The Motley Fool Discussion Boards

Previous Page

Investment Analysis Clubs / General Motors Community


Subject:  The Pension Problem Date:  3/16/2003  7:59 AM
Author:  DHeavy Number:  2543 of 7023

GM is not the only one facing pension problems. A recent article in Fortune (March 17, 2003 v147 i5 p65) states that:

more than 70% of the FORTUNE 500--pensions remain a very big deal. From the oil-futures trader at Exxon Mobil to the drug researcher at Eli Lilly, the plans cover 23 million active workers and pay more than $111 billion each year to another 21 million who are already retired.

These plans are woefully underfunded which is killing corporate profits. Companies are having to subsidize the plans with cash which goes right to the bottom line.

For the first time in years, the plans don't have enough money set aside to pay for the $1.2 trillion or so in benefits that they owe current and future retirees. The size of the shortfall? Some $240 billion, or more than half of what they earned in 2002.

To me, given the recent long-term slump in the market, companies need to find a way to reduce their pension liabilities. Unfortunately, for the existing worker, that ultimately means taking a hit on pesion benefits. For new workers, that means enrolling in company sponsored 401K and just as important- SAVING for the future.


Copyright 1996-2019 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us