Authorities Warn Car Employees on Pension Funds
Employees and retirees of car companies face a grim year as their pension funds may be cut if some manufacturers collapse due to slumping sales and demand. And as the country is expecting recession in midyear, this gloomy prediction may happen, affecting an estimated 1.3 million car employees.
Car employees and retirees face a grim future as their pension funds may be cut if some companies from the auto industry collapse, according to Pension Benefit Guaranty Corp. (PBGC) director Charles Millard.
In an interview with the Wall Street Journal, Millard said that an estimated 1.3 million employees and retirees will be affected if the car industry continues to experience slumping sales and demand which may force some manufacturers to “kill their pension plans.”
While Millard said that the country’s three largest auto firms, Ford Motor Co, Chrysler LLC, and General Motors Corp are maintaining well-funded pensions based on the standard rule of Securities and Exchange Commission (SEC), if one or more of these car makers would kill its pension plans, it will result to a deficit amounting to more than $40 billion.
Millard added that pension funds of Detroit's Big Three can only cover nearly 76 percent of its obligations if one or more of these car manufacturers would stop its pension plans.
When asked for response, Ford Motor spokesman Bill Collins said their company’s pension plan is worth more than $45 billion and 103 percent funded, or more than $1.3 billion surplus cash.
Meanwhile, General Motor spokeswoman Julie Gibson said the automaker’s pension funds are well-funded and the company is not facing any pending obligations regarding the issue.
Chrysler cannot be reached to provide comments.
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