GM’s Pensions

It goes from bad to worse.

General Motors Corp., reeling from five straight quarterly losses, said it will replace the current defined-benefits pension for many of its 36,000 salaried workers with a less expensive defined-contribution plan starting next year.
The change will save GM, the world’s largest automaker, about $420 million on a pretax basis next year, and reduce the Detroit-based automaker’s year-end 2006 pension liability by about $1.6 billion. GM will take a $120 million pretax charge related to the reduced pension liability. Employees will switch to the new plan based on their hiring dates.
GM said Feb. 7 that it would make changes to the pension plan to reduce spending on salaried workers. GM Chief Executive Officer Rick Wagoner also said earlier this month that he will slash his own compensation in half and trim pay by 30 percent for his three top lieutenants. GM also agreed to cut its $2-a-share annual dividend in half and reduce health-care benefits.
Employees hired before Jan. 1, 2001, will stop accruing benefits under a phased-in plan starting next year. Workers hired on or after that date will stop accruing credits under their plan and receive a contribution to their 401(k) from GM of 4 percent of annual base salary. GM said additional 401(k) contributions for those employees will boost costs by about $15 million a year.

Posted by on March 7th, 2006 at 12:09 pm


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