General Motors Corp.'s $89.7 billion pension plan will be nearly fully funded by the end of this year, based on asset returns of 18% through Nov. 30, a discount rate of 6.25% and a total projected contribution of $18.5 billion to the pension plan this year, John Devine, CFO, said today in a conference call. GM's pension fund was underfunded by $19.3 billion at the end of 2002.
Mr. Devine said he doesn't expect to make another contribution to the fund for another 10 years. GM has already contributed $14.4 billion in 2003 through the sale of stocks and bonds and intends to contribute an additional $4.1 billion in cash if the company can complete its sale of Hughes Electronics by the end of the year. However, Mr. Devine conceded there is no backup plan for a cash contribution in 2003 if the deal is not completed.
W. Allen Reed, president and CEO of General Motors Asset Management, which manages GM's pension plans, said that after the contributions are made, the investment strategy will change somewhat to reduce volatility and allow for more diversification. The proposed changes are: U.S. equities 24% to 28%, from the current 29% to 33%; real estate to 8% to 12%, from 7% to 11%; and alternatives to 9% to 13%, from 6% to 8%. Foreign equities will be unchanged at 17% to 21%, and global bonds will remain at 32% to 36%. No timetable was given for the changes.