DaimlerChrysler faces e5.5bn pensions shortfall
US/GERMANY- US/German group DaimlerChrysler faces underfunded pension obligations to the tune of e5.5bn by the end of 2002 if capital markets remain at current levels.
Speaking at the disclosure of DaimlerChrysler’s Q3 2002 results, CFO, Manfred Gentz, announced that, due to weak performance of equity markets, returns on pension assets fell by –12% for US plan assets and –17% for German plan assets up to September 30 2002.
Gentz said that if the situation continues, the US/German group’s pension obligations will be underfunded at the end of the year by around e5.5bn, of which e3.1bn would be concentrated in North America. A decision on the contribution to the pension funds will be taken in the coming months.
Explains Gentz: “the remaining underfunded status would result in a credit to pension accruals charged against equity.” This will result in the equity ration declining over September 30 levels, but there will be no impact on the profit and loss account for 2002.
DaimlerChrysler now expects a lower return on plan assets in 2002, with the pension expense increasing in 2003 by e400m to e600m.