General Motors Co.'s U.S. hourly and salaried defined benefit pension plans had a combined funding shortfall of $11.5 billion as of Dec. 31, for a funding level of 89%, according to a report Thursday from the Detroit-based automaker.
A year earlier, the U.S. plans had a combined funding shortfall of $16.2 billion, an 84% funding level.
The funding level was improved in part because of a $4 billion cash contribution on Dec. 2 — $2.7 billion to GM's hourly plan and $1.3 billion to its salaried plan. The contributions were the only ones made in 2010.
Noreen Pratscher, GM spokeswoman, said the company won't release figures on pension plan assets until it issues its 10-K report. She didn't have timetable for issuing the report.
The combined plans could have some $104 billion in assets and $116 billion in liabilities as of Dec. 31, based on a Pensions & Investments estimate.
The underfunding doesn't include GM's Jan. 13 contribution of 60.6 million shares of company stock to its U.S. plans, which were valued at $2.2 billion. Of that, 40.4 million shares, valued at $1.5 billion, went to the hourly pension plan and 20.2 million shares, valued at $700 million, went to the salaried pension plan, according to a GM statement at the time.
The shares were valued at $2 billion, based on Thursday's closing price of $33.02.
When the stock contribution is included, GM's U.S. plans combined were funded at a 91% level, Christopher P. Liddell, GM vice chairman and CFO, said Thursday in a conference call, according to a transcript. Mr. Liddell did not provide a value for the updated unfunded liabilities.
The U.S. plans' assets returned an estimated 14% on investments in 2010, well above GM's assumed 8.5% rate of return, Mr. Liddell said.
The GM report Thursday doesn't project contributions, and Ms. Pratscher said company officials weren't providing any projections.
GM on Nov. 18 projected in an SEC filing that its total contributions to its U.S. pension plans could range from $5.1 billion to $14.7 billion from 2012 through 2015.
The amount of the contributions depends on variations in the projected investment return on its U.S. pension fund and the discount rate for its U.S. pension liabilities. For its U.S. pension plan, GM uses an assumed expected long-term investment return of 8.5% and a 5.52% discount rate.
GM could contribute $500 million in 2012, $100 million in 2013, $3.9 billion in 2014 and $5.4 billion in 2015, if its U.S. pension assets' annual investment return is 8.4%. But if the return falls to 7.4%, contributions would rise to $800 million in 2012, $200 million in 2013, $4.1 billion in 2014 and $5.7 billion in 2015, according the November filing.
If the discount rate falls 50 basis points, the contributions for those four years would rise to a combined $14.7 billion. If the discount rate rises 50 basis points, the combined contributions would fall to $5.1 billion.
The November filing didn't project contributions for 2011.
Mr. Liddell said in a transcript of a Jan. 11 investors conference call that GM's financial strategy of “a fully funded derisked pension plan” is tough to achieve.
“The pension plan cannot be what it has been, which is this hugely volatile value creator or destroyer, depending on what happens to discount rates and asset returns,” Mr. Liddell said. “So it's critical we fully fund and derisk the pension plan so that it's no longer a fundamental part of the value of the company.”
In derisking, the “biggest problem we've got is just the size of (the pension plan),” Mr. Liddell said. “It's going to be practically difficult to derisk it totally, but the basic concept is to get assets that match your liabilities to the greatest extent possible … We have certain liabilities. We have uncertain assets, as most pension plans are configured like ours, so we need to move it to a set of assets which more match the portfolio.”
The “whole concept of having a mismatch between your assets and your liabilities never made any sense to me at all,” he added.
A fully funded, derisked pension plan “is probably critical for us more than any other company in the country,” Mr. Liddell said. “We have something like 70,000 active employees” and 700,000 participants in GM's pension plans. “So it's a 10-to-1 ratio (of participants to active employees). If it was a 1-to-10 ratio, I probably wouldn't be so concerned, but this (is a) massive obligation that we have.”
Mr. Liddell provided no time frame for the derisking or details on the derisking strategy.
Ms. Pratscher on Thursday said GM hasn't disclosed any specifics or timetable for fully funding the plans.
