Agency Raises Concerns About Car Makers’ Pensions – WSJ.com
by Tom on January 10, 2009
in Market Musings
“An awful lot of people seem to think these plans are well funded or overfunded,” Mr. Millard said in an interview. “Each of these plans is significantly underfunded [and] in three years I don’t want people coming back and saying, ‘How come the PBGC never told us that?’”
This concern adds fodder to an ongoing debate over what the government’s role should be in helping the struggling auto makers from collapsing as the trio face a difficult road in 2009. Some people argue a bailout for Detroit would be a good use of taxpayer money, and that holding back financial aid would result in a collapse, and force the government to spend billions shoring up the companies pension plans.
Mr. Millard estimates that the three auto makers only have enough money in their pension funds to cover only 76% of the pension obligations they have made, if they terminate the pension plans. GM’s plan is estimated to be $20 billion, or about 20% underfunded, while Chrysler’s plan is 34% underfunded, leading to a $9 billion-plus shortfall, the agency said. Ford’s funded ratio is not publicly available, but the company’s pension plans are likely running at a $12 billion deficit.
About $13 billion of the estimated $41 billion shortfall would be covered by the PBGC, Jeffrey Speicher, an agency spokesman, said. The remainder represents benefits that PBGC could not pay because of limits set by Congress, and those benefits would be lost by employees and retirees.
Agency Raises Concerns About Car Makers’ Pensions – WSJ.com.
Don’t think we’re done hearing about the Big Three and their financial problems……
Tom
