Ford Offers Pension Buyouts to 90,000 Retirees
and Former Workers
By Jerry Hirsch, Los Angeles Times
April 28, 2012
Ford Motor Co. will offer about
90,000 U.S. salaried retirees and former employees
vested in its pension plan a lump-sum payment to buy
them out of monthly benefits.
Ford, which also reported lower first-quarter earnings
Friday because of losses in Europe and Asia, said the
plan was an innovative strategy to reduce its pension
The automaker won't put up any operating cash but
rather will make the one-time payments from existing
pension plan assets.
"We believe this is the first time a program of this
type and magnitude has been done in an ongoing pension
plan," said Bob Shanks, Ford's chief financial
If an individual elects to receive the lump-sum
payment, the company's pension obligation to the
individual will be settled. Ford said it was working
with federal regulators on how to execute the plan.
The payouts will start later this year.
"It is really important that we improve the risk
profile of the company," Shanks said.
Ford also said it could expand the program to its
hourly union employees, subject to an agreement with
the United Auto Workers union.
The automaker has a U.S. pension obligation of about
The strategy could reduce both Ford's pension
obligations and assets, said Robert Schulz, an auto
analyst at Standard & Poor's. But it unclear how
many will take up the offer.
"This is relatively untested and how many people will
take it and what the final outcome will be is hard to
judge," said Schulz. "We view it as a modest positive
in the long run even if it doesn't have an immediate
It also lets workers avoid the risk of future problems
in the auto industry by cashing out now, while the
company is doing well.
The automaker continues do to well in the U.S., the
company announced Friday, posting for the quarter its
highest operating profit in North America in more than
Although its U.S. market share fell to 15.2% in the
quarter from 16% a year earlier, it is making more
money per car sold.
Ford's North American business logged an operating
profit of $2.1 billion, compared with $1.8 billion a
Brian Johnson, an analyst at Barclays Capital, noted
that Ford's 11.5% operating profit margin in North
America was particularly strong.
Overall, Ford earned $1.4 billion, or 35 cents a
share, down 45% from the $2.6 billion, or 61 cents, a
Sales also slid, falling 2% to $32.5 billion from
Operating profit in South America slid to $54 million
from $210 million.
Ford's European operations lost $149 million, compared
with a profit of $293 million a year earlier. The
automaker was hurt by the Eurozone debt crisis and
poor economic conditions in the region. This year,
Ford expects to incur a loss in Europe of $500 million
to $600 million, Shanks said.
Ford's Asian operations lost $95 million, compared
with a profit of $33 million in the same period last
"Our team delivered a solid performance during the
first quarter, with particularly strong results in
North America, despite a challenging global external
environment," said Alan Mulally, Ford's chief
The automaker forecast that earnings in the second
half of this year will be higher than the first half.
Ford shares fell 27 cents to $11.60.