More behind GM stock reaction to pension buyout plan
Any news that reduces burden and costs to General Motors Company (NYSE: GM) should be viewed as great news to GM stock holders. Problem is, looking at the 5-minute intraday chart, the market didn’t quite see it that way, as GM stock popped up on the news, but fell back later in the day. Question is: why? And what does this move portray for the country?
For the record, I am one of those retirees who may receive the lump-sum offer as the letter arrived in today’s mail; wonderful timing I might add. According to the GM news release (which I read later), the retirement plan actions will result in an expected $26 billion reduction of GM’s U.S. salaried pension obligation.
Furthermore, not every retiree will get the offer. I would have paid to be a fly on the wall for those meetings which determined the criteria.
Also according to the news release and the letter, select U.S. salaried retirees will receive a lump-sum payment offer and other retirees will receive a continued monthly pension payment securely administered and paid by The Prudential Insurance Company of America, a Prudential Financial, Inc. company. Again, what criteria determines who gets on the select list? No surprise, GM never reveals those kind of details.
Of course, Prudential has to be ecstatic with such an influx of new funds coming its way, in light of present economic conditions. "We are delighted to be working with General Motors to help the company fulfill its promise of guaranteed lifetime income for retirees in the salaried retirement program," said Christine Marcks, president of Prudential Retirement, a business unit of Prudential Financial, Inc. "We have a strong track record in this area, having worked with companies and organizations since 1928 to provide guaranteed pension benefits for millions of retirees."
Perhaps we need to check Prudential stock instead; but I wonder whose pockets got greased on that decision. C’mon, you were thinking it, too.
Recall that Ford made a similar offer to its employees a few weeks ago. So, in truth, I figured it was just a matter of time before GM employees would receive the same; in other words, I‘m not totally shocked. How many times, though, does that company have to screw with its employees’ and former employees’ lives? Can’t anyone just retire in peace anymore? Notice automakers seldom touch executive pay and compensation, though.
Then again, the stock holders are not getting out of this unscathed, as they will pay a price with hits on earnings. For example, GM’s anticipated cash contribution to its U.S. salaried pension plans to affect these actions will be in the range of $3.5 to $4.5 billion to help fund the purchase of the group annuity contract, and to improve the funded status of the pension plan for active salaried employees. The final amount will be determined at the closing of the transactions.