Chrysler sees no need to offer pension buyouts

June 5, 2012
Chrysler sees no need to offer pension buyouts
No plans to follow in footsteps of Big 3 rivals, CEO says
By DAVID SHEPARDSON
/ Detroit News Washington Bureau
Chrysler Group LLC said Monday it has no plans to follow the decisions of rivals General Motors Co. and Ford Motor Co. to offer pension buyouts to salaried workers.
Chrysler CEO Sergio Marchionne made the remarks to reporters in Austin, Texas, on Monday. “There’s no need for us to do that,” Marchionne said, according to Dow Jones Newswires. “Not at all.”
A Chrysler spokesman confirmed the comments.
GM’s decision to cut salaried pension obligations by 20 percent may set the stage for a similar offer to its nearly 500,000 hourly pensioners and could prod Ford to turn over some of its pension plans to an outside firm, financial analysts say.
GM said Friday it was cutting its $134 billion pension liability $26 billion by offering buyouts to 42,000 salaried retirees, and offloading the rest of its salaried pension plans for retirees to Prudential Insurance.
“We view this as a substantial step forward in strategic de-risking by reducing potential future plan volatility,” Barclays Capital auto analyst Brian Johnson wrote in a research note Monday. He said GM will retain its pension plan for current salaried workers, but “still needs to address unionized retirees.”
Calls to United Auto Workers President Bob King for comment weren’t returned Monday.
GM will still have $81 billion of U.S. pension liability — including $71 billion in hourly plans — and a $12 billion underfunding gap.
Morgan Stanley auto analyst Adam Jonas noted that Ford’s buyout offer to its salaried pensioners did not include turning over pensions to an outside company: “We expect the Ford team is watching with interest what GM has accomplished and can come back with similar offers to new tranches of its pension population.”
He said the firm had expected GM to pay 120 percent of liabilities; it paid 110 percent.
UBS Securities analyst Colin Langan said in a note Monday he doubts “this creates value for shareholders” and said GM may have overpaid. UBS reduced its price target on GM stock from $32 to $30, because of the premium GM paid to Prudential.
“We believe funding pensions would more adequately address pension risk,” Langan wrote.
GM stock dropped Monday to a 52-week-low of $21.11, down 90 cents, or 4.1 percent.
Salaried retirees eligible for the lump-sum payment have until July 20 to decide whether to continue drawing monthly pension checks or take the lump-sum starting in September.

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