US/German group DaimlerChrysler could be facing underfunded pensions obligations of more than e8bn by the end of the year, says ratings agency, Standard & Poor’s.
The figure is much greater than that predicted by DaimlerChrysler’s chief financial officer Manfred Gentz in October, at the disclosure of DaimlerChrysler’s third-quarter 2002 results.
Gentz announced that, due to weak performance of equity markets, returns on pension assets had fallen by 12% for US plan assets and 17% for German plan assets up to 30 September 2002. He added that if the situation continued, pension obligations would be underfunded at the end of the year by around e5.5bn, of which e3.1bn would be concentrated in North America. S&P also expects the company’s annual pensions expenses to increase by e400m–600m in 2003. It adds that DaimlerChrysler is allowed to spread the associated funding requirement over a much longer period.
The S&P report, Occupational pension schemes rise to prominence in Germany, discusses the increasing role of company-sponsored pension schemes.
“Reduced reliance on the state pension due to an ageing population, combined with increasing pressure from labour unions to include occupational pension schemes as part of an employee’s total remuneration package, is resulting in increased focus on occupational pension schemes in Germany, which are set to increase their share of a pensioner’s retirement income over the medium term,” says the report.