GM: Retiree benefits, pensions cuts save $4.6 billion

April 7, 2010

GM: Retiree benefits, pensions cuts save $4.6 billion

The Detroit News

General Motors Co. saved $4.6 billion in trimming its pension and retiree health care benefits during its bankruptcy reorganization, the company revealed Wednesday.

In a report filed with the Securities and Exchange Commission, GM said it saved $2.7 billion by eliminating health care benefits for salaried retirees that are 65 or older and eligible for Medicare and capping the amount it will spend on retiree health care for salaried retirees younger than 65.

GM also disclosed under new accounting rules its worldwide unfunded pension liabilities are $27 billion as of Dec. 31. GM’s U.S. obligations grew by $3.5 billion to $17.1 billion as of the end of 2009, while it owes $10.3 billion for pension obligations elsewhere.

GM is giving salaried retirees $260 a month until they turn 65 and qualify for Medicare. That money can be used for health expenses.

The automaker said in 2008 that it would end health care coverage for Medicare-eligible retirees in 2009.

Those under 65 were allowed to keep their coverage, with costs capped at 2007 levels. No health care coverage is provided for salaried retirees who joined GM after 1993.

The company also recorded a savings of $923 million by sharply limiting life insurance for salaried retirees and limiting some executive retiree benefits.

GM is limiting salaried retiree life insurance to $10,000 for current retirees. But it ended the insurance for its former top executives.

For those former top executives, GM saved $221 million by ending a portion of its Supplemental Employee Retiree Plan. Former GM CEO Rick Wagoner’s pension was cut by two thirds — from roughly $20 million to about $8.5 million.

GM also saved $3.3 billion by canceling a monthly payment of $66.70 for its hourly pension plan that was to start on Jan. 1.

But GM had to add another $2.6 billion in liabilities to its hourly pension plan to account for lower interest rates.

The net impact was a savings of $675 million.

GM’s pension plans cover about 650,000 people and are underfunded by $13.6 billion, according to a government report. GM expects to make pension contributions totaling $12.3 billion by 2014.

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