This Auto News Article shows how much the accuracy of management estimates of pension fund liability for a huge company with a huge retired employee pool can swing the company's financials. GM, which has been sporting a pension fund shortfall in the tens of BILLIONS (yes, with a B) of dollars, now says that based on current returns, they expect this shortfall to disappear within a year or so. I read in another article that GM has about 2 retired workers for every currently employed worker.

I thought it would be neat to include an article from a non-financial magazine that shows the impact of accounting. I think you need to register (free) to actually follow the link, but the article is short so I've copied the whole thing below:

"GM may eliminate pension liability problem in '04
By Dave Guilford
Automotive News / October 20, 2003
TOKYO -- General Motors will likely wipe out its underfunded pension liability early next year, Vice Chairman John Devine said.

A resurgent stock market will likely rid GM of the liability, part of the “legacy costs” which have drawn strong criticism from Wall Street. GM’s pension fund was underfunded by more than $19 billion at the end of 2002.

As a result, Devine said, “We could get this thing behind us.” Devine spoke to reporters here at a press event before the Tokyo Motor Show.

Devine said GM is getting a 14 percent return on its fund’s investments, compared to the 9 percent it had projected. GM will also reap $4 billion in cash from the sale of Hughes Electronics and $13.5 billion from a massive bond sale last summer.

GM is still burdened with projected retiree health care costs that are more than $50 billion greater than its fund to cover such expenses. But, unlike pension costs, GM does not have to pay into the retiree health care fund to meet federal funding requirements, diverting capital from operations."