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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: ild who wrote (199244)10/22/2002 12:30:32 PM
From: mishedlo  Read Replies (1) of 436258
 
northerntrust.com

Nice piece on Pension funding.

Fitch Ratings just reported that the underfunding of auto workers' pension plans at US producers will rise at year-end to an estimated $30 billion from $13.9 billion last year. GM is the most hard hit of the Big Three, with its pension underfunding expected to rise to around $21 billion to $23 billion at the end of this year from last year's underfunding of $9 billion. This pension issue was a major reason for Standard & Poor's downgrade this past week of GM's debt to BBB, just two notches above junk status.

But the pension-underfunding problem is not restricted to the auto producers. Indeed, the venerable IBM announced in its third quarter earnings report that it would be adding as much as $1.5 billion to its underfunded plan at year-end. If the value of its pension assets stay approximately the same, it is estimated that IBM might have to continue adding $1.5 billion annually over the next three years to hit its goal of a fully-funded plan by 2005. This annual contribution represents about 20% of IBM's free cash flow over the past four quarters. Ouch! Less left over for Big Blue to use for stock buybacks. And that means that Big Blue will actually have to increase its earnings if it wants to show increases in its earnings per share.
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