GM's Pension Fund Problems

In July 2003, GM and GMAC borrowed US$ 18 billion through the biggest bond offering ever by a US-based company. GM also raised US$ 5 billion by selling its stake in GMHE. GM was to pay 7% interest on its bonds while it expected its pension assets to consistently yield 9% over the next few years. The average maturity of the bonds was 20 years. GM's pension plan assets yielded 19% in returns in 2003. For the year 2003, GM invested put US$ 18.5 billion into its pension fund.

However, GM was not interested in using the money obtained from spin offs to fund its retiree healthcare liabilities. Commenting on this, Devine said, "We're pretty much down to an auto company here, and that's what we plan to keep for the foreseeable future"...

While some analysts felt that it was necessary for GM to take strong measures to reduce its healthcare, pension and OPEB benefits provided to workers, a few of them felt that the legacy costs were just one of the major problems that GM had been affected with. They said that one of the main problems for GM since the 1970s had been its falling market share which was due to problems in product development.

They said that though GM had too many non-performing brands, it was unwilling to phase them out. GM vehicles were not attractive, fuel-efficient high performers and compared badly to the Japanese manufacturers like Toyota or Honda, on these counts. It was also much less efficient in production...