DaimlerChrysler using cars as pension collateral
GERMANY – Automotive giant DaimlerChrysler is using €295m of company cars as collateral for its German pension scheme.
The news comes as the firm said it would inject a further €1.5bn into its pension schemes, which are €6.6bn underfunded.
“At December 31 2004, inventories include €295m of company cars of DaimlerChrysler pledged as collateral to the DaimlerChrysler Pension Trust e.V.,” the company said in its 2004 annual report. “The pledge was made in 2004 due to a new requirement to provide collateral for certain vested employee benefits in Germany.”
The firm was the first major German company to set up a pension trust for its existing defined benefit plans in 1999, in the form of a contractual trust arrangement.
At the end of 2004, DaimlerChrysler had pension obligations of €34.4bn – up from €32.1bn a year before. The obligations were covered by €27.8bn of assets.
“The decrease in the financing status resulted primarily from an increase of he pension obligations due to the decrease of the discount rate in 2004 and he first-time consolidation of MFTBC [Mitsubishi Fuso Truck and Bus_Corporation],” it said. This was partially offset by good stock market performance and a €1.6bn contribution. It contributed €2.0bn in 2003.
The discount rate fell to 4.8% in 2004, from 5.3% in 2003 and 5.8% in 2002.
The group sees the same expected rate of return on plan assets in 2005 as in 2004 – 7.5% for German plans and 8.5% for non-German plans. The expected rate of return has been falling over the last few years. In 2002 it was 7.9% for German plans and 10.1% for non-German plans.