One of the legacy costs that GM was not able to reduce in the bailout was pension costs, a whopping $128b obligation as of the end of 2010. And though the plan is “only” underfunded by $10.8b at the end of June according to GM, Kenneth Hackel, president of CT Capital LLC (and author of two textbooks on valuing securities) recently told Bloomberg

The financial risk because of [GM's pension liability] is higher than people understand. The cold reality is if you used a conservative discount rate and you wanted to close out the plans, you would have to raise about $35 billion.

With GM’s market cap sagging into the low-$30b range (currently around $34b), the risk of pension liabilities growing larger than GM’s market capitalization is very real. And as lower interest rates and a weak stock market reduce pension fund returns, the obligations grow, in turn putting pressure on GM’s stock price. And it’s not like nobody saw this coming: a GAO report released in April 2010 issued dire warnings about the state of GM and Chrysler’s pension obligations. Now, according to the ace reporters at Reuters, GM and the UAW have hashed out a buyout deal giving workers the option of being bought out of their pensions. Which has us dying to know: what’s a UAW pension worth in cash?

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When the music finally stopped at Old GM, the UAW’s VEBA fund was left holding a lot of IOUs. On those merits, the union’s benefit trust was given about 17.5 percent of the equity in the bailed-out and re-organized New GM. UAW leadership has always maintained that having its membership’s benefits staked on the company’s financial performance would not change its mission, and that VEBA’s representative on GM’s board, Steve Girsky, would operate free from union influence. And one hopes he would, considering he’s being paid well to advise CEO Ed Whitacre. But the tension between GM’s IPO sprint and the UAW’s non-VEBA interests never goes away, and the Wall Street Journal [sub] is reporting that the latest spat is over the old hobbyhorse of buyouts.

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It’s been a while since we’ve heard the word “buyout” echoing out of Detroit, as 2008 marked the year in which auto industry employees finally started to be fired like everyone else: without a hefty severance kiss-off. Ford, on the other hand, did not get a shot at free house-cleaning in bankruptcy court, so it’s bringing back buyouts. According to Market Watch, the Blue Oval is offering blue-collar employees a $50,000 lump sum payment and a $25,000 voucher for a new vehicle or another $20,000 lump sum, as well as six months of health insurance coverage. There’s even an extra $40k for workers of “a certain age.” But this being Detroit, employee benefits are either feast or famine. While Ford’s workers are being offered cash for their jobs, the former Ford parts division Visteon announced today that it is seeking to dump pensions for 21,000 retirees in bankruptcy, following Delphi into yet another stealthy yet popular form of indirect automaker bailout.

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