GERMANY – Engineering giant MAN Group has confirmed plans to remove €1.72bn in pension liabilities from its balance sheet and finance them via an external fund.
A spokesman for MAN said the move, to happen in phases, was linked to the overall trend among big German companies to switch to international accounting standards. Under these standards, an external fund like a contractural trust arrangement (CTA) is regarded as an ideal way of funding pensions liabilities.
MAN runs both a defined benefit scheme and a defined contribution scheme. According to the company's annual report, all employees hired after July 1 1999 were only eligible for the DC scheme.
Beyond the €1.72 in pension liabilities held as book reserves (Direktzusage), the spokesman said MAN had another €350m in pension assets that were not on its balance sheet. He could not provide any further details on the pensions revamp.
Yet sources with knowledge of MAN’s plans said that as part of the revamp, the firm was looking for asset managers with considerable international scope to invest their pension assets.
It is not clear whether MAN is hiring an investment consultant to assist it in the revamp.
The sources added that the impetus for the pension revamp came from Håkan Samuelsson, a Swede who took over as MAN’s chief executive at the beginning of 2005. Prior to that, Samuelsson was head of MAN’s diesel truckmaking division.
In setting up an external fund for its pension liabilities, MAN follows such German multi-nationals as Deutsche Bank, the technology group Siemens, the airline Deutsche Lufthansa and, most recently, Bertelsmann.
The Munich-based firm, which employs around 60,000 people, had operating profit of €573m on sales of just under €15bn last year.
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