WHAT GM thinks is good for its bottom line is bad for its pension fund for hourly workers -- and potentially worse for the nation.
General Motors owes $24 billion to the fund -- the biggest such obligation of any employer.
Last month, it made a seemingly generous offer to reduce the shortfall by contributing $5.5 billion in one class of its common stock to the fund (along with the promise of future cash contributions).
But this is just fancy bookkeeping that does not properly address the company's obligations, and federal regulators should make sure it doesn't happen.
The Federal Pension Benefit Guaranty Corp., which pays off pensions up to a specified maximum if a fund goes bankrupt, has grounds to be nervous.
Though companies pony up premiums for the coverage, the premiums are not properly scaled to compensate the agency for risk. Ultimately, taxpayers might have to absorb the federal losses in a kind of savings-and-loan flimflam.
The federal agency told me the other day that it has enough cash to meet its short-term obligations, but said that its prospective obligations exceeded its present and projected assets by $2.7 billion.
The Shadow Financial Regulatory Committee, a group of economists, says that figure is a laughable underestimate.
Here's why. At the end of 1992, the pension funds of the 50 companies with the greatest shortfalls were underfunded by a total of $38 billion.
The biggest five were GM ($20 billion at the time), Bethlehem Steel, LTV, Chrysler and Westinghouse.
So what would happen if, say, GM faltered? The pension fund would be one of many claimants on its inadequate assets.
To get approval for its pension fund maneuver, GM is seeking a waiver from Labor Department regulations that allow no more than 10 percent of a parent company's stock in a plan's assets. GM proposes 20 percent.
The value of the stock it wants to contribute to its pension fund is linked to the performance of a wholly owned subsidiary, Electronic Data Systems, which Ross Perot started.
If Secretary of Labor Robert Reich lets GM replace one IOU with another, the agency's risk will go through the roof, because company after company will ask to follow suit.
Instead of undercutting the Pension Benefit Guaranty Corp., Congress ought to rescind corporations' 10 percent solutions without delay.
The agency should require GM to make up the pension shortfall rapidly through contributions of cash or other assets not linked to its financial future.
Lawrence J. White is professor of economics at the Stern School of Business at New York University.