On July 16, 2002, General Motors disclosed that most of the $3.5 billion in cash flow it had generated in the previous quarter had to be handed over to its pension fund to make up for dramatic losses in equity investments. It further warned that it would have to pump an additional $6 billion to $9 billion into the fund over the next five years to meet regulatory requirements. Investors quickly unloaded GM’s shares, shaving 4.3% off the company’s market value. As the year progressed and the stock market slide continued, the bad news got worse. GM ended 2002 with a pension-funding gap of $19.3 billion, more than double what it had been at the end of the previous year. Its annual pension expense, which had been running at about $1 billion, was expected to triple in 2003.

A version of this article appeared in the June 2003 issue of Harvard Business Review.