GM Wins Pension Payback Ruling

July 6, 2005 ( - A federal judge has ruled that the federal government has to pay General Motors as much as $253 million for one of its underfunded pension programs.

The ruling by Judge Nancy Firestone of the US Court of Federal Claims came in the giant automaker’s 2000 lawsuit, which charged that the government was obligated to pay it the $253 million covering a division GM sold, according to a Wall Street Journal report. The division, Allison Gas Turbine, provided services to the government under contract before GM sold it in 1993.

Firestone said the government should pay the allocable amount of the pension underfunding, though she didn’t specify a dollar amount. However, the judge denied GM’s motion to recover not only the underfunded amount, but a profit as well. The US government is likely to appeal the court’s decision to the US Court of Appeals for the DC Circuit, so any potential recovery could take years, the Journal said.

According to the report, when companies have government contracts, the government pays for salaries and also foots the bill for a portion of the pension costs. When companies subsequently close or sell a unit with an overfunded pension plan, the government generally recovers the portion of the pension surplus attributable to the amounts it contributed to the pension fund, the Journal said.

Contractors say that if the government was able to recover pension surplus during the good times, it is only fair that it also share the pain in the bad times, according to the report.

The opinion is  here .