GERMANY/US – The pension funds of carmakers DaimlerChrysler and General Motors are both underfunded by more than previously stated, though the German carmaker’s underfunding was only slightly worse than expected.
DaimlerChrysler’s chief financial officer Manfred Gentz was quoted by Reuters as telling an analyst briefing that weak equity markets had left its pension plans underfunded by 5.6 billion euros, and its pension costs would rise 700 million euros in 2003.
It quoted Gentz as saying the situation was not serious though “we will have higher charges to the (profit and loss) in the years to come as long as the stock exchanges are weak".
It had previously said pension obligations would be underfunded at the end of 2002 by around 5.5 billion euros. But the figure is better than feared - ratings agency Standard & Poor’s had forecast that the underfunding would reach eight billion euros by year-end. S&P had also forecast that DaimlerChrysler’s pension costs would rise to 600 million euros in 2003.
Separately, rival carmaker General Motors said in a statement: “A preliminary analysis of GM's US pension plans showed that the plans' underfunded status was approximately 19.3 billion dollars (18.4 billion euros) at the end of 2002 based on a 2002 asset return of approximately negative 7%, and a discount rate of 6.75%.” The figure compares to an underfunding of 9.1 billion dollars at the end of 2001, the car firm said.
It said that it is reducing the discount rate, which is used to calculate the present value of future pension liabilities, from 7.25% to 7.0%.