Administration September 1, 2003

GM Reduces Forecast, Pension Return Rates

January 9, 2003 (PLANSPONSOR.com) - Rising pension fund cost have attributed to General Motors Corp (GM) issuing 2003 earnings forecast numbers below 2002's mark.
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GM said it expect pension expenses to balloon to approximately $3 billion in 2003, from about $1 billion in 2002. Initial indications show GM’s US pension plans underfunded by about $19.3 billion at the end of 2002, up drastically from the $9.1 billion underfunding at the end of 2001.  The company attributed the underfunding to sharp losses incurred during the current bear market.

The company said it expects to earn $5.00 a share in 2003, while reiterating its earlier projected earnings of $6.75 a share for 2002.  Analysts at Thomson First Call were not so optimistic, forecasting income of $4.82 a share for 2003 and $6.54 a share for 2002, according to the Wall Street Journal.

Rate Cut

Additionally, GM announced that it would  reduce the expected rate of return  on its pension fund to 9% from 10%, trimming the return rate after nine years at 10%.   GM spokesman Gerry Dubrowski said that a one-point cut in the rate of return translates into a nearly $700 million increase in pension expenses. He added that GM would work to offset any increased pension expenses by cutting other costs.

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