General Motors 2013 Annual Report Download - page 107

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In addition to the guarantees and indemnifying agreements previously discussed, we indemnify dealers for certain product liability
related claims as subsequently discussed.
With respect to other product-related claims involving products manufactured by certain joint ventures, we believe that costs
incurred are adequately covered by recorded accruals. These guarantees terminate in years ranging from 2020 to 2027.
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 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 $500 million to $800 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, 2013. 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 eight separate group actions
in the Incheon District Court in Incheon, Korea. The cases, which in aggregate involve more than 10,000 employees, allege that GM
Korea failed to include bonuses and certain allowances in its calculation of Ordinary Wages due under the Presidential Decree of the
Korean Labor Standards Act. In November 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. GM Korea appealed to the Supreme Court of the Republic of Korea (Supreme Court) and initiated a
constitutional challenge to the adverse interpretation of the relevant statute. At September 30, 2013 we had an accrual of 843 billion
South Korean Won (equivalent to $784 million) in connection with these cases. In December 2013, the Supreme Court rendered a
decision in a case involving another company not affiliated with us which addressed many of the issues presented in the cases pending
against GM Korea and resolved many of them in a manner which we believe is favorable to GM Korea. In particular, while the
Supreme Court held that fixed bonuses should be included in the calculation of Ordinary Wages, it also held that claims for retroactive
application of this rule would be barred under certain circumstances. We believe the Supreme Court’s reasoning is applicable to GM
Korea, even though GM Korea’s case remains pending before the Supreme Court. Accordingly, we have eliminated the accrual
associated with these cases. In the year ended December 31, 2013 we recorded a net reduction of our accrual of 746 billion South
Korean Won (equivalent to $711 million) to 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 estimate our reasonably possible loss, as defined by ASC 450,
“Contingencies,” to be 632 billion South Korean Won (equivalent to $599 million) at December 31, 2013. We are also party to
litigation with current and former salaried employees over allegations relating to Ordinary Wages regulation. Although the issues
differ due to differences between hourly and salaried benefit design, we believe the latest decision of the Supreme Court also impacts
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