GM pension buyout offer in the works?
Company may follow Ford with lump-sum payout proposal
 | GM CFO Dan Ammann: "We're looking at a number of alternatives." |
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DETROIT -- Ford Motor Co.'s offer last month to buy out the pensions of salaried retirees has renewed questions over whether General Motors is considering a similar move.
Officially, GM won't say whether a pension buyout is on the table. "We're looking at a number of alternatives," CFO Dan Ammann said this month.
But one possible sign of GM's intentions came last week in the form of an alert posted on the General Motors Retirees Association's Web site.
The association, which represents mostly GM salaried retirees, said some of its members have been surveyed recently by a third-party firm about whether they would accept a pension buyout.
The association "has been informed by several GM retirees that they have been contacted by Gallup, a polling organization, asking GM retirees if they would accept a lump sum 'pension buyout' by GM, in lieu of a monthly pension benefit," the Web posting said.
Officials from the association couldn't be reached for comment.
A GM spokesman said he couldn't confirm whether GM commissioned Gallup to survey its retirees.
"We're in the field surveying our key stakeholders on a range of topics," he said.
At the end of last year, GM had 120,000 U.S. salaried retirees and dependents and 400,000 U.S. hourly retirees and dependents, according to its annual report.
GM's U.S. pension obligations totaled $108.6 billion at the end of 2011, the annual report says. Its U.S. pension plans were underfunded by $13.3 billion at the time.
Last month, Ford said it will offer 90,000 U.S. salaried retirees and former employees the option of receiving a lump-sum pension payout, rather than continuing to receive monthly payments.
David Whiston, an automotive analyst at Morningstar Inc. in Chicago, says that whether GM will move forward with a lump-sum pension buyout is "an obvious question after Ford's announcement and given the cash hoard that GM is sitting on right now."
As of March 31, GM had $32.1 billion of cash and marketable securities, according to a regulatory filing. That's up from $29.6 billion a year earlier and up from $23.5 billion two years earlier.
Whiston and other analysts point to GM's massive U.S. pension liability -- the highest of any U.S. company -- as one of the last remaining threats to GM's long-term viability.
"When you keep accumulating cash like they have, why wouldn't you do something to reduce that large liability?" either through a buyout or cash contribution to the pension plans, Whiston says.
Ammann and CEO Dan Akerson espouse a "fortress balance sheet" strategy, marked by little debt, strong cash reserves and reduced pension obligations.
GM has taken steps to whittle the pension liability on its books. In September, for example, GM will freeze its pension plan for salaried workers.
In a regulatory filing this month detailing its first-quarter results, GM said it is "currently exploring other options that could result in a settlement of some of our pension liabilities."
• U.S. hourly retirees and dependents: 400,000
• U.S. salaried retirees and dependents: 120,000
• U.S. pension obligation: $108.6 billion
• U.S. pension underfunding: $13.3 billion
Source: General Motors
You can reach Mike Colias at mcolias@crain.com.
