Vauxhall Motors, the UK-based wholly-owned subsidiary of General Motors Corporation (GM), employs around 10,000 people, supervised from the company’s headquarters in Luton, Bedfordshire. GM acquired Vauxhall in 1925 and since then the company has been closely integrated into GM Europe in terms of products, manufacturing processes and information systems, but has remained independent in terms of employee benefits and compensation policies.
“GM’s subsidiaries are independent when it comes to the employee benefits they offer,” says Bruce Warman, director of personnel at Vauxhall in Luton. “The group’s philosophy is that pension schemes are set up in line with country’s practice and legislation.” However, there is an increasing interest within the GM group in applying global strategies on pension fund investments, but the differences in terms of pension payments and benefits calculation will continue to be set on a local basis.
Although the trend towards moving to defined contribution (DC) systems in Europe is becoming more and more important, Vauxhall covers its employees under a defined benefit (DB) final salary scheme and they don’t have plans about changing this approach. “Switching from DB to DC is a subject that we discuss occasionally but I don’t thing this move is going to happen,” says Warman. “Our employees and the trade unions are very aware of what they’ve got and we couldn’t administer the pension fund without their help.”
He adds: “When talking to colleagues running DC schemes in Continental Europe they always mention the fact that their employees are becoming quite concerned about the vulnerability of their schemes and, as time goes by, we realise that our employees here are increasingly recognising the value of having a funded scheme.”
The Vauxhall pension plan covers UK employees only, but also from its headquarters administers funds for other companies within the GM and Delta groups. The plan’s assets are managed by a separate GM subsidiary, GM Investment Trustees (GMITL), based in Luton. The investment team also manages the assets of other UK GM pension plans, together with the assets of third-party occupational pension schemes. GMITL manages a series of multi-managed pooled vehicles, allowing participants to adopt customised investment strategies.
To allow the pooling of non-GM third-party assets, effective 1 July 2000 GMITL restructured the existing common investment funds into a series of pension fund pooling vehicles.Since this is the first time that such an arrangement has been implemented in the UK, the whole process of setting up the new vehicle has been slow.
“The only differences between these two vehicles are the legal and tax structures,” says David Mount, responsible for pensions administration at the GM pension department in Luton. “But from the point of view of the trustees nothing will change.”
The investment strategy will be the same as they’ve been working with for the past few years, based on a unitised structure with a series of investment funds investing in different asset classes, managed by specialist external managers. “Since we offer different plans to retirees and active members, this structure allows us to use the same funds and mix them depending on the liabilities of the plans,” says Warman. Following this approach, the pension schemes within the company choose different units from the common investment pool. “The retirees plan has a much more conservative and solid mix than the others,” he says.
Every three years the board of trustees appoints a consultancy firm to carry out a detailed asset/liability study to set the strategic asset allocation which will be different depending on the maturity of the plan. The 1998 Vauxhall pension plan’s popular report stated total investment returns of 14%, outperforming the benchmark of 13.7%. The best performing asset classes that year came from UK equity and index linked bonds. Although the investment returns had been comfortably ahead of the long-term investment assumptions and the plan remains well funded, the funding position has not been improved as the cost of liabilities increased sharply. The board of trustees took this into consideration when setting the asset allocation for 1999, when the plan obtained better returns. The scheme is using consultants WM Company and Frank Russell for monitoring performance and Chase as its global custodian.
“We are very pleased with the results we are obtaining,” says Mount. “I think our investment team has done quite well setting up the investment strategies and overseeing the work of the external managers. The 1999 results have been exceptional, with the plan obtaining returns of 26.4% versus a benchmark of 23% and three-year annualised returns of 18.1% versus benchmark of 16.9.”
Vauxhall employees working abroad remain members of the UK pension fund and are always considered as expatriates, getting a different range of benefits depending on the country’s cost of living. “People coming from other countries to work in the UK stay in their country’s pension plan because those relocations are usually for a period of three years,” says Warman . “But for those employees moving from country to country the situation is different. I think it would be more appropriate to set up a pension fund especially designed for them.” He adds: “This is something we are considering at the moment, because we believe that the circumstances of these workers are very particular and they need to be covered under a specific structure.” Although nothing has been implemented as yet, the best solution would be an off-shore pension fund that could cover the needs of these employees. Warman strongly believes that a greater harmonisation at EU level could really improve mobile workers’ benefits, but he is not this situation to get better in the near future. “State pension schemes are changing all around Europe because people are living longer and the population is getting older,” he says. “However, I can’t see any significant changes towards more harmonisation in the short or medium terms.”
Apart from the pension scheme, Vauxhall offers a private medical scheme for executives and stock options for a number of employees. In the US, GM has replaced profit share schemes with stock options for everyone, and Vauxhall is considering doing the same as an incentive for all its workers, following the trend among other big corporations. It also provides middle and senior management with lease car schemes and offers discounts on new car purchases to all employees and relatives.
“The type of benefits we are offering are pretty similar from those offered by other companies within the car industry,” says Mount. “It’s true that some companies are more generous but the principles on employee benefits and compensation are quite the same.” He adds: “We are always are trying to improve our approach to employee benefits and I believe our philosophy is in line with what is common practice in most big corporations. “With all the mergers and acquisition within GM and Vauxhall itself, the pension fund arena is getting larger and larger and we believe that, so far, we are doing quite well on both the administration and the investment side.”
Commenting on the way GM’s schemes operate in the US, Warman says: “They are structured fundamentally differently.”

Topics