The Detroit News and The Wall Street Journal are reporting that Motown automakers’ pensions funds are no longer fully-funded. “The outgoing director of the U.S. Pension Benefit Guaranty Corp. warned Friday that Detroit’s Big Three automakers face a $41 billion pension shortfall. “We’re not trying to tell people that the pension house is on fire,” quoth E.F. Millard in the DetN. “The point is that in many ways this has a similar look to other situations, such as a Bethlehem Steel.” Not surprisingly, the WSJ has an even more alarming sound bite. “An awful lot of people seem to think these plans are well funded or overfunded. Each of these plans is significantly underfunded [and] in three years I don’t want people coming back and saying, ‘How come the PBGC never told us that?'” Let’s drill down, then.

The three automakers reported $130.5 billion in pension assets, which represents only 76 percent of their combined liabilities. GM’s pension is 20 percent underfunded, Chrysler’s is 34 percent underfunded, and Ford is short by 27 percent.”

“When GM last gave a year-end update on its pension funds, the funds covered more than 400,000 retirees and were overfunded by $18.8 billion. But in November, GM said its plan for hourly workers was underfunded by $500 million because of restructuring expenses.”

So where did the money go? Heavy losses in investment portfolios, declining interest rates on assets and (as stated above) Detroit’s reliance on pension funds to pay for early retirement.

“It is certainly possible that none of these companies ever files for bankruptcy,” Millard said. “It is certainly possible that they all do.” He said the risk to the PCBG’s reserves is “significantly greater than it was six or seven months ago.’

And then…?

“If all three automakers were to collapse and turn their plans over to the pension corporation, the agency estimates it would pay out $13 billion of the $41 billion, because of limits set by Congress on how much the pension corporation can cover. The agency generally has a yearly cap of $54,000 in benefits for people who are 65.”