The federal agency that insures private pension plans for millions of Americans said Thursday that DaimlerChrysler AG's Daimler unit had agreed to pay $1 billion into Chrysler's pension plan if it is terminated within five years.
Vince Snowbarger, interim director of the Pension Benefit Guaranty Corporation (other-otc: GRTYA.PK - news - people ), said DaimlerChrysler (nyse: DCX - news - people ) and Cerberus Capital Management LP had made "significant financial commitments" to ensure the pensions of Chrysler workers as part of the agreement.
DaimlerChrysler announced Monday that Cerberus would pay $7.45 billion for an 80.1 percent stake in Chrysler. Daimler would retain the remaining 19.1 percent.
The sale, which was approved by DaimlerChrysler's supervisory board on Wednesday, is expected to close sometime in the third quarter.
Under the terms outlined by the PBGC, Daimler agreed to provide a guarantee of $1 billion to be paid into Chrysler plans if the plans terminate within five years. Under the new ownership of Cerberus, Chrysler will contribute $200 million to workers' pensions during the next five years beyond the required minimum payments.
Snowbarger noted the federal agency had entered into discussions with the companies as they were finalizing the agreement to ensure the protection of the pensions.
"I commend both Daimler and Cerberus on their willingness to work with the PBGC to protect the retirement security of Chrysler workers and retirees," Snowbarger said in a statement.
Leaders of the United Auto Workers have said Chrysler's pension plan is $2 billion overfunded and that its benefits are secure.
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