DETROIT -

General Motors made several moves Thursday meant to reduce its debt by as much as $11 billion as well as unveiled a strategy to shore up its balance sheet as an initial public offering approaches.

Chris Liddell, GM vice chairman and chief financial officer, described the actions as decisions that will bring down the manufacturer’s leverage by $11 billion by reducing debt and improving its pension funding position.

GM implemented two capital structure actions:

—Repayment of $2.8 billion outstanding on the 9 percent secured note provided to the UAW Retiree Medical Benefits Trust. The company plans to record a $0.2 billion non-cash gain in the fourth quarter related to this early extinguishment of debt.  

—Completion of a $5 billion, five-year revolving credit facility with a syndicate of banks, which GM said can provide an additional source of backup liquidity. Executives noted the facility is expected to remain generally undrawn.

GM also said it expects to implement the following capital actions, conditional upon completion of its IPO.

—Purchase of the $2.1 billion of 9 percent Series A Preferred Stock held by the U.S. Department of the Treasury at a price equal to 102 percent of the $2.1 billion liquidation amount. The company plans to record a $0.7 billion charge to net income attributable to common stockholders for the difference between the purchase price and the recorded value of the Series A Preferred Stock.  

—A contribution of at least $4 billion in cash and $2 billion in GM common stock to GM’s U.S. hourly and salaried pension plans. Executives indicated the stock contribution is contingent upon a Department of Labor review and the number of shares contributed would be determined based on the public offering price for GM’s common stock. They also noted the stock contribution will be valued as a plan asset for pension funding purposes at the time of contribution and for balance sheet purposes when the shares become fully transferable.

In addition to those actions and subject to completion of the public offering, GM mentioned that it expects to terminate a wholesale advance agreement. That agreement is meant to provide for accelerated receipt of payments made by a financial institution on behalf of GM’s U.S. dealers pursuant to wholesale financing arrangements.

Under such arrangements, the company explained GM’s U.S. dealers can borrow from financial institutions to fund their inventory of vehicles purchased from the OEM.

The company added similar modifications will be made in Canada.

Company executives went on to highlight the wholesale advance agreements cover the period for which vehicles are in transit between assembly plants and dealerships. Upon termination, GM declared that it will no longer receive payments for vehicles purchased by the dealers in advance of the scheduled delivery date.

“This action will result in an estimated $2 billion increase to GM’s accounts receivable balance, on average, depending on sales volumes and certain other factors in the near term, and the related costs under the arrangements will be eliminated,” executives explained.

Dan Ammann, GM vice president of finance and treasurer, elaborated about what these decisions mean to the financial health of the company.

“Completion of these actions will enable us to reduce net interest cost and preferred dividends by $0.5 billion per year,” Ammann noted.

“As importantly, we will have approximately $24 billion of total liquidity as of June 30, 2010, pro forma for these actions, our AmeriCredit acquisition, and excluding any public offering proceeds,” he added.