GM to Cut Pension Obligation by $26 Billion

[marmar]

(Bloomberg) General Motors Co. (GM), the largest U.S. automaker, said it expects to cut its pension obligation by $26 billion by offering lump-sum payments to about 42,000 retirees and shifting its plans to a unit of Prudential Financial Inc. (PRU)

“These actions represent a major step toward our objective of de-risking our pension plans and will further strengthen our balance sheet and give us more financial flexibility,” Dan Ammann, GM’s chief financial officer, said today in a statement.

GM said the moves will lead to special charges worth $2.5 billion to $3.5 billion in the second half. The Detroit- based company projects future pension income to be reduced by $200 million annually.

GM’s global pension plans were underfunded by $25.4 billion at the end of 2011, up from $22.2 billion at the end of 2010, according to federal filings. Analysts with credit-rating companies have said they will evaluate how GM addresses that shortfall as they consider returning the automaker to an investment-grade credit rating. ...................(more)

The complete piece is at: http://www.bloomberg.com/news/2012-06-01/gm-chief-hopes-to-return-to-investment-grade-within-year.html