Ford Motor Co., Dearborn, Mich., contributed $800 million to its worldwide pension plans, including $500 million to its U.S. plans, in the quarter ended June 30, according to a webcast presentation to investment analysts Wednesday by corporate executives.
The contribution was “in line with the company's previously disclosed long-term strategy to derisk its funded pension plans,” Chief Financial Officer Robert L. Shanks said during the presentation, according to a transcript of the webcast.
The derisking plan includes offering lump-sum buyouts to pension plan participants but doesn't include annuitizing corporate pension obligations. (General Motors Co., Detroit, plans to purchase a group annuity contract for its 118,000 retirees in its $33 billion U.S. salaried defined benefit plan, reducing its pension obligations by $26 billion, as reported June 11. GM has a total of $94 billion in U.S. pension assets and $107 billion in liabilities.)
Ford just sent out initial lump-sum offers and doesn't know yet what the response and the total cost to the pension funds will be, according to the transcript.
“In terms of annuitization, it is something that we have looked at as we were developing all of the strategies around our pension derisking; it isn't something that we thought at the time that we wanted to pursue,” Mr. Shanks said, according to the transcript. It is “not something that is part of our plan, but I wouldn't necessarily take it off the table. But (it is) not something … that's currently in our thinking.”
Ford's contributions will “be significant in the years ahead because we've got to close that (pension funding) gap that we had at the end of last year,” he said, according to the transcript. Ford didn't project the amount.
In 2011, Ford contributed $1.5 billion worldwide, including $132 million to its U.S. plans.
Ford's derisking strategy includes shifting its pension plans' allocation to 80% fixed income and 20% growth-seeking assets of equities and alternative investments over the next few years, to better match plan assts to its liabilities' characteristics to reduce its net pension exposure, Neil Schloss, vice president and treasurer, said on March 9 when Ford detailed its derisking plan.
As of Dec. 31, Ford's U.S. plans had a total $39.4 billion in assets and $48.8 billion in obligations, while its non-U.S. plans had $19.1 billion in assets and $25.1 billion in obligations, according to its 10-K.