General Motors Corp. on March 7 slashed retirement benefits for white-collar employees in the latest action aimed at reducing operating costs. The move is expected to reduce GM's year-end 2006 pension liability by as much as $1.6 billion. Non-unionized workers will have their current defined benefit pension plans frozen on January 1. Those who have been with the company for more than five years will see their benefits capped while newer employees will become responsible for managing their own retirement funds through a defined contribution program.
"Global competition is truly changing the auto industry, and we must restructure ourselves to compete successfully in it," GM Chairman and CEO Rick Wagoner said. Wagoner said GM was at a disadvantage because non-U.S. competitors did not offer such generous benefits to employees.
"In many cases, our non-U.S. based competitors do not have comparable legacy costs, because retirement benefits for employees and retirees in their home countries are more heavily government funded," he said.
GM said the changes will reduce its pre-tax pension expenses by approximately $420 million in 2007. On an annual basis, the additional 401(k)contributions should increase pension expenses by $15 million. "These changes will reduce financial risks and future costs for GM, while protecting current retirees' and employees' earned pension benefits and providing competitive and fair retirement benefits going forward," Wagoner said.
Copyright Agence France-Presse, 2006