GM Negative Return - 30 September, 2002

General Motors, the US carmaker, has made a negative 3 per cent return on its $67.3bn fund.This decline was credible given the fall in stock market returns.

The decline is likely to further exacerbate the $9.1bn shortfall in GM's US pension fund and a further $3.61bn hole in its non-US pension obligations.

GM's admission that its 10 per cent target for future returns may be unrealistic. According to an internal study at GM, each percentage point reduction in the assumption would knock $700m off annual pre-tax profits.

GM, moreover, also faces significant post-retirement healthcare liabilities. The underfunded status of its retiree benefits plan was put at $47.5bn at the end of 2001.

The assumption of a 9.5 per cent return in the pension fund of Ford Motor, GM's arch-rival, has also been questioned.

The company balance sheet liabilities have driven much of its strategy recently, as it uses heavy discounting and zero per cent finance deals to attract buyers and generate cash.