GM's Termination of Salaried Pension Plan, while Aggressive, Doesn't Improve its Credit Profile - Moody's Global Credit Research

GM's Termination of Salaried Pension Plan, while Aggressive, Doesn't Improve its Credit Profile

GM's Termination of Salaried Pension Plan, while Aggressive, Doesn't Improve its Credit Profile - Moody's Global Credit Research
GM's Termination of Salaried Pension Plan, while Aggressive, Doesn't Improve its Credit Profile
Published Jun 03, 2012
2 pages (1585 words) — Published Jun 03, 2012
Price US$ 200.00  |  Buy this Report Now

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...Last Friday, General Motors Company (Ba1 positive) announced that it is terminating its US salaried pension plan and offering retirees an option to receive a lump-sum settlement or an annuity contract from Prudential Insurance Company of America (A2 positive). The transaction is an important step in addressing the automaker's massive underfunded pension obligations. Although the proposed transaction is an aggressive step forward in de-risking the company's pensions, we conclude that it does not provide any meaningful improvement to its credit profile. GM's termination of salaried pension will be the largest such transaction ever undertaken to our knowledge. About $26 billion of existing plan assets will be transferred to Prudential, along with an additional payment of $3.5-$4.5 billion of GM cash in exchange for Prudential assuming GM's future obligations for its salaried retirees. This will reduce pension-related volatility in GM's earnings and balance sheet and will free the company from...

  
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General Motors Company
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General Motors Company - Company Profile – 2013/03/01 – US$ 200.00 – ...General Motors Company (GM) is a worldwide automotive manufacturer. Its business includes the development, assembly and sale of cars and trucks, and provision of automotive financing services through its subsidiary General Motors Financial Company, Inc. (GM Financial). In the financial year ended 31 December 2011 (2011), GM manufactured 9.3 million vehicles and sold 9.0 million. Its principal brands include Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Opel, Vauxhall, Alpheon, Baojun, Jiefang and Wuling. As of 31 December 2011, GM operated from 101 locations (including 40 manufacturing plants but excluding automotive financing operations and dealerships) in 26 US states, and 17 sites in Canada. As of the same date, it also maintained assembly, manufacturing, office and warehousing facilities in 61 other countries. In the 12 months ended 30 September 2012, the company reported revenues of USD149.1 billion. GM was established in 2009 with the acquisition of assets and selected liabilities...

GM rating unchanged by agreement to purchase shares held by the US Treasury - Issuer Comment – 2012/12/20 – US$ 200.00 – Global Credit Research Issuer Comment 20 DEC 2012 Issuer Comment: General Motors Company GM rating unchanged by agreement to purchase shares held by the US Treasury Moody's Investors Service said that the ratings of General Motors...

General Motors Company - LGD Assessment – 2012/10/25 – US$ 750.00

GM's Salaried Pension Plan Actions Do Not Materially Change Its Credit Profile - Credit Focus – 2012/05/31 – US$ 750.00 – ...+ General Motors' plan to terminate its US salaried pension plan has no immediate credit implications for the company. The proposal has certain positive and negative credit elements that largely balance each other. + The key positives: $1 billion reduction in underfunded pension liability; relief from making future salaried pension payments; and relief from the volatility associated with approximately $26 billion in pension assets and liabilities, which will be transferred to Prudential Insurance Company of America. + The key negative: Liquidity will fall by $3.5 billion-$4.5 billion. GM will spend $1 billion to fill a $1 billion underfunded position in the pension assets/liabilities transferred to Prudential. It will also spend an additional $2.5 billion to $3.5 billion that will effectively compensate Prudential for assuming the return, interest rate and mortality risks associated with the $26 billion in pension assets and liabilities the insurance company will assume. + Liquidity will...

GM-Wells Fargo Financing Agreement Is Credit Negative for Ally Financial - Issuer Comment – 2012/03/11 – US$ 200.00 – ...On 1 March, General Motors Co. announced that it had partnered with Wells Fargo & Company (A2 negative) to offer auto financing to GM dealers and consumers in the Western US. The arrangement is credit negative for Ally Financial Inc. (B1 stable), GM's former captive finance subsidiary that is 74%-controlled by the US government and the largest provider of sales financing for GM vehicles in the US, as it is another threat to Ally's franchise position. Wells Fargo's agreement with GM permits it to compete on equal footing with Ally for GM subvented retail auto loans, or loans that include rate incentives (e.g., 0% financing). Wells will also compete to provide dealer inventory financing in the region. After GM sold a majority interest in Ally (known then as GMAC) in 2006, Ally maintained the exclusive right to originate GM subvented loans. In May 2009, Ally and GM amended their agreement, reducing the fees Ally paid to GM, but opening the door for other lenders to bid for the subvented business...

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Moody's Global Credit Research—Moody's Investors Service, a leading global credit rating, research and risk analysis firm, publishes credit opinions, research, and ratings on fixed-income securities, issuers of securities and other credit obligations. Credit ratings and research help investors analyze the credit risks associated with fixed-income securities. Ratings also create efficiencies in fixed-income markets and similar obligations, such as insurance and derivatives, by providing reliable, credible, and independent assessments of credit risk. For issuers, Moody's services increase market liquidity and may reduce transaction costs.

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MLA:
Moody's Global Credit Research. "GM's Termination of Salaried Pension Plan, while Aggressive, Doesn't Improve its Credit Profile" Jun 03, 2012. Alacra Store. Feb 16, 2019. <http://www.alacrastore.com/moodys-credit-research/GM-s-Termination-of-Salaried-Pension-Plan-while-Aggressive-Doesn-t-Improve-its-Credit-Profile-PBC_142769>
  
APA:
Moody's Global Credit Research. (). GM's Termination of Salaried Pension Plan, while Aggressive, Doesn't Improve its Credit Profile Jun 03, 2012. New York, NY: Alacra Store. Retrieved Feb 16, 2019 from <http://www.alacrastore.com/moodys-credit-research/GM-s-Termination-of-Salaried-Pension-Plan-while-Aggressive-Doesn-t-Improve-its-Credit-Profile-PBC_142769>
  
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