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General Motors to reduce pension burden by $26bn

US car giant General Motors (GM) has announced plans to reduce its pension obligations by $26bn (£17bn) by offering tens of thousands of retiring workers lump-sum payments.

The firm will also contract Prudential Financial to run ongoing pensions.

It said it would take a hit of $2.5bn to $3.5bn in its accounts in the second half of the year due to the changes.

GM's current pension plans are under-funded and have hindered the carmaker's recent recovery.

"These actions represent a major step toward our objective of de-risking our pension plans and will further strengthen our balance sheet and give us more financial flexibility," said Dan Ammann, GM's chief financial officer.

The changes, which will save the company tens of millions of dollars every year, should be completed by the end of 2012, the carmaker said.

Last month, GM reported a sharp drop in quarterly profits, due in part to its loss-making European operations.

Net profit for the first three months of the year was $1.35bn, compared with $3.41bn a year earlier.

Last year, the firm made record profits of $7.6bn, but lost $700m at its European division, which includes its UK Vauxhall plants in Ellesmere Port and Luton.

In 2009, the carmaker filed for Chapter 11 bankruptcy protection and received a $50bn bailout from President Barack Obama's administration.

BBC News

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