Investigation into GM’s pension fund
Loss-making General Motors, the world’s largest carmaker, is being investigated by regulators over its pension accounting and the insurance regime at its finance arm.
The powerful American regulator the Securities and Exchange Commission (SEC) has issued subpoenas against GM which centre on its pension liabilities with car parts maker Delphi, which declared bankruptcy earlier this month after spinning off from GM in 1999.
GM’s liabilities to Delphi workers, to whom it still has obligations, could total $12bn (£6.73bn).
The SEC is investigating whether GM has inflated or minimised profit swings by using unreasonable assumptions to value its pension assets and liabilities. GM estimates its deficit at $31bn, but industry estimates say that when extended healthcare costs are accounted for the deficit rises to $70bn.
The carmaker admitted it had been subpoenaed by the regulator and said in a statement: “GM and its subsidiaries are co-operating with all these investigations.”
The move comes after German carmaker DaimlerChrysler said on Tuesday that it had received an SEC subpoena for information as part of the commission’s investigation into pension accounting practices at GM.
A spokesman for the regulator would not comment on any ongoing investigation. However, GM says the SEC will look at four key areas: the financial reporting of GM’s pension programme; transactions between GM and Delphi; credit agreements between GM and its suppliers and GM’s obligation to the Delphi pension fund.
The investigation is another headache for GM CEO Rick Wagoner, who is trying to revive the 97-year-old carmaker. The company’s American market share has fallen to its lowest level since the 1920s, losing ground to Japanese rivals such as Toyota and Honda.
GM added that the SEC and a federal grand jury had issued subpoenas on its finance arm, General Motors Acceptance, as part of an industry-wide probe into how insurance claims are accounted for. Since 2003 Disney, Northwest Airlines, Navistar International and Sysco have all been asked to help with SEC inquiries.