities classified as trading.    The following table summarizes the pre-tax earnings effect for each type of hedge classification, segregated by the asset or liability hedged.                                         Year ended December 31, ($ in millions)   2005   2004   2003   Income Statement Classification             Fair value hedge ineffectiveness gain (loss):                                        Debt obligations      $6       $46       $45          Interest and discount expense           Mortgage servicing rights      57       70       348          Mortgage banking income           Loans held for sale      (29 )     (12 )     (2 )        Mortgage banking income         Cash flow hedges ineffectiveness gain (loss):                                        Debt obligations      3       (19 )     (1 )        Interest and discount expense         Economic hedge change in fair value:                                        Off-balance sheet securitization activities:                                          Financing operations      (36 )     (26 )     (102 )        Other income             Mortgage operations      1       (18 )     254          Mortgage banking income           Foreign currency debt (a)      (202 )     44       87          Interest and discount expense           Loans held for sale or investment      59       (60 )     (86 )        Mortgage banking income           Mortgage servicing rights      (55 )     (7 )     (16 )        Mortgage banking income           Mortgage related securities      (42 )     (95 )     (13 )        Investment income           Other      (11 )     (18 )     19          Other income                 Total gain (loss)      ($249 )     ($95 )     $533                    (a)       Amount represents the difference between the changes in the fair     values of the currency swap, net of the revaluation of the     related foreign denominated debt.    The following table presents additional information related to our derivative financial instruments.                                 Year ended December 31, ($ in millions)   2005   2004   2003             Net gain on fair value hedges excluded from assessment of     effectiveness      $59       $180       $175           Expected reclassifications from other comprehensive income to     earnings (a)      12       (1 )     (1 )              (a)       Estimated to occur over the next 12 months.    Derivative financial instruments contain an element of credit risk in the event that counterparties are unable to meet the terms of the agreements. Credit risk associated with derivative financial instruments is measured as the net replacement cost should the counterparties which owe us under the contract completely fail to perform under the terms of those contracts, assuming no recoveries of underlying collateral, as measured by the market value of the derivative financial instrument. At December 31, 2005 the market value of derivative financial instruments in an asset or receivable position (from our perspective) was $3.0 billion, including accrued interest of $0.7 billion. We minimize the credit risk exposure by limiting the counterparties to those major banks and financial institutions that meet established credit guidelines. As of December 31, 2005, more than of 84% of our exposure is with counterparties with a Fitch rating of A+ or higher (or an equivalent rating from another rating agency if a counterparty is not rated by Fitch). Additionally, we reduce credit risk on the majority of our derivative financial instruments by entering into legally enforceable agreements that permit the closeout and netting of transactions with the same counterparty upon occurrence of certain events. In order to further mitigate the risk of counterparty default, we maintain collateral agreements with certain counterparties. The agreements require both parties to maintain cash deposits in the event the fair values of the derivative financial instruments meet established thresholds. We have placed cash deposits totaling $125 million and $40 million at December 31, 2005 and 2004, respectively, in accounts maintained by counterparties. We have received cash deposits from counterparties totaling $247 million and $266 million at December 31, 2005 and 2004, respectively. The cash deposits placed and received are included in our  99   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      Consolidated Balance Sheet in Other assets and Other liabilities, respectively.                   17      Pension and Other Postretirement     Benefits     Pension   Certain of our employees are eligible to participate in various domestic and foreign pension plans of General Motors. Benefits under the plans are generally related to an employee’s length of service, salary and, where applicable, contributions. For these plans, we are a participating employer in GM sponsored retirement plans. As such, GM allocates pension expense to us for participating employees. The allocation is made on a pro-rata basis and, as such, is impacted by the various assumptions (discount rate, return on plan assets, etc.) that GM utilizes in determining its pension obligation. Detailed information about GM’s pension plans can be found in the GM Annual Report on Form 10-K. Pension expense allocated for our employees participating in GM plans totaled $60 million, $50 million and $51 million for the years ended December 31, 2005, 2004 and 2003, respectively.   Other employees (primarily at our Mortgage operations, Commercial Finance Group, and certain subsidiaries of GMAC Insurance) participate in separate retirement plans that provide for pension payments to eligible employees upon retirement based on factors such as length of service and salary. The following summarizes information relating to these non-GM sponsored plans:                                                               2005   2004                   GMAC       Commercial   GMAC       Commercial       Mortgage   GMAC   Finance   Mortgage   GMAC   Finance   Year Ended December 31, ($ in millions)   Operations   Insurance   Group (b)   Operations   Insurance   Group             Benefit obligation      $296       $41       $14       $250       $34       $23           Fair value of plan assets      265       30       14       211       21       18                 Funded status      (31 )     (11 )     —       (39 )     (13 )     (5 )           Unrecognized net actuarial gain      42       7       —       39       5       —             Unrecognized prior service cost      1       —       —       1       —       —             Net transition obligation      —       —       —       —       —        —               Accrued benefit cost      $12       ($4 )     $—       $1       ($8 )     ($5 )             Net pension expense (a)      $23       $4       $1       $34       $5       $5                (a)       Net pension expense for year ended December 31, 2003,     totaled $26, $4 and $5 for GMAC Mortgage operations, GMAC     Insurance and Commercial Finance Group, respectively.   (b)       GMAC Commercial Finance terminated the GMAC Commercial Credit     LLC U.S. Retirement Plan during 2005, resulting in an     extinguishment of approximately $11 million in accumulated     benefits.    Cash contributions to these non-GM sponsored pension plans made by GMAC Mortgage operations, GMAC Insurance, and Commercial Finance Group for the year ended December 31, 2005, were $35 million, $9 million and $5 million, respectively.   The expected rate of return on plan assets is an estimate we determine by summing the expected inflation and the expected real rate of return on stocks and bonds based on allocation percentages within the trust. The weighted average assumptions for the non-GM sponsored pension plans are as follows:                         Year Ended December 31,   2005   2004             Discount rate      5.71%       6.02%           Expected return on plan assets      8.61%       8.67%           Rate of compensation increase      4.66%       5.27%           Other Postretirement Benefits   Certain of our subsidiaries participate in various postretirement medical, dental, vision and life insurance plans of General Motors while other subsidiaries participate in separately maintained postretirement plans. These benefits are funded as incurred from our general assets. We accrue postretirement benefit costs over the active service period of employees to the date of full eligibility for such benefits. We have provided for certain amounts associated with estimated future postretirement benefits other than pensions and characterized such amounts as other postretirement benefits. Notwithstanding the recording of such amounts and the use of these terms, we do not admit or otherwise acknowledge that such amounts or existing postretirement benefit plans (other than pensions) represent legally enforceable liabilities. Our other postretirement benefits expense totaled $88 million, $72 million and $74 million in 2005, 2004 and 2003, respectively.  100   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                      18      Income Taxes     The significant components of income tax expense were as follows:                                   Year ended December 31, ($ in millions)   2005   2004   2003             Current income tax expense                                    U.S. federal      $616       $1,518       $1,411             Foreign      52       128       161             State and local      29       (37 )     351               Total current expense      697       1,609       1,923               Deferred income tax expense                                    U.S. federal      168       (466 )     (196 )           Foreign      271       142       63             State and local      69       149       (199 )             Total deferred expense      508       (175 )     (332 )             Total income tax expense      $1,205       $1,434       $1,591           A reconciliation of the statutory U.S. federal income tax rate to our effective tax rate applicable to income is shown in the following table.                                   Year ended December 31,   2005   2004   2003             Statutory U.S. federal tax rate      35.0 %     35.0 %     35.0 %         Change in tax rate resulting from:                                    State and local income taxes, net of federal income tax benefit      2.0       2.7       2.3             Tax-exempt income      (1.1 )     (0.8 )     (0.7 )           Foreign income tax rate differential      (1.8 )     (1.3 )     (0.2 )           Other      (0.6 )     (2.6 )     (0.1 )             Effective tax rate      33.5 %     33.0 %     36.3 %         Deferred tax assets and liabilities result from differences between assets and liabilities measured for financial reporting purposes and those measured for income tax return purposes. The significant components of deferred tax assets and liabilities are reflected in the following table.                           December 31, ($ in millions)   2005   2004         Deferred tax liabilities                            Lease transactions      $4,020       $3,416             Mortgage servicing rights      857       669             Deferred acquisition costs      676       580             Debt issuance costs      316       327             Unrealized gains on securities      277       333             State and local taxes      118       116             Hedging transactions      61       319             Other      91       129               Gross deferred tax liabilities      6,416       5,889           Deferred tax assets                            Provisions for credit losses      809       958             Sales of finance receivables and loans      327       314             Postretirement benefits      301       288             Unearned insurance premiums      297       278             Goodwill      102       (127 )           Loss carryforwards      54       64             Other      162       360               Gross deferred tax assets      2,052       2,135               Net deferred tax liability(a)      $4,364       $3,754                (a)       GMAC Commercial Mortgage $169 million net deferred tax     asset was transferred to liabilities related to reporting     segment held for sale in our Consolidated Balance Sheet, as of     December 31, 2005.    Foreign pre-tax income totaled $988 million in 2005, $1,003 million in 2004, and $784 million in 2003. Foreign pre-tax income is subject to U.S. taxation when effectively repatriated. We provide for federal income taxes on the undistributed earnings of foreign subsidiaries, except to the extent that such earnings are indefinitely reinvested outside the United States. At December 31, 2005, $3,699 million of accumulated undistributed earnings of foreign subsidiaries was indefinitely reinvested. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings is not practicable.   For the years ended December 31, 2005 and 2004, GM had consolidated federal net operating losses. After GM utilized all prior year federal carryback potential, the remaining net operating losses were carried forward. The consolidated federal net operating losses also created charitable contribution deduction and foreign tax credit carryforwards. Pursuant to the tax sharing agreement between GM and us, our consolidated allocation of tax attributes from GM for 2005 and 2004 federal net operating losses (due to certain loss subsidiaries), charitable contributions deduction and foreign tax credits are carried forward subject to utilization in the carryforward period by GM. Therefore, at December 31, 2005, we had an intercompany tax receivable from GM of $690 million. The receivable is comprised of federal net operating loss carryforward of $611 million, charitable contributions carryforward of $12 million and foreign tax credit carryforward of $67 million. We believe that the intercompany tax receivable is realizable as GM has determined that it is more likely than not that the tax attributes will be utilized in the remaining carryforward period.   We have open tax years primarily from 2001 to current with various U.S. and foreign taxing jurisdictions. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they related to amount timing or inclusion of revenue and expenses or the sustainability of income tax credits for a given audit cycle. We have established a liability of approximately $425 million for those matters where the amount of loss is probable and estimable. The amount of the liability is based on management’s best estimate given our history with similar matters and interpretations of current laws and regulations.  101    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                      19      Transactions with Affiliates     As a wholly owned subsidiary, we enter into various operating and financing arrangements with our parent, GM. A master intercompany agreement governs the nature of these transactions to ensure that they are done on an arms length basis, in accordance with commercially reasonable standards and in our best interest as a diversified financial services company.   Balance Sheet   A summary of the balance sheet effect of transactions with GM and affiliated companies is as follows:                           December 31, ($ in millions)   2005   2004             Assets:                          Finance receivables and loans, net of unearned income (a)                            Wholesale auto financing      $1,159       $1,619             Term loans to dealers      207       194           Investment in operating leases, net (b)      108       121           Notes receivable from General Motors (c)      4,565       4,921           Other assets                            Real estate synthetic lease (d)      1,005       969             Receivable related to taxes (due from GM) (e)      690       —           Liabilities:                          Unsecured debt                            Notes payable to GM      1,190       1,306           Accrued expenses and other liabilities (f)                            Wholesale payable      802       1,185             Subvention receivables (rate and residual support)      (133 )     (143 )           Insurance premium and contract receivable, net      (81 )     (113 )           Lease pull ahead receivable      (189 )     (377 )           Other      (246 )     (353 )         Stockholder’s equity:                            Dividends paid (g)      2,500       1,500                (a)       Represents wholesale financing and term loans to certain     dealerships wholly owned by GM or in which GM has a controlling     interest. All of these amounts are included in finance     receivables.   (b)       Includes net balance of buildings and other equipment classified     as operating lease assets that are leased to GM affiliated     entities.   (c)       Includes borrowing arrangements with GM Opel and GM of Canada     and arrangements related to our funding of GM company-owned     vehicles, rental car vehicles awaiting sale at action, our     funding of the sale of GM vehicles through the use of overseas     distributors and amounts related to GM trade supplier finance     program. In addition, we provide wholesale financing to GM for     vehicles in which GM retains title while the vehicles are     consigned to us or dealers in the UK. The financing to GM     remains outstanding until the title is transferred to the     dealers. The amount of financing provided to GM under this     arrangement varies based on inventory levels.   (d)       During 2000 GM entered into a     16-year lease     arrangement, under which we agreed to fund and capitalize     improvements to three Michigan properties leased by GM totaling     $1.2 billion. In 2004 the lease arrangement was increased     to $1.3 billion. The outstanding balance for Argonaut     dealership leases is $35 million and $50 million at     December 31, 2005 and 2004, respectively.   (e)       In December GMAC recorded an intercompany tax receivable from GM     of $690 million. The receivable is comprised of federal net     operating loss carryforward of $611 million, charitable     contributions carryforward of $12 million and foreign tax     credit carryforward of $67 million. We believe that the     intercompany tax receivable is realizable as GM has determined     that it is more likely than not that the tax attributes will be     utilized in the remaining carryforward period.         (f)       Includes (receivables) payables from GM as follows: wholesale     settlements payable to GM, subvention receivables due from GM     and notes payable due from GM, which are included in accrued     expenses, other liabilities and debt, respectively.         (g)       The 2004 amount represents the total dividend payment to GM, all     of which was paid during the fourth quarter. The 2005 amount     represents dividends of $500 in each of the first three     quarters and $1.0 billion in the fourth quarter.    In January 2004 we assumed management and financial control of GM’s Brazilian financing operation (Banco GM, or BGM), while GM maintained legal ownership. As a result of entering into this arrangement, effective January 1, 2004, we began consolidating BGM, which previously had been consolidated by GM. The impact of the consolidation was a $119 million increase in capital, which represents the net assets of the Brazilian operations on December 31, 2003. In the fourth quarter of 2004, we purchased BGM from GM for $336 million resulting in the transfer of legal ownership.   In December 2000 we transferred the legal ownership of GMAC Germany to GM while maintaining management and financial control and all financial risks and rewards of this business. We continue consolidating GMAC Germany as was done prior to the legal transfer.   In October 2005 we repurchased operating lease assets and related deferred tax liabilities from GM previously sold to them under a purchase and sale agreement. The leases were repurchased at fair market value, however, the assets and liabilities were transferred at their carrying value because this was a transaction between related parties. The difference between the net assets acquired and the proceeds remitted to GM is reflected as a reduction to our stockholder’s equity.  102    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      Retail and lease contracts acquired by us that included rate and residual subvention from GM, payable directly or indirectly to GM dealers, as a percent of total new retail installment and lease contracts acquired were as follows:                               Year ended December 31,   2005   2004                 GM and affiliates rate subvented contracts acquired:                                North American operations      78 %     63 %               International operations      53 %     58 %             In addition to subvention programs, GM provides payment guarantees on certain commercial assets we have outstanding with certain third-party customers. As of December 31, 2005 and 2004, commercial obligations guaranteed by GM were $934 million and $1,285 million, respectively.   Income Statement   A summary of the income statement effect of transactions with GM and affiliated companies is as follows:                                   Year ended December 31, ($ in millions)   2005   2004   2003             Net financing revenue:                                    GM and affiliates lease residual value support      $527       $560       $986             Wholesale subvention and service fees from GM      159       174       160             Interest paid on loans from GM      (46 )     (45 )     (22 )           Consumer lease payments (a)      168       348       225             Insurance premiums earned from GM      339       450       479           Other income:                                    Interest on notes receivable from GM and affiliates      300       153       151             Interest on wholesale settlements (b)      150       101       106             Revenues from GM leased properties      79       73       58           Service fee income:                                    GMAC of Canada operating lease administration (c)      18       28       35             Rental car repurchases held for resale (d)      22       16       22             Other      —       —       14           Expense:                                    Employee retirement plan costs allocated by GM      147       129       132             Off-lease vehicle selling expense reimbursement (e)      (17 )     (51 )     (60 )           Payments to GM for services, rent and marketing expenses      132       281       67                 (a)       GM sponsors lease pull-ahead programs whereby consumers are     encouraged to terminate lease contracts early in conjunction     with the acquisition of a new GM vehicle, with the     customer’s remaining payment obligation waived. For certain     programs, GM compensates us for the waived payments, adjusted     based on the remarketing results associated with the underlying     vehicle.     (b)       The settlement terms related to the wholesale financing of     certain GM products are at shipment date. To the extent that     wholesale settlements with GM are made prior to the expiration     of transit, we receive interest from GM.     (c)       GMAC of Canada, Limited administers operating lease receivables     on behalf of GM of Canada Limited (GMCL) and receives a     servicing fee, which is included in other income.     (d)       We receive a servicing fee from GM related to the resale of     rental car repurchases.     (e)       An agreement with GM provides for the reimbursement of certain     selling expenses incurred by us on     off-lease vehicles sold     by GM at auction.      As a marketing incentive GM may sponsor residual support programs as a way to lower customer monthly payments. Under residual support programs the contractual residual value is adjusted above GMAC’s standard residual rates. GM reimburses us to the extent that remarketing sales proceeds are less than the customer’s contractual residual value. Based on the December 31, 2005 outstanding U.S. operating lease portfolio the amount that we would expect to be paid by GM under these lease residual support programs would be $2.4 billion. These projections would be paid over the remaining life of the lease portfolio (on average approximately 2 years) and are based on the expected remarketing performance of the vehicles. The maximum amount that could be paid under the residual support programs is approximately $4.2 billion and would only be paid in the unlikely event that the proceeds from the entire portfolio of lease assets would be lower than both the contractual residual value and GMAC’s standard residual rates.   In addition to residual support programs GM also participates in a risk sharing arrangement whereby GM shares equally in residual losses to the extent that remarketing proceeds are below GMAC’s standard residual rates (limited to a floor). Based on the  103    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      December 31, 2005 outstanding U.S. operating lease portfolio, the amount that we would expect to be paid by GM under the risk sharing program is $0.1 billion. The maximum amount that could be paid under the risk sharing arrangements is approximately $1.7 billion and would only be paid in the unlikely event that the proceeds from all outstanding lease vehicles would be lower than GMAC’s standard residual rates. The amounts in the above table represent the amounts paid over the past three years under both the residual support and risk sharing programs.   In addition to the financing arrangements summarized in the foregoing table, GM has a $4 billion revolving line of credit from GMAC that expires in September 2006. This credit line is used for general operating and seasonal working capital purposes and to reduce external liquidity requirements. The maximum outstanding balance on this line during the year was $3.3 billion with no amounts outstanding on this line as of December 31, 2005. The daily average balance drawn by GM on this line of credit was $488 million and $720 million during 2005 and 2004, respectively. Interest income recognized by GMAC on amounts drawn by GM during the year totaled $16 million in 2005 as compared to $22 million and $2 million in 2004 and 2003 respectively. Interest is payable on amounts advanced under the arrangements based on market interest rates, adjusted to reflect the credit rating of GM or GMAC in its capacity as borrower. In addition to this line of credit, GMAC had a similar line of credit with GM that allowed GMAC to draw up to $6 billion. This arrangement expired in December 2005 and was not renewed.                         20      Comprehensive Income     Comprehensive income is composed of net income and other comprehensive income, which includes the after-tax change in unrealized gains and losses on available for sale securities, foreign currency translation adjustments and cash flow hedging activities. The following table presents the components and annual activity in other comprehensive income:                                                           Accumulated       Unrealized gains (losses)           other       on investment   Translation   Cash flow   comprehensive   Year ended December 31, ($ in millions)   securities (a)   adjustments (b)   hedges   income (loss)             Balance at December 31, 2002      $303       ($240 )     ($158 )     ($95 )           2003 net change      245       300       67       612               Balance at December 31, 2003      548       60       (91 )     517             2004 net change      78       306       265       649               Balance at December 31, 2004      626       366       174       1,166         2005 net change      (89 )     (295 )     46       (338 )         Balance at December 31, 2005      $537       $71       $220       $828                (a)       Primarily represents the     after-tax difference     between the fair value and amortized cost of the available for     sale securities portfolio.   (b)       Includes after-tax     gains and losses on foreign currency translation from operations     for which the functional currency is other than the     U.S. dollar. Net change amounts are net of a tax benefit     totaling $35 for the year ended     December 31, 2005, and tax expense of $104 and $153     for the years ended December 31, 2004, and 2003,     respectively.    The net changes in the following table represent the sum of net unrealized gains (losses) of available for sale securities and net unrealized gains on cash flow hedges with the respective reclassification adjustments. Reclassification adjustments are amounts recognized in net income during the current year and that would have been reported in other comprehensive income in previous years.                                   Year ended December 31, ($ in millions)   2005   2004   2003             Available for sale securities:                                    Net unrealized gains (losses) arising during the period, net of     taxes (a)      ($11 )     $125       $199             Reclassification adjustment for net (gains) losses included     in net income, net of taxes (b)      (78 )     (47 )     46               Net change      (89 )     78       245               Cash flow hedges:                                    Net unrealized gains on cash flow hedges, net of taxes (c)      45       264       61           Reclassification adjustment for net losses included in net     income, net of taxes (d)      1       1       6               Net change      $46       $265       $67                 (a)       Net of tax benefit of $6 for 2005, and tax expense of $67 for     2004 and $109 for 2003.   (b)       Net of tax expense of $42 for 2005 and $25 for 2004,     and tax benefit of $25 for 2003.   (c)       Net of tax expense of $23 for 2005, $142 for 2004 and     $37 for 2003.   (d)       Net of tax benefit of $1 for 2005, $1 for 2004 and     $3 for 2003.   104   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                      21      Fair Value of Financial     Instruments     We have developed the following fair value estimates by utilization of available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value, so the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions or estimation methodologies could be material to the estimated fair values. Fair value information presented herein is based on information available at December 31, 2005 and 2004. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been updated since those dates and, therefore, the current estimates of fair value at dates subsequent to December 31, 2005 and 2004 could differ significantly from these amounts. The following describes the methodologies and assumptions used to determine fair value for the respective classes of financial instruments.   Investment Securities   Bonds, equity securities, notes and other available for sale investment securities are carried at fair value, which is based on quoted market prices. The fair value of mortgage-related trading securities is based on market quotes to the extent available, discounted using market prepayment assumptions and discount rates. If external quotes are not available, valuations are based on internal valuation models using market based assumptions. Held to maturity investment securities are carried at amortized cost. The fair value of the held to maturity investment securities is based on valuation models using market based assumptions. Interests in securitization trusts are carried at fair value based on expected cash flows discounted at current market rates.   Loans Held for Sale   The fair value of loans held for sale is based upon actual prices received on recent sales of loans and securities to investors and projected prices obtained through investor indications considering interest rates, loan type and credit quality.   Finance Receivables and Loans, Net   The fair value of finance receivables is estimated by discounting the future cash flows using applicable spreads to approximate current rates applicable to each category of finance receivables. The carrying value of wholesale receivables and other automotive and mortgage lending receivables for which interest rates reset on a short-term basis with applicable market indices are assumed to approximate fair value either because of the short-term nature or because of the interest rate adjustment feature. The fair value of mortgage loans held for investment is based on discounted cash flows, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality; the net realizable value of collateral and/or the estimated sales price based on quoted market prices where available or actual prices received on comparable sales of mortgage loans to investors.   Notes Receivable from GM   The fair value is estimated by discounting the future cash flows using applicable spreads to approximate current rates applicable to certain categories of other financing assets.   Derivative Assets and Liabilities   The fair value of interest rate swaps is estimated based on discounted expected cash flows using quoted market interest rates. The fair value of caps, written and purchased options, and mortgage-related interest rate swaps is based upon quoted market prices or broker-dealer quotes. The fair value of foreign currency swaps is based on discounted expected cash flows using market exchange rates over the remaining term of the agreement.   Debt   The fair value of debt is determined by using quoted market prices for the same or similar issues, if available, or based on the current rates offered to us for debt with similar remaining maturities. Commercial paper, master notes, and demand notes have an original term of less than 270 days and, therefore, the carrying amount of these liabilities is considered to approximate fair value.   Deposits   Deposits represent certain consumer bank deposits as well as mortgage escrow deposits. The fair value of deposits with no stated maturity is equal to their carrying amount. The fair value of fixed-maturity deposits was estimated by discounting cash flows using currently offered rates for deposits of similar maturities.  105   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      The following table presents the carrying and estimated fair value of assets and liabilities considered financial instruments under Statements of Financial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments (SFAS 107). Accordingly, certain amounts that are not considered financial instruments are excluded from the table.                                               2005   2004                   Carrying   Fair   Carrying   Fair   December 31, ($ in millions)   value   value   value   value         Financial assets                                            Investment securities      $18,207       $18,207       $14,960       $14,963             Loans held for sale      21,865       21,934       19,934       20,224             Finance receivables and loans, net      181,869       182,166       200,237       200,464             Notes receivable from GM      4,565       4,565       4,921       4,915             Derivative assets      3,000       3,000       9,489       9,489       Financial liabilities                                            Debt (a)      255,220       246,959       269,678       270,734             Bank deposits and escrows      5,930       5,830       4,230       4,106             Derivative liabilities      2,444       2,444       953       953                (a)       Debt includes deferred interest for zero coupon bonds of $813     and $718 for 2005 and 2004, respectively.    The foregoing table excludes GMAC Commercial Mortgage assets and liabilities held for sale (see Note 1 to our Consolidated Financial Statements for further details). The carrying value and fair value of assets held for sale totaled $19,030 and $19,190, respectively. The carrying value and fair value of liabilities held for sale totaled $10,941 and $10,906, respectively. The fair value estimates were determined using valuation methodologies described in this section.                       22      Variable Interest Entities     The following describes the variable interest entities that we have consolidated or in which we have a significant variable interest.   Automotive finance receivables — In certain securitization transactions, we transfer consumer finance receivables and wholesale lines of credit into bank-sponsored multi-seller commercial paper conduits. These conduits provide a funding source to us (as well as other transferors into the conduit) as they fund the purchase of the receivables through the issuance of commercial paper. Total assets outstanding in these bank-sponsored conduits approximated $15.3 billion as of December 31, 2005. While we have variable interest in these conduits, we are not considered to be the primary beneficiary, as we do not retain the majority of the expected losses or returns. Our maximum exposure to loss as a result of our involvement with these non-consolidated variable interest entities is $132 million and would only be incurred in the event of a complete loss on the assets that we transferred.   Mortgage warehouse funding — Our Mortgage operations transfer residential mortgage loans, lending receivables, home equity loans and lines of credit pending permanent sale or securitization through various structured finance arrangements in order to provide funds for the origination and purchase of future loans. These structured finance arrangements include transfers to warehouse funding entities, including GMAC and bank-sponsored commercial paper conduits. Transfers of assets into each facility are accounted for as either sales (off-balance sheet) or secured financings (on-balance sheet) based on the provisions of SFAS 140. However, in either case, creditors of these facilities have no legal recourse to our general credit. Some of these warehouse funding entities represent variable interest entities under FIN 46R.   Management has determined that for certain mortgage warehouse funding facilities, we are the primary beneficiary and, as such, we consolidate the entities in accordance with FIN 46R. The assets of these residential mortgage warehouse entities totaled $7.2 billion at December 31, 2005, the majority of which are included in loans held for sale, in our Consolidated Balance Sheet.   During 2005, the use of the commercial mortgage warehouse entities was terminated. The results of our variable interest analysis indicated that we were the primary beneficiary, and as such, we consolidated the entities in accordance with FIN 46R. The assets in these entities totaled $526 million at December 31, 2004, which are included in loans held for sale, in our Consolidated Balance Sheet. The beneficial interest holders of these variable interest entities do not have legal recourse to our general credit.   Residential mortgage loan alliances — GMAC-RFC has invested in strategic alliances with several mortgage loan originators. These alliances may include common or preferred equity investments, working capital or other subordinated lending, and warrants. In addition to warehouse lending arrangements, management has determined that we do not have the majority of the expected  106    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      losses or returns and as such, consolidation is not appropriate under FIN 46R. Total assets in these alliances were $139 million at December 31, 2005. Our maximum exposure to loss under these alliances, including commitments to lend additional funds or purchase loans at above-market rates, is $265 million at December 31, 2005.   Construction and real estate lending — We use a special purpose entity to finance construction lending receivables. This special purpose entity purchases and holds the receivables and funds the majority of the purchases through financing obtained from third-party asset-backed commercial paper conduits. The results of our variable interest analysis indicate that we are the primary beneficiary, and as such, we consolidate the entity in accordance with FIN 46R. The assets in this entity totaled $1.6 billion at December 31, 2005, which are included in finance receivables and loans, net of unearned income, in our Consolidated Balance Sheet. The beneficial interest holders of this variable interest entity do not have legal recourse to our general credit.   We have subordinated real estate lending arrangements with certain entities. These entities are created to develop land and construct residential homes. Management has determined that we do not have the majority of the expected losses or returns, and as such, consolidation is not appropriate under FIN 46R. Total assets in these entities were $496 million at December 31, 2005, of which $134 million represents our maximum exposure to loss.   Warehouse lending — We have a facility in which we transfer mortgage warehouse lending receivables to a 100% owned SPE which then sells a senior participation interest in the receivables to an unconsolidated QSPE. The QSPE funds the purchase of the participation interest from the SPE through financing obtained from third-party asset-backed commercial paper conduits. The SPE funds the purchase of the receivables from us with cash obtained from the QSPE, as well as a subordinated loan and/or an equity contribution from us. The senior participation interest sold to the QSPE, and the commercial paper issued are not included in our assets or liabilities in 2004. However, the SPE was restructured in 2005 and the senior participation interest sold and commercial paper issued were included in our Consolidated Balance Sheet at December 31, 2005. Once the receivables have been sold, they may not be purchased by us except in very limited circumstances, such as a breach in representations or warranties. Management has determined that we are the primary beneficiary of the SPE, and as such, consolidates the entity in accordance with FIN 46R. The assets of the SPE totaled $3.5 billion at December 31, 2005, which are included in finance receivables and loans, net of unearned income, in our Consolidated Balance Sheet. The beneficial interest holders of this variable interest entity do not have legal recourse to our general credit.   Collateralized debt obligations (CDOs) — Our Mortgage operations sponsors, purchase subordinate and equity interests in, and serve as collateral manager for CDOs. Under CDO transactions, a trust is established that purchases a portfolio of securities and issues debt and equity certificates, representing interests in the portfolio of assets. In addition to receiving variable compensation for managing the portfolio, we sometimes retain equity investments in the CDOs. The majority of the CDOs sponsored by us were initially structured or have been restructured (with approval by the senior beneficial interest holders) as qualifying special purpose entities, and are therefore exempt from FIN 46R.   We receive an asset management fee for purposes of surveillance of existing collateral performance. In the event that an asset is credit impaired, a call option is triggered whereby we, as collateral manager, may buy the asset out of the pool and sell it to a third-party. The call is triggered only by events that are outside of our control, such as the downgrade by a rating agency of an asset in the pool or in the event more than a specified percentage of mortgage loans underlying a security are greater than 60 days delinquent (or have been liquidated). In the event the conditions under which we can exercise the call option are met, we recognize these assets. In accordance with these provisions, we did not recognize any assets as of December 31, 2005 or 2004.   For the majority of our remaining CDOs, the results of the primary beneficiary analysis support the conclusion that consolidation is not appropriate under FIN 46R, because we do not have the majority of the expected losses or returns. The assets in these CDOs totaled $3.1 billion at December 31, 2005, of which our maximum exposure to loss is $43 million, representing our retained interests in these entities. The maximum exposure to loss would only occur in the unlikely event that there was a complete loss on our retained interests in these entities. In addition, management has determined that for certain CDO entities, we are the primary beneficiary, and as such, we consolidate the entities in accordance with FIN 46R. The assets in these entities totaled $569 million at December 31, 2005, the majority of which are included in investment securities in our Consolidated Balance Sheet. The beneficial interest holders of these variable interest entities do not have legal recourse to our general credit.   Interests in real estate partnerships — Our Commercial Mortgage operations syndicate investments in real estate partnerships to unaffiliated investors, and in certain partnerships, has guaranteed the timely payment of a specified return to those investors. The investors’ returns are principally generated from each partnership’s share of affordable housing tax credits and tax losses derived from the partnership’s investments in entities which develop own, and operate affordable housing properties throughout the United States. These entities are considered VIE’s under FIN 46R. The determination of whether we are the primary beneficiary of a given tax credit fund depends on many factors, including the number of limited partners and the rights and obligations of the general and limited partners in that fund.   We have variable interests in the underlying operating partnerships (primarily in the form of limited partnership interests). The results  107    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      of our variable interest analysis indicated that we are not the primary beneficiary of some of these partnerships and, as a result, are not required to consolidate these entities under FIN 46R. Assets outstanding in these underlying operating partnerships approximated $6.5 billion at December 31, 2005. Our maximum exposure to loss related to these partnerships is $682 million. In addition, management has determined that for certain partnerships, we are the primary beneficiary, and as such, we consolidate the partnerships in accordance with FIN 46R. The impact of this consolidation resulted in an increase to our assets totaling $452 million at December 31, 2005, which are included in the reporting segment held for sale in our Consolidated Balance Sheet. This consolidation did not impact reported net income. Real estate held as collateral for these entities totaled $252 million at December 31, 2005. The beneficial interest holders of these variable interest entities do not have legal recourse to our general credit.   We hold variable interests in syndicated affordable housing partnerships where we provide unaffiliated investors with a guaranteed yield on their investment. These partnerships are reflected in the reporting segment held for sale in our Consolidated Balance Sheet under the financing method in accordance with Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate (SFAS 66). Our exposure to loss at December 31, 2005, was $1.4 billion representing the $1.0 billion financing liability reflected in our Consolidated Balance Sheet, (i.e., real estate syndication proceeds) as well as $0.4 billion in additional unpaid equity installments. The maximum exposure amount represents the amount payable to investors in the event of liquidation of the partnerships. Our exposure to loss increases as unaffiliated investors place additional guaranteed commitments with us, and decreases as tax benefits are delivered to the investors. Considering such committed amounts, our exposure to loss in future periods is not expected to exceed $1.9 billion.   New market tax credit funds — We syndicate and manage investments in partnerships that make investments, typically mortgage loans that, in turn, qualify the partnerships to earn New Markets Tax Credits. New Markets Tax Credits permit taxpayers to receive a Federal income tax credit for making qualified equity investments in community development entities. For one particular tax credit fund, management has determined that we do not have the majority of the expected losses or returns, and as such, consolidation is not appropriate under FIN 46R. The assets in these investments totaled $62 million at December 31, 2005, of which $41 million represents our maximum exposure to loss. In addition to this entity, management has determined that for other tax credit funds, we are the primary beneficiary and, as such, we consolidate these entities in accordance with FIN 46R. The impact of this consolidation resulted in an increase to our assets totaling $206 million at December 31, 2005, which are included in reporting segment held for sale in our Consolidated Balance Sheet. The beneficial interest holders of these variable interest entities do not have legal recourse to our general credit.  108    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                          23      Segment and Geographic     Information     Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. Financial information for our reportable operating segments is summarized as follows:   Reporting Segments                                                                             Financing operations (a)   Mortgage operations                                           North           GMAC               Year ended December 31,   American   International   GMAC   GMAC-   Commercial               ($ in millions)   Operations (b)   Operations (b)   Residential   RFC   Mortgage   Insurance   Other (c)   Consolidated         2005                                                                          Net revenue before provision for credit losses      $4,465       $1,432       $38       $1,329       $112       $—       $1,008       $8,384           Provision for credit losses      (313 )     (102 )     (3 )     (623 )     (40 )     —       (4 )     (1,085 )         Other revenue      2,779       844       1,908       1,573       1,283       4,259       (738 )     11,908               Total net revenue      6,931       2,174       1,943       2,279       1,355       4,259       266       19,207           Goodwill impairment      —       —       —       —       64       —       648       712           Noninterest expense      5,987       1,608       1,421       1,183       894       3,627       176       14,896               Income before income tax expense      944       566       522       1,096       397       632       (558 )     3,599           Income tax expense (benefit)      341       158       222       381       107       215       (219 )     1,205               Net income (loss)      $603       $408       $300       $715       $290       $417       ($339 )     $2,394               Total assets      $165,050       $30,066       $23,269       $93,672       $19,030       $12,624       ($23,195 )     $320,516           2004                                                                          Net revenue before provision for credit losses      $5,971       $1,505       $262       $2,167       $84       $—       $817       $10,806           Provision for credit losses      (814 )     (145 )     5       (983 )     —       —       (16 )     (1,953 )         Other revenue      2,218       706       1,457       970       1,014       3,983       (534 )     9,814               Total net revenue      7,375       2,066       1,724       2,154       1,098       3,983       267       18,667           Noninterest expense      5,972       1,499       1,223       1,148       823       3,497       158       14,320               Income before income tax expense      1,403       567       501       1,006       275       486       109       4,347           Income tax expense      409       152       226       377       71       157       42       1,434               Net income      $994       $415       $275       $629       $204       $329       $67       $2,913               Total assets      $192,207       $33,495       $15,235       $78,706       $15,670       $11,744       ($22,918 )     $324,139           2003                                                                          Net revenue before provision for credit losses      $6,597       $1,414       $95       $1,448       $225       $—       $839       $10,618           Provision for credit losses      (1,045 )     (185 )     (20 )     (420 )     3       —       (54 )     (1,721 )         Other revenue      2,250       523       1,798       889       1,144       3,464       (546 )     9,522               Total net revenue      7,802       1,752       1,873       1,917       1,372       3,464       239       18,419           Noninterest expense      6,189       1,314       1,282       1,065       858       3,186       141       14,035               Income before income tax expense      1,613       438       591       852       514       278       98       4,384           Income tax expense      594       159       217       314       172       99       36       1,591               Net income      $1,019       $279       $374       $538       $342       $179       $62       $2,793               Total assets      $191,658       $27,105       $10,205       $60,084       $15,193       $10,340       ($26,422 )     $288,163                (a)       Financing operations in the MD&A also includes our     Commercial Finance Group, which is a separate operating segment     and therefore, is included in Other.   (b)       North American Operations consists of automotive financing in     the U.S. and Canada. International Operations consists of     automotive financing and full service leasing in all other     countries and Puerto Rico.   (c)       Represents our Commercial Finance Group, certain corporate     activities related to the Mortgage Group, reclassifications and     eliminations between the reporting segments. At     December 31, 2005, total assets were $7.0 billion     for the Commercial Finance Group, $1.7 billion for the     corporate activities of the Mortgage Group and     ($31.9) billion in eliminations.   109    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      Information concerning principal geographic areas was as follows:   Geographic Information                                                             Income before       Long-lived   Year ended December 31, ($ in millions)   Revenue (a)   Expense (b)   income taxes   Net income   assets (c)         2005                                                  Canada      $1,881       $1,687       $194       $108       $7,784           Europe      2,285       1,809       476       329       2,125           Latin America      947       520       427       330       115           Asia-Pacific      302       198       104       74       201               Total foreign      5,415       4,214       1,201       841       10,225           Total domestic      13,792       11,394       2,398       1,553       22,740               Total      $19,207       $15,608       $3,599       $2,394       $32,965           2004                                                  Canada      $1,552       $1,258       $294       $194       $5,908           Europe      2,127       1,713       414       305       2,193           Latin America      768       456       312       226       86           Asia-Pacific      309       187       122       95       265               Total foreign      4,756       3,614       1,142       820       8,452           Total domestic      13,911       10,706       3,205       2,093       19,475               Total      $18,667       $14,320       $4,347       $2,913       $27,927           2003                                                  Canada      $1,189       $966       $223       $159       $4,464           Europe      1,800       1,465       335       209       1,929           Latin America      603       356       247       170       61           Asia-Pacific      365       258       107       103       224               Total foreign      3,957       3,045       912       641       6,678           Total domestic      14,462       10,990       3,472       2,152       19,085               Total      $18,419       $14,035       $4,384       $2,793       $25,763                (a)       Revenue consists of total net revenue as presented in our     Consolidated Statement of Income.   (b)       Expense is composed of total expense as presented in our     Consolidated Statement of Income.   (c)       Primarily consists of net operating leases assets and net     property and equipment. At December 31, 2005,     $76 million of GMAC Commercial Mortgage long-lived assets     were transferred to reporting segment held for sale in our     Consolidated Balance Sheet. Refer to Note 1 to our     Consolidated Financial Statements.   110    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation                          24      Guarantees, Commitments, Contingencies     and Other Risks     Guarantees   Guarantees are defined as contracts or indemnification agreements that contingently require us to make payments to third parties based on changes in an underlying agreement that is related to a guaranteed party. The following summarizes our outstanding guarantees made to third parties, including Commercial Mortgage which has been classified as reporting segment held for sale in our Consolidated Balance Sheet, for the periods indicated:                                               2005   2004                       Carrying value       Carrying value   December 31, ($ in millions)   Maximum liability   of liability   Maximum liability   of liability             Agency/construction lending      $847       $2       $964       $3           Standby letters of credit      135       3       231       1           Securitization and sales:                                            Agency/loans sold with recourse      977       19       648       6             Commercial mortgage securitizations      1,136       —       1,210       1             HLTV and international securitizations      205       1       450       11             Mortgage-related securities      —       —       31       29           Agency loan program      6,196       —       4,711       —           Guarantees for repayment of third-party debt      393       —       212       3           Repurchase guarantees      256       —       —       —           Other guarantees      108       3       136       —           Agency/construction lending — We have guaranteed repayment of principal and interest on certain construction loans through our Commercial Mortgage operations. Additionally, guarantees are issued on long-term fixed rate agency loans. Losses would be incurred in the event of default of the underlying construction loans. These guarantees have expiration dates that range from 2006 through 2009. No collateral was pledged with respect to these guarantees at December 31, 2005 or 2004.   Standby letters of credit — Our Financing operations (primarily through our Commercial Finance Group) issues financial standby letters of credit to customers that represent irrevocable guarantees of payment of specified financial obligations (typically to client’s suppliers). In addition, our Mortgage operations issues financial standby letters of credit as part of its warehouse and construction lending activities. Expiration dates on the letters of credit range from 2006 to ongoing commitments, and are generally collateralized by assets of the client (trade receivables, cash deposits, etc.).   Agency/loans sold with recourse — Our Commercial Mortgage operations guarantee loans sold with recourse. Guarantees represent exposure on loans sold with recourse and subject to first loss position. Losses would be incurred in the event of default of the underlying loans. These guarantees have expiration dates that range from 2006 through 2036. No collateral was pledged with respect to these guarantees at December 31, 2005 or 2004.   Commercial mortgage securitizations — Through our Commercial Mortgage operations we have guaranteed repayment of principal and interest associated with certain commercial mortgage loan securitization transactions. Securities issued as a result of these securitization transactions were credit enhanced by an AAA rated insurer and we have issued a guarantee to the insurer for a portion of the guaranteed bonds. We have also retained an investment in these securitizations that is subordinate to these guarantees. Guarantee losses would be incurred in the event that losses on the underlying collateral exceed our subordinated investment. Certain guarantees have expiration dates that range from 2006 to 2037. Other guarantees have initial terms of 18 months, with automatic annual renewals thereafter. Collateral totaling $134 million and $110 million was pledged with respect to certain of these guarantees at December 31, 2005 and 2004, respectively. Expiration dates range from 2006 to 2037.   High loan-to-value (HLTV) and international securitizations — Our residential mortgage operations have entered into agreements to provide credit loss protection for certain HLTV and international securitization transactions. The maximum potential obligation for certain agreements is equal to the lesser of a specified percentage of the original loan pool balance or a specified percentage of the current loan pool balance. We are required to perform on our guaranty obligation when the bond insurer makes a payment under the bond insurance policy. We pledged mortgage loans held for sale totaling $53 million and $97 million and cash of $43 million and $58 million as collateral for these obligations as of December 31, 2005 and 2004, respectively. For certain other HLTV securitizations, the maximum obligation is equivalent to the pledged collateral amount. We pledged mortgage loans held for sale totaling $70 million and $133 million as collateral for these obligations as of December 31, 2005 and 2004, respectively. The event which will require us to perform on our guaranty obligation  111    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      occurs when the security credit enhancements are exhausted and losses are passed through to over the counter dealers. The guarantees terminate the first calendar month during which the aggregate note amount is reduced to zero.   Mortgage-related securities — GMAC-RFC had contingent obligations related to prepayment risk on sales of certain mortgage-related securities. For the year ended December 31, 2004, the obligation required payment of remaining principal upon maturity of senior classes of issued securities and was capped at $31 million with this cap decreasing as the underlying securities were paid down. This obligation matured and was paid in January 2005.   Agency loan program — Our Mortgage operations deliver loans to certain agencies that allow streamlined loan processing and limited documentation requirements. In the event any loans delivered under these programs reach a specified delinquency status, we may be required to provide certain documentation or, in some cases, repurchase the loan or indemnify the investors for any losses sustained. Each program includes termination features whereby once the loan has performed satisfactorily for a specified period of time we are no longer obligated under the program. The maximum liability represents the principal balance for loans sold under these programs.   Guarantees for repayment of third-party debt — Under certain arrangements, we guarantee the repayment of third-party debt obligations in the case of default. Some of these guarantees are collateralized by letters of credit.   Our Commercial Finance Group provides credit protection to third parties which guarantee payment of specified financial obligations of the third parties customers, without purchasing such obligations.   Repurchase guarantees — Our Mortgage operations have issued repurchase guarantees to buyers of certain mortgage loans whereby in the event that a closing condition or document deficiency is identified by an investor after the closing, we may be required to indemnify the investor in the event that the loan becomes delinquent.   Other guarantees — We have other standard indemnification clauses in certain of our funding arrangements that would require us to pay lenders for increased costs resulting from certain changes in laws or regulations. Since any changes would be dictated by legislative and regulatory actions, which are inherently unpredictable, we are not able to estimate a maximum exposure under these arrangements. To date, we have not made any payments under these indemnification clauses.   Our Mortgage operations have guaranteed certain amounts related to servicing advances, set-aside letters and credit enhancement and performance guarantees.   In connection with certain asset sales and securitization transactions, we typically deliver standard representations and warranties to the purchaser regarding the characteristics of the underlying transferred assets. These representations and warranties conform to specific guidelines, which are customary in securitization transactions. These clauses are intended to ensure that the terms and conditions of the sales contracts are met upon transfer of the asset. Prior to any sale or securitization transaction, we perform due diligence with respect to the assets to be included in the sale to ensure that they meet the purchaser’s requirements, as expressed in the representations and warranties. Due to these procedures, we believe that the potential for loss under these arrangements is remote. Accordingly, no liability is reflected in our Consolidated Balance Sheet related to these potential obligations. The maximum potential amount of future payments we could be required to make would be equal to the current balances of all assets subject to such securitization or sale activities. We do not monitor the total value of assets historically transferred to securitization vehicles or through other asset sales. Therefore, we are unable to develop an estimate of the maximum payout under these representations and warranties.  112    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      Commitments   Financing Commitments   The contract amount and gain and loss positions of financial commitments were as follows:                                                               2005   2004                   Contract   Gain   Loss   Contract   Gain   Loss   December 31, ($ in millions)   amount   position   position   amount   position   position             Commitments to:                                                            Originate/purchase mortgages or securities (a)      $16,560       $42       ($4 )     $13,865       $9       ($26 )           Sell mortgages or securities (a)      11,592       4       (28 )     11,823       6       (10 )           Remit excess cash flows on certain loan portfolios (b)      4,305       —       (39 )     4,335       19       —             Fund construction lending (c)      2,387       —       —       2,702       —       —             Sell retail automotive receivables (d)      33,000       —       —       2,000       —       —             Provide capital to equity method investees (e)      1,038       —       —       487       —       —           Unused mortgage lending commitments (f)      16,097       —       —       15,519       —       —           Unused revolving credit line commitments (g)      7,390       —       —       6,721       —       —                (a)       The fair value is estimated using published market information     associated with commitments to sell similar instruments.     Included as of December 31, 2005 and 2004 are     commitments accounted for as derivatives with a contract amount     of $25,670 and $24,832, a gain position of $46 and     $33 and a loss position of $71 and $35, respectively.   (b)       Under certain residential mortgage purchase agreements, we are     committed to remitting to its shared execution partners’     cash flows that exceed a required rate of return less credit     loss reimbursements to the mortgage originators. This commitment     is accounted for as a derivative.   (c)       We are committed to fund the completion of the development of     certain lots and model homes up to the amount of the agreed upon     amount per project.   (d)       We have entered into agreements with third-party banks to sell     automotive retail receivables in which we transfer all credit     risk to the purchaser (whole loan sales).   (e)       We are committed to lend equity capital to certain private     equity funds. The fair value of these commitments is considered     in the overall valuation of the underlying assets with which     they are associated.         (f)       The fair value of these commitments is considered in the overall     valuation of the related assets.         (g)       The unused portions of revolving lines of credit reset at     prevailing market rates, and as such, approximate market value.    The mortgage lending and revolving credit line commitments contain an element of credit risk. Management reduces its credit risk for unused mortgage lending and unused revolving credit line commitments by applying the same credit policies in making commitments as it does for extending loans. We typically require collateral as these commitments are drawn.   Lease Commitments   Future minimum rental payments required under operating leases, primarily for real property, with noncancelable lease terms that expire after December 31, 2005, were as follows:                 Year ended December 31, ($ in millions)                 2006      $201           2007      171           2008      133           2009      93           2010      68           2011 and thereafter      158               Total minimum payment required      $824           Certain of the leases contain escalation clauses and renewal or purchase options. Rental expenses under operating leases were $224 million, $230 million and $230 million in 2005, 2004 and 2003, respectively.   Contractual Commitments — We have entered into multiple agreements for information technology, marketing and advertising, and voice and communication technology and maintenance. Many of the agreements are subject to variable price provisions, fixed or minimum price provisions, and termination or renewal provisions. Future payment obligations under these agreements totaled $231 million and are due as follows: $141 million in 2006, $77 million in 2007 and 2008, $13 million in 2009 and 2010, and $0 million after 2011.   Extended Service and Maintenance Contract Commitments — Extended service contract programs provide consumers with expansions and extensions of vehicle warranty coverage for specified periods of time and mileages. Such coverage generally provides for the repair or replacement of components in the event of failure. The terms of these contracts, which are sold through automobile dealerships and direct mail, range from 3 to 84 months.   The following table presents an analysis of activity in unearned service revenue.                         Year ended December 31, ($ in millions)   2005   2004             Balance at beginning of year      $2,723       $2,042           Written service contract revenue      1,345       1,375           Earned service contract revenue      (909 )     (694 )             Balance at end of year      $3,159       $2,723          113   Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      Legal Contingencies   We are subject to potential liability under laws and government regulations and various claims and legal actions that are pending or may be asserted against it.   We are named as defendants in a number of legal actions, and from time to time involved in governmental proceedings arising in connection with our respective businesses. Some of the pending actions purport to be class actions. We establish reserves for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. The actual costs of resolving legal claims may be substantially higher or lower than the amounts reserved for those claims. Based on information currently available, advice of counsel, available insurance coverage, and established reserves, it is the opinion of management that the eventual outcome of the actions against us will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows. However, in the event of unexpected future developments, it is possible that the ultimate resolution of a legal matter, if unfavorable, may be material to our consolidated financial condition, results of operations or cash flows.   Other Contingencies   We are subject to potential liability under various other exposures including tax, non-recourse loans, self-insurance, and other miscellaneous contingencies. We establish reserves for these contingencies when the item becomes probable and the costs can be reasonably estimated. The actual costs of resolving these items may be substantially higher or lower than the amounts reserved for any one item. Based on information currently available, it is the opinion of management that the eventual outcome of these items will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows.   Other Risks   Loans Sold with Recourse   Our outstanding recourse obligations were as follows:                           December 31, ($ in millions)   2005   2004             Loans sold with recourse      $5,622       $3,449           Maximum exposure on loans sold with recourse (a):                            Full exposure      976       611             Limited exposure      142       53               Total exposure      $1,118       $664                (a)       Maximum recourse exposure is net of amounts reinsured with third     parties totaling $1 and $1 at December 31, 2005 and     2004, respectively. Loss reserves, included in other     liabilities, related to loans sold with recourse totaled $11 and     $7 at December 31, 2005 and 2004, respectively.    Concentrations   Our primary business is to provide vehicle financing for GM products to GM dealers and their customers. Wholesale and dealer loan financing relates primarily to GM dealers, with collateral consisting of primarily GM vehicles (for wholesale) and GM dealership property (for loans). For wholesale financing, we are also provided further protection by GM factory repurchase programs. Retail installment contracts and operating lease assets relate primarily to the secured sale and lease, respectively, of vehicles (primarily GM). Any protracted reduction or suspension of GM’s production or sale of vehicles, resulting from a decline in demand, work stoppage, governmental action, or any other event, could have a substantial adverse effect on us. Conversely, an increase in production or a significant marketing program could positively impact our results.   The majority of our finance receivables and loans and operating lease assets are geographically diversified throughout the United States. Outside the United States, finance receivables and loans and operating lease assets are concentrated in Canada, Europe (primarily Germany, the United Kingdom and Italy), Australia, Mexico and Brazil.   Our Insurance operations have a concentration of credit risk related to loss and loss adjustment expenses and prepaid reinsurance ceded to certain state insurance funds. Michigan insurance law and our large market share in North Carolina, result in credit exposure to the Michigan Catastrophic Claims Association and the North Carolina Reinsurance Facility totaling $782 million and $784 million at December 31, 2005 and 2004, respectively.   Credit Concentration   We originate and purchase residential mortgage loans that have contractual features that may increase our exposure to credit risk and thereby result in a concentration of credit risk. These mortgage loans include loans that may subject borrowers to significant future payment increases, create the potential for negative amortization of the principal balance or result in high loan-to-value ratios. These loan products include interest only mortgages, option adjustable rate mortgages, high loan-to-value mortgage loans and teaser rate mortgages. Our total loan production related to these products and our combined exposure related to these products recorded in finance receivables and loans and loans held for sale (unpaid principal balance) for the  114    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      years ended and as of December 31, 2005 and 2004 is summarized as follows:                                                 Unpaid Principal       Loan Production   as of       For the Year   December 31,               (In millions)   2005   2004   2005   2004             Interest only mortgages      $43,298     $ 15,782     $ 19,361     $ 8,375           Option adjustable rate mortgages      5,077       6       1,114       12           High loan-to-value (100% or more) mortgages      6,610       9,473       13,364       15,076           Below market initial rate (teaser) mortgages      537       638       411       704           Mezzanine loans (characterized by high LTV, IO payments, and     deferred interest)      65       216       154       142                 •   Interest-only mortgages — Allow interest-only     payments for a fixed period of time. At the end of the     interest-only period, the loan payment includes principal     payments and increases significantly. The borrower’s new     payment once the loan becomes amortizing (i.e., includes     principal payments) will be greater than if the borrower had     been making principal payments since the origination of the loan.       •   Option adjustable rate mortgages — Permit a     variety of repayment options. The repayment options include     minimum, interest-only, fully amortizing 30-year and fully     amortizing 15-year payments. The minimum payment option sets the     monthly payment at the initial interest rate for the first year     of the loan. The interest rate resets after the first year, but     the borrower can continue to make the minimum payment. The     interest-only option sets the monthly payment at the amount of     interest due on the loan. If the interest-only option payment     would be less than the minimum payment, the interest-only option     is not available to the borrower. Under the fully amortizing     30-year and 15-year payment options, the borrower’s monthly     payment is set based on the interest rate, loan balance and     remaining loan term.       •   High loan-to-value mortgages — Defined as     first-lien loans with loan-to-value ratios in excess of 100%, or     second-lien loans that when combined with the underlying     first-lien mortgage loan result in a loan-to-value ratio in     excess of 100%.       •   Below market rate mortgages — Contain     contractual features that limit the initial interest rate to a     below market interest rate for a specified time period with an     increase to a market interest rate in a future period. The     increase to the market interest rate could result in a     significant increase in the borrower’s monthly payment     amount.       •   Mezzanine loans — Represents a hybrid of debt     and equity financing from our Commercial Mortgage operations.     Mezzanine financing is typically used to finance the expansion     of existing companies, and it is basically debt capital that     gives the lender the rights to convert to an ownership or equity     interest in the company if the loan is not paid back in time and     in full. It is generally subordinated to debt provided by senior     lenders such as banks and venture capital companies.    All of the mortgage loans we originate and most of the mortgages we purchase (including the higher risk loans in the preceding table) are subject to our underwriting guidelines and loan origination standards. This includes guidelines and standards that we have tailored for these products and include a variety of factors, including the borrower’s capacity to repay the loan, their credit history and the characteristics of the loan, including certain characteristics summarized in the table that may increase our credit risk. When we purchase mortgage loans from correspondent lenders, we either re-underwrite the loan prior to purchase or delegate underwriting responsibility to the correspondent originating the loan. We believe our underwriting procedures adequately consider the unique risks which may come from these products. We conduct a variety of quality control procedures and periodic audits to ensure compliance with our origination standards, including our criteria for lending and legal requirements. We leverage technology in performing both our underwriting process and our quality control procedures.   Capital Requirements   Various of our international subsidiaries are subject to regulatory and other requirements of the jurisdictions in which they operate. These entities operate either as a bank or a regulated finance company in the local market. The regulatory restrictions primarily dictate that these subsidiaries meet certain minimum capital requirements, restrict dividend distributions and require that some assets be restricted. To date, compliance with these various regulations has not had a materially adverse effect on our financial position, results of operations or cash flows. Total assets in these entities approximated $12.9 billion and $13.3 billion as of December 31, 2005 and 2004, respectively.   We also have certain subsidiaries of our Mortgage operations and North American Automotive Financing operations that operate as depository institutions in the United States which are subject to minimum aggregate capital requirements, and other subsidiaries that are required to maintain regulatory capital requirements under agreements with Freddie Mac, Fannie Mae, Ginnie Mae, the Department of Housing and Urban Development, Utah State Department of Financial Institutions and the Federal Deposit Insurance Corporation (FDIC). Assets in the depository institutions totaled $16.9 billion and $7.5 billion at December 31, 2005 and 2004, respectively. Deposits in the entities are insured by the FDIC. As of December 31, 2005, we have met all regulatory requirements and were in compliance with the minimum capital requirements.  115    Table of Contents  Notes to Consolidated Financial Statements   General Motors Acceptance Corporation      GMAC Insurance is subject to certain minimum aggregated capital requirements, restricted net assets, and restricted dividend distributions under applicable state insurance law, the National Association of Securities Dealers, the Financial Services Authority in England, the Office of the Superintendent of Financial Institution of Canada, and the National Insurance and Bonding Commission of Mexico. To date, compliance with these various regulations has not had a materially adverse effect on our financial condition, results of operations or cash flows.   Under the various state insurance regulations, dividend distributions may be made only from statutory unassigned surplus, and the state regulatory authorities must approve such distributions if they exceed certain statutory limitations. Based on the December 31, 2005 statutory policyholders’ surplus, the maximum dividend that could be paid by the insurance subsidiaries over the next twelve months without prior statutory approval approximates $313 million.                       25      Subsequent Events     On January 4, 2006, our Insurance operations completed the previously announced acquisition of MEEMIC Insurance Company for $325 million. MEEMIC Insurance Company is a leading provider of personal auto coverage in Michigan and its business is therefore complementary to that of GMAC Insurance.   On March 23, 2006, we sold approximately 78 percent of our equity in GMAC Commercial Mortgage for approximately $1.5 billion in cash. At the closing, GMAC Commercial Mortgage also repaid to us approximately $7.3 billion of intercompany loans, bringing our total cash proceeds to $8.8 billion. At the closing, GMAC Commercial Mortgage changed its name to Capmark Financial Group Inc. (Capmark). Additionally, we will also invest an additional $250 million in Capmark trust preferred stock. Our remaining interest in GMAC Commercial Mortgage will be reflected as an equity method investment.  116   Table of Contents  Supplementary Financial Data   General Motors Acceptance Corporation             Summary of Consolidated Quarterly     Earnings (unaudited)                                                    First   Second   Third   Fourth       Year ended December 31, 2005 ($ in millions)                                 Total financing revenue      $5,188       $5,317       $5,324       $5,485               Interest and discount expense      3,001       3,050       3,320       3,559               Provision for credit losses      329       201       385       170               Total net revenue      4,699       4,850       4,907       4,751               Net income      $728       $816       $675       $175 (a)                  (a)       Decline in fourth quarter 2005 net income primarily relates to     goodwill impairments taken at our Commercial Finance       Group operating segment and our Commercial Mortgage reporting     segment. Refer to Note 12 to our Consolidated       Financial Statements for further details.                                                  First   Second   Third   Fourth       Year ended December 31, 2004 ($ in millions)                                 Total financing revenue      $4,934       $5,058       $5,048       $5,301               Interest and discount expense      2,223       2,253       2,398       2,661               Provision for credit losses      484       413       548       508               Total net revenue      4,653       4,791       4,583       4,640               Net income      $764       $846       $620       $683                        Restatement of Interim Cash Flow     Information (unaudited)      As we were preparing the Form 10-K, it was discovered that cash outflows related to certain mortgage loan originations and purchases were not appropriately classified as either operating cash flows or investing cash flows consistent with our original designation as loans held for sale or loans held for investment. In addition, proceeds from sales and repayments related to certain mortgage loans, which initially were classified as mortgage loans held for investment and subsequently transferred to mortgage loans held for sale, were reported as operating cash flows instead of investing cash flows in our Consolidated Statement of Cash Flows, as required by Statement of Financial Accounting Standards No. 102 Statement of Cash Flows — Exemption of Certain Enterprises and Classification of Cash Flows from Certain Securities Acquired for Resale. Finally, certain non-cash proceeds and transfers were not appropriately presented in the Consolidated Statement of Cash Flows or the supplemental disclosure to the Consolidated Statement of Cash Flows.   These matters impacted the Consolidated Statement of Cash Flows for the years ended December 31, 2004 and 2003 and the three, six and nine month periods included in our quarterly reports on Form 10-Q for the quarterly periods ended March 31, June 30, and September 30, 2005 and 2004, respectively. We have restated our Consolidated Statement of Cash Flows for the years ended December 31, 2004 and 2003 within this Form 10-K. We also intend to restate the Consolidated Statement of Cash Flows for the three, six and nine month periods included in our previously filed quarterly reports on Form 10-Q for the quarterly periods ended March 31, June 30, and September 30, 2005 and 2004, respectively.   The restatement of this information does not change total cash and cash equivalents reflected in any of the previously reported Consolidated Statement of Cash Flows. Furthermore, the restatement has no effect on our Consolidated Statement of Income, Consolidated Balance Sheet or Consolidated Statement of Changes in Stockholder’s Equity for any period during 2005, 2004 or 2003. The annual cash flows on the aforementioned mortgage loans have been properly classified in our Consolidated Statement of Cash Flows for the year ended December 31, 2005 and for the restated years ended December 31, 2004 and 2003.   The following comparative table presents the corrected cash flow amounts for the applicable periods in 2005 and 2004:                           Nine Months Ended September 30,           ($ in millions)   2005   2004             Net cash provided by (used in) operating activities                            As previously reported      ($220 )   $ 8,039             As restated      (10,895 )     5,438           Net cash provided by (used in) investing activities                            As previously reported      4,180       (20,360 )           As restated      14,855       (17,759 )         Net cash provided by financing activities                            As previously reported      (4,768 )     18,737             As restated      (4,768 )     18,737          117   Table of Contents  Supplementary Financial Data   General Motors Acceptance Corporation                              Six Months Ended June 30,   2005   2004   ($ in millions)                     Net cash provided by (used in) operating activities                            As previously reported      $44     $ 5,414             As restated      (4,226 )     4,573           Net cash provided by (used in) investing activities                            As previously reported      5,202       (18,664 )           As restated      9,472       (17,823 )         Net cash provided by financing activities                            As previously reported      (8,112 )     11,957             As restated      (8,112 )     11,957                                   Three Months Ended March 31,   2005   2004   ($ in millions)                     Net cash provided by (used in) operating activities                            As previously reported      ($4,718 )   $ 1,674             As restated      (6,729 )     1,111           Net cash provided by (used in) investing activities                            As previously reported      2,515       (12,600 )           As restated      4,526       (12,037 )         Net cash provided by financing activities                            As previously reported      (4,379 )     10,165             As restated      (4,379 )     10,165           Refer to Item 9A of this Form 10-K filed with the Securities and Exchange Commission corresponding to the year ended December 31, 2005, for information on the Corporation’s Disclosure Controls and Procedures and on Internal Control over Financial Reporting. Also refer to Management’s Report on Internal Control over Financial Reporting included in this Form 10-K.  118      EX-21 15 k03376exv21.htm SUBSIDIARIES OF THE REGISTRANT    exv21       Exhibit 21  GENERAL MOTORS CORPORATION AND SUBSIDIARIES  SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 2005  Subsidiary companies of the Registrant are listed below.                  State or       Sovereign Power   Name of Subsidiary   of Incorporation     Subsidiaries included in the Registrant’s consolidated financial statements       4309642 Canada, Inc.   Canada   Aisin GM Allison Co., Ltd.   Japan   Annunciata Corporation   Delaware   Argonaut Holdings, Inc.   Delaware   BOCO (Proprietary) Limited   South Africa   General Motors South Africa (Pty.) Limited   South Africa   Chevrolet Sociedad Anonima de Ahorro para Fines Determinados   Argentina   Controladora General Motors, S.A. de C.V.   Mexico   Componentes Para Automotores, S. de R.L. de C.V.   Mexico   Controladora AC Delco S.A. de C.V.   Mexico   Cadillac Polanco, S.A. de C.V.   Mexico   General Motors de Mexico, S. de R.L. de C.V.   Mexico   GMAC Holding S.A. de C.V.   Mexico   Servicios GMAC S.A. de C.V.   Mexico   Sistemas Para Automotores de Mexico, S.A. de C.V.   Mexico   Convesco Vehicle Sales GmbH   Germany   Dealership Liquidations, Inc.   Delaware   DMAX, Ltd.*   Ohio   Doraville Bond Corporation   Delaware   EL-MO Leasing II Corporation   Delaware   EL-MO Leasing III Corporation   Delaware   Environmental Corporate Remediation Company, Inc   Delaware   General International Limited   Bermuda   General Motors — Colmotores, S.A.   Colombia   General Motors Acceptance Corporation   Delaware   Autofinanciamiento GMAC, S.A. de C.V.   Mexico   Banco General Motors S.A.   Brazil   Consorcio Nacional GM Ltda   Brazil   GMACI Corretora de Seguros S.A.   Brazil   Basic Credit Holding Company, L.L.C.   Delaware   Alexium Financial Services, Inc.   Delaware   Nuvell Credit Corporation   Delaware   Nuvell Financial Services Corp.   Delaware   Saab Financial Services Corp.   Delaware   Capital Auto Receivables, Inc.   Delaware   Central Originating Lease, LLC   Delaware   Facilities Real Estate LLC   Delaware   G.M.A.C. Comercio e Aluguer de Veiculos, Lta.   Portugal   Produgar, Mediacao de Seguros, Lda.   Portugal   Gamma Auto Receivables, Inc.   Delaware   General Motors Acceptance Corporation (N.Z.) Limited   New Zealand   CARI New Zealand   New Zealand   General Motors Acceptance Corporation (Thailand) Limited   Thailand   General Motors Acceptance Corporation de Portugal — Servicos Financeiros, S.A.   Portugal   General Motors Acceptance Corporation Hungary Commercial Limited Liability Company   Hungary   General Motors Acceptance Corporation Italia S.p.A.   Italy   General Motors Acceptance Corporation Nederland N.V.   Netherlands   GMAC Espana, Sociedad Anonima de Financiacion, E.F.C   Spain   General Motors Acceptance Corporation of Canada, Limited   Canada   Canadian Lease Auto Receivable Corporation   Canada   Canadian Securitized Auto Receivables Corporation   Canada   Canadian Securitized Auto Receivables One Corporation   Canada   GMAC Leaseco Corporation / La Compagnie GMAC Location   Canada   General Motors Acceptance Corporation Suisse S.A.   Switzerland                *   Joint Venture Partnership           GENERAL MOTORS CORPORATION AND SUBSIDIARIES                 State or       Sovereign Power   Name of Subsidiary   of Incorporation     General Motors Acceptance Corporation, Australia   Delaware   CARI Australia Pty. Ltd.   Australia   Interleasing (Australia) Limited   Australia   General Motors Acceptance Corporation, Colombia S.A.   Delaware   G.M.A.C. Financiera de Colombia S.A. Compania de Financiamiento Comercial   Colombia   General Motors Acceptance Corporation, Continental   Delaware   GM Finance HB   Sweden   GMAC Finansiering A/S   Denmark   General Motors Acceptance Corporation, North America   Delaware   General Motors Acceptance Corporation, South America   Delaware   General Motors Acceptance Corporation de Venezuela, C.A.   Venezuela   Servicios, Representacion y Asesoramiento de Personal Persoserv S.A.   Ecuador   GMAC Arrendamiento S.A. de C.V.   Mexico   GMAC Auto Lease Finance Corporation   Cayman Islands   GMAC International Funding Company   Cayman Islands   North American New Cars, Inc   Delaware   GMAC Automotive Bank   Utah   GMAC Bank Polska Spolka Akcyjna   Poland   GMAC Banque   France   GMAC Canadian Credit Aggregation Corporation   Delaware   GMAC Comercial Automotriz Chile S.A.   Chile   GMAC Automotriz Limitada   Chile   GMAC Commercial Corporation   Delaware   GMAC Commercial Finance LLC   Delaware   Commercial Credit Land One LLC   New York   Commercial Credit Land Two LLC   New York   Commercial Credit Land Three LLC   New York   Commercial Finance EFD 2002-I, LLC   Delaware   Commercial Finance EFD 2002-II, LLC   Delaware   Dillingham Hyperion Holdings LLC   Michigan   Fenton Real Property Holdings LLC   Michigan   GMAC Commercial Finance (HK) Limited   Hong Kong   GMAC Commercial Finance Corporation-Canada, Societe Financiera Commerciale GMAC-Canada   Canada   Patriot Constructors, LLC   Delaware   Pinnacle Furniture Leasing, LLC   Delaware   GMAC Compania Financiera S.A.   Argentina   GMAC d.o.o.   Croatia   GMAC del Ecuador S.A.   Ecuador   GMAC Financial Services India Limited   India   GMAC Holdings (U.K.) Limited   England   General Motors Acceptance Corporation (U.K.) plc   England   GMAC Financial Services Limited   Korea   On:Line Finance Ltd.   England   GMAC Hungary Financial Services Limited   Hungary   GMAC Insurance Holdings, Inc.   Delaware   ABA Seguros, S.A. de C.V.   Mexico   CoverageOne Corporation / Compagnie Protection Premiere   Canada   CoverageOne Purchasing Group, Inc.   Michigan   CoverageOne, Inc.   Delaware   GM Motor Club, Inc.   North Carolina   GMAC Insurance Management Corporation   Delaware   GMAC International Insurance Company Ltd.   Bermuda   GMAC RE Corp.   Delaware   GMAC Risk Services, Inc.   Delaware   GMAC Securities Corporation   Delaware   GMAC Service Agreement Corporation   Michigan   Motors Insurance Corporation   Michigan   MRP Service Agreement Corporation   Michigan   SmartCoverage Insurance Agency Inc.   Canada   Trinity General Agency, Inc.   Texas   Universal Warranty Corporation   Michigan   GMAC International Corporation   Delaware   GMAC International Finance B.V.   Netherlands             GENERAL MOTORS CORPORATION AND SUBSIDIARIES                  State or       Sovereign Power   Name of Subsidiary   of Incorporation     GMAC Lease B.V.   Netherlands   Masterlease Europe Renting, S.L.   Spain   GMAC Leasing Corporation   Delaware   Patlan Corporation   Delaware   GMAC Leasing G.m.b.H. (Austrian entity)   Austria   GMAC Mexicana, S.A. de C.V. Sociedad Financiera de Objeto Limitado Filial   Mexico   GMAC Mortgage Group, Inc.   Michigan   GMAC Commercial Holding Corp.   Nevada   GMAC Mortgage Holdings, Inc.   Delaware   Helm Company, LLC   Delaware   Residential Capital Corporation   Delaware   GMAC-SAIC Automotive Finance Company Limited   China   GMAC Sverige AB   Sweden   GMAC Taiwan, Inc.   Delaware   MasterLease Motors, Inc.   Taiwan   GMAC, a.s.   Czech Republic   GMAC, Australia (Finance) Limited   Australia   Master Lease Austria GmbH   Austria   P.T. GMAC Lippo Finance   Indonesia   SA Holding One LLC   Delaware   SA Holding Two LLC   Delaware   Semperian, Inc.   Delaware   Wholesale Auto Receivables Corporation   Delaware   General Motors Asia Pacific (Japan) Limited   Japan   General Motors Asia Pacific (Pte) Ltd.   Singapore   General Motors Asia Pacific Holdings, LLC   Delaware   General Motors India Private Limited   India   General Motors Limited (active)   England   ISPOL-IMG Holdings B.V.   Netherlands   GM APO Holdings, LLC   Delaware   General Motors Taiwan Ltd.   Taiwan   GM LAAM Holdings, LLC   Delaware   General Motors do Brasil Ltd.   Brazil   PT General Motors Indonesia   Indonesia   P.T. GM AutoWorld Indonesia   Indonesia   General Motors Asia, Inc.   Delaware   Chevrolet Sales (Thailand) Ltd.   Thailand   GM Auto World Korea Co.   Korea   General Motors Asset Management Corporation   Delaware   General Motors Investment Management Corporation   Delaware   General Motors Trust Bank, N.A.   New York   General Motors Trust Company   New Hampshire   General Motors Automobiles Philippines, Inc.   Philippines   General Motors Chile S.A., Industria Automotriz   Chile   General Motors China, Inc.   Delaware   General Motors Warehousing and Trading (Shanghai) Co. Ltd.   China   General Motors (China) Investment Company Limited   China   TaiJin International Automotive Distribution Co., Ltd.   Taiwan   General Motors Commercial Corporation   Delaware   General Motors del Ecuador S.A.   Ecuador   General Motors East Africa Limited   Kenya   General Motors Export Corporation   Delaware   General Motors Foreign Sales Corporation   Barbados   General Motors Global Industries Co. Ltd.   Taiwan   General Motors Holding Espana, S.A.   Spain   General Motors Espana, S.L.   Spain   General Motors Manufacturing Poland sp.z.oo   Poland   General Motors Importaktiebolag   Sweden   General Motors Indonesia, Inc.   Delaware             GENERAL MOTORS CORPORATION AND SUBSIDIARIES                  State or       Sovereign Power   Name of Subsidiary   of Incorporation     General Motors International Holdings, Inc.   Delaware   General Motors Automotive Holdings, S.L.   Spain   Adam Opel GmbH   Germany   General Motors Belgium N.V.   Belgium   General Motors Poland Spolka, zo.o.   Poland   General Motors Turkiye Limited Sirketi   Turkey   GM Automotive Services Belgium   Belgium   General Motors Europe Holdings, S.L.   Spain   General Motors Austria GmbH   Austria   General Motors CIS   Russia   General Motors Europe AG   Switzerland   General Motors Finland Oy   Finland   General Motors Italia s.r.l.   Italy   General Motors Nederland, B.V.   Netherlands   General Motors Norge AS   Norway   General Motors Southeast Europe   Hungary   General Motors Strasbourg   France   General Motors Suisse S.A.   Switzerland   GM Ireland Limited   Ireland   Opel Portugal — Comerico e Industria de Veiculos S.A.   Portugal   General Motors Investment Services Company N.V.   Belgium   General Motors Isuzu Diesel Engineering Limited K.K.   Japan   General Motors Japan Ltd.   Japan   General Motors Korea, Inc.   Delaware   GM Korea Co., Ltd.   Korea   General Motors Nova Scotia Finance Company   Canada   General Motors Nova Scotia Investments Ltd.   Canada   General Motors of Canada Limited   Canada   1908 Holdings Ltd.   Cayman Islands   3096169 Nova Scotia Company   Canada   GM Automotive UK   England   IBC Vehicles Limited   England   Millbrook Proving Ground Ltd.   England   GM Holdings (U.K.) Ltd.   England   Millbrook Pension Management Ltd.   Delaware   General Motors Coordination Center BVBA.   Belgium   OnStar Canada Corporation   Canada   Saab Automobile AB   Sweden   GM Credit AB   Sweden   GM Europe Treasury Company, AB   Sweden   GM Worldwide Purchasing Sweden AB   Sweden   Saab Automobile Australia Pty Ltd   Australia   Saab Automobile Investering AB   Sweden   Saab Duetschland GmbH   Germany   Saab France S.A.   France   Saab Great Britian Ltd.   England   Saab Opel Sverige AB   Sweden   General Motors Overseas Corporation   Delaware   General Motors Australia Limited   Australia   GM Holden Ltd.   Australia   General Motors Venezolana, C.A.   Venezuela   GMOC Administrative Services Corporation   Delaware   Lidlington Engineering Company, Ltd.   Delaware   Truck and Bus Engineering U.K., Limited   Delaware   General Motors Overseas Distribution Corporation   Delaware   General Motors Africa and Middle East FZE   Dubai   GMODC Finance N.V.   Netherlands         Antilles   General Motors Peru S.A.   Peru   General Motors Powertrain — Austria GmbH   Austria   General Motors Powertrain — Sweden AB   Sweden   General Motors Product Services, Inc.   Delaware   General Motors Receivables Corporation   Delaware   General Motors U.S. Trading Corp.   Nevada   General Motors Uruguay, S.A.   Uruguay             GENERAL MOTORS CORPORATION AND SUBSIDIARIES                  State or       Sovereign Power   Name of Subsidiary   of Incorporation     GM Asset Management (UK) Limited   England   GM Auslandsprojekte GmbH   Germany   GM Auto Receivables Co.   Delaware   GM Canada Holdings Corporation   Canada   GM GEFS L.P.   Nevada   GM Car Company LLC   Delaware   GM Eurometals, Inc.   Delaware   GM Global Technology Operations, Inc.   Delaware   GM Imports & Trading Ltd.   Bermuda   GM International Sales Ltd.   Cayman Islands   GM Inversions Santiago Limitada   Chile   General Motors de Argentina S.r.L.   Argentina   GM Plats (Proprietary ) Limited   South Africa   GM Powertrain Holdings B.V.   Netherlands   General Motors Powertrain — Hungary Ltd.   Hungary   GM Powertrain Ltda.   Brazil   GM Purchasing Vauxhall UK Limited   England   GM Technologies, LLC   Delaware   GM Worldwide Purchaisng Austria GmbH   Austria   GM Worldwide Purchasing do Brasil Ltda   Brazil   GM Worldwide Purchasing Opel Belgium N.V.   Belgium   GM-DI Leasing Corporation   Delaware   GMAC Auto Lease Purchase Corporation   Cayman Islands   GME-Global Purchasing and Supply Chain Hungary Limited Liability Company    Hungary   GMI Diesel Engineering Limited K.K.   Japan   Holden New Zealand Limited   New Zealand   General Motors New Zealand Pensions Limited   New Zealand   Japan Autoweb Services K.K.   Japan   Jennings Motors, Inc.   Delaware   Manual Transmission of Muncie, LLC   Delaware   Metal Casting Technology, Inc.   Delaware   Motor Enterprises, Inc.   Delaware   Motors Holding San Fernando Valley, Inc.   Delaware   Multiple Dealerships Holdings of Albany, Inc.   Delaware   OnStar Corporation   Delaware   Saturn Corporation   Delaware   Saturn Distribution Corp.   Delaware   PIMS Co   Delaware   Premier Investment Group, Inc.   Delaware   Riverfront Development Corporation   Delaware   Riverfront Holdings, Inc.   Delaware   Riverfront Holdings Phase II, Inc.   Delaware   Saab Automobili Italia S.r.l.   Italy   Saab Cars Holding Corp.   Delaware   Saab Cars Holding Overseas Corp.   Delaware   Saab Cars USA, Inc.   Connecticut   Saturn County Bond Corporation   Delaware   Sistemas de Compra Programada Chevrolet, CA   Venezuela   TX Holdco, LLC   Delaware   WRE, Inc.   Michigan   Grand Pointe Holdings, Inc.   Michigan           294 directly or indirectly owned subsidiaries               Companies not included in the Registrant’s consolidated financial statements, for which no financial statements are submitted:   52 other directly or indirectly owned domestic and foreign subsidiaries       6 active subsidiaries       46 inactive subsidiaries       12 fifty-percent owned companies and 24 less than fifty-percent owned companies the investments in which are accounted for by the equity method.             GENERAL MOTORS CORPORATION AND SUBSIDIARIES  In addition, the Registrant owns 100% of the voting control of the following companies:      170 dealerships, including certain dealerships operating under dealership assistance plans, engaged in retail distribution of General Motors      products           115 dealerships operating in the United States           55 dealerships operating in foreign countries   The number of dealerships operating under dealership assistance plans decreased by a net of 40 during 2005.  Companies not shown by name, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.  * * * * * * *       During 2005, there were changes in the number of subsidiaries and companies of the Registrant, as follows:  2 directly and 6 indirectly owned domestic subsidiaries, and 2 directly and 16 indirectly owned foreign subsidiaries were organized or acquired. No directly owned and 24 indirectly owned domestic subsidiaries; and no directly owned and 9 indirectly owned foreign subsidiaries were dissolved, sold, or spun-off. No domestic and 1 foreign 50% owned company was organized or acquired. A less than 50% interest was acquired in 2 foreign companies, while interests in 2 foreign 50% owned and 16 foreign less than 50% owned companies were terminated. Domestic and foreign companies had 8 changes in ownership or percentage in ownership; 1 company moved from 100% owned to 50% owned; 14 companies moved from less than 50% owned to over 50% owned; 8 companies moved from active to inactive; 3 companies moved from inactive to active; 5 companies moved from inactive to dissolved; 1 company moved to 100% owned; 1 company moved from less than 50% owned to over 50% owned; 1 company moved from over 50% owned to 50% owned; 2 GM companies became GMAC subsidiaries; 1 less than 50% owned company was dissolved and 2 companies moved to less than 20% owned from less than 50% owned. There were 29 company name changes in domestic and foreign subsidiaries.  * * * * * * *          EX-23 16 k03376exv23.htm CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    exv23       Exhibit 23  CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  We consent to the incorporation by reference of:       •   our reports dated March 28, 2006 on the consolidated financial statements and financial statement schedules of General Motors Corporation (which report expresses an unqualified opinion and includes an explanatory paragraph relating to (1) accounting for the estimated fair value of conditional asset retirement obligations, (2) the consolidation of certain variable interest entities, and (3) the expensing of the fair market value of newly granted stock options and other stock-based compensation awards issued to employees), and on management’s report on the effectiveness of internal control over financial reporting (which report expresses an adverse opinion on the effectiveness of the Corporation’s internal control over financial reporting), and;        •   our reports dated March 28, 2006 on the consolidated financial statements of General Motors Acceptance Corporation (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the restatement discussed in Note 1, and an explanatory paragraph relating to the consolidation of certain variable interest entities), and on management’s report on the effectiveness of internal control over financial reporting (which report expresses an adverse opinion on the effectiveness of the Corporation’s internal control over financial reporting);    appearing in this Annual Report on Form 10-K of General Motors Corporation for the year ended December 31, 2005 in the following Registration Statements:                      Registration       Form   Statement No.   Description     S-3    333-88508    General Motors Corporation and GM Nova Scotia Finance Company Debt Securities, Preferred Stock, Preference     Stock and Common Stock               S-8    333-109615    The General Motors Personal Savings Plan for Hourly-Rate Employees in the United States               S-8    333-90097    General Motors Stock Incentive Plan               S-8    333-109616    General Motors Savings-Stock Purchase Program for Salaried Employees in the United States               S-8    333-120617    The GMAC Mortgage Group Savings Incentive Plan               S-8    333-47200    Saturn Individual Savings Plan for Represented Members               S-8    333-17937    Saturn Personal Choices Savings Plan for Non-Represented Members               S-8    333-44957    General Motors 1998 Stock Option Plan               S-8    333-66653    ASEC Manufacturing Savings Plan               S-8    333-31846    General Motors Deferred Compensation Plan for Executive Employees               S-8    333-55118    The GMAC Insurance Personal Lines Retirement Savings Plan               S-8    333-55122    The Holden Employee Share Ownership Plan               S-8    333-120616    GMAC Mortgage Group Deferred Compensation Plan for Executive Employees     /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Detroit, Michigan March 28, 2006           EX-31.1 17 k03376exv31w1.htm SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER    exv31w1       Exhibit 31.1  CERTIFICATION  I, G. Richard Wagoner, Jr., certify that:     1.   I have reviewed this annual report on Form 10-K of General Motors Corporation;      2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;      3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;      4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:         a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;        b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;        c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and        d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and       5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):         a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and        b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.    Date: March 28, 2006                          /s/ G. RICHARD WAGONER, JR.        G. Richard Wagoner, Jr.       Chairman and Chief Executive Officer                 EX-31.2 18 k03376exv31w2.htm SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER    exv31w2       Exhibit 31.2  CERTIFICATION  I, Frederick A. Henderson, certify that:     1.   I have reviewed this annual report on Form 10-K of General Motors Corporation;      2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;      3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;      4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:         a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;        b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;        c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and        d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and       5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of the directors (or persons performing the equivalent function):         a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and        b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.    Date: March 28, 2006                          /s/ FREDERICK A. HENDERSON        Frederick A. Henderson       Vice Chairman and Chief Financial Officer                 EX-32.1 19 k03376exv32w1.htm SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICER    exv32w1       Exhibit 32.1  CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  In connection with the Annual Report of General Motors Corporation (the “Corporation”) on Form 10-K for the period ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, G. Richard Wagoner, Jr., Chairman and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:     1.   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and      2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.    /s/ G. RICHARD WAGONER, JR. G. Richard Wagoner, Jr. Chairman and Chief Executive Officer March 28, 2006          EX-32.2 20 k03376exv32w2.htm SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICER    exv32w2       Exhibit 32.2  CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  In connection with the Annual Report of General Motors Corporation (the “Corporation”) on Form 10-K for the period ended December 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frederick A. Henderson, Vice Chairman and Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:     1.   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and      2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.    /s/ FREDERICK A. HENDERSON Frederick A. Henderson Vice Chairman and Chief Financial Officer March 28, 2006          GRAPHIC 21 k03376k0337600.gif GRAPHIC  begin 644 k03376k0337600.gif M1TE&.#EA0P`U`/<``````(````"``("`````@(``@`"`@,#`P,#/CX^KJZO'Q\?CX^/_[\*"@I("`@/\```#_ M`/__````__\`_P#______RP`````0P`U```(_@!-"1Q(L*#!@P@3*C2XB%Z\ M6K7<+9Q(L>+"1?,2)-B5P*+'CQ07Q8.7H-8\D"A3$FS(\:'*ER`;_ILGCQ[, MFQ5E_MN)LZ="G3Q]"BT(]-_0HP*+(CVJ=*G0IDY[0OUHJ&K4E?1V!O58"QZ] MKRX)&N)X8.,B@K0V;J25,ZM6CX;F:9W[[ZQ`0_7FLATH;VZMMG,])M`ZSYW< MG?$&%MVE.*N]G7]#NMTZ46='@8-WVC4T^9_$I%KS1J[*B?X]=*:[W>*_, MQS,-":1%=_3%TA6?:6VE6.M>SO_JN;5;*WC>?[9_XJ;H"O4_U4D3E+4KLQZ\ MG=#C_9.G'3G@M[EW_BL$CCSOWKR[NB=/.'6A[L=V$>JDE?6`J=/_:/7U+CEP M>,WW[2+@+@=LYM8SU\U#@&YU';:>?,M-U!QV]]'EVH'%&56<36X]>%!["C'X M#V^+R'-8?G<=2-L_8_T#CRD=?D>9>UI!9PIY%^Y$"WZT\/(/8S'V!QY%(L8W M7XHZPHB<=G\%29I_S-6X6I+WN<66=O-DI9J3MT$YD8B\)77<;U::LHM6])S% MI7)>7J058P(5UUI2968XDT!KLA=AESOM0LL!>B&)XC/'\8(G9#(:9=&9SM&% MXGV'L:539'E"V.9$F6EE$I7D1788=,=YR-">(=%""W15Q7>C57-5*H'(GD;2Y5J61F7UBJNON^;*RUY/#CG1BHXFJVRR M:VR^'LG++YO[_BLKNP(G6G"_]1[\8<(*6SO7(A!'+/'$%%=L\<485]Q90``` !.S\_ ` end    GRAPHIC 22 k03376k0337601.gif GRAPHIC  begin 644 k03376k0337601.gif M1TE&.#EA10`H`/<`````````"```$```&```(0`('``"*P`$-0H%!1`*$@P, M(`H0,QH:%BDI)QX@,S$Q+P``0@``2@((1P462```6@`$7@4*8`(87Q0E6"HS M43DU.3D[2D!`14I!1SQ%74I$5```=P`-<``8=0T@;P`0@0`W-[>W]O=WMW>W-SA']_?X1[A(1[E(2$?X2$C(:)AHZ& MAHR,C)"0D)2,E)24C)24E)2UM[>WM[GWM[GY^?>WN?GWN?GY^?OWN?OY^?O M[^_GWN_GY^_OY^_O[^_W[^_W]_?OY_?O[_?W[_?W]_?W__?_]_?____O]__W M[__W]__W____[___]____RP`````10`H```(_@#_"1Q(L*#!@P@3*ER(<-^_ M=ZX,8,@P,8.G@ON:09L&+5HR?`69*8O6D5D]@NX<.<"P,@.V=PP3[@,0`D\2 M.3?PQ+"0B2`\`#58"(5@KJ``%R=JI`#0;6`[`27F]+"11T:(`/YB&J0'0$0> M(F1L+"EB1P8%3`/],;##Y8H:$?0*DD!RQ4L?10/G2:C!9@83-&WL0'EA2&M! M5B/J<(DRML@8&V/T1/#U+VNF/$*B7%'!@&`U$&S`S)!A:Z``/S&V,!D2I0@3 M(&\HT-*:M;*!)&FZ"/&R1-1(48?=J`1 M1A%7R!"`8=U,<`8643CA@P&<@$(`#68HH<0<`LP#$R`UK"$$'@84(Q`X(9@! M1!=\F")0(RFP<80=+*#002@`[+"%A&6,$(Q6FKR@!!IJ?#$",P*94\`24/QV M06VGU!`%&TR8@$RB*D3!A!@D_/G/!U-I=@(B&!8C01Y7#*'$":YH]0D/_M_- MD(,'&+YY0@LXI'#`*#R.L$,37=#PBT"`O(`%&F!8H,T_YE!0QQA8M"%!.?_< M\T\#)VR11AI)K!`3/@#X084:,*A`[4"M2'#`"L#,)A`V$_BP!QE M<**.0`831$TJ#U"BRBGMD-+([9X$0HL&J?RS@<'(-$`)+KQ,@TDL7X^3`#&` MT++,/*(40LOE"60#R#^IL$0AQ@&(;,CB`1V@12X4@0Y'P"(AYZ@:3`82%YBT MXQT_$P@^[H&/<0Q-(,ZI#3RRXJ7::$@@JWM(TOZQ#VL)I![C,$]#-@`)1$`B M`P\T#"MH"`E("(,#_HA`1"0T8`[S8(*'D/#`+`JB"@]\H(<;^&!"Z$&`/[1` M#CY@3D$`\`N:T>P;(^@!#?X`@1+@P`4_,``V:L,`%>P@!W+X@]F<4@`_X``' M?B!`"A$2%WE(X`A%`((>!C".@DR@`A880"4H4SUX4$`+JT%5'F;@ATO88QT" MF0<)A/`:+C#B'_P`R3968(14D4DKD#@#DHJ``C,YY!^;L(`<]D`%%3R@("OH M01:B,(8J#$$,/O@`0D*0K!A@#%4*$+=9#`/^)1W('$ M0P(Y2((1]C">*\1!!0@`Y5X%<@\!U,`&9C@"'7B0*Z8HQ`$O\$$+?D"(:V_C&.,ZQCG?,XQ[[^,=` ..#K*0ATSD(AOYQ`$!`#L_ ` end    GRAPHIC 23 k03376k0337602.gif GRAPHIC  begin 644 k03376k0337602.gif M1TE&.#EA*@`F`/<``````(````"``("`````@(``@`"`@,#`P,#/CX^KJZO'Q\?CX^/_[\*"@I("`@/\```#_ M`/__````__\`_P#______RP`````*@`F```(_@!-"11H:.#`@@81)C1H2N'! MAPPC2IQ(<6'%BQ@S:MS(L:/'CR!#BAP9TB%)DHL.Q(O'BY;!6KL2N#35ZD"" M78M`&J+WKV?/F:;D]4P@L%;/>CDEFHQ(ZQ\]6HOB_8LW4.J_>0(3]*27RN MAA&E:JVU:"I=M?^(:J5'5:!4H[6:@DW[<:VI77VQ6OY7:UX"S(\[1Q;X[.I` M>/]H)9@';UY3SAX/_#MLJ&EE4U)I&:67H#57D%KEB77Z.G93THUQ=S0:VU"W M?\I'0_W9^/A$KP,;4OOL*1IX];C1!T_?FL#MP/8NY\U;](RR^HZ&[I^4^"RS M\%H`!BC@@+2`AY%6XR6HH$_2<:3;@A#ZY-U^(QE($(6(8:CAAAQVZ.&'(%H( 'XHBF!`0`.S\_ ` end    -----END PRIVACY-ENHANCED MESSAGE-----