Case | HBS Case Collection | July 2005 (Revised December 2005)

General Motors U.S. Pension Funds

by Luis M. Viceira and Helen Tung


In June 2003, General Motors Corp. (GM) successfully marketed the largest corporate debt offering in U.S. history, worth $17.6 billion. The offering included $13.6 billion worth of debt denominated in dollars, euros, and pounds and $4 billion dollars denominated in convertibles. GM announced that it would use the majority of these proceeds to shore up its heavily underfunded U.S.-defined pension plans. GM 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%.

Keywords: Decisions; Bonds; Investment Return; Policy; Borrowing and Debt; Corporate Finance; Auto Industry; United States;


Viceira, Luis M., and Helen Tung. "General Motors U.S. Pension Funds." Harvard Business School Case 206-001, July 2005. (Revised December 2005.)