GENERAL MOTORS CORP (Form: 10-K, Received: 03/28/2006 17:06:47)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549-1004

Form 10-K


þ		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

o		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 1-143

GENERAL MOTORS CORPORATION

(Exact Name of Registrant as Specified in its Charter)


STATE OF DELAWARE		38-0572515
(State or other jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

300 Renaissance Center, Detroit, Michigan		48265-3000
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (313) 556-5000

Securities registered pursuant to Section 12(b) of the Act:


		Name of Each Exchange on
Title of Each Class		Which Registered

Common, $1 ² / 3 par value		New York Stock Exchange, Inc.

Note: The $1 ² / 3 par value common stock of the Registrant is also listed for trading on the following exchanges:


		Chicago Stock Exchange, Inc.		Chicago, Illinois
		Pacific Exchange, Inc.		San Francisco, California
		Philadelphia Stock Exchange, Inc.		Philadelphia, Pennsylvania
		Frankfurter Wertpapierborse		Frankfurt am Main, Germany
		Borse Düsseldorf		Düsseldorf, Germany
		Bourse de Bruxelles		Brussels, Belgium
		Euronext Paris		Paris, France
		The London Stock Exchange		London, England

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

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 o No þ

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 þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of June 30, 2005, the aggregate market value of General Motors $1 ² / 3 par value common stock held by nonaffiliates of GM was approximately $19.2 billion. The closing price on June 30, 2005 as reported on the New York Stock Exchange was $34.00 per share. As of June 30, 2005, the number of shares outstanding of GM $1 ² / 3 par value common stock was 565,503,422 shares.

Documents incorporated by reference are as follows:


		Part and Item Number of Form 10-K
Document		into Which Incorporated

General Motors Notice of Annual Meeting of Stockholders and Proxy Statement for the Annual Meeting of Stockholders to be held June 6, 2006		Part III, Items 10 through 14
General Motors Acceptance Corporation Annual Report on Form 10-K for the year ended December 31, 2005		Part I, Item 1; Part II, Items 6, 7, and 8

GENERAL MOTORS CORPORATION

INDEX


		Page

PART I
Item 1.	Business		I-1
Item 1A.	Risk Factors		I-12
Item 1B.	Unresolved Staff Comments		I-27
Item 2.	Properties		I-27
Item 3.	Legal Proceedings		I-27
Item 4.	Submission of Matters to a Vote of Security Holders		I-34
Item 4A.	Executive Officers of the Registrant		I-35

PART II
Item 5.	Market for the Registrant’s Common Equity and Related Stockholder Matters		II-1
Item 6.	Selected Financial Data		II-3
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		II-5
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		II-47
Item 8.	Financial Statements and Supplementary Data		II-53
	Consolidated Statements of Income		II-53
	Consolidated Balance Sheets		II-55
	Consolidated Statements of Cash Flows		II-57
	Consolidated Statements of Stockholders’ Equity		II-59
	Notes to Consolidated Financial Statements		II-60
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		II-132
Item 9A.	Controls and Procedures		II-132
Item 9B.	Other Information		II-133

PART III
Item 10.	Code of Ethics for Senior Executives		III-1
Item 11.	Executive Compensation		III-1
Item 12.	Security Ownership of Certain Beneficial Owners and Management		III-1
Item 13.	Certain Relationships and Related Transactions		III-1
Item 14.	Principal Accountant Fees and Services		III-1

PART IV
Item 15.	Exhibits and Financial Statement Schedule		IV-1
Signatures			IV-4
Bylaws of General Motors Corporation
Agreement, dated as of October 22, 2001
General Motors Company Vehicle Operations
Compensation Statement for G.R. Wagoner, Jr.
Compensation Statement for John M. Devine
Compensation Statement for Robert A. Lutz
Compensation Statement for G.L. Cowger
Compensation Statement for Thomas A. Gottschalk
GM Supplemental Executive Retirement Plan
General Motors Benefit Equalization Plan for Salaried Employees
Description of Executive and Board Compensation Reductions
Computation of Ratios of Earnings to Fixed Charges
General Motors Acceptance Corp Annual Report
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Section 302 Certification of Chief Executive Officer
Section 302 Certification of Chief Financial Officer
Section 906 Certification of Chief Executive Officer
Section 906 Certification of Chief Financial Officer

PART I

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

THE CORPORATION

General Motors Corporation, incorporated in 1916 under the laws of the State of Delaware, is hereinafter sometimes referred to as “we,” the “Registrant,” the “Corporation,” “General Motors,” or “GM.”


Item 1.	*Business*

General

GM is primarily engaged in automotive production and marketing, and financing and insurance operations. GM designs, manufactures, and markets vehicles worldwide, having its largest operating presence in North America. GM’s finance and insurance operations are principally those of General Motors Acceptance Corporation (GMAC), a wholly owned subsidiary of GM, which provides a broad range of financial services, including automotive finance and mortgage products and services.

The following information is incorporated herein by reference to the indicated pages in Part II:


Item		Page(s)

Production Volumes		II-12 through II-17
Employment and Payrolls		II-39
Note 26 to the GM Consolidated Financial Statements (Segment Reporting)		II-120 through II-123

GM presents separate supplemental financial information for its reportable operating segments:


	•	Automotive and Other Operations (Auto & Other); and

	•	Financing and Insurance Operations (FIO).

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 Corporation (Delphi) and other retirees, and certain corporate activities.


	*GM Automotive and Other Operations*

GMNA primarily meets the demands of customers inside North America with vehicles designed, manufactured, and/or marketed under the following nameplates:


• Chevrolet	• Buick	• Saab
• Pontiac	• Cadillac	• Hummer
• GMC	• Saturn

GME, GMLAAM, and GMAP primarily meet the demands of customers outside North America with vehicles designed, manufactured, and/or marketed under the following nameplates:


• Opel	• Saab	• GMC
• Vauxhall	• Buick	• Cadillac
• Holden	• Chevrolet	• Daewoo

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

As of December 31, 2005, GM also has equity ownership directly or indirectly through various regional subsidiaries in New United Motor Manufacturing, Inc. (NUMMI), Suzuki Motor Corporation (Suzuki), Isuzu Motors Ltd., Shanghai General Motors Co., Ltd. (SGM), SAIC-GM-Wuling Automobile Company Ltd., and CAMI Automotive Inc. (CAMI). These investees design, manufacture and market vehicles under the following nameplates:


• Pontiac	• Wuling	• Saab
• Suzuki	• Daewoo	• Chevrolet
• Isuzu	• Holden
• Buick	• Cadillac


	*GM Financing and Insurance Operations*

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, automotive dealership and other commercial financing, residential and commercial mortgage services, automobile service contracts, personal automobile insurance coverage and selected commercial insurance coverage. See related business discussion in GMAC’s Form 10-K, Item 1, which is incorporated herein by reference. GMAC’s Form 10-K is filed separately with the Securities and Exchange Commission (SEC).


	*Hughes Split-Off*

GM’s businesses included those of Hughes Electronics Corporation (Hughes) prior to the split-off of that business from GM on December 22, 2003. Hughes’ activities included digital entertainment, information and communication services, and satellite-based private business networks.

Vehicle Unit Sales

Production volume of GM passenger cars and trucks during the three years ended December 31, 2005 is summarized in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section below.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Total industry new motor vehicle (passenger cars, trucks and buses) unit sales of domestic and foreign makes and GM’s competitive position during the years ended December 31, 2005, 2004, and 2003 were as follows:


			Vehicle Unit Sales(1)
			Years Ended December 31,

			2005						2004						2003

							GM as						GM as						GM as
							a % of						a % of						a % of
			Industry		GM		Industry		Industry		GM		Industry		Industry		GM		Industry

			(Units in thousands)
United States
	Cars
		Small		2,370		490		20.7%		2,256		456		20.2%		2,339		487		20.8%
		Mid-size		3,740		1,007		26.9%		3,714		1,190		32.0%		3,681		1,240		33.7%
		Sport		424		58		13.6%		403		59		14.6%		420		32		7.5%
		Luxury		1,208		197		16.3%		1,190		180		15.2%		1,197		202		16.9%

	Total cars			7,742		1,752		22.6%		7,563		1,885		24.9%		7,637		1,961		25.7%
	Trucks
		Pickups		3,201		1,163		36.3%		3,198		1,133		35.4%		3,115		1,151		37.0%
		Vans		1,468		328		22.4%		1,456		313		21.5%		1,398		339		24.3%
		Utilities		4,585		1,212		26.4%		4,693		1,324		28.2%		4,523		1,264		27.9%
		Medium Duty		459		63		13.8%		392		52		13.2%		297		42		14.0%

	Total trucks			9,713		2,766		28.5%		9,739		2,822		29.0%		9,333		2,796		30.0%

	Total United States			17,455		4,518		25.9%		17,302		4,707		27.2%		16,970		4,757		28.0%
Canada, Mexico, and Other				3,087		728		23.6%		2,980		705		23.6%		2,872		683		23.8%

	Total GMNA			20,542		5,246		25.5%		20,282		5,412		26.7%		19,842		5,440		27.4%
	GME			20,970		1,982		9.5%		20,763		1,956		9.4%		19,588		1,819		9.3%
	GMLAAM			4,980		881		17.7%		4,225		738		17.5%		3,626		584		16.1%
	GMAP			18,240		1,064		5.8%		17,156		887		5.2%		15,919		773		4.9%

Total Worldwide				64,732		9,173		14.2%		62,426		8,993		14.4%		58,975		8,616		14.6%


(1)	GM vehicle unit sales primarily represent vehicles manufactured by GM or manufactured by GM’s investees and sold either under a GM nameplate or through a GM-owned distribution network. Consistent with industry practice, vehicle unit sales information includes estimates of sales in certain countries where public reporting is not legally required or otherwise available on a consistent basis.


	*Fleet Sales and Deliveries*

The U.S. sales and market share data provided above cover both retail and fleet sales and deliveries. GM’s U.S. fleet sales are comprised primarily of sales and deliveries to daily rental car companies, as well as commercial fleet and government customers. Certain U.S. fleet transactions, especially daily rental, are less profitable than U.S. retail sales.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

The table below shows our fleet sales in the United States, and the amount of those sales as a percentage of our total U.S. car and truck vehicle unit sales for the last three years. The daily rental category principally consists of vehicle transactions that GM guarantees to repurchase from customers at contractually agreed upon values. See Note 1 to the Consolidated Financial Statements for a description of our accounting treatment for U.S. fleet transactions and our revenue recognition policies.


			GM U.S. Fleet Sales
			Years Ended December 31,

			2005			2004			2003

			(Units in thousands)
Daily rental units				780			801			713
Other fleet units				388			353			288

	Total fleet units			1,168			1,154			1,001

U.S. retail/ fleet mix
	U.S. fleet sales as % of total sales
		Cars		36.8	%		36.7	%		31.7	%
		Trucks		19.0	%		16.4	%		13.6	%
		Total		25.9	%		24.5	%		21.0	%

Product Pricing

GM, through the “Total Value Promise,” announced in January 2006 its intent to reduce the use and amount of incentives in GMNA as a stimulant to sales and that it would instead reduce the manufacturers’ suggested retail price on many GM vehicles and, on that basis, emphasize the value GM offers to consumers. Historically, GM has used a number of methods to promote its products, including the use of incentives. GM uses retail and fleet incentives, primarily through rebates, finance incentives and special lease programs. In addition, GM uses dealer incentives to promote its vehicles. The level of incentives is dependent in large part upon the level of competition in the markets in which GM operates and the level of demand for GM’s products.

Seasonal Nature and Cyclical Nature of Business

In the automotive business, there are retail sales fluctuations of a seasonal nature, and production varies from month to month. Certain changeovers occur throughout the year for reasons such as new market entries and vehicle model changeovers; however, the changeover period related to the annual new model introduction has traditionally been concentrated in the third quarter of each year. Production is typically lower during the third quarter due to these annual product changeovers and the fact that annual plant shutdowns are planned during this time to facilitate product changes. For this reason, lower production rates in the third quarter cause operating results to be, in general, less favorable than those in the other three quarters of the year. The magnitude of the changeover needed to commence production of new models depends on, for example, design modifications related to more fuel-efficient vehicle packaging, stricter government standards for safety and emission controls, and consumer-oriented improvements in performance, comfort, convenience, and style.

The market for automobiles is cyclical and dependent upon general economic conditions and consumer spending. A deterioration in general economic conditions may cause consumers to defer purchasing or leasing new vehicles or opt for used vehicles instead, resulting in a decrease in the total number of new cars and light trucks sold. Fluctuations in the price of fuel also affect consumer preferences and spending.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Relationships with Dealers

We market our vehicles and provide financing for those products through a network of independent retail dealers and distributors in the United States, Canada, and Mexico, and through distributors and dealers overseas. At December 31, 2005, there were approximately 7,350 GM vehicle dealers in the United States, 750 in Canada, and 300 in Mexico. Additionally, there were a total of approximately 15,600 distribution outlets overseas for vehicles manufactured by GM and its affiliates. These outlets include distributors, dealers and authorized sales, service, and parts outlets.

GM dealers operated the following number of GM dealerships in the following locations:


	As of December 31,

	2005		2004

GMNA		8,440		8,661
GME		10,200		9,522
GMLAAM		2,053		1,679
GMAP		3,329		2,788

Total Worldwide		24,022		22,650

In North America, GM enters into contracts with each authorized dealer agreeing to sell the dealer one or more specified product lines at wholesale prices and granting the dealer the right to sell those vehicles from a GM approved location to retail customers. GM dealers often offer more than one GM brand of vehicle in a single dealership. GM’s current dealer network plans focus primarily on combining only certain GM brands within dealerships. In some instances, an authorized GM dealer may also be an authorized dealer for another manufacturer’s vehicles. Authorized GM dealers offer parts, accessories, service, and repairs for GM vehicles in the product lines that they sell, usually using genuine GM vehicle accessories and service parts. GM dealers are authorized to service GM vehicles under GM’s limited warranty, and those repairs are to be made only with genuine GM parts. In addition, GM dealers generally provide their customers access to credit or lease financing, vehicle insurance, and extended service contracts provided by GMAC or one of its subsidiaries.

Because dealers maintain the primary sales and service interface with the ultimate consumer of GM products, the quality of GM dealerships and GM’s relationship with its dealers and distributors is significant to the success of the Corporation. In addition to the terms of its contracts with its dealers, GM is regulated by various state franchise laws that take precedence over those contractual terms and impose specific regulatory requirements and standards for initiating dealer network changes, pursuing terminations for cause, and other contractual matters.

Research, Development and Intellectual Property

In 2005, GM incurred $6.7 billion in costs for research, manufacturing engineering, product engineering, and development activities related primarily to the development of new products or services or the improvement of existing products or services, including activities related to vehicle emissions control, improved fuel economy, and the safety of persons using GM products. GM spent $6.5 billion and $6.2 billion on similar company-sponsored research and other product development activities in 2004 and 2003, respectively. GM’s research activities include working to improve the environmental performance of our vehicles, diversify energy sources, and provide gasoline-saving solutions around the world. For example, in addition to our gas hybrid vehicles and fuel cell development activities, GM has delivered to date in the United States more than 1.5 million vehicles capable of running on E85, a blend of 85% ethanol and 15% gasoline, and we expect to produce approximately 400,000 more such vehicles in 2006.

GM generates and holds a significant number of patents in a number of countries in connection with the operation of GM’s business. While none of these patents by itself is material to GM’s business as a whole, these patents are very important to GM’s operations and continued technological development. In addition,

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM holds a number of trademarks and service marks that are very important to GM’s identity and recognition in the marketplace.

Raw Materials, Services and Supplies

GM purchases a wide variety of raw materials, parts, supplies, freight, transportation, energy, and other services from numerous firms and suppliers for use in the manufacture of our products. The raw materials primarily consist of steel, aluminum, resins, copper, lead, and platinum group metals. GM has not experienced any significant shortages of raw materials and normally does not carry substantial inventories of such raw materials in excess of levels reasonably required to meet our production requirements. Recently, the global automotive industry has experienced increases in commodity costs, most notably for steel and petroleum-based products (such as resins). These price increases have been driven by increased global demand for steel and petroleum, in large part due to strong demand in Asia. GM attempts to manage fluctuations in commodity prices through the use of derivatives. GM does not speculate in the use of derivatives, but rather attempts to systematically hedge percentages of raw material purchases.

In many instances, GM purchases systems, components and parts and supplies from a single source, and may be at an increased risk for supply disruptions. Furthermore, the inability or unwillingness of GM’s largest supplier, Delphi Corporation (Delphi), to supply GM with parts and supplies could adversely affect GM because GM’s production could be limited without those supplies.

Based on our standard payment terms with our systems, components and parts suppliers, we are generally required to pay most of these suppliers on the second day of the second month following delivery.

Competitive Position

The global automotive industry is highly competitive. The principal factors that determine consumer automobile preferences in the markets in which we operate include price, quality, style, safety, reliability, fuel economy and functionality. The table below sets forth, as of December 31, 2005, GM’s principal competitors in passenger cars and trucks in the United States and their respective U.S. market shares. We also compete with these and other manufacturers on a worldwide basis.


	U.S Market Share

GM		25.9	%
Ford Motor Company		18.2	%
DaimlerChrysler AG		15.3	%
Toyota Corporation		13.0	%
Honda Motor Company, Ltd.		8.4	%
Nissan Motor Corporation, Ltd.		6.2	%

The global automobile market is growing, especially in developing economies such as China and India. While GM has the leading market share in the United States, some of its competitors have greater market shares in other countries in which GM competes. Even though GM produced the second highest annual volume in its operating history in 2005, its market share on a worldwide basis declined from 14.4% in 2004 to 14.2% in 2005.

Environmental and Regulatory Matters


	*Automotive Emissions Control*

Both the U.S. federal and California governments currently impose stringent emission control requirements on vehicles sold in their respective jurisdictions. These requirements include pre-production testing of vehicles, testing of vehicles after assembly, the imposition of emission defect and performance warranties, and

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

the obligation to recall and repair customer-owned vehicles determined to be non-compliant with emissions requirements.

Both the U.S. Environmental Protection Agency (EPA) and the California Air Resources Board (CARB) continue to place emphasis on compliance testing of customer-owned vehicles. We believe that our vehicles meet currently applicable EPA and CARB requirements. However, failure to comply with the emission standards or defective emission control systems or components discovered during such testing, or discovered during government-required defect reporting, can lead to substantial cost for General Motors related to emissions recalls. New CARB and federal requirements will increase the time and mileage periods over which manufacturers are responsible for a vehicle’s emission performance.

Both the EPA and the CARB emission requirements will become even more stringent in the future. A new tier of exhaust emission standards for cars and light-duty trucks, the “Low-Emission Vehicles (LEV) II” standards, began phasing in for California vehicles in the 2004 model year. Similar federal “Tier 2” standards began phasing in during 2004. In addition, both the CARB and the EPA have adopted more stringent standards applicable to future heavy-duty trucks.

California requires that a specified percentage of cars and certain light-duty trucks be zero emission vehicles (ZEVs), such as electric vehicles or hydrogen fuel cell vehicles. This requirement started at 10% in model year 2005 and increases in subsequent years. Manufacturers have the option of meeting a portion of this requirement with partial ZEV credits, which are vehicles that meet very stringent exhaust and evaporative emission standards and have extended emission system warranties. An additional portion of the ZEV requirement can be met with vehicles that meet these partial ZEV requirements and incorporate advanced technology, such as a hybrid electric propulsion system meeting specified criteria.

The Clean Air Act permits states that have areas with air quality compliance issues to adopt the California car and truck emission standards in lieu of the federal requirements, and four states (New York, Massachusetts, Maine and Vermont) have these requirements in effect now. Six states (Connecticut, New Jersey, Oregon, Pennsylvania, Rhode Island and Washington) have or are adopting the California requirements that will begin in the future. Additional states could also adopt the California standards in the future.

In addition to the above-mentioned exhaust emission programs, onboard diagnostic (OBD) systems, used to diagnose problems with emission control systems, were required both federally and in California effective with the 1996 model year. This system has the potential of increasing warranty costs and the chance for recall. OBD requirements become more challenging each year as vehicles must meet lower emission standards, and new diagnostics are required. California has adopted more stringent OBD requirements beginning in the 2004 model year, including new design requirements and corresponding enforcement procedures.

New evaporative emission control requirements for cars and trucks began phasing in with the 1995 model year in California and the 1996 model year federally. Systems are being further modified to accommodate onboard refueling vapor recovery (ORVR) control standards. ORVR was phased-in on passenger cars in the 1998 through 2000 model years, and is phasing-in on light-duty trucks in the 2001 through 2006 model years. Beginning with the 2004 model year, even more stringent evaporative emission standards apply in California, as well as federally.


	*Industrial Environmental Control*

GM is subject to various laws relating to protection of the environment, including laws regulating air emissions, water discharges, waste management, and environmental cleanup.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM is in various stages of investigation or remediation for sites where contamination has been alleged, and recorded a liability of $255 million at December 31, 2005 and $214 million at December 31, 2004 for worldwide environmental investigation and remediation as summarized below:


	•	GM has been identified as a potentially responsible party at sites identified by the EPA and state regulatory agencies for investigation and remediation of soil and/or groundwater contamination under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and similar state statutes. GM voluntarily and actively participates in cleanup activity where such involvement has been verified. The total liability for sites involving GM was $66 million at December 31, 2005. This compares with $79 million at December 31, 2004.

	•	For closed plants owned by the Corporation, the estimated liability for environmental investigation and remediation was $29 million at December 31, 2005, based on an environmental assessment of the plant property. This compares with $17 million at December 31, 2004. The increase in 2005 was primarily due to additional clean-up responsibilities at two idled facilities.

	•	GM is involved in investigation and remediation activities at additional locations worldwide with an estimated liability of $160 million at December 31, 2005. This compares with an estimated liability of $118 million at December 31, 2004. The increase in 2005 was primarily due to additional clean-up responsibilities at an active facility.

The cost impact of the Clean Air Act Amendments under the Title V Renewable Operating Permit Program is the annual emission fees of approximately $2 million per year and annual cost of on-going testing of $1 million to $2 million per year. Additionally, under the Clean Air Act, complying with the Hazardous Air Pollutant standards is estimated to cost an aggregate of approximately $55 million from 2006 through 2007. General Motors also spends approximately $7 million per year to comply with regulatory reporting requirements.

GM is implementing and publicly reporting on various voluntary initiatives to reduce energy consumption and greenhouse gas emissions from its operations around the globe. GM surpassed its 2005 target of a reduction of 8% in carbon dioxide (CO ₂ ) emissions from its global facilities compared to 2000 emission levels. By 2004, GM had reduced CO ₂ emissions from its global facilities by 12.5% compared to 2000 levels. Several GM facilities are included in the European emissions trading regime, which is being implemented to meet the European Community’s greenhouse gas reduction commitments under the Kyoto Protocol. GM has been reporting in accordance with the Global Reporting Initiative (GRI), the Carbon Disclosure Project, and the DOE 1605(b) since the inception of the programs. Global Environment and Energy goals and progress made on all voluntary programs are available in GM’s Corporate Responsibility Report at www.gmresponsibility.com.


	*Vehicular Noise Control*

All vehicles manufactured and sold by General Motors may be subject to noise emission regulation.

In the United States, passenger cars and light-duty trucks are subject to state and local motor vehicle noise regulations. General Motors is committed to designing and developing its products to meet these noise requirements. Addressing the various vehicle noise regulations established in numerous state and local jurisdictions, however, is not practical or possible. The Corporation therefore identifies the most stringent requirements and validates to a composite requirement that satisfies the most stringent of these requirements. In those rare instances where a state or local noise regulation is not covered by the composite requirement, a waiver of the requirement is requested. Medium to heavy-duty trucks are regulated at the federal level. Federal truck regulations preempt all United States state/local noise regulations for trucks over 10,000 lbs. gross vehicle weight rating (GVWR).

Outside the United States, noise regulations have been established by national and supranational (e.g., European Union or United Nations Economic Commission for Europe) authorities. General Motors believes that its vehicles meet all applicable noise regulations in the markets where they are sold.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES


	*Automotive Fuel Economy*

The Energy Policy and Conservation Act passed in 1975 provided for production-weighted average fuel economy requirements for passenger cars built for the 1978 model year and thereafter. Based on EPA combined city-highway test data, the GM 2005 model year domestic passenger car fleet achieved a Corporate Average Fuel Economy (CAFE) of 29.2 miles per gallon (mpg), which exceeded the requirement of 27.5 mpg. GM’s CAFE estimate for 2006 model year domestic passenger cars is projected at 29.1 mpg.

For GM’s imported passenger cars, 2005 model year CAFE attained 30.5 mpg. which exceeded the requirement of 27.5 mpg. The CAFE estimate for 2006 model year import passenger cars is 29.8 mpg.

Fuel economy standards for light-duty trucks became effective in 1979. General Motors’ light truck CAFE fleet average for the 2005 model year achieved at 21.8 mpg which exceeds the requirement of 21.0 mpg. GM’s 2006 model year truck CAFE is projected at 22.6 mpg which exceeds the requirement of 21.6 mpg. The National Highway Traffic Safety Administration (NHTSA) has proposed new fuel economy standards for trucks for model years 2008 — 2011 and substantial changes to the structure of the truck CAFE program.

In addition, in 2002 California passed legislation (known as Assembly Bill 1493) requiring the California Air Resources Board (CARB) to regulate greenhouse gas emissions from new motor vehicles sold in the state beginning in the 2009 model year. Because CO ₂ is the primary greenhouse gas emitted by automobiles and CO ₂ emissions are directly proportional to the amount of fuel consumed by motor vehicles, AB 1493 is tantamount to establishing state level fuel economy standards, which is prohibited by the federal fuel economy law. Nonetheless, CARB promulgated its AB 1493 Rule standards, which effectively require about a 40% increase in new vehicle fuel economy by 2016. These standards are now subject to legal challenges by the Alliance of Automobile Manufacturers and several dealers in federal court and by GM, DaimlerChrysler and several dealers in state court.

Because CARB has characterized its AB 1493 Rule as an “emission” regulation, other states have adopted the California CO ₂ requirements pursuant to claimed authority under the federal Clean Air Act. As of March 2006, the following states have adopted California’s AB 1493 Rule imposing CO ₂ (i.e., state fuel economy) requirements on new motor vehicles beginning with the 2009 model year: Connecticut, Maine; Massachusetts; New Jersey; New York; Oregon; Rhode Island; Vermont; and Washington. Other states, such as Pennsylvania, are also considering adoption of the AB 1493 Rule.

Because these attempts at state regulation of fuel economy are believed to be preempted by the federal fuel economy law, the industry has filed several federal lawsuits challenging the AB 1493 Rule. In addition to the California federal litigation mentioned above, there are also federal lawsuits challenging the AB 1493 Rule in Vermont and Rhode Island.

Further, in 1999, ACEA (the European Auto Manufacturers’ Association) and the European Union established a voluntary agreement with an emission target of 140 grams of CO ₂ per kilometer on average for new passenger cars sold in the European Union by 2008. Discussions are now ongoing between the European Union and European auto manufacturers, including GM, on targets for the period beyond 2008.

We continue to improve the fuel efficiency of our vehicles, even as we add more safety features, customer convenience options, enhance utility and performance and address other environmental aspects of our products, which as they add mass to a vehicle tend to lower its fuel economy. GM provides the broadest array of fuel efficient cars and trucks in the United States of any manufacturer. Based on EPA 2006 fuel economy data, GM leads in fuel economy comparisons on a model to model basis across the vehicle spectrum in the United States. For both cars and trucks, GM leads in 56% (74 of 132) of the comparisons (combined city-highway unadjusted) in which GM has an offering. GM’s product lineup includes a wide array of models that get an EPA estimated 30 miles per gallon or better on the highway – more than any other automaker. Overall fuel economy and CO ₂ emissions from cars and light duty trucks on the road are determined by a number of factors, including what products customers select and how they use them, congestion, transit alternatives, fuel quality and availability and land use patterns.

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GM has established aggressive near, mid and long-term plans to develop and bring to market technologies designed to further improve fuel efficiency, reduce emissions and provide additional value and benefits to our customers. These include enhancements to conventional internal combustion engine technology such as Active Fuel Management, variable valve timing systems, six-speed automatic transmissions, and flex-fuel E85 ethanol vehicles. In addition, GM currently offers hybrid-electric buses that are capable of improving the fuel efficiency of city buses by 25% to 50%, and reducing some emissions by as much as 90%. GM currently has hybrid-electrical systems in full-sized pickup trucks available in the market and is bringing a range of additional hybrid products to market over the next several years. In 2006, GM will offer the Saturn VUE Green Line with a GM Hybrid System, and in 2007, GM plans to launch a Two-mode Hybrid system in our large sport utility vehicles. GM has extensive efforts underway to develop fuel cell vehicles designed to run on hydrogen. GM believes that the development and global implementation of new, cost-effective energy technologies in all sectors, such as hydrogen fuel cells, is the most effective way to improve energy efficiency and reduce greenhouse gas emissions.

Despite these advanced technology efforts, GM’s ability to satisfy fuel economy requirements is contingent on various future economic, consumer, legislative, and regulatory factors that GM cannot control and cannot predict with certainty. If GM is not able to comply with specific new fuel economy requirements, including state CO ₂ requirements such as those imposed by the AB 1493 Rule, then GM could be subject to sizeable civil penalties and/or could have to severely restrict product offerings or close plants to remain in compliance. Any such actions could have substantial adverse impacts on GM operations, including plant closings and loss of sales revenue.


	*Non U.S. Regulation*

GM’s non U.S. operations are affected significantly by various laws and government regulations which are designed to reduce automotive emissions, encourage the recycling of end-of -life vehicles and parts and increase fuel economy and vehicle safety. Many foreign governments impose certain tariffs, non-tariff trade barriers and other price or exchange controls on imports. In addition, certain foreign governments place restrictions on the ability of GM to repatriate profits. GM works to mitigate any adverse effect of these regulations on GM’s business and operations.


	*Safety*

New vehicles and equipment sold by GM in the United States are required to meet certain safety standards promulgated by the National Highway Traffic Safety Administration (NHTSA). The National Traffic and Motor Vehicle Safety Act of 1966 authorizes the NHTSA to determine these standards and the schedule pursuant to which they are implemented. In addition, if there is a vehicle defect that creates an unreasonable risk to motor vehicle safety or a noncompliance with a safety standard, the act generally requires that the manufacturer notify owners and provide a remedy. The Transportation Recall Enhancement, Accountability and Documentation Act requires GM to report certain information relating to certain customer complaints, warranty claims, field reports, lawsuits and non U.S. fatalities and recalls.

In addition to these U.S. rules, GM is subject to certain safety regulations in the non U.S. markets in which it operates. For the most part, these standards are similar to applicable U.S. standards. Nevertheless, from time to time, these countries pass regulations which are more stringent than U.S. standards.


	*Pension Legislation*

GM is subject to a variety of federal rules and regulations which govern the manner in which it administers its pensions. The U.S. Congress is currently considering two separate bills which would effect significant reforms in these rules and regulations, the Pension Protection Act of 2005, which passed the U.S. House of Representatives (House) on December 16, 2005 and the Pension Security and Transparency Act, which passed the U.S. Senate (Senate) on December 23, 2005. GM does not know what form the final

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version of any pension reform legislation may take or whether such legislation will eventually become law. However, both bills are designed to increase the amount by which companies fund their pension plans, to require companies that sponsor defined benefit plans to pay higher premiums to the Pension Benefit Guaranty Corporation (PBGC), and to prohibit the funding of certain executive compensation agreements when a company’s pension plan is severely underfunded. The Senate bill also contains a provision which would use a company’s credit ratings as one condition, among several, in determining whether its pension plans should be considered “at risk” and thereby subject to stricter funding and benefit rules. While GM’s U.S. Hourly and Salaried pension plans were overfunded on a Statement of Financial Standards No. 87 basis by $7.5 billion as of December 31, 2005, under both versions of the proposed legislation, GM, under certain future circumstances, could become subject to additional funding requirements.


	*Export Control*

GM is subject to a number of domestic and international export control requirements. GM’s Office of Export Compliance (OEC) is responsible for addressing export compliance issues that are specified in regulations issued by the U.S. Department of State, the U.S. Department of Commerce and the U.S. Department of Treasury, as well as issues relating to non U.S. export control laws. The OEC works with export compliance officers in GM business units who address export compliance issues on behalf of their business organizations. If GM fails to comply with applicable export compliance regulations, GM could be subject to criminal and civil penalties and, under certain circumstances, suspension and debarment.

Employees

As of December 31, 2005, GM employed approximately 335,000 employees, of whom approximately 67% (225,000) were hourly employees and approximately 33% (110,000) were salaried employees, in the following business segments (in thousands):


	2005		2004

GMNA		173		181
GME(1)		63		61
GMLAAM		31		29
GMAP(2)		31		15
GMAC		34		34
Other		3		4

Total		335		324


(1)	2005 includes approximately 7,000 employees added from a former powertrain joint venture with Fiat.

(2)	2005 includes approximately 13,000 employees added as the result of the consolidation of GM Daewoo.

As of December 31, 2005, GM had approximately 343,000 U.S. hourly and approximately 121,000 U.S. salaried retirees. As of December 31, 2005, approximately 75% (106,000) of GM’s U.S. employees were represented by unions. The International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) represents the largest portion of our U.S. employees who are union members, representing approximately 102,000 employees. Our current collective bargaining agreement with the UAW expires in September 2007. In addition, many of our hourly employees outside the United States are represented by various unions.

Segment Reporting Data

Operating segment and principal geographic area data for 2005, 2004, and 2003 are summarized in Note 26 to the GM Consolidated Financial Statements in Part II.

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Website Access to GM’s Reports

GM’s internet website address is www.gm.com.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act) are available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

Item 1A. Risk Factors

We face a number of significant risks and uncertainties in connection with our operations. Our business, results of operations, and financial condition could be materially adversely affected by the factors described below, which we have divided generally into two categories:


	•	Risks related to GM and its automotive business; and

	•	Risks related to GM’s finance, mortgage and insurance businesses.

While we describe each risk separately, some of these risks are interrelated and it is possible that certain risks could trigger the applicability of other risks described below. Also, the risks and uncertainties described below are not the only ones that we face. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, could also potentially impair our business, results of operations and financial condition.

Risks related to GM and its automotive business


	Our ability to achieve structural and material cost reductions and to realize production efficiencies for our automotive operations is critical to our ability to achieve our turnaround plan and return to profitability.

We currently are in the process of implementing a number of structural (fixed) and material cost reduction and productivity improvement initiatives in our automotive operations, including substantial restructuring initiatives for our GMNA operations, which were unprofitable in 2005, as more fully discussed below in our Management’s Discussion and Analysis of Financial Condition and Result of Operations section. Successfully implementing these restructuring initiatives throughout our automotive operations, and in GMNA in particular, is critical to our future competitiveness and ability to return to profitability. However, there can be no assurance that these initiatives will be successful in this regard.


	*Financial difficulties, labor stoppages or work slowdowns at key suppliers, including Delphi, could result in a disruption in our operations and have a material adverse effect on our business.*

We rely on many suppliers to provide us with the systems, components and parts that we need to manufacture our automotive products and operate our business. In recent years, some of these suppliers have experienced severe financial difficulties and solvency problems. Financial difficulties or solvency problems at those suppliers could materially adversely affect their ability to supply us with the systems, components and parts that we need to operate our business, resulting in a disruption in our operations. Similarly, many of these suppliers utilize workforces with substantial union representation. Workforce disputes resulting in work stoppages or slowdowns at these suppliers could also have a material adverse effect on their ability to continue supplying us.

In particular, our largest supplier, Delphi, filed a Chapter 11 bankruptcy petition in October 2005. While Delphi has indicated to us that it expects no disruption in its ability to continue supplying us with the systems, components and parts we need as Delphi pursues its bankruptcy restructuring plan, labor disruptions at Delphi resulting from Delphi’s pursuit of a restructuring plan could seriously disrupt our North American operations, prevent us from executing our GMNA turnaround initiatives, and materially adversely affect our business.

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In addition, a number of our other suppliers, including Collins & Aikman Corporation, Dana Corporation and Tower Automotive, Inc., have filed Chapter 11 bankruptcy petitions, which could lead to a material adverse effect on our business.


	*Delphi may seek to reject or compromise its obligations to us through its Chapter 11 bankruptcy proceedings.*

In connection with its Chapter 11 bankruptcy restructuring, Delphi may attempt to reject some or all of its contracts with us in order to exit specific lines of business or increase the price GM pays for various systems, components and parts we purchase from Delphi. As a result, we could experience a material disruption in our supply of automotive systems, components and parts that could force the suspension of production at GM assembly facilities, which could materially adversely affect our business, including implementation of our GMNA turnaround initiatives. It is also difficult for us to quickly switch to a different supplier for some of the systems, components and parts we purchase from Delphi as a result of the extended validation and production lead times for these items.

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. The financial impact of a substantial compromise of our right of setoff could have a material adverse impact on our financial position.


	We have guaranteed a significant amount of Delphi’s financial obligations to its unionized workers. If Delphi fails to satisfy these obligations, we would be obligated to pay some of these obligations.

In connection with the 1999 spin-off of Delphi from GM, we entered into separate agreements with the UAW, the International Union of Electrical Workers and the United Steel Workers unions. Under these agreements, we agreed to guarantee Delphi’s payment of certain levels of pension and post-retirement health-care and life insurance benefits (OPEB) to certain former GM U.S. hourly employees who were transferred to Delphi in connection with the spin-off. As a result, we are contractually responsible for such payments to the extent Delphi fails to pay these benefits at required levels.

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 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. We believe that it is probable that we have incurred a contingent liability under these benefit guarantees as a result of Delphi’s Chapter 11 filing. As a result, in the fourth quarter of 2005, we recorded a charge of $5.5 billion ($3.6 billion after tax) as an estimate of contingent exposures relating to Delphi’s Chapter 11 filing. We believe that the range of these 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

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unions. 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 our ultimate liability for these contingent exposures may change, and will depend on the results of ongoing discussions among us, Delphi, and Delphi’s unions, and other factors. We are currently unable to estimate the amount of additional charges that could arise from Delphi’s Chapter 11 filing. Any increase in our contingent exposures, including under the benefit guarantees, could materially increase our expenses and adversely affect our results of operations.


	*Our health-care cost burden is one of our biggest competitive challenges, and if we do not make progress on structurally fixing this issue, it will continue to be a long-term threat to GM.*

GM’s health-care costs for employees and retirees have been rising significantly over the past few years. In particular, we are exposed to significant and growing liabilities for OPEB for both our hourly and salaried workforces. These OPEB liabilities have grown to approximately $84.9 billion on a global basis as of December 31, 2005, with increases in recent years primarily resulting from increases in health-care inflation and decreases in the discount rates used in calculating OPEB liabilities. To address these rising costs, we made modifications to health-care benefits for salaried workers and retirees in 2005 and, in February 2006, announced a cap on salaried retiree health care effective in January 2007. We also entered into a tentative agreement with the UAW related to retiree health care that we announced in October 2005 and finalized that agreement with the UAW and a class of hourly retirees in December 2005. This agreement is subject to court approval. Under this agreement, our U.S. pre-tax OPEB expense, which was $5.3 billion for 2005, is expected to decrease to an estimated $4.0 billion in 2006, which is before the effect (if any) of any amounts incurred or paid on the Delphi benefit guarantees and contributions to a defined contribution plan. In recent years, we have paid our OPEB expenditures from operating cash flow, which reduces our liquidity and cash flow from operations. We expect that our U.S. health-care cash spending will be $5.0 billion in 2006, which is before the effect (if any) of any amounts incurred or paid on the Delphi benefit guarantees and contributions to a defined contribution plan, down from $5.4 billion in 2005, principally due to our tentative agreement with the UAW. If this agreement is not approved by the court, these health-care savings will not be achieved.

Controlling our health-care liabilities and expenses, particularly with respect to our hourly employees and retirees, is a critical element of our GMNA turnaround initiatives. However, our efforts to control these costs may not always be successful. Failure to adequately control our health-care costs is likely to result in materially higher expenses and have a material adverse effect on our results of operations.


	*Our extensive pension and OPEB obligations to retirees are a competitive disadvantage for us.*

We believe that we are competitively disadvantaged due to the relatively large number of retirees for whom we provide pension and OPEB benefits, consisting of both retiree health care and life insurance. In particular, we believe that our pension and OPEB cash expenditures as a percentage of revenues are significantly greater than our competitors and that, as a result, we have relatively less available cash to invest in product development and capital projects.


	We have recently experienced a series of credit rating actions that have downgraded our credit ratings to historically low levels. Further reduction of our credit ratings, or failure to restore our credit ratings to 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 our competitive and financial strength, including whether we will experience a labor interruption and how we will fund our health-care liabilities, have led to a series of rating actions that have downgraded the credit ratings on our debt. These actions have substantially reduced our access to the unsecured debt markets and have unfavorably impacted our overall cost of borrowing. Each of GM and GMAC is currently assigned a non-investment grade rating by each of these rating agencies, and Residential

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Capital Corporation (ResCap), the holding company for GMAC’s residential mortgage business, has recently been downgraded to the lowest investment grade rating.

Our current credit ratings have resulted in increased borrowing costs and could severely limit GM’s and GMAC’s access to unsecured debt markets. Our current credit ratings also increase the possibility that more burdensome and restrictive terms and conditions will be added to any new or replacement financing arrangements.

Further downgrades of our current credit ratings, or significant worsening of our financial condition generally, could also result in increased demands by our suppliers for accelerated payment terms, increased finance charges, or other more onerous supply terms.


	*Our liquidity position could be negatively affected by a variety of factors, which in turn could have a material adverse effect on our business.*

While we believe that we currently have sufficient liquidity to operate our business over the short and medium term, our ability to meet our capital requirements over the long term will require substantial liquidity and will depend on our successful execution of our four-point turnaround plan and the return of our North American operations to profitability and positive cash flow, and our ability to execute the globalization of our principal business functions. Last year, we incurred a consolidated net loss of $10.6 billion, due primarily to losses at GMNA. We are subject to numerous risks and uncertainties that could negatively affect our cash flow and liquidity position in the future. These include, among other things, risk of labor disruptions (either at Delphi, our largest supplier, or at GM, such as in connection with the renegotiation of our collective bargaining agreement with the UAW in 2007), any inability to access (or amend or replace) our existing standby bank credit facility, any claims that may be successfully asserted against GM under various financing agreements in view of GM’s recent restatement of its prior financial statements, obligations associated with approximately $1.2 billion of convertible debentures that may be put to GM for cash settlement in March 2007 ahead of the scheduled maturity date, or pressure from suppliers to agree to changed payment or other contract terms. The occurrence of one or more of these events could weaken our liquidity position and, under certain circumstances, materially adversely affect our business, such as by curtailing our ability to make important capital expenditures.


	GM’s recent restatement of its prior financial statements could negatively impact its rights and obligations under certain contracts to which it is a party, including its $5.6 billion standby credit facility, which could under certain circumstances materially adversely affect GM’s future liquidity.

GM believes that it has a good faith basis on which to make a borrowing request under its $5.6 billion unsecured standby line of credit facility. However, in view of GM’s recent restatement of its prior financial statements, there is substantial uncertainty as to whether the bank syndicate would be required to honor such a request, and therefore there is a high risk that GM would not be able to borrow under this facility. GM believes that this matter is unlikely to be tested because GM has no current need or intention to draw on the existing facility. Moreover, GM is currently exploring the possibility of amending or replacing the existing facility with new terms that would, among other things, resolve any uncertainty regarding GM’s ability to borrow thereunder. There can be no assurance that GM will be successful in negotiating an amendment or replacement of the existing credit line or, if so, as to the amount, terms or conditions of any such amended or replacement facility. GM believes that issues also may arise from its restatement under various financing agreements, which consist principally of obligations in connection with sale/ leaseback transactions and other lease obligations and do not include GM’s public debt indentures, as to which GM is a party. GM is currently studying the effect of its recent restatement of prior financial statements under these agreements, including its legal rights (such as its ability to cure) with respect to any claims that could be asserted as well as economic disincentives for third parties to raise such claims to the extent they have them. Under certain circumstances, these matters could materially adversely affect GM’s future liquidity.

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	*Continued failure to achieve profitability may cause some or all of our deferred tax assets to expire.*

As of December 31, 2005, we had approximately $21.6 billion in U.S. net deferred tax assets. These deferred tax assets include net operating loss carryovers that can be used to offset taxable income in future periods and reduce our income taxes payable in those future periods. However, many of these deferred tax assets will expire if they are not utilized within certain time periods. At this time, we consider it more likely than not that we will have U.S. taxable income in the future that will allow us to realize these deferred tax assets. However, it is possible that some or all of these deferred tax assets could ultimately expire unused, especially if our GMNA restructuring initiatives are not successful or if GMAC’s income declines. 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, which would materially increase our expenses in the period taken and adversely affect our business. If we were required to record a valuation allowance against all of our U.S. deferred tax assets as of December 31, 2005, our resulting total stockholders’ equity would have been negative.


	Restrictions in our labor agreements, including the JOBS bank provisions in the UAW agreement, could limit our ability to pursue or achieve cost savings through restructuring initiatives, and labor strikes, work stoppages or similar difficulties could significantly disrupt our operations.

Substantially all of the hourly employees in our U.S., Canadian and European automotive operations are represented by labor unions and are covered by collective bargaining agreements, which usually have a multi-year duration. Many of these agreements include provisions that limit our ability to realize cost savings from restructuring initiatives such as plant closings and reductions in work force. In particular, our collective bargaining agreement with the UAW, which covers the majority of our U.S. hourly employees, includes a JOBS bank provision that requires us to continue paying full wages and benefits, generally after 48 weeks of layoff, during the term of the agreement to qualified employees who would have otherwise been laid off due to plant idlings or other restructuring initiatives. We have been discussing these provisions with the UAW in an effort to develop an agreed upon accelerated attrition program by which we can reduce the number of employees that are and will be in the JOBS bank in a cost effective manner. However, currently this provision significantly limits our ability in the United States to achieve cost savings through plant idlings, workforce reductions, or similar initiatives and, in particular, our ability to execute our GMNA turnaround initiatives.

As part of our discussions with the UAW, on March 22, 2006, GM, Delphi and the UAW reached a tentative agreement intended to reduce the number of U.S. hourly employees through an accelerated attrition program. The agreement is subject to approval by the bankruptcy court of Delphi’s participation in the agreement. We cannot provide any assurance that the bankruptcy court will approve of Delphi’s participation in the agreement (and if such approval is not obtained, GM and the UAW will have no obligations under the agreement) or that enough employees will agree to participate in the attrition program to reduce employment levels at GM sufficient to provide the benefits we anticipate.

Our current collective bargaining agreement with the UAW will expire in September 2007. Any UAW strikes, threats of strikes, or other resistance in connection with the negotiation of a new agreement could impair our ability to implement further measures to reduce structural costs and improve production efficiencies in furtherance of our GMNA initiatives.


	*The government is currently investigating certain of our accounting practices. The final outcome of these investigations could require us to restate prior financial results.*

The SEC has issued subpoenas to us in connection with various matters that it is investigating. These matters for which we have received subpoenas include our financial reporting concerning pension and OPEB, certain transactions between us and Delphi, supplier price reductions or credits, and any obligation we may have to fund pension and OPEB costs in connection with Delphi’s Chapter 11 proceedings. In addition, the SEC recently issued a subpoena in connection with an investigation of our transactions in precious metal raw

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materials used in our automotive manufacturing operations, and a federal grand jury recently issued a subpoena in connection with supplier credits. Separately, SEC and federal grand jury subpoenas have been served on GMAC entities in connection 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 government in connection with all these investigations. A negative outcome of one or more of these investigations could require us to restate prior financial results (in addition to our recent restatements) and could result in fines, penalties, or other remedies being imposed on GM, which under certain circumstances could have a material adverse effect on our business.


	*We operate in a highly competitive industry that has excess manufacturing capacity.*

The automotive industry is highly competitive and overall manufacturing capacity in the automotive industry exceeds current demand, which is at a historically high level. We have encountered significant price competition in our markets and expect this competition to continue in the future. In addition, many of the markets in which we compete present few barriers to entry for our competitors. Over the past several years, industry-wide manufacturing overcapacity has put pressure on GM and other manufacturers to make vehicles more attractive to customers by adding vehicle enhancements or marketing incentives or reducing vehicle prices in certain markets. Some strategies employed to help maintain market share are subsidized financing or leasing programs, option package discounts or rebates. This overcapacity has had, and is expected to continue to have a negative impact on our vehicle pricing, market share and operating results, and presents a significant risk to our ability to enhance our per vehicle revenue.


	*The bankruptcy or insolvency of a major competitor could result in further competitive disadvantages for us in relation to that competitor.*

Certain of our major competitors are obligated, like us, to provide substantial pension and OPEB benefits to their retirees. The bankruptcy or insolvency of a major competitor with substantial pension and OPEB obligations could result in that competitor gaining a significant cost advantage over us by eliminating or reducing through bankruptcy its contractual obligations to unions and other parties. In addition, the bankruptcy or insolvency of a major U.S. automotive manufacturer could lead to a disruption in our supply base, which could materially adversely affect our business.


	*Shortages and increases in the price of fuel can result in diminished profitability due to shifts in consumer vehicle demand.*

High gasoline prices in 2005 have contributed to weaker demand for certain of our higher margin vehicles, especially our full-size sport utility vehicles, as consumer demand has shifted to more fuel-efficient, smaller and lower margin vehicles. Any future increases in the price of gasoline in the United States or in our other markets, or any sustained shortage of fuel, could weaken further the demand for such vehicles. Such a result could lead to lower revenues and have a material adverse effect on our business.


	*A decline in consumer demand for our higher margin vehicles could result in diminished profitability.*

Our results of operations depend not only on the number of vehicles we sell, but also the product mix of our vehicle sales. Sales of full-size and luxury vehicles are generally more profitable for us than sales of our smaller and lower-priced vehicles. Similarly, retail sales of vehicles are generally more profitable to us than fleet sales. Shifts in demand away from these higher margin sales could materially adversely affect our business.


	*Our indebtedness and other obligations of our automotive operations are significant and could materially adversely affect our business.*

We have a significant amount of indebtedness. As of December 31, 2005, we had approximately $33 billion in loans payable and long-term debt outstanding for our automotive operations, which includes

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approximately $1.2 billion of convertible debentures that may be put to GM for cash settlement in March 2007. Our significant indebtedness may have several important consequences. For example, it could:


	•	Require us to dedicate a significant portion of our cash flow from operations to the payment of principal of, and interest on, our indebtedness, which will reduce the funds available for other purposes; and

	•	Make us more vulnerable to adverse economic and industry conditions, limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions.

Any one or more of these consequences could have a material adverse effect on our business.


	Our pension and OPEB expenses are affected by factors outside our control, including the performance of plan assets, interest rates, actuarial data and experience, and changes in laws and regulations.

Our future funding obligations for our IRS-qualified U.S. defined benefit pension plans and OPEB plans depend upon 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 data and experience, and any changes in government laws and regulations. In addition, our employee benefit plans hold a significant amount of equity securities. If the market values of these securities decline to a point where our pension obligations are not fully funded, our pension and OPEB expenses would increase and, as a result, could materially adversely affect our business. Any decreases in interest rates, if and to the extent not offset by contributions and asset returns, could also increase our obligations under such plans. We may be legally required to make contributions to the pension plans in the future, and those contributions could be material.

In addition, the Financial Accounting Standards Board (FASB) has announced that it is considering changes in the accounting rules for pensions and other postretirement benefits. The rule changes that are expected to be proposed in March 2006 would require a company to include on its balance sheet an additional net asset or net liability to reflect the funded or unfunded status, as the case may be, of its retirement plans. In light of the unrecognized losses associated with our pension and OPEB liabilities under existing accounting rules, if these expected proposed rules had been in effect as of December 31, 2005, the substantial additional liability that we would have had to include on our balance sheet would have caused our total stockholders’ equity to be negative.

Further, the U.S. Congress is currently considering legislation that, if adopted, would affect the manner in which GM administers its pensions. This proposed legislation is designed, among other things, to increase the amount by which companies fund their pension plans and to require companies that sponsor defined benefit plans to pay higher premiums to the PBGC. If this proposed legislation becomes law, GM, under certain future circumstances, could become subject to additional material funding requirements.


	*The pace of introduction and market acceptance of new vehicles is important to our success.*

Customers have come to expect new and improved vehicle models to be introduced frequently. In order to meet these expectations, we must introduce on an annual basis both new vehicle models as well as enhanced versions of existing vehicle models. Our competitors have introduced, and likely will continue to introduce, new and improved vehicle models designed to meet consumer expectations. Because product lifecycles do not all coincide, some competitive vehicles will always be newer than some of our existing models in the same market segments. This has and will continue to put pricing and vehicle enhancement pressure on our vehicles and, in some vehicle segments, has and will result in market share declines. In addition, consumer preferences for vehicles in certain market segments change over time. Vehicles in less popular segments may have to be discounted in order to be sold in similar volumes. Further, the pace of our development and introduction of new and improved vehicles is dependent on our ability to successfully implement improved technological innovations in design, production and manufacturing. Continuing reduction in our margins, sales volumes and market shares will result if we are unable to produce models that compare favorably to competing models,

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particularly in our higher margin vehicle lines such as full-size sport utility vehicles. Vehicle lines that are particularly important to our future success include our new sport utility vehicles and pickup trucks, and there can be no assurance of success related to market acceptance of these or any other products.


	*Economic and industry conditions constantly change and could have a material adverse effect on our business and results of operations.*

Our business and results of operations are tied to general economic and industry conditions. The number of cars and trucks sold industry-wide can vary from year to year. Demand for our vehicles depends largely on general economic conditions, including the strength of the global and local market economies, unemployment levels, consumer confidence levels, the availability of credit and the availability and cost of fuel. Cars and trucks are durable items, the replacement of which can be significantly deferred. Difficult economic conditions may also cause buying patterns to shift to less-expensive and lower margin vehicle models or to used vehicles. While we may attempt to limit the effect of these trends through pricing or other marketing measures, these trends can have a material adverse effect on our business. Because we have higher fixed costs, relatively small changes in the number of vehicles sold can have a significant effect on our business. Consequently, if industry demand softens due to, among other things, slowing or negative economic growth, our business, results of operations and financial condition may be materially adversely affected. There can be no assurance that current industry vehicle sales levels will continue.


	*Changes in existing, or the adoption of new, laws, regulations or policies of governmental organizations may have a significant negative impact on how we do business.*

We are affected significantly by a substantial amount of costly governmental regulation, which is anticipated to increase. In the U.S. and Europe, for example, governmental regulation has arisen primarily out of environmental, vehicle safety and fuel economy concerns. The costs of complying with government regulatory requirements can be substantial, and it can be difficult to pass these costs through to our customers.

Of particular concern are the U.S. mandated corporate average fuel economy requirements. If these standards are increased significantly, we may have to curtail sales of our higher margin vehicles. Similarly, a number of states have adopted regulations that establish carbon dioxide emission standards that effectively impose heightened fuel economy standards for new vehicles sold in those states. Although GM and other automobile manufacturers are challenging certain of these state regulations in court, no assurance can be given that these challenges will be successful.

Similarly, meeting or exceeding government-mandated safety standards is difficult and costly, because crashworthiness standards tend to conflict with the need to reduce vehicle weight in order to meet emissions and fuel economy standards. While GM is managing its product development and production operations on a global basis to reduce costs and lead times, unique national or regional standards or vehicle rating programs can result in additional costs for product development, testing, and manufacturing. Governments often require the implementation of new requirements during the middle of a product cycle, which can be substantially more expensive than accommodating these requirements during the design of a new product.


	*Our businesses outside the United States expose us to additional risks that may cause our revenues and profitability to decline.*

We conduct a significant portion of our automotive business and our finance, insurance and mortgage businesses 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, including foreign regulations restricting our ability to sell our products in those countries;

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	•	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;

	•	Foreign state takeovers of our manufacturing facilities in those countries; and

	•	Political and economic instability, natural calamities, war and terrorism.

The effects of these risks may, individually or in the aggregate, materially adversely affect our business.


	*A failure of or interruption in the communications and information systems on which we rely to conduct our operations could adversely affect our business.*

We rely heavily upon communications and information systems to conduct our business in each country and market in which we operate. The failure or interruption of our information systems or the third-party information systems on which we rely could cause supply, production and delivery delays in connection with our automotive operations. Such a failure or interruption could cause underwriting or other delays or result in significantly fewer applications being received, slower processing of applications and reduced efficiency in servicing in connection with GMAC’s operations. The occurrence of any of these events could have a material adverse effect on our business.


	*We could be materially adversely affected by changes in currency exchange rates, commodity prices, equity prices and interest rates.*

We are exposed to risks related to the effects of changes in foreign currency exchange rates, commodity prices, equity prices and interest rates. While we carefully watch and attempt to manage these exposures, these types of changes can have material adverse effects on our business.


	*We are subject to significant risks of litigation.*

We are currently subject to numerous litigation matters, including a number of stockholder and bondholder class action and derivative lawsuits. We cannot provide assurance that we will be successful in defending any of these matters, and adverse judgments could, under certain circumstances, materially adversely affect our business. We are also regularly named a defendant in purported class actions alleging a variety of vehicle defects, in product liability cases seeking damages for personal injury, and in suits alleging GM responsibility for claimed asbestos related illnesses. Some of these matters are described in greater detail in our Legal Proceedings section below. Since the outcomes of such pending or future litigation are not predictable, we cannot provide assurance that, under certain circumstances, such litigation will not materially adversely affect our business.

Risks related GM’s finance, mortgage and insurance businesses

We are considering the sale of a controlling interest in GMAC 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 GMAC’s credit rating from GM’s credit rating or maintain ResCap’s investment grade credit rating. In addition, any such initiative, if completed, would reduce our interest in their earnings going forward.

As previously announced, we are exploring the possible sale of a controlling interest in GMAC, as well as exploring other strategic and structural alternatives with respect to ResCap. The extent of the effect on GMAC’s and ResCap’s credit ratings, if any, will depend on the structure and other terms of any potential

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transaction as well as the extent of GMAC’s ongoing credit exposure to GM. We are uncertain at this time if any transaction with respect to GMAC 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 GMAC, or if a transaction is completed with respect to ResCap, there is the possibility that these initiatives will not delink GMAC’s credit rating from GM’s credit rating or maintain ResCap’s credit rating at investment grade.

Failure to execute a GMAC strategic transaction will place further pressure on both GM’s and GMAC’s credit profiles, potentially resulting in further downgrades with GMAC’s credit ratings explicitly 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:


	•	GMAC’s 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 may increase, leading 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;

	•	Uncompetitive funding costs may result in a lower return on capital and significantly lower earnings and dividends; and

	•	GMAC may need to consider divesting certain businesses in order to maintain adequate liquidity to fund new originations or otherwise preserve the value of its businesses.

In addition, any such transactions, if completed, would reduce our interest in the earnings of GMAC and ResCap, although the financial effects of that reduction would be offset by the value of any consideration we receive from a purchaser.


	Our finance, mortgage and insurance businesses require substantial capital, and if we are unable to maintain adequate financing sources, our business, results of operations and financial condition will suffer and jeopardize our ability to continue operations.

Our liquidity and ongoing profitability in this segment 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 GMAC, 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. If we are unable to maintain adequate financing, or if other sources of capital are not available to us, we could be forced to suspend, curtail or reduce certain aspects of our insurance, mortgage and finance operations, which could harm our business, results of operations and financial condition.

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.

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	*We are exposed to credit risk which could affect the business, results of operations and financial condition of our finance, mortgage and insurance operations.*

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 the business, results of operations and financial condition of our finance, mortgage and insurance operations. 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.


	*Our earnings may decrease because of increases or decreases in interest rates.*

The profitability of our finance, mortgage and insurance operations 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 become more expensive.

	•	Rising interest rates will generally reduce the value of mortgage and automotive financing loans and contracts, 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 the business, results of operations and financial condition of our finance, mortgage and insurance operations.


	*Our hedging strategies may not be successful in mitigating our risks associated with changes in interest rates.*

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 if our hedges do not adequately mitigate the impact of changes in interest rates or prepayment speeds, we may incur losses that could adversely affect the business, results of operations and financial condition of our finance, mortgage and insurance operations.


	*ResCap’s ability to pay dividends and to prepay subordinated debt obligations to GMAC is restricted by contractual arrangements.*

In June 2005, we entered into an operating agreement with GMAC and ResCap to create separation between GMAC and ourselves, on the one hand, and ResCap, on the other hand. The operating agreement restricts ResCap’s ability to declare dividends or prepay subordinated indebtedness to GMAC. As a result of

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these arrangements, ResCap has obtained investment grade credit ratings for its unsecured indebtedness that are separate from our ratings and the ratings of GMAC.

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 GMAC 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 GMAC $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.

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, the business, results of operations and financial condition of our finance, mortgage and insurance operations 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 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 materially adversely affect the business, results of operations and financial condition of our finance, mortgage and insurance operations.


	General business and economic conditions of the industries and geographic areas in which we operate affect the business, results of operations and financial condition of our finance, mortgage and insurance operations.

Our business, results of operation 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.

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	•	An increase in automotive labor rates or parts prices could negatively affect the value of our automotive extended service contracts.


	*Our business, results of operations 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, GMAC will 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. Our brand image, consumer preference for our products, and our marketing programs that influence the new and used vehicle market for our 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. 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 business, results of operation and financial condition.


	*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 materially adversely affect the business, results of operations and financial condition of our mortgage business.

The ability of GMAC’s 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 SEC, 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 materially adversely affect our revenues and profitability of our mortgage business. 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.

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	GMAC may be required to repurchase contracts and provide indemnification if GMAC breaches representations and warranties from its securitization and whole loan transactions, which could harm our business, results of operations and financial condition.

When GMAC sells retail contracts or leases through whole loan sales or securitizes retail contracts, leases or wholesale loans to dealers, GMAC is required to make customary representations and warranties about the contracts, leases or loans to the purchaser or securitization trust. GMAC’s whole loan sale agreements generally require GMAC to repurchase retail contracts or provide indemnification if GMAC breaches a representation or warranty given to the purchaser. Likewise, GMAC is required to repurchase retail contracts, leases or loans and may be required to provide indemnification if GMAC breaches a representation or warranty in connection with its securitizations.

Similarly, sales by GMAC’s mortgage subsidiaries of mortgage loans through whole loan sales or securitizations require GMAC to make customary representations and warranties about the mortgage loans to the purchaser or securitization trust. GMAC’s whole loan sale agreements generally require GMAC to repurchase or substitute loans if GMAC breaches a representation or warranty given to the purchaser. In addition, GMAC’s 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, GMAC is required to repurchase or substitute mortgage loans if GMAC breaches a representation or warranty in connection with its securitizations. The remedies available to a purchaser of mortgage loans may be broader than those available to GMAC’s mortgage subsidiaries against the original seller of the mortgage loan. If a mortgage loan purchaser enforces its remedies against GMAC’s mortgage subsidiaries, GMAC may not be able to enforce the remedies it has 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 business, results of operations and financial condition.

GMAC and its mortgage subsidiaries have repurchase obligations in their 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 business, results of operations and financial condition or those of our mortgage subsidiaries.


	*A loss of contractual servicing rights could have a material adverse effect on our operations.*

GMAC is the servicer for all of the receivables it has originated and transferred to other parties in securitizations and whole loan sales of automotive receivables. GMAC’s mortgage subsidiaries service the mortgage loans it has securitized, and GMAC services the majority of the mortgage loans that GMAC has sold in whole loan sales. In each case, GMAC is paid a fee for its 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.

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 or 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 business, results of operations and financial condition and/or those of our mortgage subsidiaries. For the year ended December 31, 2005, our consolidated mortgage servicing fee income was $1.6 billion.

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	*The regulatory environment in which GMAC operates could have a material adverse effect on its business.*

Our domestic finance, mortgage and insurance operations are generally 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 laws 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, results of operations and financial condition.

Our finance, mortgage and insurance 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 the local markets and our insurance operations are subject to various requirements in the markets in which they 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. There can be no assurance 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, results of operations and financial condition.


	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 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 business, results of operation 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 to price our securitizations and whole loan sales at attractive rates. The result would be lower proceeds from these activities and lower profits for GMAC.

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Item 1B.	*Unresolved Staff Comments*

None.

* * * * * *


Item 2.	*Properties*

The Corporation, excluding its Financing and Insurance Operations, has approximately 335 locations operating in approximately 40 states and approximately 200 cities in the United States. Of these, approximately 20 are engaged in the final assembly of GM cars and trucks; approximately 30 are service parts operations responsible for distribution or warehousing; and the remainder are offices or involved primarily in the testing of vehicles or the manufacturing of automotive components and power products. In addition, the Corporation has approximately 20 locations in Canada and assembly, manufacturing, distribution, or warehousing operations in approximately 55 other countries, including equity interests in associated companies which conduct assembly, manufacturing, or distribution operations. The major facilities outside the United States and Canada, which are principally vehicle manufacturing and assembly operations, are located in:


• Germany	• Australia	• China	• Poland
• United Kingdom	• Sweden	• Thailand	• South Korea
• Brazil	• Belgium	• Argentina	• South Africa
• Mexico	• Spain	• Portugal

Most facilities are owned by the Corporation or its subsidiaries. Leased properties consist primarily of warehouses and administration, engineering, and sales offices. The leases for warehouses generally provide for an initial period of five years and contain renewal options. Leases for sales offices are generally for shorter periods.

Properties of GM and its subsidiaries include facilities which, in the opinion of management, are suitable and adequate for the manufacture, assembly and distribution of their products.

Additional information regarding worldwide expenditures for plants and equipment is presented in Note 26 to the GM Consolidated Financial Statements in Part II.

GMAC owns properties in southeastern Michigan that are leased to GM. GMAC primarily operates its finance, insurance and mortgage businesses from leased office space.


Item 3.	*Legal Proceedings*

Material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Corporation became, or was, a party during the year ended December 31, 2005, or subsequent thereto but before the filing of this report, are summarized below:

Canadian Export Antitrust Class Actions

Seventy-nine purported class actions on behalf of all purchasers of new motor vehicles in the United States since January 1, 2001, have been filed in various state and federal courts against General Motors Corporation, General Motors of Canada Ltd. and Ford, Daimler Chrysler, Toyota, Honda, Nissan and BMW and their Canadian affiliates, the National Automobile Dealers Association and the Canadian Automobile Dealers Association. The federal court actions have been consolidated for coordinated pretrial proceedings in federal court under the caption In re New Market Vehicle Canadian Export Antitrust Litigation Cases in the U.S. District Court for the District of Maine and the more than 30 California cases have been consolidated in the California Superior Court in San Francisco County under the case captions Belch v. Toyota, et al. and Bell v. General Motors.

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Legal Proceedings (continued)

The nearly identical complaints allege that the defendant manufacturers, aided by the association defendants, conspired among themselves and with their dealers to prevent the sale to United States citizens of vehicles produced for the Canadian market and sold by dealers in Canada. The complaints allege that new vehicle prices in Canada are 10% to 30% lower than those in the United States and that preventing the sale of these vehicles to United States citizens resulted in the payment of supracompetitive prices by United States consumers. The complaints, as amended, seek injunctive relief under federal antitrust law and treble damages under federal and state antitrust laws, but do not specify damages. The complaints further allege unjust enrichment and violations of state unfair trade practices act. On March 5, 2004, the federal court in Maine issued a decision holding that the purported indirect purchaser classes failed to state a claim for damages but allowed a separate claim seeking to enjoin future alleged violations to continue. On March 10, 2006, the federal court in Maine certified a nationwide class of buyers and lessees under Federal Rule 23(b)(2) solely for injunctive relief. The court expressly deferred to an unspecified later time a decision on plaintiffs’ Federal Rule 23(b)(3) motion to certify a class for damages under the laws of as many as 23 states and the District of Columbia. No determination has been made to certify any of these cases as a damages class action under federal or state law. General Motors believes its actions have been lawful and intends to vigorously defend these cases.

* * * * * * *

Health Care Litigation

UAW, et al. v. General Motors Corporation — On October 18, 2005, the UAW and two hourly retirees filed a putative class action in the U.S. District Court for the Eastern District of Michigan on behalf of hourly retirees, spouses and dependants, seeking to enjoin unilateral modifications by GM to hourly retiree health-care benefits, claiming that such benefits are unalterably vested. GM maintains that retiree health-care benefits are not vested and that it has expressly reserved the right to make unilateral changes. On October 29, 2005, GM and the UAW entered into a memorandum of understanding that provided for a number of changes to health care coverage for both UAW represented active employees and UAW retirees. On October 31, 2005, plaintiffs’ filed an amended complaint adding four additional retirees and one surviving spouse as putative class representatives. The lawsuit followed months of negotiations between GM and the UAW regarding changes to retiree health-care benefits and is the initial step in implementing this agreement.

On December 16, 2005, GM, the UAW and the putative class representatives finalized a settlement agreement and submitted motions to the court for certification of the class, preliminary approval of the final settlement and approval of the proposed notice to class members. At a hearing on December 22, 2005, the court granted the motion for class certification, preliminarily approved the final settlement agreement and directed that proposed notice of the settlement be mailed to class members. That mailing was complete on December 30, 2005. A final hearing to determine whether the settlement agreement is fair, reasonable and adequate with respect to the class was held on March 6, 2006. GM is awaiting a final determination on the settlement agreement by the court.

* * * * * * *

General Motors Securities Litigation

On September 19, 2005, Folksam Asset Management filed a purported class action complaint 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, Folksam Asset Management, et.al. v. General Motors, et al. Plaintiffs purported to bring the claim on behalf of purchasers of GM debt and/or equity

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Legal Proceedings (continued)

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 Section 11, Section 12(a) and, with respect to the individual defendants, Section 15 of the Securities Act of 1933, as amended (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 the Corporation’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 the Corporation’s 2005 earnings forecast that were later revised significantly downward. In October 2005, a similar suit, asserting claims under the Exchange Act based on substantially the same factual allegations, was filed and subsequently consolidated with the Folksam case, Galliani, et.al. 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 adds a claim against defendants Wagoner and 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 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.

On November 21, 2005, Teresa and Joseph Paul Sacco filed a purported class action, Sacco, et al. v. General Motors Corporation, et al. On December 21, 2005, Charles Rosen filed a purported class action, Rosen, et al. v. General Motors Corporation, et al. Both of these actions were filed in the U.S. District Court for the Eastern District of Michigan against GM, G. Richard Wagoner, Jr., John F. Smith, Jr. (in Rosen only), Peter R. Bible, and John M. Devine. Plaintiffs purported to bring claims on behalf of purchasers of GM stock during the period April 18, 2001 through November 9, 2005. The complaints alleged that defendants violated Section 10(b) and, with respect to the individual defendants, Section 20(a) of the Exchange Act. The complaints focused on certain statements regarding the Corporation’s financial performance. The complaints did not specify the amount of damages sought, and defendants had no means to estimate damages the plaintiffs sought based upon the limited information available in the complaints. On January 6, 2006, the plaintiffs in Sacco filed a notice of voluntary dismissal. On February 16, 2006, the plaintiffs in Rosen filed a notice of voluntary dismissal.

* * * * * * *

Shareholder Derivative Suits

On November 10, 2005, Albert Stein filed a purported shareholder derivative action in the Eastern District of Michigan, ostensibly on behalf of GM, against the members of the GM board of directors at that time, Stein v. Bowles, et al. The complaint alleges that defendants breached their fiduciary duties of due care, loyalty and good faith by, among other things, causing GM to overstate its income (as reflected in the Corporation’s restatement of 2001 earnings and second quarter 2005 earnings) and exposing the Corporation to potential damages in SEC investigations and investor lawsuits. The suit seeks damages based on defendants’

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Legal Proceedings (continued)

alleged breaches and an order requiring defendants to indemnify the Corporation for any future litigation losses. Plaintiffs claim that demand on the GM board to bring suit itself (ordinarily a prerequisite to suit under Delaware law) is excused because it would be “futile.” The complaint does not specify the amount of damages sought and defendants have no means to estimate damages the plaintiffs will seek based upon the limited information available in the complaint.

On December 15, 2005, Henry Gluckstern filed a purported shareholder derivative action in the U.S. District Court for the Eastern District of Michigan, ostensibly on behalf of GM, against the GM board of directors, Gluckstern v. Wagoner, et al. This suit is substantially identical to Stein v. Bowles, et al. Also on December 15, 2005, John Orr filed a substantially identical purported shareholder derivative action in the U.S. District Court for the Eastern District of Michigan, ostensibly on behalf of GM, against the GM board of directors, Orr v. Wagoner, et al. Counsel for plaintiffs in the Stein, Gluckstern and Orr actions have filed a motion to consolidate these three actions, to appoint lead plaintiff and to approve selection of lead counsel. The directors have not yet filed their response to the Stein, Gluckstern and Orr complaints, but intend to vigorously defend these actions.

On December 2, 2005, Sharon Bouth filed a similar purported shareholder derivative action in the Circuit Court of Wayne County, Michigan, ostensibly on behalf of GM, against the members of the GM board of directors and a GM officer not on the board, Bouth v. Barnevik, et al. The complaint alleges that defendants breached their fiduciary duties of due care, loyalty and good faith by, among other things, causing GM to overstate its earnings and cash flow and improperly account for certain transactions and exposing GM to potential damages in SEC investigations and investor lawsuits. The suit seeks damages based on defendants’ alleged breaches and an order requiring defendants to indemnify the Corporation for any future litigation losses. Plaintiffs claim that demand on the GM board is excused because it would be “futile.” The complaint does not specify the amount of damages sought and defendants have no means to estimate damages the plaintiffs will seek based upon the limited information available in the complaint.

On December 16, 2005, Robin Salisbury filed an action in the Circuit Court of Wayne County, Michigan substantially identical to the Bouth case described above, Salisbury v. Barnevik, et.al. The Salisbury and Bouth cases have been consolidated and plaintiffs have stated they intend to file an amended consolidated complaint. The directors and the officer not on the board named in these cases have not yet filed their responses to the Bouth or Salisbury complaints, but intend to vigorously defend these actions.

* * * * * * *

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 Stein v. Bowles, et al. filed a Motion with the Judicial Panel on Multidistrict Litigation to transfer and consolidate these cases for pretrial proceedings in the U.S. District Court for the Eastern District of Michigan.

On January 5, 2006, defendants submitted to the Judicial Panel on Multidistrict Litigation an Amended Motion seeking to add to their original Motion the Rosen, Gluckstern, and Orr cases for consolidated pretrial proceedings in the U.S. District Court for the Eastern District of Michigan. The Panel has set this motion 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,

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Legal Proceedings (continued)

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, were materially false and misleading as evidenced by GMAC’s 2005 restatement of these quarterly results. In December 2005, 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 from April 23, 2004 to March 14, 2005 and adding approximately 60 additional underwriters as defendants. The complaint does not specify the amount of damages sought and 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 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, 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, G. Richard Wagoner, Jr. 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 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 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 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 above cases are in preliminary phases. No determination has been made that the shareholder and bondholder cases can be maintained as class actions or that the shareholder derivative actions can proceed

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Legal Proceedings (continued)

without making a demand in accordance with Delaware law that the GM board bring the actions. As a result, the scope of the actions and whether they will be permitted to proceed is uncertain.

* * * * * * *

Asbestos Litigation

Like most domestic and foreign automobile manufacturers, over the years GM has used some brake products which incorporated small amounts of encapsulated asbestos. These products, generally brake linings, are known as asbestos-containing friction products. There is a significant body of scientific data demonstrating that these asbestos-containing friction products are not unsafe and do not create an increased risk of asbestos-related disease. GM believes that the use of asbestos in these products was appropriate.

A number of the claims are being filed against GM by automotive mechanics and their relatives seeking recovery based on their alleged exposure to the small amount of asbestos used in brake components. These claims almost always identify numerous other potential sources for the claimant’s alleged exposure to asbestos, which do not involve GM or even asbestos-containing friction products, and many of these other potential sources would place users at much greater risk. The vast majority of these claimants do not have an asbestos-related illness and may never develop one. This is consistent with the experience reported by other automotive manufacturers and other end users of asbestos.

Two other types of claims related to alleged asbestos exposure are being asserted against GM, representing a significantly lower exposure than the automotive friction product claims. Like other locomotive manufacturers, GM used a limited amount of asbestos in locomotive brakes and in the insulation used in the manufacturing of some locomotives. These uses have been the basis of lawsuits filed against GM by railroad workers seeking relief based on their alleged exposure to asbestos. These claims almost always identify numerous other potential sources for the claimant’s alleged exposure to asbestos, which do not involve GM or even locomotives. Many of these claimants do not have an asbestos-related illness and may never develop one. In addition, like many other manufacturers, a relatively small number of claims are brought by contractors who are seeking recovery based on alleged exposure to asbestos-containing products while working on premises owned by GM. These claims almost always identify numerous other potential sources for the claimant’s alleged exposure to asbestos which do not involve GM. The vast majority of these claimants do not have an asbestos-related illness and may never develop one.

While GM has resolved many of these cases over the years and continues to do so for conventional strategic litigation reasons (avoiding defense costs and possible exposure to runaway verdicts), GM, as stated above, believes the vast majority of such claims against GM are without merit. Only a small percentage of the claims pending against GM allege the contraction of a malignant disease associated with asbestos exposure. GM intends to vigorously defend these actions whenever possible. The West Virginia and Ohio supreme courts have ruled that Federal law preempts asbestos tort claims asserted on behalf of railroad workers. Such preemption means that Federal law entirely eliminates the possibility that railroad workers could maintain state law claims against GM.

As previously reported, GM’s annual expenditures associated with the resolution of these claims decreased in 2004 after increasing in nonmaterial amounts in prior years. They remained approximately the same in 2005, but the amount expended in any year is highly dependent on the number of claims filed, the amount of pretrial proceedings conducted, and the number of trials and settlements which occur during the period.

* * * * * * *

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Legal Proceedings (continued)

ERISA Class Actions

In May 2005, the U.S. District Court for the Eastern District of Michigan consolidated under the case caption In re General Motors ERISA Litigation three related Employment Retirement Income Security Act (ERISA) purported class actions against GM and other named defendants who are alleged to be fiduciaries of the GM stock purchase programs and personal savings plans for salaried and hourly employees. In June 2005, plaintiffs filed a consolidated class action complaint against GM, the Investment Funds Committee of the GM board, its individual members, GM’s Chairman and Chief Executive Officer, members of GM’s Employee Benefits Committee during the putative class period, General Motors Investment Management Corporation (GMIMCo) and State Street Bank. The complaint alleges that the GM defendants breached their fiduciary duties to plan participants by, among other things, investing their assets, or offering them the option of investing, in GM stock on the ground that it was not a prudent investment. Plaintiffs purport to bring these claims on behalf of all persons who were participants in or beneficiaries of the plans from March 18, 1999 to the present, and seek to recover losses allegedly suffered by the plans. The complaint does not specify the amount of damages sought and defendants have no means at this time to estimate damages the plaintiffs will seek. Defendants filed a motion to dismiss the complaint in September 2005. The court heard arguments on the defendants’ motion on February 1, 2006, but has not yet ruled on the motion. No determination has been made that the case can be maintained as a class action. General Motors intends to vigorously defend this action.

In addition, GMIMCo, a wholly-owned subsidiary of GM, is one of numerous defendants in several purported class action lawsuits filed in March and April 2005, in the U.S. District Court for the Eastern District of Michigan alleging violations of ERISA with respect to the Delphi company stock plans for salaried and hourly employees. On September 13, 2005, the cases were consolidated under the case caption In re Delphi ERISA Litigation and have been transferred to the Eastern District of Michigan for coordinated pretrial proceedings with other Delphi shareholder lawsuits in which GMIMCo is not named as a defendant. On March 3, 2006, the lead plaintiffs appointed by the court filed a consolidated amended class action complaint alleging that from May 28, 1999 to November 1, 2005, GMIMCo, a named fiduciary of the Delphi plans, breached its fiduciary duties to plan participants by allowing them to invest in the Delphi Common Stock Fund when it was imprudent to do so, failing to monitor State Street Bank and Trust, the entity appointed by GMIMCo to serve as investment manager for the Delphi Common Stock Fund, and by knowingly participating in, enabling, or failing to remedy breaches of fiduciary duty by other defendants. No determination has been made that a class action can be maintained against GMIMCo and there have been no decisions on the merits of the claims. GMIMCo intends to defend these cases vigorously.

* * * * * * *

Hughes Split-Off Class Actions

On April 11 and 14, 2003, two purported class actions, Young v. Pearce, et al. and Silverstein v. Pearce, et al., were filed in Delaware Chancery Court on behalf of owners of GM Class H shares against Hughes Electronics Corporation, General Motors Corporation, News Corporation and the Hughes directors. On April 11 and 15, 2003, two purported class actions, Matcovsky, et al., v. Hughes Electronics Corporation, et al. and Brody v. Hughes Electronics Corporation, et al ., were filed in Superior Court in Los Angeles, California, against Hughes, GM and the Hughes and GM directors. Two purported stockholder class actions which name only General Motors and the GM directors have been brought in Delaware Chancery Court challenging the agreements with News Corp., Wyser-Pratte Management Company v. General Motors Corporation, et al. , which was filed April 18, 2003, and Robert LaMarche v. General Motors Corporation, et al. , which was filed April 28, 2003. The Delaware cases were consolidated in the Delaware Chancery Court and the California cases were consolidated in state court in Los Angeles and plaintiffs in both cases have filed consolidated complaints.

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Legal Proceedings (concluded)

The Delaware cases allege that GM and the GM directors performed ultra vires acts and that the GM directors breached their fiduciary duties by approving a transaction that is more favorable to the holders of GM $1 ² / 3 par value common stock than the holders of GM Class H common stock. They claim that the holders of GM Class H common stock were treated unfairly because (1) GM received mostly cash for its shares while the holders of GM Class H common stock received News Corp. American Depositary Shares (ADSs) that may fluctuate in value, (2) GM received a $275 million payment from Hughes, (3) a substantial number of shares of GM Class H common stock were contributed to various GM employee benefit plans prior to announcement of the deal to improve the prospects of shareholder approval, and (4) the transaction was announced just prior to the announcement of improved financial results at Hughes and PanAmSat to make it appear that holders of GM Class H common stock would receive a premium that would exceed the 20% recapitalization premium provided for in the GM restated certificate of incorporation, as amended. The California cases allege that the transactions involving News Corp.’s acquisition of a 34% interest in Hughes provides benefits to GM not available to all GM Class H shareholders, in violation of fiduciary duties. The new consolidated complaints are similar to the original complaints, except that the Delaware complaint adds allegations challenging the adequacy of the disclosures in the consent solicitation and only names GM and members of the GM board of directors as defendants. Plaintiffs in both cases seek unspecified damages. GM’s motion to dismiss the Delaware cases was granted by the Delaware Chancery Court on May 4, 2005. On March 20, 2006, the Delaware Supreme Court unanimously affirmed the dismissal of the consolidated Delaware cases. In the California cases, the claims against directors without any connection to California have been dismissed and the consolidated case has been stayed pending a ruling on the motion to dismiss the Delaware consolidated complaint. GM and the director defendants intend to vigorously defend the lawsuits.

* * * * * * *

John Evans and Evans Cooling System v. General Motors

On March 15, 2006, the Connecticut Supreme Court reversed and remanded to the trial court for a jury trial a judgment in favor of GM alleging trade secret misappropriation. Plaintiffs John Evans and Evans Cooling Systems, Inc. commenced litigation against GM in January 1994 comprising separate suits for patent infringement and trade secret misappropriation. In the patent case, summary judgment for GM was affirmed on appeal. In the trade secret case, following a four-week trial in 2003, the presiding judge ruled for GM and plaintiffs appealed. Plaintiffs seek relief in excess of $12 billion. The trade secret lawsuit involves the so-called “reverse flow” cooling system employed on GM’s Gen II (LT1) engine, which was first introduced on the 1992 Corvette and later used on other rear wheel drive passenger cars. The Gen II engine has since been replaced by the Gen III engine, which utilizes a conventional cooling system not involved in the litigation (although plaintiffs may seek to expand the case to encompass the Gen III engine on remand). GM intends to vigorously defend this case on re-trial.

* * * * * * *


Item 4.	*Submission of Matters to a Vote of Security Holders*

None

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES


Item 4A.	*Executive Officers of the Registrant*

The names and ages, as of March 15, 2006, of all executive officers of General Motors and their positions and offices with General Motors are as follows:


Name and (Age)		Positions and Offices

G. Richard Wagoner, Jr. (53)		Chairman and Chief Executive Officer
John M. Devine (61)		Vice Chairman
Frederick A. Henderson (47)		Vice Chairman and Chief Financial Officer
Robert A. Lutz (74)		Vice Chairman Global Product Development
Thomas A. Gottschalk (63)		Executive Vice President — Law and Public Policy, and General Counsel

The following information pertains to all other officers of General Motors who file reports pursuant to Section 16(b) of the Exchange Act:


Name and (Age)		Positions and Offices

Troy A. Clarke (50)		Group Vice President and President, GM Asia Pacific
Gary L. Cowger (58)		Group Vice President, Global Manufacturing and Labor Relations
Eric A. Feldstein (46)		Group Vice President and Chairman, General Motors Acceptance Corporation
Carl-Peter Forster (51)		Group Vice President and President, GM Europe
Maureen Kempston Darkes (57)		Group Vice President and President, GM Latin America, Africa and Middle East
Thomas G. Stephens (57)		Group Vice President, GM Powertrain
Ralph J. Szygenda (57)		Group Vice President and Chief Information Officer
Bo I. Andersson (50)		Vice President, Global Purchasing and Supply Chain
Kathleen S. Barclay (50)		Vice President, Global Human Resources
Lawrence D. Burns (54)		Vice President, Research & Development and Strategic Planning
Steven J. Harris (60)		Vice President, Global Communications
Peter R. Bible (47)		Chief Accounting Officer
Walter G. Borst (44)		Treasurer
Paul W. Schmidt (61)		Controller

There are no family relationships, as defined in Item 401 of Regulation S-K, between any of the officers named above, and there is no arrangement or understanding between any of the officers named above and any other person pursuant to which he or she was selected as an officer. Each of the officers named above was elected by the Board of Directors or a Committee of the Board to hold office until the next annual election of officers and until his or her successor is elected and qualified or until his or her earlier resignation or removal. The Board of Directors elects the officers in conjunction with each annual meeting of the stockholders and may appoint other officers between annual meetings.

G. Richard Wagoner, Jr. has been associated with General Motors since 1977. In October 1998, he was elected a director, President and Chief Operating Officer of General Motors. On June 1, 2000, Mr. Wagoner

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Executive Officers of the Registrant — (continued)

was named Chief Executive Officer and became Chairman of the Board of Directors on May 1, 2003. He is currently a director of GMAC.

John M. Devine was named Vice Chairman and Chief Financial Officer of General Motors, effective January 1, 2001. He relinquished the title of chief financial officer in January 2006, but he continues to serve as Vice Chairman, focusing on implementing the Corporation’s North America turnaround plan and other strategic issues. Mr. Devine was Chairman and Chief Executive Officer of Fluid Ventures, LLC, immediately prior to his GM appointment.

Frederick A. Henderson became Vice Chairman and Chief Financial Officer for General Motors on January 1, 2006. Prior to his promotion, Henderson was a GM Group Vice President and Chairman of GME. Mr. Henderson has been associated with General Motors since 1984, and from June 1, 2000 he served as Group Vice President and President of GMLAAM. He was named GM Group Vice President and President of GMAP effective January 1, 2002. Effective June 1, 2004, he was appointed Group Vice President and President of GME. He is currently a director of GMAC.

Robert A. Lutz was named Vice Chairman Product Development of General Motors, effective September 1, 2001. He was named Chairman of GMNA on November 13, 2001, and served in that capacity until April 4, 2005, when he assumed responsibility for Global Product Development. He also served as president of GME on an interim basis from March to June 2004.

Thomas A. Gottschalk has been associated with General Motors since 1994. He previously held the position of Senior Vice President and General Counsel. He was elected to the position of Executive Vice President of General Motors with primary responsibility for Law and Public Policy on May 25, 2001. He retains the General Counsel responsibility in his current position and is also responsible for the Office of the Secretary.

Troy A. Clarke was appointed Group Vice President and Executive Vice President, GMAP on February 4, 2004, and President of GMAP, effective June 1, 2004. Mr. Clarke was named GM Group Vice President of Manufacturing and Labor Relations in June 2002, and had been Vice President of Labor Relations since January 2001.

Gary L. Cowger was appointed Group Vice President of Global Manufacturing and Labor Relations in April 2005 and had previously been president of GMNA since November 13, 2001. He has been associated with General Motors since 1965. Mr. Cowger became Group Vice President in charge of GM Manufacturing and Labor Relations on January 1, 2001. He was named GM Group Vice President and President of GMNA on November 13, 2001.

Eric A. Feldstein has been associated with General Motors since 1981. Mr. Feldstein was named GM Vice President and Treasurer in 1997 and GM Vice President of Finance and Treasurer in 2001. He was named GM Group Vice President and Chairman of GMAC in November 2002.

Carl-Peter Forster has been GM Vice President and President of GME since June 2004 and was appointed GM Group Vice President effective January 1, 2006. Mr. Forster was Chairman and Managing Director of Adam Opel AG from April 2001, and before that date he was responsible for vehicle development projects for BMW AG.

Maureen Kempston-Darkes has been associated with General Motors since 1975. She was named GM Group Vice President and President of GMLAAM effective January 1, 2002. She is a member of the board of directors of Falconbridge Limited, Thomson Corporation, and the Canadian National Railway.

Thomas G. Stephens is the Group Vice President responsible for GM Powertrain. He was appointed Vice President of Vehicle Integration in January 2001 and held this position prior to being named Group Vice President for GM Powertrain in 2001.

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Executive Officers of the Registrant — (concluded)

Ralph J. Szygenda was named Group Vice President and Chief Information Officer on January 7, 2000. Mr. Szygenda is a member of the board of directors of the Handleman Company. He has been associated with GM since 1996.

Bo I. Andersson began his career with GM in 1987. He was appointed GM Vice President, Worldwide Purchasing, Production Control and Logistics on December 1, 2001 and GM Vice President, Global Purchasing and Supply Chain on March 1, 2005.

Kathleen S. Barclay has been associated with General Motors since 1985 and has been Vice President in charge of Global Human Resources since 1998.

Lawrence D. Burns has been associated with General Motors since 1969 and has been Vice President of Research & Development and Strategic Planning since 1998.

Steven J. Harris was elected General Motors Vice President in charge of Global Communications February 1, 2006, when he returned to the Corporation from retirement. He previously served as Vice President of GM Communications from 1999 until his retirement on January 1, 2004.

Peter R. Bible joined General Motors as Chief Accounting Officer in December 1996.

Walter G. Borst has been associated with General Motors since 1980. He was named Treasurer in February 2003. Prior to that, Mr. Borst was Executive Director of Finance and Chief Financial Officer for GM’s German subsidiary, Adam Opel AG, since October 2000. He is currently a director of GMAC.

Paul W. Schmidt has been associated with General Motors since 1969. He was named Controller in 2002. Mr. Schmidt had been executive-in -charge of GM’s investor relations since August 2001. Prior to that, he was executive-in -charge of GMNA Finance since 1994. Mr. Schmidt is a member of the board of directors of Lennox Corporation.

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Item 5.	*Market for the Registrant’s Common Equity and Related Stockholder Matters*

General Motors lists its common stock on the stock exchanges specified on the cover page of this Form 10-K under the trading symbol “GM”.

As of December 31, 2005, there were 384,375 holders of record of GM $1 ² / 3 par value common stock. As of December 31, 2004, there were 405,272 holders of record of GM $1 ² / 3 par value common stock. The following table sets forth the high and low sale prices of GM’s $1 ² / 3 par value common stock and the quarterly dividends declared for the last two years.


		2005 Quarters

		1st		2nd		3rd		4th

Cash dividends per share of common stock $1 ² / 3 par value		$	0.50	$	0.50	$	0.50	$	0.50
Price range of common stock $1 ² / 3 par value(1): High		$	40.80	$	36.65	$	37.70	$	31.50
	Low	$	27.98	$	24.67	$	30.21	$	18.33


		2004 Quarters

		1st		2nd		3rd		4th

Cash dividends per share of common stock $1 ² / 3 par value		$	0.50	$	0.50	$	0.50	$	0.50
Price range of common stock $1 ² / 3 par value(1): High		$	55.55	$	50.04	$	46.93	$	43.29
	Low	$	44.72	$	42.88	$	40.53	$	36.90


(1)	New York Stock Exchange composite interday prices as listed in the price history database available at www.NYSEnet.com.

On February 6, 2006, GM’s Board of Directors declared a quarterly cash dividend of $0.25 per share, representing a reduction from the quarterly rate of $0.50 per share that had been followed since the first quarter of 1997. GM’s Dividend Policy is described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section below.

The table below contains information about securities authorized for issuance under equity compensation plans. The features of these plans are described further in Note 24 to the Consolidated Financial Statements in Part II.

Number of Securities

to be Issued upon

Weighted Average

Remaining Available for

Exercise of

Exercise Price of

Future Issuance under

Outstanding Options,

Equity Compensation

Plan Category

Warrants and Rights

Plans(1)

Equity compensation plans approved by security holders:

General Motors Amended Stock Incentive Plan (GMSIP)

84,130,586

53.11

4,901,267

Equity compensation plans not approved by security holders(2):

General Motors 1998 Salaried Stock Option Plan (GMSSOP)

27,213,635

55.19

771,326

Total

111,344,221

53.62

5,672,593

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Market for the Registrant’s Common Equity and Related Stockholder Matters — (concluded)


(1)	Excludes securities reflected in the first column, “Number of securities to be issued upon exercise of outstanding options, warrants and rights.”

(2)	All equity compensation plans except the GMSSOP were approved by the stockholders. The GMSSOP was adopted by the Board of Directors in 1998 and expires December 31, 2007. The purpose of the plans is to recognize the importance and contribution of GM employees in the creation of stockholder value, to further align compensation with business success and to provide employees with the opportunity for long-term capital accumulation through the grant of options to acquire shares of General Motors common stock.

Purchases of Equity Securities

GM made no purchases of GM $1 ² / 3 par value common stock during the three months ended December 31, 2005.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES


Item 6.	*Selected Financial Data*


		Years Ended December 31

		2005			2004		2003			2002			2001

		(Dollars in millions except per share amounts)
Total net sales and revenues		$	192,604		$	193,517	$	185,837		$	177,867		$	169,051

Income (loss) from continuing operations		$	(10,458	)	$	2,804	$	2,899		$	1,813		$	1,041
(Loss) from discontinued operations			—			—		(219	)		(239	)		(621	)
Gain from sale of discontinued operations			—			—		1,179			—			—
Cumulative effect of accounting change			(109	)		—		—			—			—

	Net income (loss)(1)	$	(10,567	)	$	2,804	$	3,859		$	1,574		$	420

$1 ² / 3 par value common stock
	Basic earnings (losses) per share from continuing operations before cumulative effect of accounting change	$	(18.50	)	$	4.97	$	5.17		$	3.24		$	1.89
	Basic earnings (losses) per share from discontinued operations		—			—	$	2.14		$	(0.16	)	$	(0.42	)
	Basic (losses) per share from cumulative effect of accounting change	$	(0.19	)		—		—			—			—
	Diluted earnings (losses) per share from continuing operations before cumulative effect of accounting change	$	(18.50	)	$	4.94	$	5.09		$	3.23		$	1.87
	Diluted earnings (losses) per share from discontinued operations		—			—	$	2.11		$	(0.16	)	$	(0.43	)
	Diluted (loss) per share from cumulative effect of accounting change	$	(0.19	)		—		—			—			—
	Cash dividends declared per share	$	2.00		$	2.00	$	2.00		$	2.00		$	2.00
GM’s Class H common stock(2)
	Basic earnings (losses) per share from discontinued operations	$	—		$	—	$	(0.22	)	$	(0.21	)	$	(0.55	)
	Diluted earnings (losses) per share from discontinued operations	$	—		$	—	$	(0.22	)	$	(0.21	)	$	(0.55	)
	Cash dividends declared per share	$	—		$	—	$	—		$	—		$	—
Total assets		$	476,078		$	479,921	$	448,819		$	369,346		$	322,637
Notes and loans payable		$	285,750		$	300,279	$	271,756		$	200,168		$	165,361
Stockholders’ equity		$	14,597		$	27,360	$	24,903		$	6,412		$	19,467

Reference should be made to the notes to GM’s consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This selected financial data should also be read in conjunction with Part II, Item 6 (Selected Financial Data), Item 7 (MD&A) and 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.


(1)	On January 1, 2002, the Corporation implemented Statement of Financial Accounting Standards (SFAS) No. 142 “Goodwill and Other Intangible Assets,” which ceased the amortization method of accounting for goodwill and changed to an impairment only approach. Accordingly, goodwill is no longer amortized and is tested for impairment at least annually. Effective January 1, 2003, the Corporation

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Selected Financial Data — (concluded)


	began expensing the fair market value of newly granted stock options and other stock-based compensation awards issued to employees to conform to SFAS No. 123, “Accounting for Stock-Based Compensation.” Effective July 1, 2003, the Corporation began consolidating certain variable interest entities to conform to FASB Interpretation No. (FIN) 46, “Consolidation of Variable Interest Entities.” As of December 31, 2005, the Corporation recorded a pre-tax asset retirement obligation of $181 million in accordance with the requirements of FIN 47 “Accounting for Conditional Asset Retirement Obligations.” The cumulative effect on net loss, net of related income tax effects, of recording the asset retirement obligations was $109 million or $0.19 per share.

(2)	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. Simultaneously, GM sold its 19.8% retained economic interest in Hughes to News Corporation in exchange for cash and News Corporation Preferred ADSs. All shares of GM Class H common stock were then cancelled. See Note 2 to the Consolidated Financial Statements.

* * * *

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*

Overview

GM is primarily engaged in automotive production and marketing and financing and insurance operations. GM designs, manufactures, and markets vehicles worldwide, having its largest operating presence in North America. GM’s finance and insurance operations primarily relate to General Motors Acceptance Corporation (GMAC), a wholly owned subsidiary of GM, which provides a broad range of financial services, including automotive finance and mortgage products and services.


	*Automotive Industry*

In 2005, global industry vehicle sales to retail and fleet customers were 64.7 million units, representing a 3.7% increase over 2004. We expect industry sales to be between 65.5 million and 66 million units in 2006. GM’s worldwide vehicle sales for 2005 were 9.2 million units compared to 9.0 million units in 2004. This represents a global market share of 14.2% for 2005, down slightly from GM’s 2004 global market share of 14.4%. In 2005, GM posted market share gains in three of its four automotive regions, with the exception of GM North America (GMNA) where GM’s market share declined. Over the past five years, the global automotive industry has experienced consistent year-to -year increases, growing approximately 13% from 2001 to 2005. Much of this growth is attributable to the continued development of emerging markets such as China.

In the United States, where GM has its largest presence, 2005 industry vehicle sales totaled 17.5 million units, representing a slight increase from the 2004 U.S. sales level of 17.3 million units. While the U.S. industry has experienced annual sales volumes of approximately 17 million units for the past eight years, management believes that competition among automotive manufacturers involving price, incentive promotions, and financing offers has been a very important factor in maintaining this level of industry sales. GM’s market share in the United States was 25.9% for 2005, down from 27.2% in 2004, due in part to declines in sales of full-size utilities, mid sized utilities and mid sized cars.

The overall U.S. industry-wide proportion of light trucks as a percentage of total U.S. vehicle sales has continued to increase over the past several decades. Light trucks include all pickups, vans, utilities, and cross over utilities derived from car platforms. In 1981, light trucks accounted for only 19% of the overall U.S. vehicle market. By 1999, light trucks had surpassed cars to take over 50% of the market for the first time. Despite the negative influence of fuel prices, in 2005 light trucks, including the growing segment of cross over vehicles, still accounted for 56% of the U.S. vehicle market, compared to 56% and 55% respectively in 2004 and 2003.


	*Financial Results*

GM’s consolidated net sales and revenues fell to $192.6 billion in 2005 from $193.5 billion in 2004. GM incurred a consolidated net loss in 2005 of $10.6 billion, compared to net income of $2.8 billion in 2004. The unfavorable results were driven primarily by losses at GMNA. GMAC’s net income in 2005 declined to $2.4 billion, compared to $3.0 billion in 2004.

GM’s results of operations in 2005 were most significantly affected by the following trends and significant events:


	GMNA Market Share and Product Mix

While industry-wide North American vehicle sales grew slightly, GMNA’s vehicle production declined 7% in 2005 to 4.9 million units due in part to GM’s efforts to reduce high dealer inventory levels, and its market share decreased by 1.2 percentage points. Compounding this decline in volumes was the effect of unfavorable product mix, whereby GM had fewer sales of higher margin large trucks and large cars, due to a combination of volatility of consumer demand and the anticipated introduction of new truck models to replace products at the end of their lifecycles.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES


	*Financial Results — (concluded)*


	Delphi Chapter 11 Proceedings

For the fourth quarter of 2005, GM recorded a charge of $5.5 billion ($3.6 billion after tax) as an estimate of contingent exposures relating to the Chapter 11 filing of Delphi Corporation (Delphi), including under the benefit guarantees for certain former GM U.S. employees who transferred to Delphi in connection with its 1999 spin-off from GM. GM believes that the range of these 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. 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.


	GMNA Restructuring and Global Asset Impairments

As a result of the North American manufacturing restructuring actions announced in November 2005, GM recorded an after-tax charge of $1.7 billion. This charge includes $1.2 billion associated with the employees and $455 million for the non-cash write-down of property, plants and equipment that we currently believe are likely to be impacted by the actions. The employee costs represent our best estimate of the wage and benefits costs that we will incur 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 to be paid thereafter. We have been discussing these provisions with the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) in an effort to develop an agreed upon accelerated attrition program that, among other things, would not require or entitle participants to also be eligible for the JOBS bank. As part of these discussions, on March 22, 2006, GM, Delphi and the UAW reached a tentative agreement intended to reduce the number of U.S. hourly employees 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 GM, which may have the effect of reducing the number of employees that are or will be in the JOBS bank. This attrition program is expected to result in additional charges being recorded in 2006 as employees at locations that were not included in the North American manufacturing restructuring actions announced in November 2005 agree to participate. Under the agreement, GM and the UAW also agreed to discuss other options to address remaining surplus people at specific locations and all areas in which GM and the UAW can work together to close GM’s competitive gap with its foreign competition and reduce GM’s structural costs.

In addition, GM’s results reflect the write-down of the Corporation’s investment in Fuji Heavy Industries, Ltd. (FHI) of $717 million after tax (considering the original impairment of $788 million and a gain on sale of $71 million due to the appreciation of the stock following the write-down). Furthermore, GM recorded after-tax charges of $872 million for plant and facility asset impairments within its automotive regions.


	Health-Care Cost Escalation

Health care in the United States is one of our biggest competitive challenges, and if we do not make progress on structurally fixing this issue, it could be a long-term threat to our company. In 2005, GM was challenged with the compound impact of escalating health-care cost rates and falling discount rates used to determine future health-care liabilities. As a result of these factors, in 2005, GM’s U.S. other postretirement employee benefits (OPEB) expense, consisting of retiree health care and life insurance, increased to $5.3 billion, an increase of more than $1 billion from 2004.


	*Strategy*

The size of GM’s 2005 loss, most of which related to its North American operations, clearly demonstrates the need for significant changes in GM’s business model. A large part of these losses arise from GM’s huge legacy cost burden and the difficulty of adjusting structural costs in line with falling revenue. Legacy costs are

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Strategy — (continued)

primarily related to the cost of benefits provided to retired employees and their dependents, and costs associated with employees and their dependents of businesses divested by GM. Structural costs are those costs that do not vary with production and include all costs other than material, freight, and policy and warranty costs. Structural costs include, among other things, the cost of unionized employees.

The top priority for GM is to return its North American operations to profitability and positive cash flow as soon as possible. GM has been systematically and aggressively implementing its four-point turnaround plan for GMNA’s business. The four elements of this plan include:


	•	Product Excellence — continue to raise the bar in the execution of great cars and trucks

	•	Revitalize Sales and Marketing Strategy — offer customers the best value in the industry

	•	Accelerate Cost Reductions and Quality Improvements — improve GM’s cost position and reduce our breakeven point in response to an intensely competitive environment

	•	Address Health Care Burden — reduce legacy cost disadvantages

To date GM has been focusing on restructuring its operations, and has already taken a number of steps to improve its performance in a more competitive global environment. A key driver of these efforts is the globalization of our principal business functions, including more aggressive engineering, product development, manufacturing and purchasing. In addition, we backed up our commitment to great cars and trucks by raising our related capital expenditures in 2005, and we intend to maintain this commitment going forward. We are endeavoring to revitalize our sales and marketing strategy to more clearly focus customer recognition on our brands, align our distribution channels, and refocus our marketing efforts on the quality of our cars and trucks and the value they offer in price, features and performance.

In the health-care area, GM announced in October 2005 a historic agreement with the UAW that will, among other things, reduce its health-care obligations for retired hourly employees. In February 2006, GM announced it would increase the U.S. salaried workforce’s participation in the cost of health care, capping GM’s contributions to salaried retiree health care at the level of 2006 expenditures. In March 2006, GM announced the details of its plan to substantially alter the pension benefits for current U.S. salaried employees, under which GM will freeze accrued benefits in the current plan and implement a reduced defined benefit plan for some salaried employees and a new defined contribution plan for the other salaried employees.

As mentioned above, GM announced a North American restructuring plan in November 2005 that will impact multiple manufacturing facilities. This GMNA restructuring initiative will reduce excess capacity by one million units and will reduce manufacturing employment levels by approximately 30,000 employees. As a result of this initiative and other cost reduction actions, we currently expect to reduce structural costs in North America by an average of $7 billion per year on a running rate basis by the end of 2006 and to reduce net material costs by $1 billion in 2006. We expect $4 billion of the structural cost reduction to be realized during calendar year 2006. Further information about these matters may be found in the GM North American Restructuring Plan discussion starting on page II-20. GM’s objective is to reduce its global structural costs to 25% of automotive revenue by 2010, down from its current level of approximately 34%. In order to achieve this objective, we need to go beyond the GMNA turnaround plan and accomplish capacity rationalization and other efficiency measures on a global basis.

Our management believes that the four elements of the GMNA turnaround plan, as well as global benchmarking of best competitive practices for major automotive processes and GM’s economy of scale, make this 25% global structural cost reduction target a realistic objective. We believe that managing our business on a global, functional basis will enable us to leverage product development spending, consolidate our brand structure, share best practices throughout the Corporation, and optimize our manufacturing, supply and engineering footprint. Accomplishing this structural cost reduction is critical to GM’s future success.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Strategy — (concluded)

In addition to the GMNA turnaround activities, GM plans to continue to address other important strategic issues, including:


	•	The bankruptcy of our largest supplier, Delphi. This situation presents significant risks to GM, including disruption in the supply of automotive systems, components, and parts, GM receiving only a portion of amounts owed by Delphi to GM, and obligations in excess of amounts recognized by GM in 2005 in connection with benefit guarantees. This situation also presents opportunities for GM, including reducing, over the long term, the significant cost penalty GM incurs in obtaining parts from Delphi, as well as improving the quality of systems, components and parts GM procures from Delphi as a result of the restructuring of Delphi through the Chapter 11 process.

	•	The pursuit of a possible sale of a controlling interest in GMAC with the goal of delinking GMAC’s credit rating from GM’s credit rating and renewing GMAC’s access to low cost financing, and the exploration of strategic and structural alternatives for ResCap.

	•	Negotiations with the UAW in connection with the expiration of our collective bargaining agreement in September 2007.

	•	Restructuring initiatives in other areas, including Brazil, Europe, and Australia.

GM believes that it has sufficient balance sheet strength to fund its short- and medium-term cash needs and implement its four-point turnaround plan and other strategic objectives under reasonably foreseeable circumstances. Over the long term, we believe that GM’s ability to meet its capital requirements will primarily depend on its successful execution of its four-point turnaround plan and the return of its North American operations to profitability and positive cash flow, and its ability to execute the globalization of its principal business functions.

As of December 31, 2005, GM’s Automotive and Other operations had cash, marketable securities, and readily available assets of the Voluntary Employees’ Beneficiary Association (VEBA) trust totaling $20.4 billion, and its debt is principally long-term. We note that our cash balance varies from time to time during the calendar year and, in particular, our cash balance is generally materially lower during the third quarter as a result of product changeovers and the annual shutdown of our North American manufacturing facilities for approximately two weeks during that period. GMAC continues to maintain adequate liquidity with cash reserve balances at December 31, 2005 of $19.7 billion, including $4.2 billion in marketable securities with maturities greater than 90 days. In addition, GM has recently implemented a number of cost-cutting and cash-saving initiatives intended to help maintain adequate liquidity, including the recent reduction of its quarterly dividend from $0.50 per share to $0.25 per share. Nevertheless, there are significant risks to GM’s liquidity position, including the possibility of an extended labor dispute at Delphi, any inability to access (or amend or replace) our existing standby bank credit facility, any claims that may be successfully asserted against GM under various financing agreements in view of GM’s recent restatement of its prior financial statements, the further deterioration in GMAC’s credit rating leading to a higher cost of capital, the failure to improve our competitive position through the 2007 labor negotiations, and the payment to Delphi employees of any amounts incremental to previously announced charges for contingent exposures relating to Delphi’s Chapter 11 filing. The occurrence of any one or a combination of these events could severely threaten our liquidity position and threaten the successful implementation of our turnaround plan.

There is uncertainty regarding our future earnings given the potential that some of these matters have to affect our earnings, both positively and negatively. We put our four-point turnaround plan in place in 2005, and we have a tremendous sense of urgency in executing the elements of the plan to the highest degree possible in 2006 and the coming years.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES


	*Business Environment*

GM views the following factors, many of which are important to the execution of GMNA’s four-point turnaround plan, as the most significant drivers of its near term financial results:


	•	Continued demand for GM’s most profitable products and the maintenance of a strong product mix;

	•	The introduction of innovative new products on a timely cadence, through the integration of global architectures, engineering, and procurement efforts;

	•	The implementation of measures for reducing structural costs, offsetting legacy and health-care burdens;

	•	Maintenance of sufficient balance sheet strength and liquidity; and

	•	Other factors affecting GM’s Financing and Insurance Operations (FIO) reportable operating segment results, including interest rates, credit ratings, and demand for mortgage financing.

In addition to these drivers, the most significant risks to the execution of our business strategy and improved financial performance are discussed above under Risk Factors.

Basis of Presentation

This management’s discussion and analysis of financial condition and results of operations (MD&A) should be read in conjunction with the GMAC Annual Report on Form 10-K for the period ended December 31, 2005, filed separately with the SEC, Part I, Item 1, (Business) and Part II, Item 6 (Selected Financial Data), Item 7 (MD&A) and Item 8 (Financial Statements and Supplementary Data) of which are incorporated into this document by reference. All earnings per share amounts included in the MD&A are reported on a fully diluted basis.

GM presents separate supplemental financial information for its reportable operating segments: Automotive and Other Operations (Auto & Other) and Financing and Insurance Operations (FIO).

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.

The disaggregated financial results for GMA 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 purpose of assisting in making internal operating decisions. In this regard, certain common expenses were allocated among regions less precisely than would be required for stand-alone financial information prepared in accordance with accounting principles generally accepted in the United States (GAAP). The financial results represent the historical information used by management for internal decision-making purposes; therefore, other data prepared to represent the way in which the business will operate in the future, or data prepared in accordance with GAAP, may be materially different.

Consistent with industry practice, our market share information includes estimates of sales in certain countries where public reporting is not legally required or otherwise available on a consistent basis.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Results of Operations

Consolidated Results


		Years Ended December 31,

		2005			2004			2003

		(Dollars in millions)
Consolidated:
	Total net sales and revenues	$	192,604		$	193,517		$	185,837
	Income (loss) from continuing operations before cumulative effect of accounting change	$	(10,458	)	$	2,804		$	2,899
	Net income	$	(10,567	)	$	2,804		$	3,859
	Net margin from continuing operations		(5.4	)%		1.4	%		1.6	%
Automotive and Other Operations:
	Total net sales and revenues	$	158,221		$	161,545		$	155,831
	Income (loss) from continuing operations before cumulative effect of accounting change	$	(12,816	)	$	(145	)	$	137
	Net income (loss)	$	(12,925	)	$	(145	)	$	1,097
Financing and Insurance Operations:
	Total revenues	$	34,383		$	31,972		$	30,006
	Net income	$	2,358		$	2,949		$	2,762

Total net sales and revenues decreased in 2005, compared with 2004, primarily due to decreased GMNA revenue of $9.8 billion, largely offset by increases in GMLAAM and GMAP revenue of $3.0 billion and $3.9 billion respectively, and increases at GMAC of $2.8 billion. Total net sales and revenues increased in 2004, compared with 2003, due to increases in GMA revenue of $6.6 billion, including increases in GMLAAM and GME revenue of $3.4 billion and $3.3 billion respectively, and increases in GMAC revenue of $1.8 billion.

Net income decreased $13.4 billion in 2005, compared to 2004, primarily driven by losses at GMNA due largely to unfavorable volume and product mix, restructuring charges, and charges for asset impairments. All other automotive regions also incurred losses in 2005. The GME loss was primarily driven by restructuring charges, offset partially by improved operating performance. The GMLAAM loss was largely attributable to a full valuation allowance taken against GM do Brasil’s deferred tax assets. The GMAP loss was mainly due to the write down of GM’s investment in FHI, as described above. GMAC’s net income declined to $2.4 billion, from $3.0 billion in 2004, primarily due to goodwill impairment charges.

In 2004, income from continuing operations decreased $95 million to $2.8 billion, compared to 2003. Automotive results improved by $614 million due to improvement at GMNA, a strong recovery at GMLAAM, and record income at GMAP, more than offsetting increased losses at GME. Other Operations’ 2004 results include an after-tax charge of $886 million related to the February 2005 settlement reached between GM and Fiat S.p.A. (Fiat) to terminate the Master Agreement (including the Put Option) and settle various disputes between the two companies. GMAC earned a record $3.0 billion net income, due to higher financing and insurance income.

2005 results included:


	•	Consolidated net loss of $10.6 billion, or $18.69 per share;

	•	Losses at all automotive regions;

	•	Charge recognized for announced GMNA restructuring plan;

	•	Charge recognized for contingent exposures relating to Delphi’s Chapter 11 filing, including under the benefit guarantees;

	•	Strong performance at GMAC despite challenging environment;

	•	Strong year-end cash position; and

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Consolidated Results — (concluded)


	•	Favorable returns on pension assets, resulting in U.S. Hourly and Salaried plans being overfunded on a Statement of Financial Accounting Standards No. 87 basis by approximately $6 billion.

More detailed discussions on the results of operations for the automotive regions, other operations, and GMAC can be found in the following sections.

GM Automotive and Other Operations Financial Review


			Years Ended December 31,

			2005			2004			2003

			(Dollars in millions)
Auto & Other:
	Total net sales and revenues		$	158,221		$	161,545		$	155,831
	Income (loss) from continuing operations before cumulative effect of accounting change		$	(12,816	)	$	(145	)	$	137
	(Loss) from discontinued operations			—			—			(219	)
	Gain on sale of discontinued operations			—			—			1,179
	Cumulative effect of accounting change			(109	)		—			—

		Net income (loss)	$	(12,925	)	$	(145	)	$	1,097

GMA net income (loss) by region:
	GMNA		$	(8,239	)	$	1,409		$	879
	GME			(1,198	)		(925	)		(466	)
	GMLAAM			(571	)		60			(329	)
	GMAP			(220	)		730			576

		Net income (loss)	$	(10,228	)	$	1,274		$	660

	Net margin			(6.4	)%		0.8	%		0.4	%
	GM global automotive market share			14.2	%		14.4	%		14.6	%
Other:
	Income (loss) from continuing operations		$	(2,697	)	$	(1,419	)	$	(523	)
	(Loss) from discontinued operations			—			—			(219	)
	Gain on sale of discontinued operations			—			—			1,179

		Net income (loss)	$	(2,697	)	$	(1,419	)	$	437

The decrease in 2005 total net sales and revenues, compared with 2004, resulted from decreased GMNA revenue of $9.8 billion, primarily from lower production and unfavorable product mix, largely offset by significant increases at GMLAAM and GMAP amounting to $3.0 billion and $3.9 billion respectively. The increase in 2004 total net sales and revenues, compared with 2003, was largely due to higher wholesale volumes at GMLAAM and GME and continued growth at GMAP, partially offset by lower GMNA revenue. GM’s global market share was 14.2% and 14.4% for the years 2005 and 2004, respectively. GMNA posted a 1.2 percentage point decline in market share largely as a result of sales declines within the large sport utility and pickup, mid sized utility and mid sized car segments. Market share gains were recognized in the other three automotive regions.

GMA’s 2005 net income decreased $11.5 billion compared with 2004. Each automotive region sustained a net loss for 2005, with volume and mix unfavorable overall. In addition, the restructuring charge at GMNA noted above, other restructuring charges at GME and GMAP, and asset impairments at all regions

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review — (continued)

contributed to the poor results for the year. GMA’s 2004 net income increased $614 million compared with 2003. GMNA’s income increased due to material cost savings and favorable tax items, partially offset by decreased production and negative mix. GMAP and GMLAAM both improved over 2003, while GME’s loss for 2004 increased due to continued price pressure and unfavorable exchange rates.

See discussion of Other Operations’ results below.

GM Automotive Regional Results


	*GM North America*


		Years Ended December 31,

		2005			2004			2003

		(Dollars in millions)
GMNA:
	Total net sales and revenues	$	104,755		$	114,545		$	116,310
	Net income (loss)	$	(8,239	)	$	1,409		$	879
	Net margin		(7.9	)%		1.2	%		0.8	%


			(Volume in thousands)
Production volume
	Cars			1,834		1,997		2,184
	Trucks			3,022		3,223		3,277
		Total GMNA		4,856		5,220		5,461
Vehicle unit sales
	Industry — North America			20,542		20,282		19,842
	GM as a percentage of industry			25.5	%	26.7	%	27.4	%
	Industry — U.S.			17,455		17,302		16,970
	GM as a percentage of industry			25.9	%	27.2	%	28.0	%
	GM cars			22.6	%	24.9	%	25.7	%
	GM trucks			28.5	%	29.0	%	30.0	%

North American industry vehicle unit sales increased 1.3% to 20.5 million units during 2005, and we expect unit sales to be relatively flat in 2006. Despite slight industry growth, GMNA’s production declined 7.0% to 4.9 million units as a result of the decreased market share of 1.2 percentage points along with a significant reduction of dealer inventories by approximately 200,000 units. GMNA ended the year with a market share of 25.5% for 2005, compared to 26.7% for 2004.

During 2005, industry vehicle unit sales in the United States increased to 17.5 million units, while GM’s U.S. market share decreased by 1.3 percentage points due to sales declines in segments where GM has high volume such as large sport utilities, mid sized utilities and mid sized cars. GM ended the year with a U.S. market share of 25.9% for 2005, versus 27.2% for 2004. GM’s U.S. car market share declined by 2.3 percentage points to 22.6%, while U.S. truck market share for the year was 28.5%, down 0.5 percentage point. Truck sales represented 61% of GM’s total U.S. vehicle unit sales in 2005, up slightly from 60% in 2004.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review — (continued)

GM North America — (continued)

Net loss from GMNA totaled $8.2 billion in 2005, compared to income of $1.4 billion and $879 million in 2004 and 2003, respectively. The deterioration in 2005 was due in part to various operating factors, including:


	•	Unfavorable product mix, which adversely affected net income by approximately $2.2 billion due primarily to reduced demand for GMNA’s large utility vehicles which were reaching the end of their product life cycle, as well as declines in sales of higher margin large cars;

	•	Production volume decreases of 7% attributable to GMNA market share decline and a significant reduction in dealer inventories, accounted for a decrease in net income of approximately $2.1 billion;

	•	Unfavorable material costs after factoring in the cost of government mandated product improvements accounted for a decrease in net income of approximately $700 million;

	•	Increased health-care expenses primarily due to the recognition of OPEB net actuarial losses, which are caused by escalating health care cost trends, and falling discount rates in the U.S., accounted for a decrease in net income of approximately $600 million. These 2005 health care cost increases do not reflect new health care initiatives with the UAW and salaried employees and retirees, which will benefit subsequent years; and

	•	Advertising and sales promotion cost increases, accounting for a decrease in net income of $500 million due to further efforts to increase product awareness.

In addition to the above items, GMNA recognized a fourth quarter 2005 restructuring charge of $1.7 billion, after tax, as a result of the GMNA restructuring initiatives announced in the fourth quarter of 2005 (refer also to subsequent discussion in Key Factors Affecting Future Results). These initiatives represent a critical step towards reducing structural costs given the high-cost manufacturing environment in the United States. The charge of $1.7 billion included $455 million, after tax, for the non-cash writedown of property, plants and equipment, comprised of $362 million for production facilities still in service at December 31, 2005, as well as other product specific assets of $93 million. The charge also included $1.2 billion, after tax, for employee costs, representing our best estimate of the wage and benefits costs that we will incur 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. Approximately 17,500 employees were affected and included in the restructuring charge. We have been discussing these provisions with the UAW in an effort to develop an agreed upon accelerated attrition program by which we can reduce the number of employees that are and will be in the JOBS bank in a cost effective manner. As part of these discussions, on March 22, 2006, GM, Delphi and the UAW reached a tentative agreement intended to reduce the number of U.S. hourly employees 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 GM, which may have the effect of reducing the number of employees that are or will be in the JOBS bank. This attrition program is expected to result in additional charges being recorded in 2006 as employees at locations that were not included in the North American manufacturing restructuring actions announced in November 2005 agree to participate. Under the agreement, GM and the UAW also agreed to discuss other options to address remaining surplus people at specific locations and all areas in which GM and the UAW can work together to close GM’s competitive gap with its foreign competition and reduce GM’s structural costs.

In 2005, GMNA also recognized after-tax impairment charges of $552 million. In the first quarter, GMNA recorded $84 million for the write-down to fair market value of various production facility assets ($82 million) and product specific assets ($2 million) in connection with the cessation of production at a Lansing, Michigan assembly plant. In the third quarter of 2005, as part of the business planning cycle, the carrying value of long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, were compared to the projected cash flows. Based on this review, GMNA concluded that certain

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review — (continued)

GM North America — (concluded)

product-specific assets, as well as certain office and production facilities, were not recoverable. Accordingly, in the third quarter of 2005 GMNA recorded an after-tax impairment charge of $468 million for assets still in service, comprised of $421 million of product-specific assets, and $47 million related to certain office and production facilities.

The increase in GMNA’s 2004 net income from 2003 was due in part to the effects of material cost savings and structural cost savings, partially offset by lower volume and unfavorable product mix. Additionally, 2004 net income includes the effect of GM’s contribution of approximately 11 million shares of XM Satellite Radio Holdings Inc. (XM) common stock to GM’s VEBA, which resulted in an after-tax gain to GMNA of $118 million. GMNA recognized tax benefits in 2004 of $540 million primarily as the result of U.S. and Mexico tax legislation and Canadian capital loss carryforwards, as well as a benefit related to the settlement of various prior year tax matters in the U.S. In addition, in the third quarter of 2004 GM completed its periodic review of products liability reserves, which comprehend all products liability exposure. This review resulted in an after-tax reduction to these reserves of approximately $250 million, in order to appropriately reflect the current level of exposure.

During 2003, GMNA incurred charges of $448 million, after tax, related to the October 2003 contract with the UAW, which provided for lump-sum payments and vehicle discount vouchers for retirees. In addition, GMNA adjusted a previously established reserve for idled workers, primarily related to the Janesville, Wisconsin plant, resulting in $103 million of net income, after tax. Also, GMNA incurred various structural cost adjustments, asset impairment and other charges, favorable interest income from settlements of prior year tax matters, and income related to the market valuation of XM warrants. These items netted to approximately $90 million of income for the year.

In the fourth quarter of 2004, GM announced plans to close its assembly plant in Baltimore, Maryland, with approximately 1,000 employees, and to lay off approximately 950 employees at GM’s assembly plant in Linden, New Jersey. In connection with these actions, GMNA recognized after-tax charges totaling $78 million in 2004 for impairment of production facilities. In addition, GMNA incurred after-tax charges in 2004 of $55 million for impairment of facilities not related to these actions, and $63 million for impairments of other product-specific assets. There were no employee idling or separation costs in conjunction with these impairments, since at the time it was believed employees would be redeployed.

In the fourth quarter of 2005, GMNA announced a four-point turnaround plan focused on improving results, and addressing factors contributing to the loss items described above. The top priority for the Corporation is to return GMNA’s operations to profitability and positive cash flow as soon as possible, via the systematic and aggressive implementation of our four-point turnaround plan. This plan is discussed in detail in the GM North American Restructuring Plan section of Key Factors Affecting Future Results found on page II-20.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review — (continued)


	*GM Europe*


	Years Ended December 31,

	2005			2004			2003

	(Dollars in millions)
GME total net sales and revenues	$	31,719		$	30,820		$	27,478
GME net (loss)	$	(1,198	)	$	(925	)	$	(466	)
GME net margin		(3.8	)%		(3.0	)%		(1.7	)%


		(Volume in thousands)
Production volume(1)			1,858		1,829		1,818
Vehicle unit sales
	Industry		20,970		20,763		19,588
	GM as a percentage of industry		9.5	%	9.4	%	9.3	%
GM market share — Germany			10.8	%	10.6	%	10.4	%
GM market share — United Kingdom			14.7	%	13.9	%	13.7	%


(1)	2004 and 2005 calendar years include GM-Avtovaz joint venture production

Industry vehicle unit sales in Europe increased slightly in 2005, by 1.0% over 2004, and GME’s total market share increased slightly to 9.5% from 9.4%. European industry vehicle unit sales are expected to be relatively flat in 2006. In the two largest markets in Europe, GM continued to increase market share: market share was 10.8% in Germany, a 0.2 percentage point increase over 2004; and in the United Kingdom market share was 14.7%, an increase of 0.8 percentage point over 2004.

Net loss from GME totaled $1.2 billion, $925 million, and $466 million, in 2005, 2004, and 2003, respectively. The increase in GME’s loss in 2005 over 2004 was due in part to the following factors:


	•	Restructuring charges totaling $673 million in connection with the restructuring plan announced in the fourth quarter of 2004, as well as costs related to the dissolution of GM’s powertrain and purchasing joint ventures with Fiat. The restructuring plan involves a reduction in workforce of up to 12,000 through 2007, largely in manufacturing operations in Germany. In December 2004, GM reached agreement with various labor unions in Europe on a framework for the restructuring plan. The charges in 2005 related to the separation of approximately 7,500 people. No charge was recognized in 2004 because the agreements were not yet finalized.

	•	Favorable material cost, structural costs, and product mix, which more than offset pricing and volume declines, resulting in an almost $370 million improvement in year over year performance.

In addition to the above items, GME recorded charges for impairment of product specific assets of $176 million and $234 million in 2005 and 2004, respectively. These charges were identified as part of the business planning cycles in the third quarter of 2005 and the fourth quarter of 2004, during which the carrying value of long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, was determined to exceed the projected cash flows.

The increase in GME’s loss in 2004 over 2003 was primarily due to continued negative pricing and unfavorable exchange rates with respect to the weakening of the U.S. dollar compared to the euro and Swedish krona, partially offset by favorable volume and mix, material cost savings and reduced structural costs. In addition, in 2004 GME’s net loss included an after-tax charge of $234 million for the impairment of various product-specific assets.

We have implemented a GME turnaround plan, which remains on track, and we expect to see more progress in 2006. In addition to the continued implementation of our significant cost reduction initiatives, we

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review — (continued)

GM Europe — (concluded)

expect to benefit from the introduction of new products such as the Opel Corsa and will continue to focus on the rollout of our multibrand strategy and particularly efforts to expand the Chevrolet brand.


	*GM Latin America/ Africa/ Mid-East*


	Years Ended December 31,

	2005			2004			2003

	(Dollars in millions)
GMLAAM total net sales and revenues	$	11,745		$	8,792		$	5,387
GMLAAM net income (loss)	$	(571	)	$	60		$	(329	)
GMLAAM net margin		(4.9	)%		0.7	%		(6.1	)%


		(Volume in thousands)
Production volume			775		716		547
Vehicle unit sales
	Industry		4,980		4,225		3,626
	GM as a percentage of industry		17.7	%	17.5	%	16.1	%
GM market share — Brazil			21.3	%	23.1	%	23.3	%

Improving economic conditions in Latin America resulted in significant industry growth in 2005, with the markets in Venezuela and Argentina increasing by approximately 70% and 34%, respectively. Brazil’s market grew more than 8% in 2005 compared to 10% in 2004. In addition, the South Africa market grew more than 25% in 2005 compared to 20% in 2004. We anticipate regional industry sales will show slower growth during 2006; however, growth should still remain positive. GMLAAM improved its regional market share by 0.2 percentage points to 17.7% in 2005 with a 19% increase in vehicle unit sales, to 881 thousand from 738 thousand in 2004.

In 2005, GMLAAM net sales and revenues improved by approximately 34% or about $3.0 billion compared to 2004. Improved volume and mix contributed $1.8 billion while favorable exchange rates and pricing contributed $0.9 billion and $0.3 billion, respectively. The 2004 increase in net sales and revenues of 63% or $3.4 billion over 2003 results is attributable to volume and mix related improvements of $1.7 billion, acquisition of the remaining interest in Delta Motors totaling $1.0 billion, and favorable exchange rates and pricing of $0.2 billion and $0.5 billion, respectively.

Net (loss) income from GMLAAM totaled $(571) million, $60 million, and $(329) million in 2005, 2004, and 2003, respectively. The deterioration in GMLAAM’s 2005 results compared to 2004 was due in part to the following factors:


	•	A full valuation allowance charge of $617 million taken against GM do Brasil’s deferred tax assets as it was determined that it is more likely than not that deferred taxes in GM’s Brazilian operations would not be realized; and

	•	Volume, product mix, and pricing improvements which exceeded losses from unfavorable exchange rate changes, primarily with respect to the Brazilian real, by approximately $40 million from 2004 to 2005.

In addition to the above items, the 2005 results include third quarter impairment charges of $99 million for assets still in service, determined by comparing projected cash flows to the book value of specific product-related assets and production facilities. Charges included $52 million, after tax, for product-specific assets, and $47 million, after tax, for production facilities. Unusually strong South American currencies have impacted

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review — (continued)

GM Latin America/ Africa/ Mid-East — (concluded)

the profitability of GMLAAM’s export business. Management’s decision to adjust export volumes resulted in lower future cash flows triggering the impairment charge.

In 2004, favorable volume and mix and positive pricing, partially offset by increased material and structural costs, drove improved results. In 2003, GMLAAM incurred asset impairment charges and unfavorable exchange effects, which were partially offset by net price increases.

Effective January 1, 2004, GM increased its ownership of Delta Motor Co. in South Africa to 100%, from 49% previously, moving from the equity method of accounting to full consolidation. The company is now known as General Motors South Africa.

Our focus for GMLAAM in 2006 is to continue to leverage our position in South Africa, accelerate our turnaround program in Brazil, and build on our strong performance in the Middle East and Andean region countries.


	*GM Asia Pacific*


	Years Ended December 31,

	2005			2004			2003

	(Dollars in millions)
GMAP total net sales and revenues	$	10,893		$	6,978		$	5,338
GMAP net income (loss)	$	(220	)	$	730		$	576
GMAP net margin		(2.0	)%		10.5	%		10.8	%


		(Volume in thousands)
Production volume(1)			1,562		1,333		420
Vehicle unit sales
	Industry		18,240		17,156		15,919
	GM as a percentage of industry		5.8	%	5.2	%	4.9	%
GM market share — Australia			17.8	%	19.4	%	20.4	%
GM market share — China			11.2	%	9.4	%	8.5	%


(1)	2004 and 2005 calendar years include GM Daewoo and Wuling joint venture production

Industry vehicle unit sales in the Asia Pacific region increased approximately 6.3% in 2005, to 18.2 million units, from 17.2 million units in 2004. This reflects slower growth in China than in previous years, where vehicle unit sales increased 13.2% to 5.9 million units in 2005, from 5.2 million units in 2004. During 2004 industry vehicle unit sales in China increased 15% over 2003 levels. We anticipate that the Asia Pacific region will remain the fastest growing automotive region in 2006, continuing its role as real catalyst for growth in automotive sales globally. GMAP increased its vehicle unit sales (including GM Daewoo Auto & Technology Company (GM Daewoo, formerly referred to as GM-DAT) and China affiliates) in the Asia Pacific region by 20% in the period, to 1.1 million units from 887 thousand in 2004. GMAP’s 2005 market share was 5.8%, compared to 5.2% in 2004. GMAP’s market share in China increased 1.8 percentage points to 11.2% in 2005, and China was GM’s second largest market for 2005.

Net income (loss) from GMAP totaled $(220) million, $730 million, and $576 million, in 2005, 2004, and 2003, respectively. The deterioration in GMAP’s 2005 results compared to 2004 was due in part to the following factors:


	•	Write-down of GM’s investment in FHI in the second quarter for $788 million, after-tax, as a result of FHI’s declining financial performance and the downward adjustments in their business plan in May

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GM Automotive and Other Operations Financial Review — (concluded)

GM Asia Pacific — (concluded)


		2005. This writedown was partially offset in the fourth quarter, when GM completed the sale of its investment in the common stock of 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; and

	•	Volume and product mix at GM Holden in Australia, as well as reduced equity income from higher costs associated with GM’s growth initiatives in China, were partially offset by favorable results from GM Daewoo, resulting in a decrease in net income of approximately $200 million from 2004 to 2005.

In addition to the above items, in the third quarter of 2005 GMAP recognized asset impairment charges of $45 million, after tax, for assets still in service at GM Holden, determined by comparing projected cash flows to the book value of assets. The charges were comprised of $23 million for product-specific assets and $22 million related to production facilities. In the fourth quarter of 2005, GMAP recognized $38 million of separation costs associated with restructuring activities that resulted in the idling of approximately 1,200 employees.

The increase in GMAP’s 2004 net income over 2003 was due to improved results at equity investees in Japan and GM Daewoo, as well as improved earnings at GM operations in Thailand and India, partially offset by reduced income at GM Holden.

In 2006, GMAP will continue to take advantage of the strong position and growth in China, leverage its capabilities at GM Daewoo, and execute the turnaround at GM’s Holden unit.

Other Operations


		Years Ended December 31,

		2005			2004			2003

		(Dollars in millions)
Other:
	Total net sales, revenues, and eliminations	$	(891	)	$	410		$	1,318
	Income (loss) from continuing operations	$	(2,697	)	$	(1,419	)	$	(523	)
	(Loss) from discontinued operations		—			—			(219	)
	Gain from sale of discontinued operations		—			—			1,179

	Net income (loss)	$	(2,697	)	$	(1,419	)	$	437

Other Operations’ net loss increased $1.3 billion in 2005 compared to 2004. The 2005 total net loss is primarily due to the impact of Delphi benefit guarantee charges offset by favorable income tax items. In the fourth quarter of 2005, an after-tax charge of $3.6 billion was recorded pertaining to the contingent exposures relating to Delphi’s Chapter 11 filing, including under the benefit guarantees (see subsequent discussion in Factors Affecting Future Results).

Income tax expense in 2005 is allocated to GM’s automotive regions based on tax rates used by management for evaluating their performance. Tax benefits realized in excess of those assigned to GMA are allocated to Other Operations, which totaled $1.6 billion in 2005.

In December 2004, GM wrote off the remaining balance of its investment in Fiat Auto Holdings B.V. (FAH), to Other Operations’ cost of sales, resulting in an after-tax charge of $136 million. On February 13, 2005, GM and Fiat reached a settlement agreement whereby GM paid Fiat approximately $2.0 billion, returned its 10% equity interest in 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

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Other Operations — (concluded)

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 or $1.56 per fully diluted share). 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.

Other Operations’ results include after-tax legacy costs of $477 million and $402 million for 2005 and 2004, respectively, related to employee benefit costs of divested businesses, primarily Delphi, for which GM has retained responsibility.

Discontinued Operations

In December 2003, GM split off Hughes by distributing Hughes common stock to the holders of GM Class H common stock in exchange for all the outstanding shares of GM Class H common stock. Simultaneously, GM sold its 19.8% retained economic interest in Hughes to The News Corporation Ltd. (News Corporation) in exchange for cash and News Corporation Preferred American Depositary Shares.

As of the completion of these transactions on December 22, 2003, the results of operations, cash flows, and the assets and liabilities of Hughes were classified as discontinued operations for all periods through such date presented in GM’s consolidated financial statements. The transactions resulted in an after-tax gain of approximately $1.2 billion classified as gain on sale of discontinued operations in GM’s consolidated statement of income for the year ended December 31, 2003. See Note 2 to the Consolidated Financial Statements for further discussion.

GMAC Financial Review

GMAC’s net income was $2.4 billion, $3.0 billion, and $2.7 billion for 2005, 2004, and 2003 respectively.


		Years Ended December 31,

		2005		2004		2003

		(Dollars in millions)
Financing operations		$	627	$	1,430	$	1,391
Mortgage operations			1,345		1,186		1,175
Insurance operations			411		352		162

	Net income	$	2,383	$	2,968	$	2,728

Net income from financing operations totaled $0.6 billion, $1.4 billion, and $1.4 billion in 2005, 2004, and 2003, respectively. The decrease in 2005 net income over 2004 was primarily due to goodwill impairment charges of $439 million, after tax, relating primarily to goodwill recognized in connection with the acquisition of GMAC’s commercial finance business, as well as lower net interest margins as a result of increased borrowing costs due to widening spreads and higher market interest rates. The decline in net interest margins was somewhat mitigated by lower consumer credit provisions, primarily as a result of lower asset levels, and the effect of improved used vehicle prices on terminating leases. The increase in 2004 net income over 2003 reflects improvement in earnings from international operations, lower credit loss provisions, improved vehicle remarketing results in North America and favorable tax items, partially offset by lower net interest margins.

Net income from mortgage operations totaled $1.3 billion, $1.2 billion, and $1.2 billion in 2005, 2004, and 2003, respectively. The increase in 2005 net income reflects increases in both the residential and commercial mortgage operations. GMAC’s 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 compared to 2004 largely due to record loan origination volume, higher gains on sales of loans and increases in fee and investment income. In 2004,

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

GMAC Financial Review — (concluded)

U.S. residential mortgage industry volumes declined by approximately 30% compared to 2003. However, despite the lower industry volumes, mortgage operations achieved market share gains, asset growth, improved mortgage servicing results and an increase in fee-based revenue in 2004 compared to 2003.

Net income from insurance operations totaled a record $411 million in 2005, and $352 million and $162 million in 2004 and 2003, respectively. The increase in 2005 reflects a combination of strong results achieved through increased premium revenue, 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. At December 31, 2004, the investment portfolio was valued at $7.3 billion, with net unrealized gains of $563 million.

As previously announced in October 2005, GM is pursuing the sale of a controlling interest in GMAC, with the goal of delinking GMAC’s credit rating from GM’s credit rating and renewing its access to low-cost financing. GM is currently in discussions with potential interested parties, and the process is ongoing. On March 23, 2006, GMAC completed the previously announced sale of a controlling interest in GMAC Commercial Mortgage.

Key Factors Affecting Future Results

The following discussion identifies the key factors, known events, and trends that could affect our future results.


	*GM North America Restructuring Plan*

The size of GM’s 2005 loss, most of which is related to GMNA, clearly demonstrates the need for significant changes in GM’s business model. A large part of those losses arises from GM’s legacy cost burden and the fixed nature of much of its cost base.

In response to these cost burdens, GM has been intently focusing, especially over the past year, on restructuring its operations to succeed in a more competitive global environment. GM has been systematically and aggressively implementing a four-point turnaround plan for GMNA’s business. The following is an update of the key elements of these plans and actions to date.


	Product Excellence

GMNA is keeping an intense focus on improving both revenue and contribution margin. Contribution margin is our revenues less material, freight, policy and warranty costs. GMNA increased capital spending by approximately $400 million in 2005 in support of new car and truck programs, despite financial pressures. GM anticipates total capital spending on product development in 2006 of $8.7 billion, of which $5.7 billion will be devoted to GMNA. The execution of new product introductions continues to be a major emphasis, as shown by the success of new entries such as the Chevrolet Cobalt, Impala, and HHR, the Hummer H3, Pontiac G6 and Solstice, Buick Lucerne, and Cadillac STS and DTS. Starting in 2006, GM will rapidly revitalize its product portfolio over the next two years with new full-sized sport utility vehicles and pick-up trucks, additional cross over vehicles, and a significantly expanded line up for Saturn. In 2006, approximately 29% of GMNA’s sales volume is expected to come from recently launched cars and trucks, as well as upcoming launch vehicles such as the Chevrolet Tahoe, Saturn Sky, GMC Yukon, Cadillac Escalade, and Saturn Aura. By 2007, GM expects more than 30% of GM’s sales volumes to come from these new vehicles. GMNA is reallocating capital and engineering to support more fuel-efficient vehicles, including hybrid vehicles in the United States, and is increasing production of active fuel management engines and six-speed transmissions. GM is also undertaking a major initiative in alternate fuels through sustainable technologies such as ethanol/gasoline blended (E85) FlexFuel vehicles. During 2006, GM will offer nine E85 FlexFuel models, bringing an additional 400,000 E85 FlexFuel vehicles into its fleet.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)


	*GM North America Restructuring Plan — (continued)*


	Revitalize Sales and Marketing Strategy

In January 2006, GM announced that it significantly lowered manufacturer’s suggested retail prices on vehicles accounting for about 80% of its automotive sales volume. This included every Chevrolet, Buick, and GMC model, as well as most Pontiac cars and trucks. This is the next step in GM’s “Total Value Promise” initiative in GMNA to emphasize the value it offers to consumers.

Clarifying, focusing, and differentiating the role of each North American brand continues to be an important goal. GM also continues to implement a more orderly and consistent alignment of its distribution system, especially among Pontiac, Buick, and GMC dealers. In addition, GM believes that its increased advertising in support of new products and its specific marketing initiatives to improve GM’s sales performance in certain major metropolitan markets will support growing GMNA’s business.


	Accelerate Cost Reductions and Quality Improvements

GM announced in November 2005 a significant move to reduce its structural costs in the manufacturing area. These plans include the cessation of operations at nine assembly, stamping, and powertrain facilities and three Service and Parts Operations facilities by 2008, and a reduction in manufacturing employment levels of approximately 30,000. GM expects that these actions, together with other efficiency and productivity initiatives, will result in efficiency and productivity gains and reduce excess capacity by one million units annually. This is in addition to the one million-unit annual reduction in assembly capacity that has been achieved over the 2002 to 2005 period.

In addition, we have been in discussions with the UAW in an effort to develop an agreed upon accelerated attrition program by which we can reduce the number of employees that are and will be in the JOBS bank in a cost effective manner. As part of these discussions, on March 22, 2006, GM, Delphi and the UAW reached a tentative agreement intended to reduce the number of U.S. hourly employees 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 GM, which may have the effect of reducing the number of employees that are or will be in the JOBS bank. Under the agreement, GM and the UAW also agreed to discuss other options to address remaining surplus people at specific locations and all areas in which GM and the UAW can work together to close GM’s competitive gap with its foreign competition and reduce GM’s structural costs. Further, GM’s management believes it is very important to negotiate a more competitive collective bargaining agreement with the UAW in 2007.

On February 7, 2006, GM announced its intention to substantially alter the pension benefits for current U.S. salaried employees. On March 7, 2006, GM announced the details of this plan, under which GM will freeze accrued benefits in the current plan, and implement a new benefit structure for future accruals, which will include a reduced defined benefit plan for some salaried employees and a new defined contribution plan for the other salaried employees. These pension plan changes will not affect current retirees or surviving spouses who are drawing benefits from the Salaried Retirement Program.

Reducing material costs, by far the largest cost item in the aggregate, remains a critical part of GMNA’s overall cost reduction plans. Despite higher commodity prices and troubled supplier situations, GMNA is targeting for 2006 a net reduction of $1 billion, prior to factoring in the cost of government mandated product improvements. GM believes that its utilization of the most competitive supply sources and its improvements to its global processes for product development are two major opportunities to reduce material costs.

GMNA is also seeking cost efficiencies in most other areas of the business including engineering, advertising, salaried employment levels, and indirect material costs. Engineering will seek to reduce

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)


	*GM North America Restructuring Plan — (continued)*

development costs through the use of common vehicle architectures that can be used on a global basis. Advertising will seek more efficient and focused spending in line with brand focus. In 2006, salaried headcount levels are expected to continue to decline. Our headcount reduction efforts have resulted in a 30% reduction to salaried headcount over the past five years.


	Address Health-Care Burden

Addressing the legacy cost burden of health care for employees and retirees in the United States is one of the critical challenges facing the Corporation.

In October 2005, GM and the UAW reached a tentative agreement to reduce GM’s health-care costs significantly while maintaining a high level of health-care benefits for its hourly employees and retirees in the United States. In December 2005, GM, the UAW and a class of hourly retirees finalized that agreement, which is subject to court approval, and submitted it for court approval.

The agreement is projected to reduce GM’s retiree health-care (OPEB) liabilities by about $15 billion, or 25% of the Corporation’s hourly health-care liability, reduce GM’s annual employee health-care expense by about $3 billion on a pre-tax basis during a seven-year amortization period, and result in cash flow savings estimated to be about $1 billion a year, after the agreement is fully implemented. The agreement will remain in effect until September 2011, after which either GM or the UAW may cancel the agreement upon 90 days written notice. Similarly, GM’s contractual obligations to provide UAW hourly retiree heath-care benefits extends to September 2011 and will continue thereafter unless terminated by GM or the UAW. This essentially means that the matters covered by this agreement will continue in effect for UAW retirees beyond the expiration of GM’s current collective bargaining agreement in September 2007.

The agreement also commits GM to make contributions to a new independent Defined Contribution Voluntary Employees’ Beneficiary Association (DC VEBA) that will be used to mitigate the effect of reduced GM health-care coverage on individual UAW hourly retirees. The new independent DC VEBA will be partially funded by GM contributions of $1 billion in each of three years, currently expected to be 2006, 2007 and 2011. GM will also make future contributions subject to provisions of the tentative agreement referencing profit sharing payments, wage deferral payments, increases in value of GM $1 ² / 3 par value common stock, and dividend payments. In addition, generally speaking, under the terms of the agreement, UAW retirees are responsible for annual increases in health-care benefit costs up to 3% and GM is responsible for increases in excess thereof.

Although GM continues to believe that it can lawfully make changes to retiree health-care benefits, GM and the UAW agreed as part of their tentative settlement to seek court approval. The agreement was finalized by GM, the UAW and a class of hourly retirees in December 2005 and submitted to a court for approval. GM is awaiting a final determination on the agreement by the court.

GM is also increasing the U.S. salaried workforce’s participation in the cost of health care. On February 7, 2006, GM announced that it will cap its contributions to salaried retiree health care at the level of its 2006 expenditures. The cap will take effect beginning January 1, 2007. This affects those employees and retirees who are eligible for the salaried post-retirement health-care benefit, their surviving spouses, and their eligible dependents. Salaried employees who were hired after January 1, 1993, are not eligible for retiree health-care benefits, so they are not affected by these changes. When average costs exceed established limits following 2006, additional plan changes that affect cost-sharing features of program coverage will occur, effective with the start of the next calendar year. Program changes may include, but are not limited to, higher monthly contributions, deductibles, coinsurance, out-of -pocket maximums, and prescription drug payments. Plan changes may be implemented in medical, dental, vision, and prescription drug plans.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)


	*GM North America Restructuring Plan — (concluded)*

GM currently expects to remeasure its OPEB liability for the revised health-care benefits for salaried retirees, which become effective in January 2007. The remeasurement is expected to result in a reduction of this liability of approximately $4.8 billion. The benefit associated with the reduction in the OPEB liability is expected to be amortized and reduce expenses at an annual pre-tax rate of $900 million for approximately eight years and have a favorable effect on GM’s 2006 pre-tax earnings estimated to be approximately $500 million. The majority of the OPEB liability reduction and related expense would accrue to GM’s North American automotive operations. Cash savings will be limited initially, but GM expects that annual cash savings from this action will grow to about $200 million within five years, and continue to increase after that.

These expected health-care cost-reduction results exclude any possible effect from the Delphi situation discussed below. GM is committed to meeting the challenges and opportunities related to the Delphi bankruptcy, and will work as constructively as possible with Delphi to support their objective of emerging from bankruptcy as a viable ongoing business.


	Expected Cost Reduction in North America

Based on the GMNA restructuring initiatives, in late 2005 we set a target of reducing structural costs in North America by $6 billion on a running rate basis by the end of 2006 and reducing net material costs by $1 billion in 2006. Running rate basis refers to the annualized cost savings into the foreseeable future anticipated to result from cost savings actions when fully implemented. Largely due to additional cost-reduction actions in the areas of U.S. salaried retiree health care and U.S. salaried employee pension benefits, we now expect to reduce structural costs in North America by an average of $7 billion on a running rate basis by the end of 2006. We expect $4 billion of the structural cost reduction to be realized during calendar year 2006. The $7 billion average reduction on a running rate basis takes into account the unfavorable impact on structural costs of $1 billion contributions that we have committed to make to a new DC VEBA in each of 2006, 2007, and 2011 in order to mitigate the effect of reduced GM health care coverage on individual UAW hourly retirees.

The expected annual structural cost reductions consist of:


	•	Approximately $3 billion related to the UAW health-care agreement. The $3 billion is comprised of approximately $1 billion principally related to OPEB service and interest costs expected to be realized each year during the six-year term of the agreement and approximately $2 billion which results from the amortization of a $15 billion gain related to the agreement over approximately a seven-year period, which coincides with the remaining service life of active employees. The annual savings will be allocated approximately 80% to GMNA and 20% to the corporate sector.

	•	Approximately $2 billion based on the capacity utilization and other manufacturing initiatives; and

	•	Approximately $2 billion based on additional productivity and cost efficiencies in other areas of the business, including engineering, advertising and salaried employment levels and benefits.

Execution of our four-point turnaround plan is critical to our success. Although a substantial portion of the cost savings arising from the UAW health-care agreement will be amortized over the six- and seven-year periods described above, GM expects to pursue other initiatives that will enable it to continue to achieve structural cost reductions in excess of this annual running rate beyond that date. GM believes that it has sufficient balance sheet strength to finance the four-point turnaround plan under reasonably foreseeable circumstances. Nevertheless, there are significant risks to GM’s liquidity position, including the possibility of an extended labor dispute at Delphi, any inability to access (or amend or replace) our existing standby bank credit facility, any claims that may be successfully asserted against GM under various financing agreements in view of GM’s recent restatement of its prior financial statements, the further deterioration in GMAC’s credit rating leading to a higher cost of capital, the failure to improve our competitive position through the 2007

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)


	*GM North America Restructuring Plan — (concluded)*

labor negotiations, and the payment to Delphi employees of any amounts incremental to previously announced charges for contingent exposures related to Delphi’s Chapter 11 filing. Further information about our liquidity can be found in the Liquidity and Capital Resources section below.


	*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. GM expects no immediate effect on its global automotive operations as a result of Delphi’s action. 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. These opportunities include reducing, over the long term, the significant cost penalty GM incurs in obtaining parts from Delphi, as well as improving the quality of systems, components and parts GM procures from Delphi as a result of the restructuring of Delphi through the Chapter 11 process. However, 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.

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

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)

Delphi Bankruptcy — (continued)

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.

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.

On March 22, 2006, 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 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 believes that the agreement will enhance the prospects for GM, the UAW and Delphi to reach a broad-based consensual resolution of issues relating to the Delphi restructuring. However, GM cannot provide any assurance that the bankruptcy court will approve of Delphi’s participation in the agreement (and if such approval is not obtained, GM and the UAW will have no obligations under the agreement) or that

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (continued)

Delphi Bankruptcy — (concluded)

enough employees will agree to participate in the attrition program to reduce employment levels at Delphi sufficient to provide the benefits we anticipate.

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.


	*GMAC Strategic Alternatives*

On October 17, 2005, GM announced that it is exploring the possible sale of a controlling interest in GMAC, with the goal of delinking GMAC’s credit rating from GM’s credit rating and renewing its access to low-cost financing. Although any transaction involving GMAC would reduce our interest in the earnings of GMAC, it is expected that the financial effects of that reduction would be offset by the value of any consideration we receive from a purchaser. We are working to finalize a transaction as rapidly as we can. Structuring a GMAC transaction is a complex endeavor and we cannot predict whether any transaction with respect to GMAC will occur, the terms of any transaction, the identity of any purchaser, or whether and over what period a transaction could achieve the principal strategic goals. Even if we do not complete a transaction involving GMAC, management believes that GMAC will be able to maintain the necessary liquidity to support GM vehicle sales with its vehicle financing activities in 2006.

A sale of a controlling interest in GMAC would trigger a need to reassess the valuation attributable to the interest we sell and the interest we retain in GMAC. Even if we do not sell a controlling interest in GMAC, we will continue to reassess the value of GMAC on a periodic basis.

GMAC also announced that it will continue to evaluate strategic and structural alternatives to help ensure that its residential mortgage business, Residential Capital Corp. (ResCap), retains its investment grade credit ratings.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Key Factors Affecting Future Results — (concluded)

Health-Care Liquidity Matters

In recent years, GM has paid its OPEB expenditures from operating cash flow, which reduces GM’s liquidity and cash flow from operations. GM’s OPEB spending was $4.3 billion in 2005, up $0.5 billion from 2004. GM’s total cash spending for health care in 2005 was $5.5 billion, up approximately $0.1 billion from 2004 spending levels. However, GM has VEBA and 401(h) trusts with assets totaling $19.1 billion in value as of December 31, 2005 that could be used to reimburse GM for its OPEB expenditures under certain circumstances. During each of the second and third quarters of 2005, GM withdrew $1 billion from its VEBA trust as a reimbursement for its retiree health care payments and life insurance costs. On October 3, 2005, GM withdrew an additional $1 billion from the VEBA and in December withdrew $121 million from the hourly VEBA and $55 million from the salaried VEBA. GM withdrew $1 billion from the hourly VEBA trust on February 1, 2006 and March 1, 2006, respectively. On a quarter-by-quarter basis, GM will evaluate the need for additional withdrawals as the cost of health care continues to adversely affect GM’s liquidity. GM’s OPEB liabilities also negatively affect GM’s credit ratings, which are discussed in the Status of Debt Ratings section below.

Because of the importance of OPEB liabilities to GM’s financial condition, GM management is pursuing an aggressive strategy on several fronts to mitigate the continued growth of these liabilities. These efforts include public policy initiatives, improvements to the health-care delivery system, enhanced consumer awareness of the effect of health-care choices and increased cost sharing with salaried and hourly employees. GM’s turnaround plan and future prospects could be materially adversely affected unless substantial progress is made on its health-care cost issues in the future.


	*Investigations*

GM has been cooperating with the government in connection with a number of investigations, including investigations concerning pension and OPEB and certain transactions between GM and Delphi.

The Securities and Exchange Commission (SEC) has issued subpoenas to GM in connection with various matters involving GM that it has under investigation. These matters include GM’s financial reporting concerning pension and OPEB, certain transactions between GM and Delphi, supplier price reductions or credits, and any obligation GM may have to fund pension and OPEB costs in connection with Delphi’s proceedings under Chapter 11 of the U.S. Bankruptcy Code. In addition, the SEC recently issued a subpoena in connection with an investigation of our transactions in precious metal raw materials used in our automotive manufacturing operations, and a federal grand jury recently issued a subpoena in connection with supplier credits.

Separately, SEC and federal grand jury subpoenas have been served on GMAC entities in connection with industry wide investigations into practices in the insurance industry relating to loss mitigation insurance products such as finite risk insurance.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES


	Restatements

GM has concluded an internal review of credits received from suppliers and the appropriateness of its accounting treatment for them during the years 2000 through 2005. The review indicated that GM erroneously recognized some supplier credits as income in the year in which they were received, when it should have instead amortized them over the future periods to which they were attributable. Upon completion of this review, GM filed revised periodic reports with the SEC in which GM restated its financial statements for these and other errors identified in all periods presented in those reports. The restated financial statements presented in those reports corrected the erroneous accounting for supplier credits, transactions between GM and Delphi, OPEB, pension, transactions involving precious metals, classifications of cash flows at ResCap, and other matters requiring out-of -period adjustments.

Certain financing agreements to which GM is a party contain customary covenants and representations with respect to the delivery and certification of financial statements, which generally require that those financial statements be materially accurate when delivered. As a result of GM’s recent restatement of its financial statements, it is possible that the counterparties under certain of those financing agreements may assert that GM is no longer entitled to the benefits under the agreements or that a default has occurred with regard to the financial statements which GM provided and which GM has now restated. These agreements consist principally of obligations in connection with sale/leaseback transactions and other lease obligations and do not include GM’s public debt indentures. Although GM has certain legal rights (such as the ability to cure) with respect to certain claims that could be asserted and there may be economic disincentives for third parties to raise certain claims to the extent they have them, there can be no assurance that one or more counterparties will not attempt to declare a default or exercise such rights or remedies as they may deem available, which could include acceleration, termination or other remedies, and the amounts involved could be material. To date, GM has not received any notices of any declaration of default or similar action from any such other counterparty, and GM continues to make required payments and satisfy other obligations under these agreements.

Liquidity and Capital Resources


	Automotive and Other Operations

Available Liquidity

GM believes it has sufficient liquidity, balance sheet strength and financial flexibility to meet its capital requirements over the short and medium-term under reasonably foreseeable circumstances. Over the long term, we believe that GM’s ability to meet its capital requirements will primarily depend on the successful execution of its four-point turnaround plan and the return of its North American operations to profitability and positive cash flow, and its ability to execute the globalization of its principal business functions. GM Auto & Other’s available liquidity includes its cash balances, marketable securities and readily-available assets of its VEBA trusts. At December 31, 2005, GM Auto & Other’s available liquidity was $20.4 billion compared with $23.3 billion at December 31, 2004. In March 2006, GM sold approximately 17% of Suzuki’s common stock for approximately $2.0 billion in cash, and continues to hold approximately 3.7% of Suzuki’s common stock. The amount of GM’s consolidated cash and marketable securities is subject to intra-month and seasonal fluctuations and includes balances held by various GM business units and subsidiaries worldwide that are needed to fund their operations.


		Years Ended December 31,

		2005		2004		2003

		(Dollars in billions)
Cash and cash equivalents		$	15.2	$	13.1	$	14.4
Other marketable securities			1.4		6.7		9.1
Readily-available assets of VEBA trusts			3.8		3.5		3.5

	Available Liquidity	$	20.4	$	23.3	$	27.0

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Automotive and Other Operations — (continued)

Available Liquidity — (continued)

In addition to the readily-available portion of GM’s VEBA trusts included in available liquidity, GM expects to have access to significant additional assets in its VEBA trusts over time to fund its future OPEB plan costs. Total assets in the VEBA trusts approximated $19.1 billion at December 31, 2005 versus $20.0 billion at December 31, 2004. The decline in these balances was primarily driven by $3.2 billion of withdrawals during 2005, partially offset by favorable asset returns during the year.

GM also has a $5.6 billion unsecured line of credit under a standby facility with a syndicate of banks that terminates in June 2008. GM has not previously drawn on this credit facility or its predecessor facilities and believes that it has sufficient liquidity over the short and medium term without drawing on this facility. GM believes that it has a good faith basis on which to make a borrowing request under this credit facility. However, in view of GM’s recent restatement of its prior financial statements, there is substantial uncertainty as to whether the bank syndicate would be required to honor such a request, and therefore there is a high risk that GM would not be able to borrow under this facility. GM believes that this matter is unlikely to be tested because GM has no current need or intention to draw on the existing facility. Moreover, GM is currently exploring the possibility of amending or replacing the existing facility with new terms that would, among other things, resolve any uncertainty regarding GM’s ability to borrow thereunder. There can be no assurance that GM will be successful in negotiating an amendment or replacement of the existing credit line or, if so, as to the amount, terms or conditions of any such amended or replacement facility.

GM believes that issues also may arise from its recent restatement of its prior financial statements under various financing agreements, which consist principally of obligations in connection with 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 agreements, including its legal rights (such as its ability to cure) with respect to any claims that could be asserted. While the amounts that might be subject to possible claims of acceleration, termination or other remedies under some or all of these agreements are uncertain, GM currently believes such amounts would likely not exceed approximately $3 billion. In addition, there may be economic disincentives for third parties to raise such claims to the extent they have them. GM believes that it has sufficient liquidity over the short and medium term, regardless of the resolution of these matters.

GM also has an additional $0.3 billion in undrawn committed facilities with various maturities and undrawn uncommitted lines of credit of $0.7 billion. In addition, GM’s consolidated affiliates with non-GM minority shareholders, primarily GM Daewoo, have a combined $1.5 billion in undrawn committed facilities. Other potential sources of liquidity could include the acceleration of additional dividends from GMAC and the sale of non-core assets.


	Cash Flow

The decrease in available liquidity to $20.4 billion at December 31, 2005 from $23.3 billion at December 31, 2004 was primarily a result of GM Auto & Other’s negative operating cash flow and the significant capital expenditures required to support the business, partially offset by withdrawals from GM’s VEBA trusts for its OPEB plans for reimbursement of retiree healthcare and life insurance benefits, cash dividends received from GMAC and net cash received and consolidated as part of transactions related to equity interests in affiliates.

For the year ended December 31, 2005, Auto & Other’s operating cash flow was breakeven, principally driven by the $(12.8) billion net loss from continuing operations before cumulative effect of accounting change. That result compares with operating cash flow of $1.2 billion and a net loss from continuing operations of $(145) million in 2004. In addition to the significant net loss, 2005 operating cash flow was unfavorably impacted by approximately $1.8 billion of cash payments made by GM to Fiat to terminate the Master Agreement and settle various disputes related thereto (GM paid a total of approximately $2.0 billion as a result of the Fiat settlement, approximately $1.8 billion of which was classified as operating cash flow, while

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Automotive and Other Operations — (continued)

Available Liquidity — (continued)

approximately $200 million, primarily related to the purchase of certain assets, was classified as investing cash flow), and by approximately $802 million of cash costs related to the GME restructuring initiative. During 2005, GM withdrew $3.2 billion from its VEBA trusts for its OPEB plans for reimbursement of retiree health care and life insurance benefits provided to eligible plan participants, improving operating cash flow by $3.2 billion.

Investments in marketable securities primarily consist of purchases, sales and maturities of highly-liquid corporate, U.S. government, U.S. government agency and mortgage-backed debt securities used for cash management purposes. During 2005, GM acquired approximately $2.6 billion of marketable securities while sales and maturities of marketable securities were approximately $7.7 billion.

Capital expenditures were a significant use of investing cash in 2005. Capital expenditures were $7.9 billion, up from $7.3 billion in 2004 primarily as a result of significant investment in GMNA required to support new product launches. Favorable investing cash flows included $2.5 billion of dividends from GMAC, up from $1.5 billion in 2004, $1.4 billion of cash acquired (net of investment) as a result of investment activity, and $846 million of proceeds from the sale of business units/equity investments. The $1.4 billion of cash acquired (net of investment) as a result of investment activity in 2005 was 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). Proceeds from the sale of business units/equity investments was primarily driven by GM’s sale of its interest in FHI, for which GM received approximately $800 million. In March 2006, GM sold its interest in Suzuki common stock for approximately $2.0 billion in cash. In 2006, GM anticipates total capital spending on product development, including GM’s full-size pickup trucks, in 2006 of $8.7 billion, of which $5.7 billion will be devoted to GMNA. We maintain a commitment to product development, but our substantial legacy costs give us less available cash to invest relative to some of our competitors.


	Debt

GM Auto & Other’s total debt at December 31, 2005 was $32.5 billion, of which $1.5 billion was classified as short-term and $31.0 billion was classified as long-term. At December 31, 2004, total debt was $32.5 billion, of which $2.1 billion was short-term and $30.4 billion was long-term.

Separate to the $1.5 billion of short-term debt, near-term North American term debt maturities include up to approximately $1.2 billion in 2007, primarily related to approximately $1.2 billion of convertible debentures that may be put to GM for cash settlement in March 2007, and approximately $1.3 billion of various maturities in 2008.

In order to provide financial flexibility to GM and its suppliers, GM maintains a trade payables program through GMACCF. The GMACCF program was implemented in the second quarter of 2005, replacing a larger program that GM maintained with General Electric Capital Corporation. Under the GMACCF program, GMAC Commercial Finance (GMACCF) pays participating GM suppliers the amount due to them from GM in advance of their contractual original due dates. In exchange for the early payment, these suppliers accept a discounted payment. On the original due date of the payables, GM pays GMACCF the full amount. At December 31, 2005, GM owed approximately $0.3 billion to GMACCF under the program, which amount is included in the balances of net payable to FIO and net receivable from Auto & Other in GM’s Supplemental Information to the Consolidated Balance Sheets, and is eliminated in GM’s Consolidated Balance Sheets.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Automotive and Other Operations — (concluded)

Available Liquidity — (concluded)


	Net Liquidity

Net liquidity, calculated as cash, marketable securities, and $3.8 billion ($3.5 billion at December 31, 2004) of readily-available assets of the VEBA trust less the total of loans payable and long-term debt, was a negative $12.1 billion at December 31, 2005, compared with a negative $9.2 billion at December 31, 2004.

Financing and Insurance Operations

GMAC’s consolidated assets totaled $320.5 billion at December 31, 2005, down 1.2% from $324.2 billion at December 31, 2004, which decrease was primarily attributable to a decrease in consumer finance receivables, primarily due to lower automotive finance receivables as a result of an increase in whole loan sales.

Consistent with the reduction in assets, GMAC’s total debt decreased to $253.2 billion at December 31, 2005 (excluding Commercial Mortgage debt of $4.3 billion, which has been reclassified as held for sale), compared to $267.8 billion at December 31, 2004 and $239.4 billion at December 31, 2003. GMAC’s 2005 year-end ratio of total debt to total stockholder’s equity was 11.9:1 compared to 12.0:1 at December 31, 2004. GMAC’s liquidity, as well as its ability to profit from ongoing activity, is in large part dependent upon its timely access to capital and the costs associated with raising funds in different segments of the capital markets. Part of GMAC’s strategy in managing liquidity risk has been to develop diversified funding sources across a global investor base. As an important part of its overall funding and liquidity strategy, GMAC maintains substantial bank lines of credit. These bank lines of credit, which totaled $47.0 billion at December 31, 2005, provide “back-up” liquidity and represent additional funding sources, if required.

GMAC currently has a $3.0 billion syndicated line of credit committed through June 2006, $4.4 billion committed through June 2008, and committed and uncommitted lines of credit of $3.6 billion and $11.0 billion, respectively. In addition, at December 31, 2005, New Center Asset Trust (NCAT) had an $18.5 billion committed liquidity facility. NCAT is a special purpose entity administered by GMAC for the purpose of funding assets as part of GMAC’s securitization funding programs. This entity funds the purchase of assets through the issuance of asset-backed commercial paper and represents an important source of liquidity to GMAC. At December 31, 2005, NCAT had commercial paper outstanding of $10.9 billion, which is not consolidated in the Corporation’s Consolidated Balance Sheet. In addition, GMAC has $126.8 billion in 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. This includes five year commitments that GMAC has entered into in 2005 with remaining capacity to sell up to $64 billion of retail automotive receivables to third party purchasers through 2010. The unused portion of these committed and uncommitted facilities totaled $87.7 billion at December 31, 2005.

Status of Debt Ratings

Standard & Poor’s, Moody’s, and Fitch currently rate GM’s and GMAC’s credit at non-investment grade. Dominion Bond Rating Services (DBRS) rates GM’s credit at non-investment grade and maintains an investment grade rating for GMAC. All major rating agencies rate ResCap at investment grade. The following table summarizes GM’s, GMAC’s and ResCap’s credit ratings as of March 27, 2006:

Senior Debt

Commercial Paper

Rating Agency

GMAC

ResCap

GMAC

ResCap

DBRS

B (High)

BBB (Low)

BBB

R-3 (Mid)

R-2 (Low)

R-2 (Mid)

Fitch

BBB-

Withdrawn

Moody’s

Ba1

Baa3

Not Prime

S&P

BBB-

B-3

B-1

A-3

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	Outlook

Rating Agency	GM	GMAC	ResCap

DBRS	Negative	Developing	Developing
Fitch	Rating Watch Negative	Evolving	Evolving
Moody’s	Review for Possible Downgrade	Review for Possible Downgrade	Review for Possible Downgrade
S&P	Negative	Developing	Developing

While GM experienced limited access to the capital markets in 2005 as a result of deterioration in its credit ratings, it was able to utilize available liquidity to meet its capital requirements. Similarly, due to the downgrade of its unsecured debt to non-investment grade, GMAC’s access to the unsecured capital markets was limited. GMAC was able to meet its capital requirements by accessing alternative funding sources, with a focus on secured funding and automotive whole loan sales. In addition, GMAC has been able to diversify its unsecured funding through the formation of ResCap, which in 2005 issued $5.25 billion in unsecured debt to investors.

Each of Standard and Poor’s, Moody’s, Fitch, and DBRS has recently downgraded GM’s senior debt ratings.

On October 10, 2005, Moody’s placed GM’s Ba2 and GMAC’s Ba1 senior unsecured ratings under review for a possible downgrade. On October 17, 2005, Moody’s announced a change in GMAC’s and ResCap’s review status to “direction uncertain” from “review for a possible downgrade.” In addition, Moody’s placed GMAC’s Non-Prime short–term rating on review for possible upgrade. On November 1, 2005, Moody’s downgraded GM’s long-term credit rating from Ba2 to B1 with a negative outlook. GMAC’s rating, at Ba1, and Rescap’s at Baa3, were left under review with direction uncertain. Moody’s affirmed the ratings of these entities on both November 21, 2005, and January 19, 2006. On February 21, 2006, Moody’s downgraded GM’s senior unsecured debt to B2 with a negative outlook from B1 under review for a possible downgrade. On March 16, 2006, Moody’s placed the senior unsecured ratings of GM, GMAC and ResCap under review for a possible downgrade. At the same time, Moody’s changed the review status of ResCap’s short-term P-3 ratings to review for possible downgrade from direction uncertain.

On October 3, 2005, Standard and Poor’s placed the ratings of GM, GMAC, and ResCap on CreditWatch with negative implications. On October 10, 2005, Standard and Poor’s downgraded GM’s long-term corporate credit rating from BB, CreditWatch with negative implications to BB minus CreditWatch with negative implications and, at the same time, downgraded GM’s short–term rating from B-1 CreditWatch with negative implications to B-2 CreditWatch with negative implications. The ratings for GMAC and Rescap were left at BB and BBB minus, respectively. The outlook for GMAC and ResCap remained on CreditWatch, but the implications on both entities were changed to “developing” from “negative.” On December 12, 2005, Standard and Poor’s resolved GM’s issuer credit rating by downgrading the rating from BB minus, CreditWatch with negative implications to B, outlook negative, and downgraded GM’s short–term ratings from B-2, CreditWatch with negative implications to B-3 outlook negative. GM’s ratings were removed from Creditwatch. The long-term ratings of GMAC and ResCap were unchanged at BB and BBB minus, respectively, both under CreditWatch with developing implications. GMAC’s and ResCap’s short–term ratings remained unchanged at B-1 and A-3 respectively, both under CreditWatch with developing implications.

On October 17, 2005 Fitch affirmed GM’s senior debt credit rating of BB and placed the ratings of GMAC and ResCap on Rating Watch Evolving with a rating of BB and BBB-minus, respectively. On November 9, 2005, Fitch downgraded GM’s senior unsecured ratings from BB to B-plus, Rating Watch Negative, leaving the ratings of GMAC and Rescap unchanged. GM’s short–term rating was withdrawn. GMAC’s and ResCap’s short–term ratings were left at B and F-3, respectively (both on Rating Watch

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Status of Debt Ratings — (concluded)

Evolving). Fitch affirmed the ratings of GM, GMAC, and ResCap on February 7, 2006. On March 1, 2006, Fitch downgraded GM’s senior unsecured rating from B+ to B. Fitch maintained the rating watch negative outlook for GM’s ratings.

On October 11, 2005, DBRS placed the ratings of GMAC and ResCap under review with developing implications. On October 14, 2005, DBRS downgraded GM’s long-term debt to BB with negative trends and confirmed GM’s commercial paper rating of R-3 (high), also with negative trends. On December 16, 2005, DBRS downgraded GM’s long–term debt to B (high) and GM’s short–term rating to R-3 (mid), both with negative trends.

While the aforementioned ratings actions have increased borrowing costs and limited access to unsecured debt markets, these outcomes have been mitigated by actions taken by GM and GMAC over the past few years to focus on an increased use of liquidity sources other than institutional unsecured markets that are not directly affected by ratings on unsecured debt, including secured funding sources beyond traditional asset classes and geographical markets, automotive whole loan sales, and use of bank and conduit facilities. Further reductions of GM’s and/or GMAC’s credit ratings could increase the possibility of additional terms and conditions contained in any new or replacement financing arrangements. As a result of specific funding actions taken over the past few years, management believes that GM and GMAC will continue to have access to sufficient capital to meet the Corporation’s ongoing funding needs over the short and medium-term. Notwithstanding the foregoing, management believes that the current ratings situation and outlook increase the level of risk for achieving the Corporation’s funding strategy and GMAC’s ability to sustain current level of asset originations over the long-term. In addition, the ratings situation and outlook increase the importance of successfully executing the Corporation’s plans for improvement of operating results. Management continuously assesses these matters 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 GMAC’s financial performance in order to provide GMAC with ratings independent 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 GMAC, with the goal of delinking GMAC’s credit rating from GM’s credit rating and renewing its access to low-cost financing. There can be no assurance that any such actions, if taken, would be successful in achieving a delinking of GMAC’s credit rating from GM’s credit rating by the rating agencies.

In addition, GMAC has been able to diversify its unsecured funding through the formation of ResCap. ResCap, which was formed as the holding company of GMAC’s residential mortgage businesses, successfully achieved an investment grade rating (independent from GMAC) and issued $4 billion of unsecured debt in the second quarter of 2005. Following the bond offering, in July 2005, ResCap closed a $3.5 billion syndication of its bank facilities consisting of a $1.75 billion syndicated term loan, $0.9 billion syndicated line of credit committed through July 2008 and a $0.9 billion 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 ($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.

Line of Credit Between GM and GMAC

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, given the differences in the timing of GM’s and GMAC’s peak funding requirements. The maximum amount outstanding on this line during the year was $3.3 billion with no amounts outstanding on this line at December 31, 2005. 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

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

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.

Pension and Other Postretirement Benefits

Plans covering 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.

GM’s policy with respect to its qualified pension plans is to contribute annually not less than the minimum required by applicable law and regulation, or to directly pay benefit payments where appropriate. As of December 31, 2005, all legal funding requirements had been met. GM made contributions to its pension plans 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 pension plan. In February 2006, GM contributed $1.7 million into its U.S. 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 GM salaried pension plan in 2005. GM does not expect to make any additional contributions into the salaried pension plan in 2006. GM expects to contribute or pay benefits of approximately $100 million to its other U.S. pension plan and $500 million to its primary non-U.S. pension plans, which include GM Canada Limited, Adam Opel and Vauxhall, in 2006.

GM’s U.S. hourly and salaried pension plans are overfunded by $7.5 billion in 2005 and $1.6 billion in 2004. This increase was primarily attributable to strong actual asset returns of approximately 13% in 2005. The non-U.S. pension plans are underfunded. The deficit for non-U.S. pension benefits increased from approximately $9 billion at the end of 2004 to $10.7 billion at the end of 2005. This increase was primarily due to declines in discount rates in various countries that GM sponsors plans.

GM also maintains hourly and salaried benefit plans that provide postretirement medical, dental, vision and life insurance to most U.S. retirees and eligible dependents. Certain of the non-U.S. subsidiaries have postretirement benefit plans, although most participants are covered by government sponsored or administered programs. GM’s U.S. OPEB plan was underfunded by $62.1 billion in 2005 and $53.8 billion in 2004. GM’s non-U.S. OPEB plans were underfunded by $3.8 billion in 2005 and $3.7 billion in 2004.

In 2005, GM withdrew a total of $3.2 billion from plan assets of its VEBA trusts for its OPEB plans for reimbursement of retiree healthcare and life insurance benefits provided to eligible plan participants. In 2004, GM contributed a total of $9 billion to its U.S. OPEB plans, primarily U.S. hourly and salaried VEBA for OPEB plan accounts. GM withdrew $1 billion from its VEBA trust on each of February 1, 2006 and March 1, 2006.

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Pension and Other Postretirement Benefits — (concluded)

The following benefit payments, which reflect estimated future employee services, as appropriate, are expected to be paid (dollars in millions):


					Other Benefits				Non-U.S. Other Benefits

	Pension Benefits						Gross				Gross
							Medicare				Medicare
			Primary		Gross Benefit		Part D		Gross Benefit		Part D
	U.S. Plans		Non-U.S. Plans		Payments		Receipts		Payments		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	$	—

Off-Balance Sheet Arrangements

GM and GMAC use off-balance sheet arrangements where the economics and sound business principles warrant their use. GM’s principal use of off-balance sheet arrangements occurs in connection with the securitization and sale of financial assets generated or acquired in the ordinary course of business by GMAC and its subsidiaries and, to a lesser extent, by GM. The assets securitized and sold by GMAC and its subsidiaries consist principally of mortgages, and wholesale and retail loans secured by vehicles sold through GM’s dealer network. The assets sold by GM consist principally of trade receivables.

In addition, GM leases real estate and equipment from various off-balance sheet entities that have been established to facilitate the financing of those assets for GM by nationally prominent lessors that GM believes are creditworthy. These assets consist principally of office buildings, warehouses, and machinery and equipment. The use of such entities 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 ownership interests in these entities and each is owned by institutions that are independent of, and not affiliated with, GM. GM believes that no officers, directors or employees of GM, GMAC, or their affiliates hold any direct or indirect equity interests in such entities.

The amounts outstanding in off-balance sheet facilities used by GM in its FIO reportable segment have increased over the past few years as GMAC continues to use securitization transactions that, while similar in legal structure to off-balance sheet securitizations, are accounted for as secured financings and are recorded as receivables and debt on the balance sheet.

Assets in off-balance sheet entities were as follows (dollars in millions):


		December 31

Automotive and Other Operations		2005		2004

Assets leased under operating leases		$	2,430	$	2,553
Trade receivables sold(1)			708		1,210

	Total	$	3,138	$	3,763

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Off-Balance Sheet Arrangements — (concluded)


Financing and Insurance Operations

Receivables sold or securitized:
	— Mortgage loans		$	99,084	$	79,043
	— Retail finance receivables			6,014		5,615
	— Wholesale finance receivables			21,421		21,291

		Total	$	126,519	$	105,949


(1)	In addition, trade receivables sold to GMAC were $525 million as of December 31, 2005 and $549 million as of December 31, 2004.

Contractual Obligations and Other Long-Term Liabilities

GM has the following minimum commitments under contractual obligations, including purchase obligations, as defined by the SEC. A “purchase obligation” is defined as an agreement to purchase goods or services that is enforceable and legally binding on GM and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Other long-term liabilities are defined as long-term liabilities that are reflected on GM’s balance sheet under GAAP. Based on this definition, the tables below include only those contracts which include fixed or minimum obligations. It does not include normal purchases, which are made in the ordinary course of business.

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

Contractual Obligations and Other Long-Term Liabilities — (continued)

The following table provides aggregated information about our Auto & Other segment’s outstanding contractual obligations and other long-term liabilities as of December 31, 2005.

Automotive and Other Operations


			Payments due by period

			2006			2007-2008			2009-2010			2011 and after		Total

			(dollars in millions)
Debt			$	1,519		$	2,847		$	589		$	27,648	$	32,603
Capital lease obligations				174			597			251			573		1,595
Operating lease obligations				630			1,472			895			1,323		4,320
Contractual commitments for capital expenditures				745			15			—			—		760
Other contractual commitments:
	Postretirement benefits(1)			3,517			3,827			—			—		7,344
		Less: VEBA assets(2)		(3,517	)		(3,827	)		—			—		(7,344	)

	Net			—			—			—			—		—
	Material			1,079			1,676			1,262			332		4,349
	Information technology(3)			333			179			4			1		517
	Marketing			1,647			634			429			115		2,825
	Facilities			201			227			178			445		1,051
	Rental car repurchases			8,347			—			—			—		8,347
	Policy, product warranty and recall campaigns liability			4,480			4,123			482			43		9,128

Total contractual commitments			$	19,155		$	11,770		$	4,090		$	30,480	$	65,495

Remaining balance postretirement benefits			$	767		$	5,438		$	10,189		$	61,203	$	77,597
		Less: VEBA assets(2)		(767	)		(5,438	)		(5,557	)		—		(11,762	)

	Net		$	—		$	—		$	4,632		$	61,203	$	65,835

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 March 2007, ahead of its scheduled maturity after 2011.


(1)	Amounts include postretirement benefits under the current contractual labor agreements in North America. The remainder of the estimated liability, for benefits beyond the current labor agreement and for essentially all salaried employees, is classified under remaining balance of postretirement benefits.

(2)	Total VEBA assets were allocated based on projected spending requirements. Amount includes $1.0 billion VEBA withdrawal and $0.2 billion VEBA withdrawal in the fourth quarter of 2005.

(3)	Does not reflect the effect of the January 2006 agreements with information technology providers.

The combined U.S. hourly and salaried pension plans were $7.5 billion overfunded on a Statement of Financial Accounting Standards No. 87 Basis at year-end 2005. As a result, and under normal conditions, GM does not expect to make any contribution to its U.S. hourly and salaried pension plans for the foreseeable future.

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Contractual Obligations and Other Long-Term Liabilities — (continued)

The following table provides aggregated information about our FIO segments outstanding contractual obligations and other long-term liabilities as of December 31, 2005.

Financing and Insurance Operations


		Payments due by period

								2011 and
		2006		2007-2008		2009-2010		after		Total

		(Dollars in millions)
Debt		$	82,054	$	59,512	$	18,801	$	93,386	$	253,753
Operating lease obligations			201		304		161		158		824
Mortgage purchase and sale commitments			24,619		3,463		—		70		28,152
Lending commitments			18,500		2,213		669		4,493		25,875
Commitments to remit excess cash flows on certain loan portfolios			—		—		—		4,305		4,305
Commitments to sell retail automotive receivables			9,000		12,000		12,000		—		33,000
Commitments to provide capital to equity method investees			553		90		107		287		1,037
Purchase obligations			150		77		13		—		240

	Total contractual commitments	$	135,077	$	77,659	$	31,751	$	102,699	$	347,186

Book Value per Share

Book value per share represents the net assets of the Corporation divided by the number of outstanding shares and was determined based on the liquidation rights of the common stockholders. Book value per share of GM $1 ² / 3 par value common stock decreased to $25.81 at December 31, 2005, from $48.41 at December 31, 2004.

Book value per share is a meaningful financial measure for GM, as it provides investors an objective metric based on GAAP that can be compared to similar metrics for competitors and other industry participants. The book value per share can vary significantly from the trading price of common stock since the latter is driven by investor expectations about a variety of factors, including the present value of future cash flows, which may or may not warrant financial statement recognition under GAAP.

As of December 31, 2005, GM’s book value per share was significantly higher than the trading price of its $1 ² / 3 par value common stock. GM believes that this difference is driven mainly by marketplace uncertainty surrounding future events at GM, such as those matters discussed in the Risk Factors section above.

We also believe the fact that GM’s book value exceeds the recent trading price of its $1 ² / 3 par value common stock is a potential indicator of impairment. Presently, none of these uncertainties warrant modification to the amounts reflected in GM’s consolidated financial statements.

Dividends

Dividends may be paid on our $1 ² / 3 par value common stock only when, as, and if declared by GM’s Board of Directors in its sole discretion out of amounts available for dividends under applicable law. At December 31, 2005, the amount of our capital surplus plus retained earnings on a GAAP basis was about $17.6 billion. Under Delaware law, our board may declare dividends only to the extent of our statutory “surplus” (which is defined as total assets minus total liabilities, in each case at fair market value, minus

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Contractual Obligations and Other Long-Term Liabilities — (concluded)

statutory capital), or if there is no such surplus, out of our net profits for the then current and/or immediately preceding fiscal year.

GM’s policy is to distribute dividends on its $1 ² / 3 par value common stock based on the outlook and indicated capital needs of the business. Cash dividends per share of GM $1 ² / 3 par value common stock were $2.00 in 2005, 2004, and 2003. At the February 6, 2006 meeting of the GM Board of Directors, the board approved the reduction of the quarterly dividend on GM $1 ² / 3 par value common stock from $0.50 per share to $0.25 per share, effective for the first quarter of 2006, which was paid on March 10, 2006 to holders of record as of February 16, 2006.

Employment and Payrolls


Worldwide employment at December 31, (in thousands)		2005		2004		2003

GMNA			173		181		190
GME(1)			63		61		62
GMLAAM			31		29		23
GMAP(2)			31		15		14
GMAC			34		34		32
Other			3		4		5

	Total employees		335		324		326

Worldwide payrolls excluding benefits (in billions)		$	21.5	$	21.5	$	20.9
U.S. hourly payrolls excluding benefits (in billions)(3)		$	8.0	$	8.7	$	8.9
Average labor cost per active hour worked U.S. hourly(4)		$	81.18	$	73.73	$	78.39


(1)	2005 includes approximately 7,000 employees added from a former powertrain joint venture with Fiat.

(2)	2005 includes approximately 13,000 employees added as the result of the consolidation of GM Daewoo.

(3)	Includes employees “at work” (excludes laid-off employees receiving benefits).

(4)	Includes U.S. hourly wages and benefits divided by the number of hours worked.

Critical Accounting Estimates

Accounting policies are integral to understanding this MD&A. The consolidated financial statements of GM are prepared in conformity with GAAP, which requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. GM’s accounting policies are described in Note 1 to the Consolidated Financial Statements. Critical accounting estimates are described in this section. An accounting estimate is considered critical if: the estimate requires management to make assumptions about matters that were highly uncertain at the time the estimate was made; different estimates reasonably could have been used; or if changes in the estimate that would have a material impact on the Corporation’s financial condition or results of operations are reasonably likely to occur from period to period. Management believes that the accounting estimates employed are appropriate and resulting balances are reasonable; however, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. The Corporation has discussed the development, selection and disclosures of these critical accounting estimates with the Audit Committee of GM’s Board of Directors, and the Audit Committee has reviewed the Corporation’s disclosures relating to these estimates.

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Critical Accounting Estimates — (continued)


	*Pension and Other Postretirement Employee Benefits (OPEB)*

Pension and OPEB costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions include factors such as discount rates, health care cost trend rates, expected return on plan assets, mortality rates, retirement rates, and rate of compensation increase, discussed below:


	•	Discount rates. For 2005, our discount rates are based on creating a hypothetical portfolio of high quality bonds (rated AA by a recognized rating agency) for which the timing and amount of cash inflows approximates the estimated outflows of the defined benefit plan.

	•	Health care cost trend rate. Our health-care cost trend rate is based on historical retiree cost data, near term health care outlook, including appropriate cost control measures implemented by GM, and industry benchmarks and surveys.

	•	Expected return on plan assets. Our expected return on plan assets is derived from detailed periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risk and correlations for each of the asset classes that comprise the fund’s asset mix, and recent and long-term historical performance.

	•	Mortality rates. Mortality rates are based on actual and projected plan experience.

	•	Retirement rates. Retirement rates are based on actual and projected plan experience.

	•	Rate of compensation increase. The rate of compensation increase for final pay plans reflects our long-term actual experience and our outlook, including contractually agreed upon wage rate increases for represented hourly employees.

In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect GM’s pension and other postretirement obligations and future expense. As of December 31, 2005, GM had unrecognized actuarial losses of $32.1 billion for its U.S. and non U.S. pension plans, and $32.3 billion for its U.S. and non U.S. OPEB plans. These balances were accumulated by differences in actual experience compared to original assumptions accumulated over several years, in particular, the general trend of lower discount rates, driven by interest rate environments, as well as escalating health care cost trend rates. GM amortizes these amounts over the future working lives of the plan participants, accordingly higher levels of unrecognized actuarial losses will have unfavorable impacts on reported pension and OPEB expense. The recognized net actuarial losses component of total U.S. and non U.S. pension and OPEB expense for 2005, 2004, and 2003 was $4.7 billion, $3.2 billion, and $2.7 billion, respectively. The increases to the total recognized net actuarial losses for U.S. and non U.S. pension and OPEB expense in 2005, 2004, and 2003 were $1.4 billion, $0.6 billion, and $1.5 billion, respectively. The balance sheet classification of these unrecognized losses is the subject of a current FASB project.

GM has established for its U.S. pension plans a discount rate of 5.70% for year-end 2005, which represents a 10 basis point increase from the 5.60% discount rate used at year-end 2004. GM’s U.S. pre-tax pension expense is forecasted to decrease from approximately $1.3 billion in 2005, excluding curtailments and settlements, to approximately $0.6 billion in 2006 due to the approximately 13% actual return on plan assets in 2005.

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Critical Accounting Estimates — (continued)

The following information illustrates the sensitivity to a change in certain assumptions for U.S. pension plans (as of December 31, 2005 the projected benefit obligation (PBO) for U.S. pension plans was $89 billion and the minimum pension liability charged to equity with respect to U.S. pension plans was $109 million net of tax):


			Effect on
	Effect on 2006		December 31, 2005
Change in Assumption	Pre-Tax Pension Expense		PBO

25 basis point decrease in discount rate	+$	150 million	+$	2.3 billion
25 basis point increase in discount rate	-$	160 million	-$	2.2 billion
25 basis point decrease in expected return on assets	+$	220 million		—
25 basis point increase in expected return on assets	-$	220 million		—

GM’s U.S. hourly pension plans generally provide covered U.S. hourly employees with pension benefits of negotiated, flat dollar amounts for each year of credited service earned by an individual employee. Formulas providing for such stated amounts are contained in the prevailing labor contract. Consistent with GAAP, the 2005 pre-tax pension expense and December 31, 2005 PBO do not comprehend any future benefit increases beyond the amounts stated in the currently prevailing contract that expires in September 2007. The current cycle for negotiating new labor contracts is every four years. There is no past practice of maintaining a consistent level of benefit increases or decreases from one contract to the next. However, the following data illustrates the sensitivity of pension expense and PBO to hypothetical assumed changes in future basic benefits. A 1% increase in the basic benefit for U.S. hourly employees would result in a $140 million increase in 2006 pre-tax pension expense and a $660 million increase in the December 31, 2005 PBO. A 1% decrease in the same benefit would result in a $130 million decrease in 2006 pre-tax pension expense and a $610 million decrease in the December 31, 2005 PBO.

These changes in assumptions would have no effect on GM’s funding requirements. In addition, at December 31, 2005, a 25 basis point decrease in the discount rate would decrease stockholders’ equity by $19.5 million, net of tax; a 25 basis point increase in the discount rate would increase stockholders’ equity by $19.5 million, net of tax. The impact of greater than a 25 basis point decrease/increase in discount rate would not be proportional to the first 25 basis point decrease/increase in the discount rate.

GM has established for its U.S. OPEB plans a discount rate of 5.45% for year-end 2005, which represents a 30 basis point reduction from the 5.75% discount rate used at year-end 2004.

The following table illustrates the sensitivity to a change in the discount rate assumption related to GM’s U.S. OPEB plans (the U.S. accumulated postretirement benefit obligation (APBO) was a significant portion of GM’s worldwide APBO of $84.9 billion as of December 31, 2005):


	Effect on 2006		Effect on
	Pre-Tax OPEB		December 31, 2005
Change in Assumption	Expense		APBO

25 basis point decrease in discount rate	+$	220 million	+$	2.6 billion
25 basis point increase in discount rate	-$	230 million	-$	2.4 billion

GM assumes a 10% initial U.S. health-care cost trend rate for the 2006 calendar year and a 5.0% ultimate U.S. health-care cost trend rate projected for calendar year 2012 and beyond as of December 31, 2005. A one percentage point increase in the assumed U.S. health care trend rates for all periods would have increased the U.S. APBO by $9.3 billion at December 31, 2005, and the 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 aggregate service and interest cost components of non-pension postretirement benefit expense for 2005 by $516 million.

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Critical Accounting Estimates — (continued)

The above sensitivities reflect the effect of changing one assumption at a time. It should be noted that economic factors and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not necessarily linear.

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.

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Critical Accounting Estimates — (continued)

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.


	*Sales Allowances*

At the later of the time of sale or the time an incentive is announced to dealers (applies to vehicles sold by GM and in dealer inventory), GM records as a reduction of revenue the estimated impact of sales allowances in the form of dealer and customer incentives. There may be numerous types of incentives available at any particular time. Some factors used in estimating the cost of incentives include the volume of vehicles that will be affected by the incentive programs offered by product and the rate of customer acceptance of any incentive program. If the actual number of affected vehicles differs from this estimate, or if a different mix of incentives is actually paid, the sales allowances could be affected.


	*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 to the Consolidated Financial Statements for the effect of retroactive adjustments to the liability for pre-existing warranties.


	*Impairment of Long-Lived Assets*

GM periodically reviews the carrying value of its long-lived assets held and used, other than goodwill and intangible assets with indefinite lives, and assets to be disposed of when events and circumstances warrant such a review. This review is performed using estimates of future cash flows. If the carrying value of a long-lived asset is considered impaired, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset exceeds its fair value.


	*Postemployment Benefits*


	*Allowance for Credit Losses*

The allowance for credit losses is management’s estimate of incurred losses in GMAC’s 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 estimated realizable value of collateral where applicable and the adequacy of the allowance for credit losses, based on historical and current trends and other factors affecting credit quality losses. 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.

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Critical Accounting Estimates — (concluded)


	*Investments in Operating Leases*

GMAC’s investments in its leasing portfolio represent an estimate of the realizable values of the assets which is based on the residual value established at contract inception. GMAC establishes residual values at contract inception by using independently published residual value guides. Management reviews residual values periodically to determine that recorded amounts are appropriate and the operating lease assets have not been impaired. GMAC actively manages the remarketing of off-lease vehicles to maximize the realization of their value. Changes in the value of the residuals or other external factors impacting GMAC’s future ability to market the vehicles under prevailing market conditions may impact the realization of residual values. 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.


	*Mortgage Servicing Rights*

The Corporation capitalizes mortgage servicing rights, which represents the capitalized value associated with the right to receive future cash flows in connection with the servicing of 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. 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.

The Corporation capitalizes the cost of originated mortgage servicing rights based upon the relative fair market value of the underlying mortgage loans and mortgage servicing rights at the time of sale or securitization of the underlying mortgage loan. 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 SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” 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 mortgage servicing rights are hedged as part of the Corporation’s risk management program. Mortgage servicing rights that do not receive hedge accounting treatment are carried at lower of cost or fair value.


	*Accounting for Derivatives and Other Fair Value Measurements*

The Corporation uses derivatives in the normal course of business to manage its exposure to fluctuations in commodity prices and interest and foreign currency rates. The Corporation accounts for its derivatives on the Consolidated Balance Sheet as assets or liabilities at fair value in accordance with SFAS No. 133. Such accounting is complex and requires significant judgments and estimates involved in the estimating of fair values in the absence of quoted market prices.

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New Accounting Standards

In December 2004, the Financial Accounting Standards Board (FASB) revised Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS No. 123R), requiring companies to record share-based payment transactions as compensation expense at fair market value. SFAS No. 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 GM as of 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 No. 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 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.

Forward-Looking Statements

In this report, in reports subsequently filed by GM with the SEC on Form 10-Q and filed or furnished on Form 8-K, and in related comments by management of GM, our use of the words “expect,” “anticipate,” “estimate,” “forecast,” “initiative,” “objective,” “plan,” “goal,” “project,” “outlook,” “priorities,” “target,” “intend,” “evaluate,” “pursue,” “seek,” “may,” “would,” “could,” “should,” “believe,” “potential,” “continue,” “designed,” “impact,” or the negative of any of those words or similar expressions is intended to identify forward-looking statements. All statements in subsequent reports which GM may file with the SEC on Form 10-Q and filed or furnished on Form 8-K, other than statements of historical fact, including without limitation, statements about future events and financial performance, are forward-looking statements that involve certain risks and uncertainties. While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable when made, these statements are not guarantees of any events or financial results, and GM’s actual results may differ materially due to numerous important factors that may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following:


	•	The ability of GM to realize production efficiencies, to achieve reductions in costs as a result of the turnaround restructuring and health care cost reductions and to implement capital expenditures at levels and times planned by management;

	•	The pace of product introductions;

	•	Market acceptance of the Corporation’s new products;

	•	Significant changes in the competitive environment and the effect of competition in the Corporation’s markets, including on the Corporation’s pricing policies;

	•	Our ability to maintain adequate liquidity and financing sources and an appropriate level of debt;

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Forward-Looking Statements — (continued)


	•	Restrictions on GMAC’s and ResCap’s ability to pay dividends and prepay subordinated debt obligations to us;

	•	Changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates;

	•	Costs and risks associated with litigation;

	•	The final results of investigations and inquiries by the SEC;

	•	Changes in our accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, including the range of estimates for the Delphi pension benefit guarantees, which could result in an impact on earnings;

	•	Changes in relations with unions and employees/retirees and the legal interpretations of the agreements with those unions with regard to employees/retirees;

	•	Negotiations and bankruptcy court actions with respect to Delphi’s obligations to GM, negotiations with respect to GM’s obligations under the pension benefit guarantees to Delphi employees, and GM’s ability to recover any indemnity claims against Delphi;

	•	Labor strikes or work stoppages at GM or its key suppliers such as Delphi or financial difficulties at GM’s key suppliers such as Delphi;

	•	Additional credit rating downgrades and the effects thereof;

	•	The effect of a potential sale or other extraordinary transaction involving GMAC on the results of GM’s and GMAC’s operations and liquidity;

	•	Other factors affecting financing and insurance operating segments’ results of operations and financial condition such as credit ratings, adequate access to the market, changes in the residual value of off-lease vehicles, changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate, and changes in our contractual servicing rights;

	•	Shortages of and price increases for fuel; and

	•	Changes in economic conditions, commodity prices, currency exchange rates or political stability in the markets in which we operate.

In addition, GMAC’s actual results may differ materially due to numerous important factors that are described in GMAC’s most recent report on SEC Form 10-K, which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following:


	•	The ability of GM to complete a transaction regarding a controlling interest in GMAC while maintaining a significant stake in GMAC, securing separate credit ratings and low cost funding to sustain growth for GMAC and ResCap, and maintaining the mutually beneficial relationship between GMAC and GM;

	•	Significant changes in the competitive environment and the effect of competition in the Corporation’s markets, including on the Corporation’s pricing policies;

	•	Our ability to maintain adequate financing sources;

	•	Our ability to maintain an appropriate level of debt;

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Forward-Looking Statements — (concluded)


	•	The profitability and financial condition of GM, including changes in production or sales of GM vehicles, risks based on GM’s contingent benefit guarantees and the possibility of labor strikes or work stoppages at GM or at key suppliers such as Delphi;

	•	Funding obligations under GM and its subsidiaries’ qualified U.S. defined benefits pension plans;

	•	Restrictions on ResCap’s ability to pay dividends and prepay subordinated debt obligations to us;

	•	Changes in the residual value of off-lease vehicles;

	•	Changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which our mortgage subsidiaries operate;

	•	Changes in our contractual servicing rights;

	•	Costs and risks associated with litigation;

	•	Changes in our accounting assumptions that may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings;

	•	Changes in the credit ratings of GMAC or GM;

	•	The threat of natural calamities;

	•	Changes in economic conditions, currency exchange rates or political stability in the markets in which we operate; and

	•	Changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations.

Investors are cautioned not to place undue reliance on forward-looking statements. GM undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other such factors that affect the subject of these statements, except where expressly required by law.

* * * * *


Item 7A.	*Quantitative and Qualitative Disclosures About Market Risk*

GM, through various market risk sensitive instruments, is exposed to market risk from changes in foreign currency exchange rates, interest rates, and certain commodity and equity security prices. GM enters into a variety of foreign exchange, interest rate, and commodity forward contracts and options, primarily to maintain the desired level of exposure arising from these risks. A risk management control system is utilized to monitor foreign exchange, interest rate, commodity and equity price risks, and related hedge positions.

A discussion of GM’s accounting policies for derivative financial instruments is included in Note 1 to the GM Consolidated Financial Statements. Further information on GM’s exposure to market risk is included in Notes 22 and 23 to the Consolidated Financial Statements.

The following analyses provide quantitative information regarding GM’s exposure to foreign currency exchange rate risk, interest rate risk, and commodity and equity price risk. GM uses a model to evaluate the sensitivity of the fair value of financial instruments with exposure to market risk that assumes instantaneous, parallel shifts in exchange rates, interest rate yield curves, and commodity and equity prices. For options and instruments with nonlinear returns, models appropriate to the instrument are utilized to determine the impact of market shifts. There are certain shortcomings inherent in the sensitivity analyses presented, primarily due to the assumption that exchange rates change in a parallel fashion and that interest rates change instantaneously.

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Quantitative and Qualitative Disclosures About Market Risk — (concluded)

In addition, the analyses are unable to reflect the complex market reactions that normally would arise from the market shifts modeled.


	*Foreign Exchange Rate Risk*

GM has foreign currency exposures related to buying, selling, and financing in currencies other than the local currencies in which it operates. More specifically, GM is exposed to foreign currency risk related to the uncertainty to which future earnings or asset and liability values are exposed as the result of operating cash flows and various financial instruments that are denominated in foreign currencies. At December 31, 2005, the net fair value asset of financial instruments with exposure to foreign currency risk was approximately $6.8 billion compared to a net fair value liability of $5.8 billion at December 31, 2004. The potential loss in fair value for such financial instruments from a 10% adverse change in quoted foreign currency exchange rates would be approximately $1.2 billion for 2005 and 2004.


	*Interest Rate Risk*

GM is subject to market risk from exposure to changes in interest rates due to its financing, investing, and cash management activities. More specifically, the Corporation is exposed to interest rate risk associated with long-term debt and contracts to provide commercial and retail financing, retained mortgage servicing rights, and retained assets related to mortgage securitizations. In addition, GM is exposed to prepayment risk associated with its capitalized mortgage servicing rights and its retained assets related to securitization activities. This risk is managed with U.S. Treasury options and futures, exposing GM to basis risk since the derivative instruments do not have identical characteristics to the underlying mortgage servicing rights. At December 31, 2005 and 2004, the net fair value liability of financial instruments held for purposes other than trading with exposure to interest rate risk was approximately $41.9 billion and $51.1 billion, respectively. The potential loss in fair value resulting from a 10% adverse shift in quoted interest rates would be approximately $3.0 billion for 2005 and 2004. At December 31, 2005 and 2004, the net fair value asset of financial instruments held for trading purposes with exposure to interest rate risk was approximately $4.6 billion and $3.5 billion, respectively. The potential loss in fair value resulting from a 10% adverse shift in quoted interest rates would be approximately $127 million and $33 million for 2005 and 2004, respectively. This analysis excludes GM’s operating lease portfolio. A fair value change in the debt that funds this portfolio would potentially have a different impact on the fair value of the portfolio itself. As such, the overall effect to the fair value of financial instruments from a hypothetical change in interest rates may be overstated.


	*Commodity Price Risk*

GM is exposed to changes in prices of commodities used in its automotive business, primarily associated with various non-ferrous metals used in the manufacturing of automotive components. GM enters into commodity forward and option contracts to offset such exposure. At December 31, 2005 and 2004 the net fair value asset of such contracts was approximately $610 million and $431 million, respectively. The potential loss in fair value resulting from a 10% adverse change in the underlying commodity prices would be approximately $241 million and $264 million for 2005 and 2004, respectively. This amount excludes the offsetting impact of the price risk inherent in the physical purchase of the underlying commodities.


	*Equity Price Risk*

GM is exposed to changes in prices of various available-for-sale equity securities in which it invests. At December 31, 2005 and 2004, the fair value of such investments was approximately $2.8 billion and $2.6 billion, respectively. The potential loss in fair value resulting from a 10% adverse change in equity prices would be approximately $280 million and $258 million for 2005 and 2004, respectively.

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Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining effective internal control over financial reporting of the Corporation. This system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Corporation’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Corporation; (ii) 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 Corporation are being made only in accordance with authorizations of management and directors of the Corporation; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Corporation’s assets that could have a material effect on the financial statements.

A material weakness is a significant deficiency, or combination of significant deficiencies, that result in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

The following material weaknesses in GM’s internal controls were identified:


	(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 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.


	(B)	A material weakness was identified related to the fact that GM’s management did not adequately design the control procedures 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.

Management assessed our internal control over financial reporting as of December 31, 2005, the end of our fiscal year. Management based its assessment on criteria established in the Internal Control/ Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on our assessment, and because of the material weakness described above, management has concluded that our internal control over financial reporting was not effective as of the end of the fiscal year to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.

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Our independent registered public accounting firm, Deloitte & Touche LLP, audited management’s assessment of internal control over financial reporting and has issued an attestation report on management’s assessment, included in Part II, Item 8 of this annual report on Form 10-K.


/s/ G. RICHARD WAGONER, JR.		/s/ FREDERICK A. HENDERSON

G. Richard Wagoner, Jr. Chairman and Chief Executive Officer March 28, 2006		Frederick A. Henderson Chief Financial Officer March 28, 2006

Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our Disclosure Controls or our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within General Motors have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

General Motors Corporation, its Directors, and Stockholders:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that General Motors Corporation and subsidiaries (the Corporation) did not maintain effective internal control over financial reporting as of December 31, 2005, because of the effect of the material weaknesses identified in management’s assessment, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Corporation’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 Corporation’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 weaknesses have been identified and included in management’s assessment: (1) management did not design and maintain adequate controls over the preparation, review, presentation and disclosure of amounts included in the consolidated statements of cash flows, which resulted in misstatements therein, and (2) 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. As discussed in Selected Quarterly Data, management restated previously reported 2005 quarterly financial statements due to the identification of these errors. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the Consolidated Balance Sheet and the related Consolidated Statements of Income, Cash Flows, and Stockholders’ Equity of the Corporation, the Supplemental Information to the Consolidated Balance Sheet and Consolidated Statements of Income and Cash Flows and the financial statement schedule listed at Item 15 as of and for the year ended December 31, 2005 (collectively, the financial statements and financial statement schedules). This report does not affect our report on such financial statements and financial statement schedules.

In our opinion, management’s assessment that the Corporation 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 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 weaknesses described above on the achievement of the objectives of the control criteria, the Corporation has not maintained effective 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.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Consolidated Balance Sheet and the related Consolidated Statements of Income, Cash Flows, and Stockholders’ Equity of the Corporation as of and for the year ended December 31, 2005. Our audit also included the Supplemental Information to the Consolidated Balance Sheet and Consolidated Statements of Income and Cash Flows and the financial statement schedule listed at Item 15 (collectively, the financial statement schedules) as of and for the year ended December 31, 2005. Our report dated March 28, 2006 expressed an unqualified opinion on those financial statements and financial statement schedules and included an explanatory paragraph relating to the accounting for the estimated fair value of conditional asset retirement obligations described in Note 1.

/s/ Deloitte & Touche llp

Deloitte & Touche llp

Detroit, Michigan

March 28, 2006

II-51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

General Motors Corporation, its Directors, and Stockholders:

We have audited the accompanying Consolidated Balance Sheets of General Motors Corporation and subsidiaries (the Corporation) as of December 31, 2005 and 2004, and the related Consolidated Statements of Income, Cash Flows, and Stockholders’ Equity for each of the three years in the period ended December 31, 2005. Our audits also included the Supplemental Information to the Consolidated Balance Sheets and Consolidated Statements of Income and Cash Flows and the financial statement schedule listed at Item 15 (collectively, the financial statement schedules). These financial statements and financial statement schedules are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules 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 General Motors Corporation and subsidiaries at December 31, 2005 and 2004, and the results of their operations and their 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. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Corporation: (1) effective December 31, 2005, began to account for the estimated fair value of conditional asset retirement obligations to conform to FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, (2) effective July 1, 2003, began consolidating certain variable interest entities to conform to FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, and (3) effective January 1, 2003, began expensing the fair market value of newly granted stock options and other stock-based compensation awards issued to employees to conform to Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Corporation’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 Corporation’s internal control over financial reporting and an adverse opinion on the effectiveness of the Corporation’s internal control over financial reporting.

/s/ Deloitte & Touche llp

Deloitte & Touche llp

Detroit, Michigan

March 28, 2006

II-52


Item 8.	*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
$1 ² / 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 $1 ² / 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
$1 ² / 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 $1 ² / 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

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

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 )
$1 ² / 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

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

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

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

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

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

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

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*


	*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

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

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

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

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 $1 ² / 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 $1 ² / 3 par value
		- as reported	$	(18.50	)	$	4.94		$	5.09
		- pro forma	$	(18.50	)	$	4.92		$	5.00

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

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

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.

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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.

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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)

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

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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

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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.

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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

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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		$	—	$	—	$	—	$	—

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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

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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

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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

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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

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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.

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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.

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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	)		—			—

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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	)		—			—

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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.

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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

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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).

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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

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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.

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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 $1 ² / 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.

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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.

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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

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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.

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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

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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

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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.

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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

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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

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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

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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.”

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

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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).

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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.

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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.

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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.

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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

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GENERAL MOTORS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 18.	Pensions and Other Postretirement Benefits — (continued)

GM’s discount rate estimation under this iterative process involves four steps:


	•	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.

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.

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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.

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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	$	—

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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.

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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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 19.	Commitments and Contingent Matters — (continued)

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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.

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
		$1 ² / 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

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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 $1 ² / 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

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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
	$1 ² / 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 $1 ² / 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 $1 ² / 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.

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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):


		$1 ² / 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 $1 ² / 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 $1 ² / 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

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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 $1 ² / 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 $1 ² / 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

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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.

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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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 24.	Stock Incentive Plans — (continued)

Under the GMSIP, 27.4 million shares of GM $1 ² / 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 $1 ² / 3 par value common stock that may be granted each year is determined by management. Approximately 0.8 million shares of GM $1 ² / 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 $1 ² / 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 $1 ² / 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	%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


Note 24.	Stock Incentive Plans — (continued)

Changes in the status of outstanding options were as follows:


		GMSIP				GMSSOP
		$1 ² / 3 Par Value Common				$1 ² / 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.

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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 $1 ² / 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 $1 ² / 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

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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.

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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

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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.

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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

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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.

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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 $1 ² / 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) $1 ² / 3 par value			565			565			565			565			566			566			566			566
Earnings (loss) per share attributable to common stock assuming dilution $1 ² / 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) $1 ² / 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	)

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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	)

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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.

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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

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

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

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 $1 ² / 3 par value		$	2.17		$	2.55		$	0.50		$	(0.25	)

Average number of shares of common stock outstanding — basic (in millions) $1 ² / 3 par value			564			565			565			565
Earnings (loss) per share attributable to common stock assuming dilution $1 ² / 3 par value		$	2.15		$	2.53		$	0.50		$	(0.25	)

Average number of shares of common stock outstanding — diluted (in millions) $1 ² / 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

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

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

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

PART IV

GENERAL MOTORS CORPORATION AND SUBSIDIARIES

ITEM 15. Exhibits and Financial Statement Schedule


(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

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

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

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 28 ^th 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

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

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


	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

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.

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.

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;

(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.

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.

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.

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)

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

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.

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.

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

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

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.

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

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

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.

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.

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

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.

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.

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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.

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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

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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.

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.

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.

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

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

Exhibit 10(j)

Robert A. Lutz

COMPENSATION STATEMENT


Commencing: January 1, 2003		Salary: $129,166.66 Per Month

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

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 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

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.

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

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 spouse ¹ 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 spouse ¹ 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

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).

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.

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]

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

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

6 ¹ / 8 % Notes due January 22, 2008		7.30% Public Income NotES (PINES) due March 9, 2031
8 ⁷ / 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 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

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.

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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

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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.

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

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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

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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.

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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.

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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.

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Fluctuations in valuation of investment securities or significant fluctuations in investment market prices could negatively affect revenues.

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.

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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

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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

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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.

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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

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.

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.

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

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.

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.

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.

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

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.

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

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

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.

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

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.

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.

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

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.

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.

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

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.

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).

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

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

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.

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.

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

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

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%.

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.

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

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.

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

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.

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.

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

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

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

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.

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

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

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).

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

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.

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.

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.

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

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,

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.

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

—

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

—

Lease commitments

824

201

304

161

158

Commitments to provide capital to equity method investees

1,037

553

107

287

Purchase obligations

231

141

—

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.

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

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.

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.

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

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.

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

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.

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.

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.

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

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.

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

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.

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

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.

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.

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.

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.

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.

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

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.

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

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,

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,

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.

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. 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.

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.

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

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.

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

($ in millions)

Cost

value

Cost

value

Due in one year or less

$1,718

$11

Due after one year through five years

6,000

5,975

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

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

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.

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

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.

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	)		—			—


		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	)		—			—

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.

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.

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

)

(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.

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.

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.

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

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.

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.

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

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.

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

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

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

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

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

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

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

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

Financial assets

Investment securities

$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

4,921

4,915

Derivative assets

3,000

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

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

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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

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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

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

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

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

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

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

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

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

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

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.

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

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

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.

* * * * * * *

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

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

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

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

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

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

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