Ford said that a gradual increase in interest rates would improve its balance sheet and also help the company offset higher costs for auto sales financing.
Ford is currently ranked by all major credit-rating companies at the investment grade and CFO Bob Shanks believes that increasing interest rates will bring a “hugely favorable effect” on the automaker’s pension obligations. By dealing with the pension shortfall, Ford will manage to reduce the impact of higher costs for the Ford Motor Credit funds.
“On the assumption that it’s sort of a progressive increase to normalized rates, consistent with an improving economy, I think we’ll be fine,” Shanks said in Bloomberg’s Detroit bureau. “Overall, that’s good news for the company.”
Interest rates have begun to increase since Federal Reserve Chairman Ben S. Bernanke announced the central bank might cut its asset purchases in 2013 and end in the middle of next year if the economic growth will meet the projections made by the policy makers.
“Our expectation is that we’ll see a return to more normal interest rates progressively over time,” Shanks said. “It’s a sign of a growing, improving economy. There are parts of the business that will be under some pressure because of that, but there are other parts of the business that will benefit.”
At the end of 2012 Ford’s pension plans have been underfunded by $18.7 billion, and GM had a shortfall of $27.8 billion.