General Motors is expecting a $35 billion pension shortfall that could delay share buyback or payments to shareholders, according to Bloomberg.
The shortfall trumps the automaker's market cap which fell to $33.1 billion last month.
GM which emerged from bankruptcy, had reported six consecutive quarterly profits and had built up its cash holdings setting off talks that the company would be buying back shares from the U.S. Treasury Department. With this shortfall at hand, dividends may be delayed.
GM's pension plans have one of the biggest deficits among American companies and were $22.2 billion shy at the end of 2010, Bloomberg reported. The figures didn't include a $2.2 billion stock contribution the company made to pensions in January.
The company doesn't have to make contributions to its U.S. pension plans till 2015 but may make a voluntary contribution this year. GM CEO Daniel Akerson said earlier this year that he wanted the company's U.S. pensions funded in his tenure but analysts think this is highly unlikely.
Kenneth Hackel, president of CT Capital LLC said GM's pension shortfall could reach $35 billion when calculated using lower asset returns and a lower rate for valuing future payments. GM used a discount rate of 4.96% last year to calculate current value for future payments, which is said to be a conservative number.
