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Funding Plummets for GM’s U.S. Pension Plans

February 19, 2009
Related Topics: Financial Impact, Retirement/Pensions, Latest News
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General Motors Corp.’s U.S. pension assets plunged to $84.2 billion as of December 31, making its two plans combined 87 percent funded, versus 124 percent funded a year earlier, according to a preliminary estimate the Detroit-based company filed with the Securities and Exchange Commission.

The plans had total assets of $104.1 billion as of December 31, 2007.

GM “may need to make significant contributions to the U.S. hourly pension plan in the 2013-2014 time frame,” the filing states. It estimates the amount at $5.9 billion in 2013 and $12.3 billion in 2014. No pension contributions are expected to be needed before then, although it could prepay some of those contributions ahead of time, said Julie Gibson, GM spokeswoman. “I don’t think we will make any decision on that [prepaying] anytime soon,” she added.

The funding level of General Motors' hourly plan fell to 83 percent as of December 31, from 120 percent a year earlier. Its assets fell 20.4 percent in 2008 to $55.5 billion. Its salaried plan’s funding level fell to 95 percent from 132 percent, and its assets fell 16.1 percent to $28.7 billion.

“General Motors is currently analyzing its pension funding strategies,” the filing states. “In view of significant negative asset returns in 2008 for most U.S. corporate pension plans, it is likely that the majority of U.S. corporations will re-evaluate funding strategies for their defined-benefit plans,” the filing states.

GM projects it would substantially repay the proposed $18 billion in federal loans by 2013 and repay a $16.5 billion federal preferred equity investment by 2017, “assuming no U.S. pension contributions are required,” the filing states.

But it also could request an additional $12 billion in federal loans, which would bring the total in loans to $30 billion, the filing states. “Additional financial support might be required in 2013 and 2014 if GM has to make contributions to our U.S. pension funds,” the filing states.

The “weakening financial markets have significantly reduced the value of GM’s large pension fund assets,” the filing states. GM pension “asset values have declined significantly over the last six months, especially so over the last quarter” of 2008.

Filed by Barry B. Burr of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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