NEW YORK - Chrysler LLC's pension plans may be underfunded by more than $10 billion, the federal Pension Benefit Guaranty Corp. has estimated.
If the pensions are terminated, the agency's claim for the shortfall in the automaker's bankruptcy case "would exceed $9 billion," Chrysler lawyers said in a filing yesterday in U.S. Bankruptcy Court in New York.
Chrysler is seeking approval of a settlement among the company, the PBGC, Cerberus Capital Management LP, and Daimler AG to partly fund the plans and avoid such a termination.
Chrysler's proposed sale would extinguish Daimler's $1 billion guaranty securing the pensions, according to the filing.
Under the proposed settlement, Daimler will make $600 million in planned cash contributions to the pensions while reducing its $1 billion pension guaranty to $200 million, leaving it in place even after the sale is completed. Daimler will forgive a $1.5 billion loan to Chrysler and Cerberus will forgive a $500 million loan, according to court papers.
"PBGC will work with Chrysler, its unions, and all other stakeholders to ensure continuation of the pension plans," said Gary Pastorius, a spokesman for the government pension agency. "If possible, we want to avoid plan termination and putting the participants or the pension insurance program at risk."
A hearing on the settlement is set for May 27.