Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote (481)	7/10/1998 7:57:00 PM
From: Freedom Fighter	Read Replies (1) of 1722

Reynolds, GM Post-Retirement Liability >As to the pension fund liability, it has been often and widely reported that GM has erased this. As you know, this is largely due to the Bull Market raising the share price of the stocks the pension fund holds to levels that may come sharply down at some point in the future.< This isn't what the balance sheet says. There is a 41 Billion dollar liability related to post-retirement health care benefits and about 7 billion of pension/other. I am in the process of trying to understand the Post-Retirement issue and how it affects the values. I did some research about a year or two ago and had a tough time getting answers. I just avoid companies with large liabilities like this. One thing is for certain. The 41B was (after accounting changes) charged against earnings (non-cash). The current promises for the future are also charged against earnings (non-cash). The actual cash expenses for past promises are ongoing NOW. So it is likely that Free Cash will average a lower amount than Net Income + Depreciation + Amortization - Capital Spending - Long Term Average Additions to Working Capital. In GM's case it should be a big number. I am sure the really big promises and miscalculations occurred in the past when unions had more power and medical inflation was rampant. The current charges against earnings for future outlays must be lower. The difference should be free cash out the door. The pension numbers I'll read more about, but they are on the Balance sheet. members.aol.com

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