Ford offers lump-sum payouts to salaried retirees

Ford offers lump-sum payouts to salaried retirees

Automotive News | March 9, 2012 – 1:28 pm EST

DETROIT (Reuters) — Ford Motor Co. plans to offer lump-sum payouts as an option for future salaried retirees in the United States as part of its push to decrease the risk presented by its pension obligation.

The move, discussed during an investor presentation today, is one of the tenets of the automaker’s effort to tackle an issue that has hurt its market value and ability to achieve an investment-grade credit rating.

The automaker said it was exploring other options to “de-risk” its pension plans. Ford already said it would pour $3.5 billion cash into its plans and is shifting those assets more heavily toward bonds.

“While we have no plans to freeze or terminate our plans at this time, we monitor and evaluate the competitiveness of our benefits on a periodic basis,” Ford Treasurer Neil Schloss said during a presentation to analysts.

General Motors Co. also announced a lump-sum payment option for its white-collar workers last month and said it was moving its veteran white-collar workers to 401(k) retirement plans to reduce future pension liabilities.

Ford’s global pension plans were underfunded by $15.4 billion at the end of last year. That shortfall, which widens and contracts based on asset returns and interest rates, is typically viewed as debt by investors.

“The volatility of the funded status drives unpredictable variability in our profits, in our cash, and adds non-core financial risk,” Schloss said.

Ford has about 25,000 salaried employees in the United States. Currently Ford has about 195,000 hourly and salaried retirees and surviving spouses.

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