DuPont Borrows $1 Billion to Add to Worker Pension Plans

Sep. 9–Dupont Co. said yesterday that it has taken advantage of low interest rates to borrow $1 billion and put the money into its U.S. pension plan, shoring up assets for 95,000 retirees and current workers.

The $1 billion infusion will not increase pensions for individuals, the chemical company said.

But the move appeases union critics of Dupont’s management of its pension plan — which have been underfunded — and will boost Dupont’s earnings by about 4 cents a share in 2006, the company said. Dupont, which has seen its profit margins squeezed this year because of high oil prices, also will get tax benefits for the pension contribution in 2005.

Dupont expects to make profits on the $1 billion by earning more in investment returns in the stock market than it pays in interest for borrowing the cash.

Carl Lukach, vice president of investor relations, said the low interest rates were attractive for the company and “made a lot of sense” to borrow. Dupont’s internal money-management firm, called Dupont Capital Management in Wilmington, will manage the $1 billion for the pension plan.

At the end of last year, Dupont reported that it had $18.25 billion in pension assets and a total pension liability of $21.7 billion. Based on this accounting snapshot, Dupont’s pensions were underfunded by about $3.5 billion.

Lukach said the funding levels did not drive the decision to boost the pension funding. “We are not under any financial stress or strain,” he said.

After going almost two decades without putting new money into its pension plan — by plowing investment returns back into it — Dupont now has infused cash into it for two consecutive years. It directed $300 million into the plan in 2004.

David J. Gibson, president of Local 1186 of the International Brotherhood of Dupont Workers at the Marshall Lab in Grays Ferry, said Dupont’s corporate restructurings and employee cutbacks have drained Dupont’s pension assets this decade. Thousands of employees took early retirement, which increased payments from the pension plans. Gibson also said the company has taken money out of the pension plans to pay for retiree health-care costs.

As for the $1 billion in new pension money, “it would be nice if they put that money into increased pensions for existing retirees but that’s not happening,” Gibson said.

Shawn Gilchrist, a United Steelworkers official, said the stock-market swoon in 2001 deflated Dupont pension funds, as it did for the pension plans of many corporations. The $1 billion will make the U.S. portion of Dupont’s pension plans almost fully funded, he said.

Dupont is under pressure to fund its pensions because it has an older workforce composed of many employees with 20 to 25 years of service and they will be retiring soon, Gilchrist said.

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