General Motors Corp. (GM) Tuesday said it would reduce traditional pension benefits for veteran salaried employees and shift newer staff to a defined contribution plan as part of a move to cut high labor costs.

The world's largest automaker said the changes would cut its year-end 2006 pension liability by about $1.6 billion and result in a pre-tax charge of about $120 million. Its shares rose 0.8 percent to $19.97 on the New York Stock Exchange.

GM's pension liability at the end of 2005 was $10.92 billion, according to its balance sheet.

The changes mirror a trend by U.S. companies to move away from traditional pension plans that guarantee retirees a lifetime monthly payout based on earnings and years of service.

Companies increasingly now provide what are known as defined benefit plans, where companies guarantee an annual contribution to employees' retirement savings. It is up to employees to manage the investment of their retirement funds, known as 401(k) plans, in order to be able to generate sufficient income for their retirement.

GM said it would reduce retirement benefits for salaried employees hired before 2001, changing the formula under which their retirement benefits are based.

Salaried employees hired from Jan. 1, 2001, will be shifted exclusively to a defined contribution pension plan and will receive a company contribution equal to 4 percent of annual base salary.

The changes come after GM reached a deal with the United Auto Workers union in November that would cut health benefits for hourly retirees.

That deal, which would save the automaker $1 billion a year, is awaiting federal court approval.

nses by about $15 million.

GM shares lost more than 50 percent of their value in 2005.