Motorola Facing Pension Charge

December 2, 2002 ( - Motorola Inc. could face a pension charge to equity of up to $500 million dollars in the fourth quarter, according to a Crain's Chicago report.

The final amount of the pension charge will not be known until after December 31, when the pension plan’s yearly performance is calculated.   Recent federal filings by Motorola anticipate a $500 million charge.  

Motorola is reporting the charge to cover the gap between pension assets and pension obligations. The charge to equity is a non-cash, after-tax entry that does not affect Motorola’s earnings.  

However, the charge will alter debt-to-equity ratios, making the company appear more highly leveraged.

Motorola is now taking steps to cut pension expenses, including “design changes” to the plan.   Previous announcements included a $215 million pre-tax charge in the fourth quarter as part of the restructuring effort.   Additionally, Motorola has announced plans to increase pension assets by putting between $150 million and $200 million cash into their plan in 2003.