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BMW denies CTA pension plan

GERMANY – Car maker BMW has denied that it plans to announce next month the creation of a contractual trust arrangement (CTA) to fund up to €2.6bn in pension liabilities currently on its balance sheet.

Citing industry sources, IPE reported last month that BMW was seriously considering the move and had even been hearing pitches from financial service providers on the matter.

Now the sources, who wished to remain anonymous, have told IPE that BMW would announce the creation of the vehicle in March.

But BMW spokesman Marc Hassinger flatly denied this. “It is simply not true that we will make an announcement concerning a CTA in March. We have made no decisions about what to do with our pension liabilities,” Hassinger told IPE from Geneva, where senior BMW executives are attending an auto show this week.

Nearly 20 of BMW’s peers on Germany’s blue-chip Dax index have already set up CTAs for their pension liabilities. Under international accounting standards (IAS), which apply to all Dax companies, the external fund is considered an ideal way of meeting those liabilities.

Other Frankfurt-based industry sources told IPE that while BMW may not announce the CTA in March, it would do so by the end of the year. The sources noted that the carmaker had already contacted the appropriate legal advisors – a crucial first step in the vehicle’s creation.

But this was also denied by Hassinger. “We have not given any legal advisors the mandate to create an external pension fund,” he said.

Separately, DZ Bank, the central bank for German co-operative banks, has recently confirmed that it has created a CTA for €805m in pension liabilities.

IPE first broke the news on DZ Bank’s plans on January 12 and followed up a week later by reporting that consultant Rauser Towers Perrin was advising the bank on the project.

In other CTA news, industry sources told IPE that energy conglomerate E.ON would next month begin the search for asset managers for a CTA that will finance up to €5.4bn in liabilities.

As evidence that much progress has been made, the sources said an asset-liability study for the CTA was near completion. The sources could not confirm an earlier IPE report that said Watson Wyatt’s new German investment consultancy was drawing up the ALM study.

Beyond E.ON and possibly BMW, Dax companies that have set up a CTA recently include engineering firm MAN, chemical giant BASF, consumer chemicals firm Henkel, Dresdner Bank and Deutsche Börse, which last month funded €60m in liabilities via the vehicle.

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