March 9, 2006
GM announces restructuring of U.S. salaried retirement benefits
Detroit, Michigan – General Motors yesterday announced modifications to its pension and other benefits for U.S. salaried employees, aimed at providing a competitive and fair benefit to future retirees while reducing financial risks to the company.
Effective January 1, 2007, GM will freeze the accrued pension benefits for U.S. salaried employees under the current defined benefit plan formula, and begin the shift toward a broader reliance on defined contribution plans in the future. Salaried employees who were hired on or after January 1, 2001 will move exclusively to a defined contribution plan for future service; those hired before that date will remain in the defined benefit plan, but will receive a reduced retirement benefit for future accruals under a new career average pay formula. The changes do not affect the benefits of current U.S. salaried retirees.
The changes to the pension plan follow a series of actions announced on February 7 aimed at reducing GM’s structural costs and improving financial flexibility. Last year, GM reached a tentative agreement with the United Auto Workers Union that would significantly reduce GM’s hourly retiree health care costs; the agreement was ratified by union members and is awaiting court approval. GM also announced plans to reduce its North American manufacturing capacity, and to eliminate 30,000 hourly jobs by 2008.
In connection with the pension changes, GM expects its worldwide pre-tax pension expense to be reduced by approximately US$420 million in 2007.