The contrast couldn't appear starker between the pension plans of General Motors Corp. and Exxon Mobil Corp.
GM, whose survival is still of concern even though it apparently has fended off rumors of imminent filing for bankruptcy protection, has the best funded U.S. defined benefit plan of major domestic corporations.
Exxon Mobil, which on July 31 reported the highest quarterly profit of any company in history $11.97 billion for the second quarter has one of the worst funded pension plans.
Pensions & Investments' data on the funded status of the 100 largest defined benefit plans among U.S. corporations show the GM plan was $18.793 billion overfunded, with assets of $104.07 billion and projected benefit obligations of $85.277 billion as of Dec. 31, 2007.
GM's overfunding is the largest in dollar terms of any of the companies in the analysis.
In contrast to GM's solid pension funding, its corporate operations have deep troubles. Standard & Poor's rates GM's general obligation bonds B, well into non-investment-grade status. S&P has the rating under review for possible downgrade. In the quarter ended March 31, GM reported a $3.251 billion loss. GM released its second quarter financial report Aug. 1, too late for publication.
In fact, GM's U.S. pension plan has a net worth more than the company's market cap. As of July 30, its market cap was $6.5 billion, about one-third the value of its excess pension assets.
Exxon Mobil's situation appears the opposite. Its U.S. plan is $1.445 billion underfunded, ranking it 95th, or near the bottom in terms of funded status of the 100 companies. The plan had $10.617 billion in assets and $12.062 billion in projected benefit obligations as of Dec. 31.
So why doesn't Exxon Mobil fully fund its U.S. plans? Its ERISA plans appear near full funding, with a combined deficit of only $64 million. But some small and executive supplemental pension plans aren't funded because tax conventions and regulatory practices don't encourage it, Chris Welberry, Exxon Mobil spokesman, said.
The funding of the pension plans is simply a financing decision by the company, Mr. Welberry said. We comply with all the rules and regulations.
The (unfunded) pension obligations are relatively modest compared to the market cap of the company, Mr. Welberry said. Its market cap was $445.8 billion as of July 30, the largest in the S&P 500.
The company also has about $40 billion in cash, Mr. Welberry added.
We fully intend to operate our business to enable us to pay all our pension promises, Mr. Welberry said. Exxon Mobil has and has had for almost 90 years an AAA bond rating, he added.
Exxon Mobil, beyond its own pension plans, has helped finance the pension promise of almost all U.S. pension sponsors corporate, public and union through their investment in the company's stock, which has provided steady appreciation in principle and dividend.
A lesson from these differences is that GM, despite its efforts to keep funding secure, promised its employees much more than the company can afford and it has harmed its ability to compete in business and maintain its work force.
Exxon Mobil can well afford its pension promises. Its unfunded pensions are a general obligation of the company, noted Jeremy Gold, president of Jeremy Gold Pensions, a pension and investment consulting firm in New York. In this case, you are talking about an AAA-rated company. It's a pretty good promise.