Ford pours $3.8 billion in worldwide pension plan to minimize risks

Article by Christian A., on February 23, 2012

As part of its aggressive efforts to reduce pension risks in an unstable market, Ford Motor Co. is investing $3.8 billion into its global pension plan this year, according to an annual securities filing. It will also heavily pour its plan assets in bonds. The planned cash injection is far from the $1.5 billion that the automaker contributed in 2011.

The company also disclosed that 80% of its pension plans in the U.S. will be spent in bonds within "the next several years." The funds that are outside the U.S. have similar targets. The shift to bonds and the outsized cash contribution are a reflection of the automaker's efforts to meet the challenges created by market volatility, lower expectations for investment returns and rock-bottom interest rates.

Analyst David Whiston at Morningstar commented that with the lower returns, one needs to be investing more into the plan over time to offset liabilities. He further explained that the liabilities do not change and that one still has to fund the plan. In 2011, the assets in the pension plan of Ford earned 7.7%, which is better compared to the broader U.S. stock market. However, this is lower than the anticipated 8% return. The automaker now predicts a long-term return at 7.5 percent.

In the regulatory filing, the automaker disclosed that it anticipated its pension assets to counterpart future benefit obligations in the next few years. The stock could increase to $24 a share if the automaker fully funds the pension plans by around 2015.

The increase is almost twice its current level, analyst Itay Michaeli at Citigroup explained in January. Whiston of Morningstar also shared that since the automaker has already re-established its dividend and the possibility of a share buyback is slim, "the next best use of cash" for the carmaker is to fund the pension plan.

Topics: ford

If you liked the article, share on:

Pin It

Comments

Recommended

It’s quite safe to say that this generation marks the rise of the electric cars. For the past few years, automakers have been very busy trying to find the perfect...
by - March 28, 2017
Want to go for a sportier look, but don’t have enough cash to burn? Good news for future Ford Edge buyers, as the 2018 model year will have an optional...
by - March 28, 2017
Audi refreshes its portfolio as its go-faster division officially announces the release of six new RS models by the end of 2018. That’s quite a huge number of cars to...
by - March 28, 2017
Has Toyota started the production of a new electric supercharger? Well, a patent that was recently published indicated that they might have. And this electric supercharger looks more durable and...
by - March 27, 2017
The Tesla Model S has finally arrived in South Korean soil and is now available for test drive. But, there’s a catch. You’ll have to wait several months if you...
by - March 27, 2017
Facebook

Youtube Channel

Tip Us
Do you have a tip for us?
Did you film an important event?
Contact us
Newsletter
Subscribe to our newsletter!
Subscribe
Galleries