General Motors Co. announced that it is eliminating traditional pensions for all U.S. salaried employees. Because the company has the largest pension obligation of any other company in the States, this change had to be made to reduce the risk that liability posed to its financial strength.
The company tries to attenuate this blow by offering its workers one extra week of vacation, bonuses tied to GM’s global performance, and pay increases to workers with critical skills this year.
“These changes, I believe, really permit employees to share in the success of the business, while at the same time supporting our ability to be profitable, to strengthen our balance sheet and to reduce risk,” said Cindy Brinkley, vice president of global human resources for GM. “We’re really improving GM’s ability to grow profitably.”
Other large companies eliminated traditional pensions years ago, and so finally did GM for employees hired after January 1st, 2001 (almost 30% of GM’s U.S. salaried workforce). Other 19,000 workers employed before 2001 will join the plan as well, retaining the traditional pension benefits they earned up to that date.
“They don’t have to do this if they don’t want to,” Brinkley stressed. “But this really will allow employees to invest their pension benefit in another retirement savings programs or do whatever they want to do with that money. It’s really up to them, and really puts the employee in the driver’s seat.”