At the beginning of 1993 Chrysler had $3.6 billion in unfunded pension liabilities. During the first three quarters of that year the company contributed $2.6 billion to its pension fund as part of an effort to reduce the unfunded liability. But the automaker said “its liability is expected to rise by year-end as a result of low interest rates.” (Wall Street Journal, November 1993). REQUIRED:

a. What kind of pension plan does Chrysler have, how do you know, and basically how does it work?

b. How could the liability rise “as a result of low interest rates”?

c. In that same article it was reported that “Because of accounting changes related to retiree expenses, Chrysler reported that its noncurrent postretirement benefits jumped to $7.5 bil¬ lion from $116 million a year earlier.” To what accounting change is this quote referring, and did Chrysler’s postretirement benefits really jump that much? Explain