DAGENHAM, England -- Ford Motor Co. U.K. has stalled plans to merge its British pension schemes after negotiations broke down over wage and pension agreements with professional staff earlier this month.
For possibly the first time in its history in the United Kingdom, Ford's professional staff will this week start a series of work stoppages that are due to last until March 8.
White-collar staff object to plans to merge Ford's 2.6 billion ($4.2 billion) Salaried Pension Plan with the 2.6 billion Hourly Paid Plan. The hourly paid workers have agreed to the merger.
The hourly fund is understood to be underfunded by 155 million, said Brian Freake, pension official for the Manufacturing Science and Finance Union, one of two unions representing the salaried workers. But the salaried plan has a surplus of 500 million and salaried workers are concerned they will lose the benefit of their plan's surplus if the two funds are merged, he said. Professional staff at Ford's 19 plants across Britain were to stop work for one hour Feb. 21, conduct one-day strikes on Feb. 24 and 29, and embark on a three-day strike March 6.
The MSF and the Transport and General Workers Union represent the professional staff in the negotiations with Ford.
Officials at Ford Motor Co. U.K. refused to comment on the pension plans until after March 8. Officials with Ford Motor Co. U.S.A. also refused to comment.
The company first told employees about merging the two plans during wage negotiations late last year. Ford told staff that if the plans were not merged, it would have to pay 11.3 million per year for the next 13 years in order to fully fund the hourly workers' plan, said Mr. Freake. Ford had planned to merge the funds later this year, said Steven Hull, a partner in the pensions department of law firm Nabarro Nathanson, London, which is advising the MSF.
The assets of the two funds are already invested on a commingled basis, the company said in a written statement. The merger would not affect contributions to the funds or employee benefits. Instead, merging the funds would cut down on professional and operational costs, because each fund has its own board of trustees and reporting processes, the company said.
Like many multinationals, Ford has centralized certain aspects of its global pension arrangements. The investment committee for the Ford Motor Co., Dearborn, Mich., also is responsible for investment decisions for the U.K. plans.
The investment committee is believed to be led by Kathleen Gallagher, director-pension asset management for Ford in Dearborn. Ms. Gallagher is known to be working with the pension team at Ford U.K.'s headquarters in Dagenham, east of London.
In another attempt to coordinate the international pension plans, Ford U.K. last year dropped Chase Manhattan Bank as its custodian and appointed The Northern Trust Co., London, as its global custodian. Northern Trust is global custodian to the U.S. plan.
But that is where the similarities stop, as the assets of Ford's U.K. schemes are in the hands of a different set of managers from the U.S. plan.
Money managers for the U.K. funds are: Barclays Global Investors; Baring Asset Management Ltd.; Fleming Investment Management Ltd.; Mercury Asset Management Ltd.; Deutsche Asset Management Ltd.; Schroder Investment Management Ltd.; State Street Global Advisors U.K. Ltd.; and Langbourn Property Investment Management Services Ltd., all of which are based in London.
Bacon & Woodrow, based in Leeds, is the actuary to the funds but would not comment on its client.
Merging pension plans is often a far more complicated procedure in Britain than in the United States. In Britain, there is no blanket legislation dictating who has rights to a pension plan's surplus, said Andrew Dyson, head of U.S. multinational investment consulting for William M. Mercer Investment Consulting Inc., New York.
In the United States, the employer or plan sponsor has absolute ownership over the surplus until the plan is terminated. But rights to the surplus of British pension plans vary from fund to fund and will be specified in the rules and regulations of each fund.
Compared with the situation in the United States, plan trustees in the United Kingdom generally have a greater say and powers of veto over the plan sponsor in discussions concerning changes to the plan structure and benefits. As a result, most British plan sponsors trying to merge pension plans will agree to certain benefit improvements for plan members who may be disadvantaged by the merger, said Nigel Moore, head of the pension practice at law firm Cameron McKenna, London.
Ford's white-collar workers are also demanding a pay settlement equivalent to that agreed to by the hourly workers. Both sets of workers were awarded an 11% increase over three years, but the hourly workers also won a cut in the working week to 37.5 hours from 39, in effect giving them an extra 4%, said Bob Purkiss of the Transport and General Workers Union. The professional staff already work a 37.5-hour week, he added.