The report projects GM could contribute a total of $5.6 billion to its U.S. pension plans this year, including $2.2 billion in stock GM already contributed in January, and it could contribute up to $5.5 billion each in 2013 and 2014, depending on pension plan investment returns.
“GM has made it clear it plans to continue making large contributions … until the U.S. plan is fully funded, at which time it will seek to immunize the pension by moving to a larger, duration-matched fixed-income allocation,” Brian A. Johnson, Barclays Capital auto analyst, wrote in the report.
Based on the report's projections on contributions and other factors, “GM would only reach full funding in 2012,” allowing it to start paying dividends as early as mid-2012, the report said.
“We do not expect GM to start paying dividends until the pension is fully funded. … Exceptionally strong returns in 2011 and 2012 (or a sharp increase in long-term rates) could accelerate the dividends until mid-2012,” Mr. Johnson wrote. “On the other hand, two years of poor asset returns could delay dividends until 2014 or beyond.”
The report projects a dividend per share of 50 cents in 2012, 75 cents in 2014 and $1 in 2015.
The GM U.S. hourly and salaried defined benefit pension plans had a combined funding shortfall of $12.3 billion as of Dec. 31, with $91 billion in assets and $103.3 billion in liabilities, according to its 10-K report issued March 1.
GM hasn't decided whether it will make additional contributions this year, the GM report said.
Noreen Pratscher, GM spokeswoman, said in an e-mail that GM officials don't comment on an individual analyst's report.
According to Ms. Pratscher, GM Chairman and CEO Daniel F. Akerson said in comments March 1 that GM was “on a journey to minimal debt and fully funding and derisking our U.S. pension plan — and I expect we will take meaningful steps in that regard in 2011.”
Neither Mr. Akerson nor Christopher P. Liddell, vice chairman and CFO, “have publicly offered a timetable for when we anticipate the plans to be fully funded,” Ms. Pratscher said in her e-mail. “We have not in any way tied the funding of the pension plan to a decision about paying dividends on common stock. They are separate business decisions."