General Motors said on Friday it expects its US hourly and salaried pension plans to be nearly fully funded by the end of 2003, reflecting strong asset returns and substantial cash contributions.

GM also said the company plans to contribute an additional $US4.1 billion in cash to its US pension plans by the end of 2003 if it is able to complete the Hughes transactions by year end. This would bring GM's total contributions in calendar year 2003 to $18.5 billion. Based on these contributions and normal asset returns, GM does not expect to be required to make additional cash contributions to the pension plans until at least 2010.

"GM has moved aggressively to address its pension funding deficit in 2003," GM vice chairman and chief financial officer John Devine said in a statement. "These actions provide GM with significantly improved financial flexibility going forward to continue to execute our business strategy."

By the end of 2003, GM expects the US hourly and salaried pension plans to be nearly fully funded, a significant improvement from the end of 2002. GM's forecast is based on 2003 asset returns of 18% and a discount rate of 6.25%, consistent with results achieved to Nov. 30, 2003.

GM expects pretax pension expense to decline by approximately $1.1 billion in 2004 to $1.5 billion. However, interest costs associated with GM's recent global debt offering are expected to offset some of the decrease in pension expense, resulting in an overall net reduction in pension and related interest expense of approximately $550 million before tax, or about $0.70 per share.

"GM's contributions to its pension plans in 2003 provide an opportunity to further reduce the volatility of the GM pension plan's assets," Devine said.

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