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SEC Probes GM's Pension Figures
By Alan Ohnsman, Bloomberg
October 27, 2005
General Motors Corp. said the U.S. Securities and Exchange Commission is probing the company's pension accounting and transactions between GM and bankrupt auto-parts maker Delphi Corp.
GM is cooperating with the SEC inquiry after the agency issued subpoenas, company spokesman Jerry Dubrowski said Wednesday. The automaker's finance unit, General Motors Acceptance Corp., also is being probed in connection with an industrywide investigations of the insurance industry, examining so-called finite risk insurance products, GM said.
The announcement comes a day after DaimlerChryslerAG said the SEC is also examining its pension accounting. The agency is studying whether companies inflate profit or minimize earnings swings by using unreasonable assumptions to value pension assets and liabilities.
Delphi's Oct. 8 bankruptcy filing probably triggered the GM inquiry, given its potential obligations to UAW employees of former subsidiary Delphi, said New York-based Argus Research Corp. analyst Kevin Tynan, who rates GM shares "sell."
"You've got three different parties here -- GM, Delphi and the UAW -- trying to figure out what GM's obligation is," Tynan said. "GM could be on the hook for a lot of those UAW workers, but it's not completely clear. It's just a giant bowl of spaghetti right now."
The SEC probes of GM include: its financial reporting of pension and other retiree benefit programs; transactions between the automaker and Delphi, which GM didn't detail; recovery of recall costs from suppliers and supplier price reductions and credits; and GM's possible obligation to fund pensions and other retiree-benefit costs related to Delphi's Chapter 11 bankruptcy filing.
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