GM seeks to slash $26 b in pensions
US automaker General Motors on Friday announced a plan to save $26
billion in pension outlays by offering some retirees lump sums and
annuities instead of monthly payments.
The proposed changes will only apply to salaried GM employees and
will not affect hourly employees, whose pension benefits are negotiated
directly with the United Auto Workers union.
Pension obligations have been a growing burden for the largest US
automaker over the past decade since it now has roughly one active
employee for every five to six retirees.
Approximately 42,000 salaried retirees and surviving beneficiaries
will be eligible to receive a voluntary single lump-sum payment option,
General Motors Co. officials said.
GM also plans to purchase a group annuity contract from insurer
Prudential under which Prudential will pay and administer future benefit
payments to most of the remaining US salaried retirees, the company
said.
The transactions are expected to be completed by the end of the year,
following completion of regulatory review.
The Detroit, Michigan-based GM said that Prudential would then assume
responsibility for the benefits covered by the agreement and begin
making the benefit payments in January 2013.
“We appreciate the contributions our retirees have made to the
company and we have taken great care in ensuring the security of their
retirement benefits,” said Cindy Brinkley, GM vice president of global
human resources.
“Many of our retirees will now have more flexibility to manage their
retirement funds and we are confident that Prudential will provide
outstanding service to those receiving a monthly payment,” she said.
GM was taking a similar approach to rival Ford Motor Co. The
number-two US automaker announced in April it planned to offer more than
90,000 salaried employees, former employees and retirees a one-time,
lump-sum cash settlement instead of regular pension payments in an
effort to reduce the size of the company's future financial obligations.
“This is really an important step for use because it reduces the
company's risk profile,” Ford's chief financial officer Robert Shanks
said during a conference call after the company reported net income fell
46 percent in the 2012 first quarter from a year ago.
AFP
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