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Natan Hayes

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  • Ford's Novel Way Of Paying Pensions [View article]
    Well said, however increasing globalization trends in industries such as automotives will lower wage and benefit costs inherently. Like manufacturing in the 90's, auto production will likely see a trend of jobs going oversea's for all the reasons you mentioned and more. Wish we could save capitalism from union influence, but too many Americans are not in the socio-economic position to deal with the volatility of the business cycle.

    Detroit needed a gun to its head to incentivize competition, and marginally debilitate the unions power. The unions drove GM to bankruptcy and the taxpayers are keeping the corruption going. Ford's equity holders (myself included) will overcompensate auto-workers for many years to come, though the trend is looking up for shareholders.

    Greece wouldn't reform its pension and corrupt government employment standards, until their entire country was in danger of an economic catastrophe. Likely, it will take similarly serious events to create more competitive markets across the world.
    Mar 1 06:48 PM | 1 Like Like |Link to Comment
  • Ford's Novel Way Of Paying Pensions [View article]
    Agreed, definitely and under-reported issue, unions have wielded too much power since the end of the Reagan-era. Expectations of 7-8% will likely hurt the company in the long-run, though 2% is a relatively low expectation of what their fixed-income portfolio might return. Ideally, I would like to see a 401-k plan for the employees, since the FCF can more comprehensively be reinvested into the business with those considerations. Ford like many other unionized industries will probably have union and pension funding issues for the foreseeable future. It took the Financial Crisis of 2008 just to drive their wages closer to market equilibrium, thus considerable progress on that front will be limited at best.
    Mar 1 06:38 PM | 1 Like Like |Link to Comment
  • Ford's Novel Way Of Paying Pensions [View article]
    Fixed-income pension funding, especially in the 80% range, is a good indicator of where Ford's management see the company in the future. Like many other cyclical companies Ford will *likely do well when the economy is and have enough cash flow to subsidize pension under-funding liabilities. However, when economy is not great as we know can happen when we least expect it, Ford will be able to rely on the relative certainty of their fixed-income portion of their pension obligations. The company appears confident of two things: Ford's operating performance will correlate to the world economy, thus providing cash when interest rates rise and pension obligation need to be funded. Further, that the opportunity cost of holding an 80% fixed-income portfolio is less of a risk than Ford not performing well in a growing economy.
    Feb 29 03:30 PM | 1 Like Like |Link to Comment
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