GM reduces future liabilities by $23 billion
Tuesday, August 08, 2006
GM reduces future liabilities by $23 billion
David Shepardson / Detroit News Washington Bureau
WASHINGTON -- General Motors Corp. said Tuesday its future pension and health-care liabilities had declined by $23.2 billion in the wake of reductions in company's spending on benefits and the early retirement of 34,400 employees.
GM has said reducing its long-term obligations are essential to its recovery; under the new calculations, GM's has cut its pension obligations by $19.3 billion and its health-care obligations by $3.9 billion.
The larger-than-expected reductions come as GM won court approval on March 31 of an agreement with the United Auto Workers to reduce its health care costs by $1 billion annually -- and at the time said it would reduce its long-term liability by $15 billion.
The increase included new calculations that current workers would work longer and that the discount rate -- a factor used in accounting for future costs -- had increased, according to a 124-page GM filing with the U.S. Securities and Exchange Commission.
Earlier this year, GM said it would reduce pension benefits for current U.S. salaried employees by freezing accrued benefits in the current plan and implementing a new benefit, including a reduced defined benefit plan for some salaried employees and a new defined contribution plan for the other salaried employees.
GM is also increasing the U.S. salaried workforce's participation in the cost of health care.
Beginning Jan, 1, 2007, GM will cap contributions to salaried retiree health care at the level of its 2006 expenditures.
In its filing Tuesday, GM said this may lead to "higher monthly contributions, deductibles, coinsurance, out-of-pocket maximums, and prescription drug payments. Plan changes may be implemented in medical, dental, vision, and prescription drug plans."
You can reach David Shepardson at (202) 662 - 8735 or dshepardson@detnews.com.
© Copyright 2006 The Detroit News. All rights reserved.
GM reduces future liabilities by $23 billion
David Shepardson / Detroit News Washington Bureau
WASHINGTON -- General Motors Corp. said Tuesday its future pension and health-care liabilities had declined by $23.2 billion in the wake of reductions in company's spending on benefits and the early retirement of 34,400 employees.
GM has said reducing its long-term obligations are essential to its recovery; under the new calculations, GM's has cut its pension obligations by $19.3 billion and its health-care obligations by $3.9 billion.
The larger-than-expected reductions come as GM won court approval on March 31 of an agreement with the United Auto Workers to reduce its health care costs by $1 billion annually -- and at the time said it would reduce its long-term liability by $15 billion.
The increase included new calculations that current workers would work longer and that the discount rate -- a factor used in accounting for future costs -- had increased, according to a 124-page GM filing with the U.S. Securities and Exchange Commission.
Earlier this year, GM said it would reduce pension benefits for current U.S. salaried employees by freezing accrued benefits in the current plan and implementing a new benefit, including a reduced defined benefit plan for some salaried employees and a new defined contribution plan for the other salaried employees.
GM is also increasing the U.S. salaried workforce's participation in the cost of health care.
Beginning Jan, 1, 2007, GM will cap contributions to salaried retiree health care at the level of its 2006 expenditures.
In its filing Tuesday, GM said this may lead to "higher monthly contributions, deductibles, coinsurance, out-of-pocket maximums, and prescription drug payments. Plan changes may be implemented in medical, dental, vision, and prescription drug plans."
You can reach David Shepardson at (202) 662 - 8735 or dshepardson@detnews.com.
© Copyright 2006 The Detroit News. All rights reserved.
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