Ford Motor Co., Dearborn, Mich., which has a $15.4 billion unfunded pension liability, rejected offloading its retiree obligations as General Motors Co. is doing in favor of investing in global expansion, new models and paying dividends.
Bob Shanks, Ford’s chief financial officer, said Monday that the automaker considered shifting its salaried pension plan to an outside company, as Detroit-based GM is doing by purchasing an annuity with a Prudential Financial unit.
GM said it will spend $3.5 billion to $4.5 billion to purchase the group annuity and offer pension buyouts to 42,000 salaried retirees.
“That’s a huge outlay,” Mr. Shanks said in an interview. “When we look at our spending plans, look at our plans for dividends, look at our plans for pension contributions, when we think about our growth plans, product plans — as we do all that, we don’t think we have excess cash.”
Ford is offering lump-sum pension payments to about 98,000 U.S. salaried retirees and former employees. Mr. Shanks can’t say how much that may lower Ford’s global $74 billion pension liability because it’s unclear how many retirees will take the buyout. Ford has $39.4 billion in U.S. pension assets.
GM said it aims to cut its pension obligation by $26 billion through offering buyouts and creating the annuity. GM’s U.S. pension plans have a combined $94 billion in assets.
“We’ve looked at all sorts of options,” Mr. Shanks said. “It’s not like it’s rocket science, there’s only so many things you can do to derisk a pension plan. We are comfortable with what we’ve done thus far.”
Ford is contributing $3.5 billion to its global pension plans this year and will begin making buyout offers to salaried retirees in August, Mr. Shanks said.
Though Ford continues to look for additional ways to reduce its pension obligation, Mr. Shanks said he doesn’t see any additional options. “We’ve looked at everything, at least everything I think we can think of,” he said. “If someone comes up with something else, I’m sure we’ll look at that, too. But I think we’re comfortable with where we are at.”
