Automotive Financing: GM Financial Analysis

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General Motors, like any other business, is exposed to interest rate risks related to certain financial instruments, primarily debt, capital lease obligations and certain marketable securities. As per the GM audited financial statements for 2014, it states “we did not have any interest rate swap positions to manage interest rate exposures in our automotive operations. At December 31, 2014 and 2013 the fair value liability of debt and capital leases was $9.8 billion and $6.8 billion. The potential increase in fair value resulting from a 10% decrease in quoted interest rates would be $0.4 billion and $0.3 billion at December 31, 2014 and 2013. At December 31, 2014 and 2013 we had marketable securities of $8.0 billion and $7.2 billion classified as available-for-sale
Automotive Financing — GM Financial Interest Rate Risk Fluctuations in market interest rates can affect GM Financial’s gross interest rate spread, which is the difference between: (1) interest earned on finance receivables; and (2) interest paid on debt, and could be affected by changes in interest rates. Typically consumer finance receivables purchased by GM Financial bear fixed interest rates and are funded by variable or fixed rate debt. Commercial finance receivables originated by GM Financial bear variable interest rates and are funded by variable rate debt. The variable rate debt is subject to adjustments to reflect prevailing market interest rates. To help mitigate interest rate risk or mismatched funding, GM Financial may employ hedging strategies to lock in the interest rate spread. 60 GENERAL MOTORS COMPANY AND SUBSIDIARIES Fixed interest rate receivables purchased by GM Financial are pledged to secure borrowings under its credit facilities. Amounts borrowed under these credit facilities bear interest at variable rates that are subject to frequent adjustments to reflect prevailing market interest rates. To protect the interest rate spread within each credit facility,

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