Which public companies have extraordinarily large pension liabilities
(especially pension costs related to health care)?  Is there a way to
calculate this liability as a percentage of current net worth? IF so,
could this calculation be done and the largest companies be listed.

Hello.

Credit Suisse First Boston did a study on this exact subject last year. 

CSFB identified the public companies with the largest pension
liabilities.  Additionally, CSFB calculated the companies' underfunded
pension liabilities as a percentage of the companies' current market
capitalizations.

Here were the results of the study:

                             (millions)
company             underfunded      market    underfunded/
                    amount           cap       market cap % 

AMR Corp.            3,367           560       601%
Delta Air Lines      4,376         1,240       353%
Avaya Inc.             703           485       145%
Goodyear Tire        1,965         1,386       142%
General Motors      29,428        21,421       137%
McDermott Intl.        448           333       134%
Delphi Corp.         4,245         4,811        88%
Navistar Intl        1,093         1,249        88%
Ford Motor Co.      14,273        17,026        84%
Cummins Inc.           729           902        81%
CMS Energy Corp.       590         1,108        53%
Xerox Corp           2,297         4,352        53%
Visteon Corp.          651         1,297        50%
Hercules Inc.          477           954        50%

source:
Credit Suisse First Boston, cited in:
"Underfunded Pension Plans May Prompt Cos. To Market," hosted
BenefitCapital.com:
http://www.benefitcapital.com/OverUnderInfoList/UnderfundedPensionPlansMayPrompt.htm

A similar study conducted by Morgan Stanley lists 38 U.S. with the
greatest pension liabilities relative to market capitalization.

Those 38 companies are listed on page 5 of this Morgan Stanley
document, hosted by ccactuaries.org:
http://www.ccactuaries.org/resourcecenter/ea-handouts/2003ea/002-E.pdf
(The document is in PDF format, so the Adobe Acrobat Reader is
required. If you don't have that, visit:
http://www.adobe.com/products/acrobat/readstep2.html )


I should note that the market values of the companies have changed a
little since these studies were conducted. If you wish to recalculate
the above figures based on today's market caps, you could obtain the
market caps from a site like Yahoo Finance.  For example, the market
cap of General Motors is now $23.92 billion instead of the $21.42
billion mentioned above.  Source: Yahoo Finance:
http://finance.yahoo.com/q?s=gm

------------

search strategy:
study pension fund liabilities
"credit suisse first boston", pension study, amr, delta, avaya
pension, amr, delta, avaya, goodyear

I hope this helps. If anything is unclear, please use the "request
clarification" feature to let me know. Thanks.

---

Request for Answer Clarification by i_guy-ga on 27 Nov 2003 19:20 PST

Nice listing of sources.  Are you able to assess if the recently
passed health care legislation [that now moves medication costs for
the retirees to the US taxpayer from the public corporation] will
positively impact any of the companies listed - if so, would any
particular one(s) be a good buy at this time?

THanks,

---

Clarification of Answer by juggler-ga on 27 Nov 2003 20:17 PST

That's an interesting question. First, though, I should note the
disclaimer on the bottom of this page that indicates that Google
Answers provides general information and is not a substitute for
professional investment advice. As you're undoubtedly aware, investing
is complicated and risky, and it would be inappropriate for a
researcher to recommend specific stocks or any other type of
investment.


In theory, though, all of these companies might benefit from this new
Medicare plan.

Representative Ron Paul explains why:

"Furthermore, the Medicare drug benefit gives private companies a
perverse incentive to dump their existing prescription coverage and
force retirees into the government system. Many large companies
already have badly underfunded pension plans. As more and more Baby
Boomers retire, these companies will face serious financial crises.
They will naturally seek to cut costs by eliminating drug coverage;
some companies already have announced their intention to do so when
the Medicare drug benefit becomes available. In fact, the
Congressional Budget Office estimates that at least one-third of all
retirees will lose their private drug coverage and becomes wards of
Medicare."
source: lewrockwell.com
http://www.lewrockwell.com/paul/paul133.html

In other words, if these companies can shift the burden of paying for
their retirees' drugs on to the U.S. taxpayer, they'll save money.

 As to which companies could benefit the most, some observers have
singled out automakers such as Ford and General Motors because those
companies have such a huge number of retirees.

There are about 522,000 retired autoworkers in the United States.
Source: Detroit Free Press:
http://www.freep.com/money/autonews/uaw8_20031008.htm

Also see, 
"Medicare drug plan may save carmakers millions," from the Detroit Free Press:
http://www.freep.com/money/autonews/medbil8_20030708.htm

Also see:
"A Prescription Time Bomb - Medicare Plan to Hit Many Hard If
Companies Drop Retiree Coverage"
source: heritage.org
http://www.heritage.org/Press/Commentary/ed063003a.cfm

------

Of course, the mere fact that the automakers might save billions by
not paying for their employees' prescription drugs does not
necessarily mean that the auto stocks are a good place to invest.
Ultimately, the success of companies like Ford and General Motors will
also depend on how well they do at their core business of selling cars
and trucks.

I hope this helps.

excellent answer.