Ford, which works on closing the increasing deficit in its pension, plans to shift more of the company’s assets to fixed income to avoid changes in interest rates.
At the end of 2012, the shortfall for Ford’s US pension plans would have increased $2.8 billion or dropped by $2.3 billion if interest rates increased 1% or dropped 1%. Ford plans a pension deficit of $400 million or less. Ford is currently working on diffusing pension risks after in 2012 the shortfall for its global plans increased with $3.3 billion to $18.7 billion.
“For companies like us and the other large industrials that have large plans where their shortfalls are meaningful relative to their market cap, pension de-risking should be a big piece of their overall capital strategy,” said treasurer Neil Schloss.
Schloss added that the US automaker’s borrowing costs, credit rating and stock price are affected by the size of its deficit and the pension liabilities. Ford plans to shift 80% of its US plan assets in fixed income securities, after ending 2012 with 55% of assets in fixed income, an increase from 30% in 2007.