GAO warns future of Chrysler and GM pensions "uncertain"
4/6/2010WASHINGTON — Automakers General Motors and Chrysler will need to put billions of dollars into their pension plans over the next five years to meet their funding requirements, the Government Accountablity Office said Tuesday.
The GAO concluded that Chrysler will have to add $12.3 billion by 2014, while Chrysler is expected to need $2.62 billion more for its pension plan to keep it properly funded.
GM and Chrysler both went through government-orchestrated Chapter 11 bankrutpcy protection last year. They emerged as newly restructured companies that were able to shed huge debts but remained responsible for the pension plans of thousands of workers and retirees.
The GAO said in a report that the future of those plans "remains uncertain" as the companies struggle to make money again.
Chrysler and GM will be able to meet their funding needs if they are profitable, the GAO said. The Treasury Department, which oversees the government's sizable stake in the two companies, believes that will happen.
But if GM and Chrysler falter and are forced to terminate their pensions, the government's Pension Benefit Guaranty Corporation insurance program would have to absorb $14.5 billion worth of company obligations to workers.
GM has roughly 702,000 people covered under its pension plans for hourly and salaried employees. Chrysler's collection of plans covers about 254,000 retirees and employees.
Greg Martin, a spokesman for GM, said the company "continues to believe our pension plans are adequately funded to meet current obligations." A Chrysler spokesman said the automaker had not yet reviewed the report.
The auto industry's deep struggles with falling auto sales and high legacy costs like health care and retirement benefits have wreaked havoc with company pension plans.
In January 2009, the PBGC estimated that automakers, parts suppliers and other companies in the industry had combined underfunded pension liabilities of $77 billion.