Item 1. Business
General Motors Acceptance Corporation (GMAC or the Company), a 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, the Company merged with its predecessor, which was originally incorporated in New York in 1919. The Company operates directly and through its subsidiaries and affiliates in which the Company or GM has equity investments.
GMAC’s global activities include Financing, Mortgage and Insurance operations:
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Financing - GMAC and its affiliated companies offer a wide variety of automotive financial services to and through General Motors and other automobile dealerships and to the customers of those dealerships. The Company also provides commercial financing and factoring services to businesses in other industries (e.g., manufacturing and apparel).
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Mortgage - The Company’s Mortgage operations originate, purchase, service and securitize residential and commercial mortgage loans and mortgage related products.
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Insurance - GMAC’s Insurance operations insure and reinsure automobile service contracts, personal automobile insurance coverages (ranging from preferred to non-standard risk) and selected commercial insurance coverages.
Various subsidiaries of the Company are subject to regulatory, financial and other requirements of the jurisdictions in which they conduct business operations. These regulatory restrictions primarily dictate that these subsidiaries meet certain minimum capital requirements, restrict dividend distributions and may restrict certain assets. To date, compliance with these various regulations has not had a material effect on the Company’s consolidated financial condition, results of operations or cash flows.
The Company had 32,205 and 31,936 employees worldwide as of December 31, 2003 and 2002, respectively. A description of the Company’s business segments, along with the products and services offered and the market competition, is contained in the individual business segment Operations sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations, which begins on page 9.
Item 2.
Item 2. Properties
The Company owns three properties in southeastern Michigan that were transferred from GM in 2000. GM leases these properties from GMAC. Automobiles, office equipment and other real properties owned and in use by the Company are not significant in relation to the total assets of the Company. GMAC primarily operates from leased office space.
Item 3.
Item 3. Legal Proceedings
GMAC is subject to potential liability under laws and government regulations and various claims and legal actions that are pending or may be asserted against it.
GMAC and its subsidiaries are named as defendants in a number of legal actions and from time to time involved in governmental proceedings arising in connection with GMAC’s respective businesses. Some of the pending actions purport to be class actions. The Company establishes 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 GMAC will not have a material adverse effect on the Company’s 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 the Company’s consolidated financial condition, results of operations or cash flows.
Part II
Item 5.
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters
The Company is a wholly-owned subsidiary of General Motors and, accordingly, there is no market for the Company’s common stock. The Company paid dividends to General Motors of $1 billion in 2003 and $400 million in 2002. No dividends were paid in 2001.
Item 6.
Item 6. Selected Financial Data
Refer to the Financial Highlights on page 7.
Item 7.
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 8. The MD&A contains various forward-looking statements within the meaning of applicable federal securities laws that are based upon GMAC’s current expectations and assumptions concerning future events, which are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Refer to the Market Risk section beginning on page 37.
Item 8.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements, together with the notes thereto and the reports of Management and of Deloitte & Touche LLP dated January 20, 2004, begin on page 42. Unaudited supplementary financial data for each quarter within the two years ended December 31, 2003, is included on page 83.
GMAC’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K are available on the Company’s 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. These reports are available at www.gmacfs.com, under Investment, Financial Statements and SEC Filings.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Item 9A. Controls and Procedures
The Company 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. As of the end of the period covered by this report, GMAC’s Chairman (Principal Executive Officer), and GMAC’s Executive Vice President and Chief Financial Officer (Principal Financial Officer) evaluated, with the participation of GMAC’s management, the effectiveness of the Company’s disclosure controls and procedures. Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, GMAC’s Principal Executive and Principal Financial Officers each concluded that the Company’s disclosure controls and procedures are effective. There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that may have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part III
Item 14. Principal Accountant Fees and Services
The Company retained Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively Deloitte & Touche) to audit its consolidated financial statements for the year ended December 31, 2003. The Company and its subsidiaries also retained Deloitte & Touche, as well as other accounting and consulting firms, to provide various other services in 2003.
The aggregate fees billed to the Company for professional services performed by Deloitte & Touche were as follows:
(a)
Audit fees pertain to the audit of the Company’s annual consolidated financial statements, including reviews of the interim financial statements contained in the Company’s Quarterly Reports on Form 10-Q and completion of statutory reports. Also included in this category are $9 million in 2003 and $5 million in 2002 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 Securities and Exchange Commission.
(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 to financial information systems design and implementation, litigation support and assistance with the implementation of non-financial systems.
In addition to the fees for services included in the table above, the Company was allocated fees of $272 thousand from its parent, GM. These amounts pertain to services such as the preparation of tax returns for personnel on international assignment and assistance to the internal audit staff, prior to the termination of such services. These services were contracted at the discretion of and paid by GM.
The services performed by Deloitte & Touche in 2003 were pre-approved in accordance with the pre-approval policy and procedures adopted by the GM Audit Committee at its August 5, 2002 meeting, and as subsequently revised. This policy requires that during its first meeting of the fiscal year, the GM Audit Committee 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 2003 were compatible with maintaining their independence as principal accountants.
Part IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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 the Consolidated Financial Statements or notes thereto.
The Company filed the following Current Reports on Form 8-K during the quarter ended December 31, 2003:
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On October 15, 2003, under Item 12, Results of Operations and Financial Condition, summarizing financial results for the quarter ended September 30, 2003.
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On December 3, 2003, under Item 5, Other Events, summarizing the decision to retain GMAC’s commercial mortgage business.
No other reports on Form 8-K were filed during the quarter ended December 31, 2003; however,
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On January 20, 2004, under Item 12, Results of Operations and Financial Condition, the Company filed a Current Report on Form 8-K summarizing financial results for the year and quarter ended December 31, 2003.
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On February 11, 2004, under Item 5, Other Events, the Company filed a Current Report on Form 8-K announcing certain executive appointments.
Pursuant to General Instruction B of Form 8-K, reports submitted under Item 12