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

The man sitting at the top of the performance division of Mercedes-Benz – Tobias Moers – cryptically indicated that the Mercedes-AMG GT4 could be really coming. Moers, chief executive of...
by - January 18, 2017
The 2017 Detroit Auto Show (2017 North American International Auto Show) has been exciting and thrilling. Several new concepts and production vehicles were announced and unveiled, with a number of...
by - January 18, 2017
Your 2017 Volkswagen Golf Facelift could get as sporty looking as the Golf R with the new R-Line packages. But without the sporty run and the premium price. Set to...
by - January 17, 2017
Whether or not you’re a tech addict, you realize that the digital revolution is now moving at high speed. Before you know it, there’s already a new one on the...
by - January 17, 2017
We really couldn’t deny that quite a number of Audi customers and would-be-buyers are intently waiting for higher performance RS versions of the Audi A4 and A5. Of course, these...
by - January 17, 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