Ford's Other Problem : Retirees

Posted by: Nanette Byrnes on July 24, 2008

As if rising gas prices, a bad product line up, and staggering credit problems, weren’t enough for Ford brass to worry about , a recent analysis by Credit Suisse shows the car maker has renewed pension problems too. Accounting analyst David Zion estimates that the company has seen its unfunded pension obligation jump from $3 billion last year to more than $9 billion this year, a $6 billion increase made more sobering by the fact that the company’s entire market cap is only $10 billion.

Executives at Ford and elsewhere have tried a variety of techniques to get their obligations to retirees under control in recent years, and for a while it seemed to be working. After hitting bottom in 2002, these plans began to climb back to a balanced budget thanks to benefit cuts and strong investment returns. By last year the S&P 500 pension plans as a whole were actually $60 billion in the black. The market’s swoon has erased all that, and now Zion is estimating they’re back in the red by $110 billion.

Quite a whipsaw and one Zion points out is likely to put pressure on earnings as management antes up cash to shore up the funds. It’s not just Ford that’s headed for a rough ride, either. General Motors, Unisys and Office Max are among those with their own unfunded bills coming due.

Reader Comments

Mike

July 28, 2008 12:33 AM

Well, don't make promises you can keep.

jezreel

July 28, 2008 3:13 AM

truely the management still working on new ideas

Robert J. Dewar

October 29, 2009 4:07 PM

Ford has 30% more retirees than it should have, due to the restrictive work rules negotiated by the UAW in the 50s, 60s, and 70s. The UAW contract allowed men to get paid for 8 hours and sometimes work as little as 3 hours, often sleeping on makeshift beds in the men's room. I cover this in my memoir from my years as a production supervisor at Ford's Sharonville Transmission Plant. Name of the book is "A Savage Factory" Website is www.asavagefactory.com

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