Ford to offer lump-sum payout to 90,000 retirees, former employees to lower pension risk
Ford Motor Co. plans to offer lump-sum payouts to about 90,000 U.S. salaried retirees and former employees as part an ongoing strategy to derisk its $39.4 billion U.S. pension plans.
The proposal will help reduce Ford's $74 billion global pension liability and balance sheet volatility, the automaker said Friday.
Ford's global pension plans were underfunded by $15.4 billion at the end of last year.
The move is probably the first of its kind, according to Jeremy Gold, president of Jeremy Gold Pensions, a New York-based consulting firm.
"I'm not aware of anyone who has done this without terminating or annuitizing their plan," Mr. Gold said.
Standard & Poor's said the move is not expected to change the amount of Ford's unfunded pension obligations materially, but "would reduce assets and liabilities and so could be a modest positive over time."
Ford said it is working with federal regulators on how to structure the payouts.
The automaker said the program won't affect its cash balances because the payments will be paid from its pension fund and will have limited impact on operating income.
Ford ended the first quarter with gross automotive cash of $23 billion.
The automaker made $1.1 billion in pension contributions during the first quarter, up from $300 million a year earlier, according to its earnings statement.
The company on Jan. 27 said it planned to contribute a total of about $3.5 billion in cash to its global pension plans in 2012, including about $2 billion in discretionary contributions to its U.S. pension plans.
Kevin Olsen and David Phillips contributed to this story