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GM to buy out white-collar pensions

DETROIT — General Motors Co. will change the way it makes pension payments to white-collar retirees, cutting its underfunded U.S. pension obligation by $26 billion.

The company announced on Friday that it will offer 42,000 retirees a lump-sum of cash to stop taking monthly benefits. For the rest of the 118,000 U.S. salaried retirees, GM will buy a group annuity that will make monthly payments starting in 2013. The Prudential Insurance Co. will handle the annuity and pay the benefits.

The move will help GM unload some of its huge pension burden, which has been one of several factors keeping its stock price low.

At the end of March, GM said its U.S. pension fund was $12.9 billion short of its obligations. Pension plans from the rest of the world were $11.6 billion short of obligations.

The move was viewed positively by investors. GM shares rose 6 cents, or 0.3 percent, to $22.26, on a day when the rest of the stock market was down more than 2 percent.

GM says it will make $3.5 billion to $4 billion in cash payments to its pension plans to buy the annuity. It expects the move to shrink earnings by $200 million a year because pension income will drop.

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