Administration March 3, 2003

GM To Benefit From Hughes Share Transfer

March 3, 2003 (PLANSPONSOR.com) - General Motors Corp. (GM) has opted to transfer one-third of its Hughes Electronics Corp. shares to GM's pension plans, to help shore up employee benefit accounts and make the subsidiary more attractive to potential buyers.
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After previous unsuccessful bids to sell its Hughes unit as a cushion against pension liabilities, the automaker has announced plans to transfer 150 million Hughes class H common stock shares to GM’s United States benefit plans over the next few weeks.

The move serves two strategic purposes, according to a Wall Street Journal report. First, the approximately $1.5-billion cash infusion GM will receive will plug a potential gap in the automaker’s underfunded pension fund. Additionally, the automaker gains more flexibility to strike a deal to sell its remaining stake in the satellite-broadcast unit.

The change is expected to make it easier for bidders interested in Hughes to structure a potential deal that would minimize the tax consequences for GM.   Under Hughes’s tracking-stock structure, GM owns 100% of the unit’s assets. But as part of its latest contribution, the amount held by GM’s employee benefit plans, managed by US Trust Company of New York, will increase to about 330 million shares and reduce GM’s retained economic interest in its wholly owned subsidiary to about 20% from just over 30%.

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