“After a three-year bear market, many major American companies are spending large amounts to shore up pension plans that have deteriorated, sometimes drastically,” writes Mary Walsh in today’s New York Times.

“Many companies are also considering ways to reduce their pension obligations to workers, possibly undermining benefits for millions.”

“The biggest pension shortfall belongs to General Motors, which said on Thursday that its United States pension plans ended the year with a deficit of $19.3 billion, even though the company pumped in $2.6 billion. G.M. also said its pension costs would triple in 2003, severely depressing its profit.”

“Many other such announcements are expected in coming months.”

“These problems have little to do with any change in the number of people retiring, or an increase in their benefits. Rather, investments by the pension funds have fared poorly in recent years. As the prices of stocks and other investments have fallen, so has the return on the money set aside for the more than 44 million current and future private-sector retirees who qualify for traditional pensions.”

“At the same time, unusually low interest rates are further undermining pension plans. The effect of the bond rates is on the financial calculations used to determine the present value of the pension liabilities, not on the pension funds’ return. Falling rates make future pension obligations look bigger on current balance sheets. To meet their obligations to workers, and to stay in compliance with pension laws, companies have been forced to set aside more money.”

“I.B.M. put almost $4 billion into its pension plans last month. Honeywell International said in November that it might have to contribute as much as $900 million more. Johnson & Johnson paid in $750 million last month, and 3M made a $789 million contribution last year. Ford said that it contributed $500 million this month and would probably add another $500 million soon, depending on tax considerations.”

“Still other companies, including Lucent Technologies, Boeing and Delta Air Lines, have been forced to reduce their net worth to reflect the way their growing pension obligations have outstripped their assets. Along with reducing a business’s value, such a step can put companies in violation of their contracts with lenders. Delta, for one, had to renegotiate with its lenders after the action.”

“Indeed, concerns about the health of pension plans are making it more expensive for businesses to raise money. That is because credit agencies have lowered their ratings on companies, like G.M., whose liabilities have soared. Even companies whose pension plans remain adequately financed, like Lockheed Martin, have begun reporting lower earnings as the plans’ investment performance has declined.”