Taxpayers still have a huge stake - $30 billion or more - in seeing GM succeed.
General Motors Company (NYSE: GM) today confirmed it has completed a contribution of 60.6 million shares of GM common stock to its U.S. hourly and salaried pension plans, valued at roughly $2 billion. GM distributed 40.4 million shares to the hourly plan and 20.2 million shares to the salaried plan. GM runs the largest pension plan in the U.S. and it has nowhere near the assets to meet its obligations.
Taxpayers are at risk here because GM’s 70,000 workers have to make enough profits to provide benefits to approximately 688,000 GM retirees.
GM still has to prove it can generate enough cash to repay U.S. taxpayers who still own one third of its stock, as well as fund its $100 billion pension plan. If GM doesn’t, taxpayers will ultimately get the bill for GM’s retirees, many of whom receive more than the maximum of $54,000 offered by the Pension Benefit Guaranty Corporation, which would pick up the plan if GM fails.
This latest contribution, largely funded by U.S. taxpayers who paid the bill to reorganize the bankrupt company, completes an estimated $6 billion contribution that was announced last October, consisting of $4 billion in cash and $2 billion in GM stock.
Pension funding standards depend on the discount rate, investment returns and contributions.
“We continue to take the steps necessary to lower our risk profile, so our focus can be on designing, building and selling the world’s best vehicles,” said Chris Liddell, GM vice chairman and chief financial officer.
The contributed shares qualify as a plan asset for funding purposes immediately as GM stock is now publicly traded.
When all of the company’s U.S. pension plans were last re-measured on 31 December 2009 for GM’s 2009 Form 10-K, they were underfunded in by a staggering $17.1 billion. The 2010 year-end re-measurement and funded status for GM’s entire U.S. pension plans waits the filing of the reorganized company’s 2010 Form 10-K.
Counting overseas plans, GM’s pension obligations are underfunded by about $30 billion.
