Statement re GM To Accelerate Balance Sheet
GM To Accelerate Balance Sheet Strengthening Initiative
NEW YORK, June 20 -- General Motors Corp. (NYSE: GM, GMH) today announced
plans to offer an aggregate of approximately $10 billion in debt securities and
convertible debentures as part of an overall effort to accelerate improvements
in GM's balance sheet and financial flexibility.
GM plans to raise approximately $10 billion with the new offerings,
effectively doubling the company's original balance-sheet-strengthening target
for 2003 -- to $20 billion from $10 billion -- and increasing the company's
near-term liquidity to more than $30 billion. GM currently expects that
substantially all of the proceeds will be used over time to partially fund
GM's U.S. pension funds and other retiree benefit obligations. GM expects to
make significant cash contributions to these funds by late 2003.
In addition, General Motors Acceptance Corp. (GMAC) will seek to raise
approximately $3 billion as part of its ongoing funding plan for 2003,
intended to be used for general corporate purposes. GMAC also decided to
undertake these debt offerings in order to satisfy funding of ongoing
operations.
'The general cost of borrowing in U.S. markets is at historic lows and we
are acting quickly to take advantage of the favorable capital markets
environment,' said GM Vice Chairman and Chief Financial Officer John Devine.
'These offerings give GM the opportunity to strengthen its balance sheet while
freeing up cash and improving financial flexibility.
'One important purpose of these offerings is that they will allow General
Motors to use cost-efficient, long-term debt to provide near-term funding of
some of its pension and retiree benefit obligations,' said Devine.
GM's offerings are expected to include intermediate- and long-term debt in
U.S. dollars and euros, as well as U.S. dollar debentures that are convertible
into GM $1-2/3 par value common stock.
As a result of these offerings by GM, the company now expects that it will
be in a position to accelerate efforts to fund its U.S. pension plans -- which
were $19.3 billion underfunded at the end of 2002. GM previously stated that
it would contribute about $15 billion to its U.S. pension and retiree benefit
plans by 2007. Contributions to the plans help to reduce the unfunded
position by increasing the asset base, which earns tax-free returns. GM
contributed $5.8 billion to its U.S. pension and retiree benefit plans during
2002 and an additional $1.2 billion in GM Class H common stock in 2003.
The improved equity markets have resulted in asset returns for the GM
pension plans of about 9 percent so far this year. Over the same time period,
however, the discount rate used to measure liabilities for accounting purposes
has declined by an estimated 75 - 100 basis points, resulting in an increase
to the unfunded portion of GM's employee benefit plan liabilities.
GM currently anticipates that substantially all of the proceeds of its
offerings will be used over time to partially fund GM's U.S. pension funds and
other retiree benefit obligations, although no determination has yet been made
as to the amount of proceeds that would be used for such purposes and the
allocation of any contribution of proceeds among its various retiree benefit
programs.
The offerings of U.S. dollar denominated debt securities by GM and GMAC
will be registered under the Securities Act of 1933, as amended, with the
Securities and Exchange Commission. GM and GMAC expect that certain of the
debt securities will be offered outside the United States in transactions not
registered under the Securities Act, which securities may not be offered or
sold in the United States absent registration or an applicable exemption from
the registration requirements.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to the registration or qualification under the securities laws
of any such state.
In this press release, our use of the words 'expect,' 'anticipate,'
'estimate,' 'forecast,' 'objective,' 'plan,' 'goal,' 'pursue' and similar
expressions is intended to identify forward looking statements. While these
statements represent our current judgment on what the future may hold, and we
believe these judgments are reasonable, actual results may differ materially
due to numerous important factors, including those described in GM's most
recent report on SEC Form 10-K (at page II-18), which may be revised or
supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors
include, among others, the following: changes in economic conditions, currency
exchange rates or political stability; shortages of fuel, labor strikes or
work stoppages; market acceptance of the corporation's new products;
significant changes in the competitive environment; changes in laws,
regulations and tax rates; and, the ability of the corporation to achieve
reductions in cost and employment levels to realize production efficiencies
and implement capital expenditures at levels and times planned by management.
SOURCE General Motors Corporation
-0- 06/20/2003 P
/NOTE TO EDITORS: For additional media information, visit
http://media.gm.com ./
/CONTACT: Toni Simonetti of General Motors Corporation, +1-212-418-6380,
toni.simonetti@gm.com /
/Web site: http://media.gm.com
http://www.gm.com /
(GM GMH)
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