DEARBORN, Mich. - Ford Motor Co. is coordinating the management of its worldwide pension operations as part of the company's sweeping global reorganization.
Treasurer Malcolm Macdonald said although the pension coordination process has just begun, the company is exploring whether a global fund would be possible, whether managers can be shared by more than one of its funds and even whether asset allocation decisions can be made on a global basis.
At the very least, Ford executives want to make sure the funds are using common standards in several areas, including fiduciary standards and manager evaluations.
What makes Ford's exploration of worldwide pension fund coordination significant is the backing of top management. It fits in with the company's Ford 2000 restructuring, announced by Chairman Alex Trottman last year, and put into effect in January.
Ford has about $30 billion in pension assets worldwide and funded plans in 12 countries - the United States, Great Britain, Canada, Belgium, Portugal, the Netherlands, Ireland, Switzerland, Australia, Taiwan, New Zealand and Mexico.
Although the company would not specify the size of each fund, analyst Nicholas Lobocarro of S.G. Warburg & Co. Inc., New York, said the U.S. fund totaled $23.4 billion at the end of 1994. Combined assets of all of the other Ford pension funds weighed in around $8 billion, he said.
According to Pension Funds and their Advisers, a directory of U.K. and European pension funds distributed in the United States by Money Market Directories Inc., Ford Motor Co. Ltd. salaried and hourly paid contributory pension funds in the United Kingdom had market values of 1.204 billion and 1.139 billion respectively in 1993, the most recent year for which data are available.
The move to coordinate the worldwide management of the pension funds is part of Ford's Treasury 2000 program. The program started this year in conjunction with Ford 2000, the company's broad restructuring aimed at making it the world's top automaker.
In the treasury program, Ford is coordinating its worldwide banking, foreign exchange management, global portfolio management, global trading and pension management processes, said Mr. Macdonald.
"We have been looking equally at opportunities to eliminate duplication and to focus our expertise in all areas of the treasury function," he said. "As part of that, we have large pension funds in the U.S. with a demonstrated track record and smaller pension funds in other parts of the world (with) smaller (assets) and fewer, if any, pension specialists devoted to the management of those funds.
"We have given the U.S. pension asset management team led by Maury Maertens a mandate to review our overseas pension business and see where they can be of assistance," he said. M.E. Maertens is Ford's director-trusts investments.
Mr. Macdonald said this process is still in its early days. "I can't tell you how this assistance will manifest itself," he said. For example, the company is a "long way off" from deciding whether the global fund concept would be suitable to Ford.
Other potential ideas: sharing managers with more than one fund - still very much in the exploratory stage - or recommendations on asset allocation on more of a global basis, said Mr. Macdonald. Ford executives don't know yet if globally disseminated asset allocation strategies would be appropriate, given the differing legal structures around the world and that some plans may be more mature than others.
But what is clear is that Ford's pension units are supposed to "look to Mr. Maertens for coordination and advice - coordination to make sure we are applying common fiduciary standards, common standards in evaluating managers, things of that nature," said the treasurer.
One money manager familiar with the plan said Ford is seeking to handle advisory and staff work from Michigan to avoid duplication of managers and in-house staff. The company, the source said, wants to view its global pension money as one asset.
According to Mr. Macdonald, there have been no recent manager changes recently in any Ford fund, nor has the coordination process involved any layoffs for Ford. Instead, without specifying, Mr. Macdonald said Mr. Maertens has been given some additional resources to carry out his coordination activities.
Mr. Maertens declined to comment for the record.
Mr. Macdonald clearly recognizes the sensitivity to, and potential legal ramifications of, globalizing a pension operation. He said activities are proceeding cautiously, and Mr. Maertens has done some traveling to meet with Ford's pension units and money managers around the world to explore issues.
Ford has no deadline for completing its central coordination of the pension function.
Mr. Macdonald didn't specify what the overall benefits of pension coordination would be. But even more enhanced returns would help significantly. "Let's just say if you added one percentage point (of returns) to $30 billion, you add $300 million to the pension fund."
Mr. Lobocarro of S.G. Warburg also pointed to benefits of central coordination. Among these: potential easier matching of assets and liabilities on a global basis. "Since liabilities can be in any number of currencies, they might be easier to manage globally," he said. Moreover, "there are probably certain functions they don't need, or individual portfolios in each country that could be allocated on a worldwide basis."
These practices could fit well into a global treasury strategy of managing cash and liabilities throughout the world. That process could produce savings and efficiencies in a number of ways, including the ability to borrow at more favorable rates if Ford leverages on its global size, suggested Mr. Lobocarro.
He said Ford's global treasury/pension thrust is more "progressive" than that of General Motors Corp., which is more decentralized in its corporate structure, and Chrysler Corp., which is less of a worldwide player.
Among multinational companies generally, the trend toward some centralizing of pension funds is increasing. Although the process is complicated by myriad demographic, financial and legal factors, more companies are eager to rein in costs and control risks whenever possible.
But in many cases, lack of top corporate support stymies efforts to centralize or coordinate pension plans worldwide.