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GM ANNOUNCES ACCOUNTING CHANGE

 SCOTTSDALE, Ariz., Feb. 1 /PRNewswire/ -- General Motors (NYSE: GM) today announced that it will adopt, effective retroactive to Jan. 1, 1992, a new accounting standard governing the reporting of retiree benefits other than pensions -- primarily health-care benefits. GM also announced a charge will be recorded in the fourth quarter of 1992, related to National Car Rental System Inc. (NCRS).
 The adoption of the Statement of Financial Accounting Standards No. 106 (SFAS 106) -- also known as "Employers' Accounting for Postretirement Benefits Other Than Pensions" -- will result in a one- time charge affecting 1992 earnings, as well as ongoing charges that will affect reported earnings in 1992 and future years. However, these charges will not affect GM's cash flow nor its ability to continue to pay dividends.
 The one-time non-cash charge, known as the transition obligation, totals $20.8 billion after tax or $33.38 per share of $1-2/3 par value common stock. It is a catch-up accrual to recognize the total cumulative expense for retiree benefits that GM would have recorded during the working years of its active and retired employes, had the accounting standard been in effect during those years. The incremental ongoing annual non-cash expense in 1992 associated with the accounting standard amounts to $1.4 billion after tax or $2.05 per share of $1-2/3 par value common stock.
 "It's important to understand that this accounting change, while certainly significant in highlighting the seriousness of GM's retiree- health-care-cost problem, does not affect GM's current cash flow," Executive Vice President and Chief Financial Officer G. Richard Wagoner, Jr., said. He noted that, "We continue to be encouraged by recent trends in our North American Operations (NAO) and continue to target NAO's financial performance in 1993 at break-even before interest, taxes and ongoing SFAS 106 expense."
 "In the past," he explained, "the cost for retiree health benefits was recognized as a current expense at the time retirees received the benefits. The actual cash expenditures for retiree health-care and life-insurance benefits will continue to be made as retirees receive the benefits."
 By choosing to take a one-time charge, GM decided against the option of amortizing the transition obligation annually for the next 20 years. "We elected to immediately recognize the transition obligation in 1992 in order to get the expense related to the transition obligation behind us, so that this element of the expense would not impact 1993 and future years," Mr. Wagoner said.
 "Taking a one-time accounting charge will not affect the corporation's ability to continue to pay dividends either for the short term or the long term," Mr. Wagoner said.
 Health care benefits provided to both active employes and retirees are a significant element of expense for GM. "The spiraling rate of increase for health-care costs places GM at a significant competitive disadvantage relative to other vehicle and component manufacturers who have younger work forces, fewer retirees, or different benefit-plan designs," Mr. Wagoner said.
 "GM recognizes that much of the cost problem associated with health care is national in scope and will require long-term solutions developed in cooperation with the government, the business community, labor and the health-care industry," he said.
 "However, given the urgency of the situation, we continue to aggressively pursue steps to further reduce the escalation of GM's health-care costs," Mr. Wagoner said. "In recent years we've held GM's rate of increase for health-care benefits one to two percentage points below the average for U.S. manufacturers, and we're taking action to achieve even greater reductions."
 GM this year began requiring greater cost-sharing for health-care benefits on the part of salaried employes and salaried retirees in the United States. "We are working with union representatives to determine what actions can be jointly taken to reduce the unacceptable cost of our ongoing health-care programs," Mr. Wagoner said.
 GM has briefed the Clinton Administration on the significance of today's action, and has pledged its support to the effort headed by the First Lady, Hillary Rodham Clinton, to find a national solution to the health-care problem.
 "We are ready to help in any way to address this key issue to find ways to reduce its adverse impact on industrial America," Mr. Wagoner said.
 GM's SFAS 106 liability covers all of the corporation's U.S. and Canadian operations, including General Motors Acceptance Corporation (GMAC) and GM Hughes Electronics Corporation (GMHE).
 GMAC's one-time transition obligation amounts to $283 million after tax. The increased ongoing expense for GMAC was $18 million after tax in 1992.
 The one-time charge related to GMHE totals $832 million after tax or $2.08 per share of GM Class H common stock. In 1992, GMHE incurred an increased ongoing annual charge of $48 million after tax or $0.11 per share of GM Class H common stock.
 Electronic Data Systems Corporation (EDS) does not provide company- paid retiree health-care benefits, so there will be no impact on the earnings of EDS or those attributable to GM Class E common stock earnings.
 Fourth-quarter charges related to National Car Rental System Inc. are estimated at $744 million after tax, compared with approximately $300 million after tax estimated by the corporation in November. The increase relates primarily to the write-off of goodwill on the books of NCRS.
 The write-off is part of an aggressive effort to restructure NCRS and return it to profitability. Over the past year, GM has taken shareholder control of the company, replaced certain key management and worked with NCRS to identify critical steps that must be taken, such as improvements in cost controls and engagement of a well-respected turnaround consultant. All of these steps are aimed at enhancing the long-term operating viability of NCRS so that strategic alternatives for GM's investment in the company can be considered.
 -0- 2/1/93
 /CONTACT: Mark A. Tanner of General Motors, 313-556-2019/
 (GM)


CO: General Motors Corporation ST: Michigan IN: AUT SU: ECO

JG -- DE029 -- 1559 02/01/93 17:22 EST
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Date:Feb 1, 1993
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