| HBS Case Collection
(Revised December 2005)
General Motors U.S. Pension Funds
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%.
Borrowing and Debt;