Mike

Based upon the pension footnotes in the 2005 annual report, the funded status of the plans is:

Projected Benefit Obligation           $89.1 billion
Market Value of Plan Assets             95.2 billion
Funded Status                            6.1 billion

Ok, so their assets exceed the liability by $6.1 billion.
But the pension asset recognized on their books (the "Net
Amount Recognized) is $36.3 billion, or $30.2 billion more
than the surplus assets.  So, if they terminated the plans
and somehow settled their benefit obligations for
$89.1 billion (assume they could get an insurance company to
provide annuities for all the benefits owed for the $89.1
billion), they would have $6.1 billion in cash remaining, 
BUT would need to write down the Net  Amount Recognized by 
$30.2 billion.  In other words they would need to take a hit 
for the 30 billion.

Their Net Amount Recognized (NAR) has grown so large because 
the amounts contributed to the plan, especially the $18.6 
billion they contributed in 2003, have exceeded the annual 
pension expense.  [The NAR at the end of the year equals the 
NAR at the beginning of the year, plus employer contributions, 
minus pension expense.  Over the past 6 years, contributions 
have exceeded expense by $21.6 billion]  So, a  large prepaid 
pension asset develops over time and is shown on their books.

So, why does the Funded Status show a "surplus" of $6.1 billion 
while the Companies books show an asset of $36.3 billion?  It 
is because primarily (1) the assets over the past 8 years have 
grown $11.1 less than expected, (2) the liabilities have over 
the past 8 years have grown $13.9 billion more than expected, 
and (3) they increased benefits plan benefits by $7.9 billion, 
especially in 1999 and 2003.   Part of the unexpected growth in 
the liabilities comes from the need to use a lower discounting 
rate thanks to the low interest rates prevailing over the past 
3,4 5 years.

Everything that GM has done regarding pensions is legit and 
according to the FASB pronouncements.

Overall, their pension asset sitting on their books is 
overstated by $30 billion right now, and I don't know how they 
will earn 9% on their assets going forward.  A while back Mike 
Burke said that a 6% annual return over the long run is a 
reasonable assumption.  If they were to change the assumption 
from 9% to 6%, their 2005 Pension Expense would not have been 
$1.446 billion, but $4.079 or $2.633 billion more.

So, in asking if GM is bankrupt, change that $36.3 billion 
pension asset on their books to $6.1, and then do the rest of 
the analysis.

Mike Schiavo