General Motors 2012 Annual Report Download - page 148

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Product Liability
With respect to product liability claims involving our and Old GM’s products, we believe that any judgment against us for actual
damages will be adequately covered by our recorded accruals and, where applicable, excess liability insurance coverage. Although
punitive damages are claimed in some of these lawsuits and such claims are inherently unpredictable, accruals incorporate historic
experience with these types of claims. Liabilities have been recorded for the expected cost of all known product liability claims plus
an estimate of the expected cost for product liability claims that have already been incurred and are expected to be filed in the future
for which we are self-insured. These amounts were recorded in Accrued liabilities and Other liabilities and deferred income taxes.
We indemnify dealers for certain product liability related claims including products sold by Old GM. We monitor actual claims
experience and make periodic adjustments to our estimates. Based on both management’s judgment concerning the projected number
and value of both dealer indemnification obligations and product liability claims, we have applied actuarial methodologies and
estimated the liability. We expect our product liability reserve to rise in future periods as new claims arise from incidents subsequent
to July 9, 2009.
Other Litigation-Related Liability and Tax Administrative Matters
Various legal actions, governmental investigations, claims and proceedings are pending against us including matters arising out of
alleged product defects; employment-related matters; governmental regulations relating to safety, emissions and fuel economy;
product warranties; financial services; dealer, supplier and other contractual relationships; tax-related matters not recorded pursuant to
ASC 740, “Income Taxes” (indirect tax-related matters) and environmental matters.
With regard to the litigation matters discussed in the previous paragraph, reserves have been established for matters in which we
believe that losses are probable and can be reasonably estimated, the majority of which are associated with indirect tax-related matters
as well as various non-U.S. labor-related matters. Indirect tax-related matters are being litigated globally pertaining to value added
taxes, customs, duties, sales, property taxes and other non-income tax related tax exposures. The various non-U.S. labor-related
matters include claims from current and former employees related to alleged unpaid wage, benefit, severance and other compensation
matters. Certain South American administrative proceedings are indirect tax-related and may require that we deposit funds in escrow.
Escrow deposits may range from $400 million to $600 million. Some of the matters may involve compensatory, punitive or other
treble damage claims, environmental remediation programs or sanctions that, if granted, could require us to pay damages or make
other expenditures in amounts that could not be reasonably estimated at December 31, 2012. We believe that appropriate accruals
have been established for such matters based on information currently available. Reserves for litigation losses are recorded in Accrued
liabilities and Other liabilities and deferred income taxes. Litigation is inherently unpredictable, however, and unfavorable resolutions
could occur. Accordingly it is possible that an adverse outcome from such proceedings could exceed the amounts accrued in an
amount that could be material to our financial condition, results of operations and cash flows in any particular reporting period.
GM Korea Wage Litigation
Commencing on or about September 29, 2010 current and former hourly employees of GM Korea filed seven separate group
actions in the Incheon District Court in Incheon, Korea. The cases, which in the aggregate involve more than 10,000 employees,
allege that GM Korea failed to include certain allowances in its calculation of Ordinary Wages due under the Presidential Decree of
the Korean Labor Standards Act. On November 23, 2012 the Seoul High Court (an intermediate level appellate court) issued a
decision affirming a decision of the Incheon District Court in a case involving five GM Korea employees which was contrary to GM
Korea’s position in all of these cases. Although GM Korea believes the decision of the Seoul High Court is incorrect and intends to
appeal to the Supreme Court of the Republic of Korea we have increased our accrual in the three months ended December 31, 2012 by
564 billion Korean Won (equivalent to $525 million) to 746 billion Korean Won (equivalent to $697 million) in connection with these
cases. In the year ended December 31, 2012 we recorded 616 billion Korean Won (equivalent to $573 million) in Automotive cost of
sales (77% of which is reflected in our Net income attributable to stockholders based on our ownership interest in GM Korea). We do
not believe we have any reasonably possible exposure in excess of the amount of the accrual. Both the scope of claims asserted and
GM Korea’s assessment of any or all of individual claim elements may change if new information becomes available.
General Motors Company 2012 ANNUAL REPORT 145