GERMANY – Auto giant Volkswagen, one of the first blue-chip German companies to create an external fund for pension obligations, still has nearly €14bn worth of those obligations on its balance sheet, according to its financial report for 2005.
According to the report, VW’s external funds for worldwide pension obligations had €2.7bn in assets at the end of 2005. These vehicles include Volkswagen Pension Trust, the contractual trust arrangement (CTA) which the carmaker launched with great fanfare in 2001. VPT itself has an estimated €1.5bn in assets.
However, most of VW’s worldwide pension obligations are still on its balance sheet. According to the report, those obligations totalled €13.97bn at the end of 2005. This puts the carmaker on par with RWE, the Dax-traded energy firm which has considered creating a CTA for €12bn in pension liabilities currently on its balance sheet.
The report also indicated that VW’s external pension funds ended 2005 with a gain of €303m, or almost double the €172m earned in 2004.
Regarding asset allocation, the report showed that VW’s external pension funds cut their exposure to equities to 42.1% in 2005 from 55.8% in 2004. Meanwhile, the funds raised their exposure to fixed income to 47.7% in 2005 from 31.4% in 2004.
Another 3.4% of the funds’ €2.7bn in assets went to real estate in 2005 and 3.7% to alternative asset classes. The remaining 3.1% was held as cash.
VW’s meagre funding of its external pension funds contrasts with the strategy taken by other Dax-30 companies recently. For example, the chemical giant BASF and the energy giant E.ON are creating CTAs to quickly finance no less than €3.6bn and €5.4bn in pension obligations, respectively.
VPT could not be reached for further comment on why, five years after its launch, it only financed a fraction of the group’s total pension liabilities.
In other CTA news, Heidelberger Druckmaschinen (HD), a leading maker of printing machines, confirmed that it was setting up such a vehicle to finance €450m in pension liabilities.
HD said that to fund the CTA, it was using €370m in assets already invested to pay for pensions. Another €80m would come in the form of a cash injection, it added.