Germany’s Daimler has moved to increase the funding level of its employee pension scheme by 6% by transferring its strategic holding in Renault/Nissan valued at around €1.8bn.
In recent years, the company has topped up its German pension fund by large amounts but in cash rather in shares.
Dieter Zetsche, chairman of Daimler’s management board and head of Mercedes-Benz Cars, said: “With this contribution, we are again reinforcing our pension assets.”
He said the company’s aim was to safeguard employees’ pension benefits for the long term.
“Regardless of the share transfer, we will continue the successful strategic alliance with the Renault-Nissan Alliance,” he said.
Bodo Uebber, Daimler’s management board member responsible for finance and controlling and financial services, said the transaction improved the funding level of pension obligations significantly, by around 6%, with no effect on cash flow.
“In addition, the company value will further benefit from a better interest result and a higher equity ratio of the industrial business,” he said.
Zetsche referred to the start of Daimler’s joint production with Nissan of its new premium compact cars in Mexico as “one of the major milestones” in the cooperation between the car manufacturers.
Daimler said the shares in Renault/Nissan, valued at €1.8bn and representing a 3.1% stake in the carmaker, were being transferred to the pension assets of Daimler AG.
The transfer will result in a one-off positive impact to Daimler’s 2016 EBIT (earnings before interest and taxes) of around €500m, the company said.
Daimler said the funding level of the pension obligations was falling due to the persistently low interest-rate environment.
In December 2015, Daimler announced that it was making an extraordinary pension contribution of €1bn to the German pension fund, and the previous December it said it was contributing an extra €2.5bn to the fund.
Daimler and the Renault-Nissan Alliance – a partnership between France’s Renault and Japan’s Nissan – began working together in April 2010 and made an equity exchange as part of their strategic collaboration, giving the Renault-Nissan Alliance a 3.1% stake in Daimler and Daimler a combined 3.1% interest in Renault and Nissan.
Last year, companies on Germany’s DAX stock exchange made around €10bn in pension fund contributions in 2015, according to research by Willis Towers Watson, an amount roughly the same as 2014 contributions.
Of this, the largest contribution had been Daimler’s €1.9bn, increasing its funding level by 1,200 basis points to 71%, the research showed.