David Shepardson / Detroit News Washington Bureau
WASHINGTON -- General Motors Corp. said it needs to make $12.7 billion in pension contributions by 2014 and is exploring options for its underfunded pension plans.
In a conference call Wednesday, GM Chief Financial Officer Ray Young said the company was "trying to understand what our options for pension funding are."
The restructuring plan GM submitted to the government Tuesday predicts the automaker will need to make a $5.9 billion pension contribution in 2013 and $12.3 billion in 2014. GM expected to borrow the money, but could get additional government help to make up the shortfall
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GM disclosed on Tuesday that its pension funds were underfunded by $12.7 billion as of Dec. 31 -- with an $11.1 billion shortfall in its hourly pension fund and $1.7 billion in its salaried fund.
In 2007, GM froze its salaried pension plan, preventing workers from getting higher pensions for additional years of service. The move saved $420 million in 2007.
GM sold $13.4 billion in bonds in 2003, doubling its long-term debt, primarily to fund pensions and other retiree benefits. Under the terms of its federal loans, GM is trying to cut its long-term debt by two-thirds by swapping it for company stock. But GM bondholders believe the plan requires a disproportionate sacrifice from them, in part by asking them to give up so much of the value of their bonds to pay pensioners who are not being asked to help GM reduce costs.
Companies across the United States saw their pension funds take sharp hits in 2008 as the stock markets were off sharply.
Last month, the outgoing head of the Pension Benefit Guaranty Corp. warned that Detroit's Big Three automakers face a $41 billion pension shortfall.
The Pension Benefit Guaranty Corp. said by its accounting methodology that GM faces a $20 billion shortfall as of Nov. 30. GM spokeswoman Renee-Rashid Merem said the difference resulted from varying assumptions and accounting methods between GM and the PBGC. She said GM remains in contact with the PBGC.
The PBGC has warned that the GM pension situation was of growing concern.
"If GM were a healthy company with positive cash flow, able to meet all of its obligations and future funding obligations," then the underfunded status wouldn't be a significant issue, PBGC Director Charles E. F. Miller told The Detroit News in January.
GM isn't the only automaker with pension issues. As of Nov. 30, the plans for hourly and salaried workers at Ford Motor Co. had an $11.7 billion deficit, according to the PBGC; Chrysler LLC had a $9.3 billion deficit as of Jan. 1.
According to the PBGC last month, the automakers reported $130.5 billion in pension assets, which represents only 76 percent of their combined liabilities. GM's pension is 20 percent underfunded, Chrysler's is 34 percent underfunded, and Ford is short by 27 percent, the PBGC said.
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