GM said its $134 billion pension obligation is the largest of any company worldwide and was underfunded by $25.4 billion at the end of 2011. Ford’s $74 billion pension liability was underfunded by $15.4 billion at the end of last year. The plans are a huge drain: Ford this year is pumping $3.5 billion into its pensions and won’t catch up until at least mid-decade. And because pension funds are invested in securities, their values can rise or fall unexpectedly. Buyouts would remove some volatility and liabilities from automakers‘ books.
GM is offering buyouts to 42,000 pensioners, or about 36 percent of its salaried retirees. Those who refuse the lump-sum buyouts will find their pension plan shifted to a unit of Prudential Financial along with those of other retired U.S. salaried workers. The moves will excise GM’s 118,000 salaried retirees from its books, though the company will continue to cover the pensions of about 400,000 hourly retirees. GM said the lump-sum payments and annuity will together cut $26 billion from its pension load.