General Motors U.S. Pension Funds

Posted: 14 Jun 2006

See all articles by Luis M. Viceira

Luis M. Viceira

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Helen H. Tung

affiliation not provided to SSRN

Date Written: July 5, 2005


SUBJECT AREAS: Asset allocation, Bonds, Debt management, Financing, Investment management, Pension funds, Hedge funds, Risk Management, Liability, Capital Structure

CASE SETTINGS: Automotive industry; $150 billion revenues; 326,000 employees; 2003

This case concerns the decision of how to finance shortfalls in a corporate defined-benefit (DB) pension plan. It specifically examines the decision of General Motors Corporation (GM) in 2003 to issue $17.6 billion of debt (to that date the largest corporate debt offering in United States history) and to use a significant fraction of the proceeds ($13.2 billion) to immediately contribute to its US pension funds, with the objective of partially funding a large shortfall in its U.S. DB pension funds. The shortfall is about $19 billion, or 24% of the plan's liabilities. The case also explores the decision that GM has to make as to how invest the contributions to the fund. GM Asset Management (GMAM) considered investing the entire contribution to its U.S. pension funds coming from the debt offering not in traditional investment grade bonds or stocks, but in a broad category GM called "alpha." GMAM believed this would help meet its new target annual return of 9%, reduce the probability of a negative return in any given year from 20% to 10%, and reduce the volatility of plan assets by 40%.

Suggested Citation

Viceira, Luis M. and Tung, Helen H., General Motors U.S. Pension Funds (July 5, 2005). HBS Publishing Case No.: 9-206-001; Teaching Note No.: 5-206-098, Available at SSRN:

Luis M. Viceira (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6331 (Phone)
617-496-6592 (Fax)


National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Helen H. Tung

affiliation not provided to SSRN

No Address Available

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