General Motors, the world’s largest automaker, has shifted 20% of its pension assets to bonds from equities.
In a 10-K filing with the Securities and Exchange Commission this morning, the company said the change was “intended to significantly lower expected volatility of asset returns and plan funded status, as well as probability of future contribution requirements.”
Once the new strategic mix is fully implemented, GM’s U.S. pension assets will have the following target allocation relative to total assets: 29% in global equity, 52% in global bonds, 8% in real estate, and 11% in alternative investments.
Based on the reallocation and a reexamination of expected asset return assumptions, the automaker revised its expected long-term annual rate assumption for its U.S. plans to 8.5% from its previous level of 9%.
Separately, GM also said it would try and reduce health and pension costs when it holds negotiations with the United Auto Workers; talks are slated for later this year.
In 2006, the company said its obligation for employee and retiree benefits was significant, hitting US$68 billion. It also warned costs could grow even larger on a global basis.
GM believes it is competitively disadvantaged because it provides post-employment benefits to more than 400,000 retirees and surviving spouses in the United States, and has similar obligations to significant numbers of current retirees and employees in Western Europe and Australia who will retire in the near future.