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GM, Chrysler profits seen; pensions draw concern

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GM, Chrysler profits seen; pensions draw concern

April 6, 2010 - 4:34 pm ET

WASHINGTON (Reuters) -- General Motors Co. and Chrysler Group should be able to attract sufficient private investment and return to profitability, U.S. Treasury officials said.

A Government Accountability Office report released today on the automakers' pensions also said that it might be difficult for Treasury officials to make some decisions down the road since it oversees government equity in both companies as well as the agency that insures corporate pensions.

The GAO said uncertainty about the long-term viability of U.S. automakers and key suppliers poses significant risks to the health of the Pension Benefit Guaranty Corporation, which insures corporate pension plans.

The GAO concluded that the ultimate impact of the federal investment on the future viability of GM and Chrysler, which both restructured in bankruptcy last year, is unclear due to the uncertain sales market and the struggling economy.

"This, too, is the case for the companies' pensions," said the GAO, which is the investigative arm of Congress.

The ability of GM and Chrysler, now run by Italy's Fiat SpA, to make large contributions to their pension plans is mostly dependent on profitability, the GAO found.

"Ultimately, much of the automaker recovery is not only dependent on how well the automakers turn their companies around but also how well the overall economy and employment levels improve," the report said.

Treasury officials told the GAO that they would consider "all commercial options" for disposing of government equity in automakers should they fail to become profitable -- including terminating pension plans.

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