Before General Motors discusses its U.S. blue-collar pension obligation with the United Auto Workers, the automaker wants to wait until its next round of labor talks in 2015, GM's vice chairman Steve Girsky told Reuters in an interview on Friday. At the end of 2011, GM had $71 billion in pension obligation to UAW-represented workers in the U.S.
This was the last time that GM talked about its blue-collar pension obligation. This surpasses the current market value of GM by approximately $20 billion. He said that there would first have to be “a lot of education” before any plan could be implemented. According to a GM spokesman, there are currently no discussions with the UAV with regards to the pension obligation.
In 2011 at the last round of talks, a deal was made between GM and the UAW to talk about ways to decrease the risk of its pension deficit, which is considered as a debt by credit ratings agencies and a worry for GM investors. No specific steps were mentioned in the agreement. Analysts think that one of the terms is the chance for UAW-represented retirees to voluntarily ask for lump-sum cash payments rather than the pension claims.
Another way is for a third party to acquire GM's blue-collar pension obligation. Last year, GM used this method when a unit of Prudential Financial Inc. took care of its U.S. pension obligation to 118,000 white-collar retirees.
Because of this measure made last year, GM cut $28 billion, or about a quarter, of its U.S. pension liability. In the past, Girsky has mentioned a plan to take the pension risk "off the table" for investors. GM had been the first of the automakers in the U.S. to set up a pension plan in 1950 as part of the "Treaty of Detroit," a contract that famous UAW leader Walter Reuther negotiated for. Ford and Chrysler then made similar moves. [source: Reuters]