Pension Benefit Guaranty Corp. Reports Chrysler Pension Plans $10 Billion Underfunded

May 20, 2009
Chrysler’s 10 U.S. defined-benefit pension plans are underfunded by a total of more than $10 billion, according to a Pension Benefit Guaranty Corp. estimate in a U.S. Bankruptcy Court filing.

In November, the PBGC estimated Chrysler’s unfunded pension liability on a termination basis to be $9.3 billion.

The court filing seeks approval of a pension settlement between the PBGC, Chrysler, Cerberus Capital Management and Daimler that will prevent the termination of Chrysler’s U.S. defined-benefit plans, which totaled $21.6 billion as of September 30, according to data provided to Pensions & Investments, a sister publication of Workforce Management.

Prior to selling a controlling interest in Chrysler to Cerberus in August 2007, Daimler said it would guarantee $1 billion of Chrysler pension liabilities if the defined-benefit plans were terminated.

To avoid termination, the proposed settlement requires Daimler to agree to make scheduled cash contributions of $600 million to the Chrysler plans during the next three years and reduces the Daimler guarantee to $200 million once the pension plans are transferred to a new Chrysler entity as part of Fiat’s deal to acquire a 20 percent ownership stake.

If Daimler meets its Chrysler pension obligation before the deal with Fiat is completed, it will eliminate the threat of the PBGC “terminating the Chrysler Pension Plans prior to the consummation of the sale—an event that would create a claim against the debtors’ estates by the PBGC that would exceed $9 billion and interfere with the closing of the sale,” according to the filing.

A hearing regarding the proposed settlement is scheduled for May 27.

Filed by Christine Williamson of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail

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