General Motors Co., Detroit, estimates its U.S. pension plans were underfunded $8.7 billion as of Sept. 30, which includes for the first time the $2.2 billion contribution in company stock made in January, said spokesman James Cain.
The underfunding has declined steadily in the past 12 months, from a shortfall estimated at $10.8 billion as of June 30 and $18 billion as of Sept. 30, 2010, Mr. Cain said.
The U.S. plans had $91 billion in assets and $103.3 billion in liabilities as of Dec. 31, 2010, or an 88% funding level, according to its 10-K.
“Part of our strategy has been to fully fund and derisk the pensions,” Mr. Cain said. The investments have moved to a “more conservative strategy and one that better matches assets and liabilities,” he added.
GM officials would not provide specifics on the investment strategy, he said.
Mr. Cain said the GM stock contribution became an asset of the plans in July, based on accounting rules. GM in January contributed 60.6 million shares of company stock, valued then at $2.2 billion and Wednesday, at a close of $22.31 a share, a total of $1.35 billion.
A Credit Suisse research report issued Monday said “GM's pension status may not be as bad as people think … perhaps by a wide margin (billions of dollars).
“We believe that GM has used derivative strategies in its asset portfolio to hedge its interest-rate risk on the liability side of the equation,” said the report, written by Christopher J. Ceraso, Robert Moffatt and Shreyas Patil, research analysts.
They estimate in the report that GM's worldwide pension plans' funding shortfall for 2011 will be about $27 billion, “which would mark a deterioration of about” $5 billion from 2010 levels.