US automaker General Motors (GM) plans to save a whopping $26 billion in pension outlays by offering some retirees lump sums and annuities instead of monthly payments.
Under the cost saving plan, around 42,000 salaried retirees and surviving beneficiaries will be eligible to receive a voluntary single lump-sum payment option and others with a continued monthly pension payment securely administered and paid by The Prudential Insurance Company of America.
The Detroit, Michigan-based carmaker plans to purchase a group annuity contract from Prudential under which Prudential will pay and administer future benefit payments to most of the remaining US salaried retirees.
GM expects the transactions to be completed by the end of 2012, and Prudential would then assume responsibility for the benefits covered by the agreement and begin making the benefit payments in January 2013.
The proposed changes are applicable only to salaried employees of the company and not hourly employees, whose pension benefits are negotiated directly with the United Auto Workers union.
The move comes two months after its local rival Ford Motors announced that it would offer more than 90,000 salaried employees, former employees and retirees a one-time, lump-sum cash settlement instead of regular pension payments in order to reduce the size of the company's future financial obligations.