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Ford (F) will tackle one of its biggest challenges this summer when it offers lump sum payout...

Ford (F) will tackle one of its biggest challenges this summer when it offers lump sum payout offers to 98K retired workers in an effort to reduce a staggering $49B pension liability. Though it's uncertain how many ex-employees will take the deals, the move could help improve Ford's credit rating even further into investment-grade territory. Shares -0.6% premarket.
Comments (15)
  • Aristiphones
    , contributor
    Comments (1327) | Send Message
     
    since when is a pension a "liability"? it is in fact an asset...unlike say...housing which most definitely is not an asset.
    31 May 2012, 07:54 AM Reply Like
  • gmmpa
    , contributor
    Comments (468) | Send Message
     
    Aristiphones you need a little work on the fundalments of accounting. I hope you didn't learn this in the Greek school of economics? I won't go into the details, but the trouble with the Automobile industry in America is the negative relationship with Unions, excessive government regulations, and the past poor company management that made long term concesses to labor unions for short term profit gains and bonuses. Now those decisions are a ball and chain to competitiveness of Ford, GM, and Chrysler. Mullaney at Ford understands this and is trying desperately to fix this for the survival of the current labor force, the investors and the company.

     

    Union Pension liability is killing the automobile industry. Cash and the ability to generate it is the only real asset that investors care about. Plants located in states that do not support the right to work are also liabilities more than assets even though even in Greek accounting they may be considered an asset.
    31 May 2012, 08:32 AM Reply Like
  • Cyanus
    , contributor
    Comments (69) | Send Message
     
    “Evil events from evil causes [-read pension liabilities-] spring.” Aristophanes. c.400 BC.

     

    It seems that Mullaney is steering his company towards the lesser of evils. For our portfolios sake let's hope he's right!
    31 May 2012, 09:24 AM Reply Like
  • desertman
    , contributor
    Comments (8) | Send Message
     
    Ford owes the money to the former employees. Owing money is a LIABILITY.
    2 Jun 2012, 01:18 AM Reply Like
  • jcanter172
    , contributor
    Comments (2) | Send Message
     
    Are they taking the money out of the pension fund for the buyouts? What happens to the people who decide to stay and their pension fund is depleted by the buyouts? Are they eventually going to the PBGC like the Delphi Salaried who had an 85 per cent funded pension fund and were kicked to the curb unlike their union counterparts who got their pension topped off in the bailout.
    31 May 2012, 08:09 AM Reply Like
  • Matsebula
    , contributor
    Comments (52) | Send Message
     
    They will take it from wherever it makes sense. With the shift to fixed-income for funding pension liability, it seems unlikely they would fund from within the pension plan.

     

    This depends on circumstances. For instance, I just got out of the Army after 6 years, and it made more sense for me to take a lump sum than it did to wait for a relatively small annuity.

     

    A pension is a long-term liability to F because it has to be paid out until the individual (and their surviving spouse too) dies. Agreed it is an asset to the pensioner, though. I think maybe you were looking at it from that perspective.
    31 May 2012, 08:46 AM Reply Like
  • Dana Blankenhorn
    , contributor
    Comments (5690) | Send Message
     
    That's right workers. If you don't organize and defend your rights the employer class is going to screw you to the wall.

     

    Thanks for your defense of the absolute requirement that workers organize. I know you meant differently -- that workers should not be allowed to organize -- but it can be read the other way too.
    31 May 2012, 10:20 AM Reply Like
  • badmustang
    , contributor
    Comments (5) | Send Message
     
    Thats what lawsuits are for. Enforce a contract, implied or otherwise.
    31 May 2012, 08:30 AM Reply Like
  • Ryandan
    , contributor
    Comments (1395) | Send Message
     
    I don't think they have 49B to cover the money owed to the pension fund. I'm guessing liability unless all those union people are required to buy Fords to get their pension money. Then I'm guessing asset.
    31 May 2012, 08:41 AM Reply Like
  • VictorHAustin
    , contributor
    Comments (793) | Send Message
     
    oh my, and we let everyone vote and we let the elected ones make important financial decisions that are binding on us all, the vast majority of which are liabilities. And they don't even know what a liability is. oh my.
    31 May 2012, 09:27 AM Reply Like
  • Matsebula
    , contributor
    Comments (52) | Send Message
     
    The best argument against democracy is a 5-minute conversation with the average voter - Winston Churchill.
    31 May 2012, 10:31 AM Reply Like
  • Dana Blankenhorn
    , contributor
    Comments (5690) | Send Message
     
    Democracy is the worst way to organize a government, except for every other way - Winston Churchill
    31 May 2012, 11:03 AM Reply Like
  • Dana Blankenhorn
    , contributor
    Comments (5690) | Send Message
     
    Yeah, just let rich white dudes like you vote and our problems are solved!
    31 May 2012, 11:03 AM Reply Like
  • Tdot
    , contributor
    Comments (3453) | Send Message
     
    Ford's global pension obligations, about $74B, are approximately 80% funded with cash and other liquid or marketable assets, including investments in stocks, bonds, and fixed-income investments. The "underfunding" level is about $15.4B, well within legal limits, and Ford has been voluntarily chipping away from that shortfall with cash contributions of on the order of a billion or two a year.

     

    Note that the proposed buyouts are for white-collar salaried retirees, not the blue-collar Union retirees. Any changes to the union retiree pension plan would have to be negotiated and agreed-to in the contract.
    31 May 2012, 10:02 AM Reply Like
  • Financial Insights
    , contributor
    Comments (945) | Send Message
     
    Hardly massive when you compare it to GMs 100B pension obligation.
    31 May 2012, 10:09 AM Reply Like
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