General Motors to Cut Debt and Pension Obligations by $11 Billion
General Motors said today it's taking a number of steps to reduce its debt and pension liabilities. The Detroit automaker said it will repay $2.8 billion it owes to the United Auto Workers retiree health care trust, buy back $2.1 billion in preferred stock held by the federal government and make a contribution valued at $6 billion to its pension plans.
"These actions will bring down our leverage by $11 billion by reducing debt and improving our pension funding position," said Chris Liddell, GM vice chairman and chief financial officer.
Combined, the actions are expected to reduce interest and dividend costs by $500 million a year, GM said. The plan is contingent on GM's initial public offering, planned for next month.
The company has also secured a $5 billion, five-year line of credit from its lenders to provide backup liquidity, it said.
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GM is owned 61% by the U.S. Treasury, following the company's descent into bankruptcy last year and subsequent restructuring. In its own statement today, Treasury said GM is repurchasing nearly 84 million preferred shares owned by the government.
On Tuesday, Ford Motor (F) said it reduced its indebtedness during the quarter, paying down its revolving credit line by $2 billion and prepaying its $3.6 billion debt obligation to the UAW retiree health care trust.
The actions reduced the Dearborn, Mich., company's debt to $26.4 billion as of Sept. 30. Ford officials said they expect the company to have net-zero debt by year's end, fully a year ahead of schedule.
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