In
its 2005 earnings announcement today, GM said that it has set aside $3.6 billion against the future cost of covering
pension benefits for its former hourly employees who were transferred to Delphi Corp.
The actual extent of
GM’s obligations to Delphi workers will be determined in negotiations ongoing between GM, the UAW, and Delphi. However,
GM had earlier stated that its potential Delphi-related costs could range anywhere from zero to $12 billion. In its
earnings statement today, GM now estimates the range to be between $3.6 billion and $12 billion.
Read GM’s
statement in full after the jump.
The following is an excerpt from GM’s preliminary report of 2005 financial results, January 26:
In October of
2005, GM estimated that its contingent exposure relating to the benefit guarantees for certain former GM U.S. hourly
employees who transferred to Delphi, ranged from zero to $12 billion. GM now believes that the range is between $3.6
billion and $12 billion with amounts closer to the low-end of the revised range considered the company’s best
estimate assuming an agreement is reached between GM, Delphi and its unions.
As a result, GM established a
reserve of $3.6 billion ($2.3 billion after tax) and this is included as a non-cash charge in the fourth quarter of
2005. The amount of this charge may change between now and when GM files its Form 10-K with the SEC, depending on the
status of discussions between GM, Delphi and its unions and other factors. GM is currently unable to estimate the
amount of additional charges, if any, that may arise from Delphi ’s Chapter 11 filing. A consensual agreement to
resolve the Delphi matter may cause GM to incur additional costs in exchange for benefits that would accrue to GM over
time.