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As if rising gas prices, a bad product line up, and staggering credit problems, weren’t enough for Ford brass to worry about , a recent analysis by Credit Suisse shows the car maker has renewed pension problems too. Accounting analyst David Zion estimates that the company has seen its unfunded pension obligation jump from $3 billion last year to more than $9 billion this year, a $6 billion increase made more sobering by the fact that the company’s entire market cap is only $10 billion.
Executives at Ford and elsewhere have tried a variety of techniques to get their obligations to retirees under control in recent years, and for a while it seemed to be working. After hitting bottom in 2002, these plans began to climb back to a balanced budget thanks to benefit cuts and strong investment returns. By last year the S&P 500 pension plans as a whole were actually $60 billion in the black. The market’s swoon has erased all that, and now Zion is estimating they’re back in the red by $110 billion.
Quite a whipsaw and one Zion points out is likely to put pressure on earnings as management antes up cash to shore up the funds. It’s not just Ford that’s headed for a rough ride, either. General Motors, Unisys and Office Max are among those with their own unfunded bills coming due.
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