Ford will start offering lump-sum pension payout this summer

Article by Christian Andrei, on June 3, 2012

This summer, Ford Motor Co. will start to offer lump-sum pension payout to its 98,000 white-collar retirees and former employees. This move represents the most aggressive strategy yet to handle an almost $50 billion risk. These voluntary buyouts could cut the $49 billion U.S. pension liability by a third. This move may be enough to support Ford’s credit rating and stock price.

Ford is unable to estimate how many would gamble on the offer. Pension experts face a challenging task that’s said to have a size and scope that are unprecedented. In an interview, Chief Financial Officer Bob Shanks told Reuters that if they get “at least a meaningful number of employees,” several billions of dollars of obligations may be removed.

The market shares of U.S.-based automakers have been lost to foreign automakers. As a result, the pension costs have become a more urgent matter to U.S. automakers since a few decades ago. This has turned into a hurdle for the U.S. auto industry, especially with the economic downturn a handful of years ago. These offers are included in a succession of steps Ford and General Motors Co. have taken to reduce these risks.

Last Friday, GM revealed a similar program for salaried retirees. GM said that this move will lead to a $26 billion drop in GM's U.S. salaried pension obligation. Ford’s total pension obligation in the U.S. of almost $109 billion is a primary concern for its investors. This issue wasn’t touched in 2009 during the bailout instigated by the Obama administration. Ford's U.S. pension liability has risen by nearly 50% since 2000. Ford was asked by several companies about the manner in rolling out the buyout offers. If successful, other automakers are certain to follow suit.

Topics: ford

If you liked the article, share on:

Comments

Login or Create new account to add a comment!

Recommended

Hyundai is making the green vehicle race more competitive by offering three powertrain types -- pure electric (EV), hybrid (EV plus combustion engine) and plug-in hybrid (PHEV) – in one...
by - December 9, 2016
Although specs for the new Renault Megane had already surfaced several weeks ago, we didn’t know that the company has cooked up something new. Aside from the 200hp gasoline, Renault‘s...
by - December 9, 2016
For the first time in fifty-eight years, Infiniti registers its first US-Spec Q60 Coupe in Cuba. American products have not been allowed entry into Cuba for six decades. But it...
by - December 9, 2016
Chevrolet has already given out the pricing for some of its 2018 Equinox models. Not only will the new Equinox be available in both the US and Canada, it is...
by - December 9, 2016
Nearly all details have been set with regards to the upcoming market introduction of the new Jaguar I-Pace. Its production version was recently previewed at the 2016 Los Angeles Auto...
by - December 8, 2016
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