Analyst sees GM dividend by 2013

March 9, 2011

Analyst sees GM dividend by 2013

He says payoff could come after carmaker fully funds pensions

Detroit News Washington Bureau

Washington — A top auto analyst says General Motors Co. may resume paying dividends in 2013.

Brian Johnson, an analyst at Barclays Capital, said he doesn’t expect GM to pay shareholders until it fully funds its pension plans.

GM said last month its U.S. plans are underfunded by $11.5 billion; it invested $6 billion in cash and stock in its pension plans last year.

“We do not expect GM to start paying dividends until the pension is fully funded.

Thus, given our baseline pension projections, GM would only reach full funding in 2012, allowing it to start dividends in 2013,” Johnson wrote in a research note Tuesday.

Another factor is the investment performance of the pension plan. If the plans don’t generate high returns, it could delay the return of dividends.

Johnson suggested GM could pay a 50-cent dividend in 2013 — or roughly $1 billion to shareholders. GM could pay 75 cents in 2014 and $1 in 2015.

GM spokeswoman Noreen Pratscher declined to comment, but referred to GM’s recent earnings presentation in which CEO Daniel Akerson said he expects the Detroit automaker to take “meaningful steps” toward fully funding the pensions in 2011.

“The pension funding decision is separate from the decision about whether and when to pay a dividend on common stock,” she said.

GM’s board would have to approve any dividend. The company has been working to pare its debt, reducing it by $11 billion in 2010.

Ford Motor Co. suspended its dividend in 2006 — the first time it had done so since 1982. It has said in recent years it plans to focus on paying off debt and boosting its credit rating.

Separately, thousands of creditors of “old” General Motors — the part of the company that was left behind in bankruptcy — are on track to receive shares in the reborn automaker around April 1 as partial compensation.

At current trading prices, creditors could receive around 35 cents on the dollar, but the final amounts won’t be known for months.

The remnants of “old” GM, now officially called Motors Liquidation Co., disclosed in a court filing Tuesday that its top two officials are paid $895 an hour to wind down what’s left of the former company.

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