Ford's $4b Pension Payout Brings It Closer to Bailout Buffet

Robert Farago
by Robert Farago
ford s 4b pension payout brings it closer to bailout buffet

G’day! The Sydney Morning Herald is first up with news that Ford will have to stump-up $4b for a 2008 pension shortfall. “The collapsing stock market left the fund with a $4.1 billion deficit for its projected obligations, after 2007’s $3 billion surplus, Ford said in its fourth-quarter financial results. That may force an infusion of money starting next year, according to the viability plan filed with Congress in December.”

The prospect of a pension contribution is “further stressing cash levels,” and Ford may need to seek government assistance later this year, Barclays Capital analyst Brian Johnson in Chicago wrote in a Feb. 2 report. He rates the stock as “underweight/neutral” with a $1 target price . . . .

Ford said its available cash fell $21 billion last year to $13.4 billion. The automaker has $38 billion in bonds and loans coming due by 2011, according to Bloomberg data. Johnson expects Ford to reach its minimum cash levels in the second half of 2009. Ford won’t say how much cash it needs to operate.

“If auto sales don’t recover and in 2010 they have to put $3 billion or $4 billion into the pension fund, that means they’ll have to get cash from the government,” Johnson said in an interview.

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4 of 11 comments
  • King Bojack King Bojack on Feb 06, 2009

    The real problem is that they were using investments to fund pensions instead of the banking equivalent of cash in a mattress (really big ass mattress) and shouldn't have happened. Still this does fall on Ford but if we don't help them keep their pension fund going their pension fund becomes US pension fund so we're paying either way (assuming they need government loans to do it).

  • on Feb 07, 2009

    @King Bojack That is nothing. Check out Social security to see the worlds biggest Ponzi scheme. The figures for GM are under 100k workers and around 500k people collecting. There is no way around this huge number of retirees that resulted from the decades of early retirement buyouts and the 30 and out provision in the contract. They just can't afford it.(and neither can the government)

  • RobertSD RobertSD on Feb 07, 2009

    This $4.1B underfunded value is derived from the estimated future costs. Ford's pension system is still solvent, but the government requires certain funding levels. But, like any gov't rule, there is a loophole: if fully-funding the pension would jeopardize the operations of a company, they can ask the Treasury Dept. for an exception. This rule was put in place specifically because of times like these where a company can lose 15-20% of its fund in a matter of months. I'm willing to bet Ford goes that route first... and I'm willing to bet the gov't offers an exception.

  • Jckirlan11 Jckirlan11 on Feb 08, 2009

    Here's a new fly in the ointment. Looks like Ford is going to strong hold the bond holders.