jpd80 Posted February 6, 2009 Share Posted February 6, 2009 Ford May Need to Put $4 Billion Into Pension, Spurring Aid Bid By Keith Naughton Feb. 6 (Bloomberg) -- Ford Motor Co. may have to contribute $4 billion to its pension plan after a 2008 shortfall, a cash drain that risks dragging the second-largest U.S. automaker closer to a federal bailout. 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. Diverting money to the retirement program would add to the strain on the only Detroit automaker not relying on U.S. aid. With domestic auto sales at their lowest since the early 1980s, Ford said Jan. 29 it lost a record $14.6 billion last year and on Feb. 3 tapped its entire $10.1 billion line of credit while the money was still available. Article continues here..... Does anyone know whether or not the draw down is related to the $4 billion shortfall for the VEBA Fund? Has Bloomberg misread Ford's actions? Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted February 6, 2009 Share Posted February 6, 2009 Pension fund = still under Ford management, and regulated by the ERISA and subsequent administrative law VEBA = funded by Ford and turned over to the UAW in 2010 Tapping of $10.1B revolver was explained by Lewis Booth as done to ensure funds were available. As mentioned before, Ford lost $800B of the $24B they negotiated (c. 3%) when Lehman Bros. went belly up. Ford cannot leave the pension underfunded, but the payback schedule required to return it to fully funded status is something I'm not sure about. Quote Link to comment Share on other sites More sharing options...
jpd80 Posted February 6, 2009 Author Share Posted February 6, 2009 (edited) I understand that Richard but it looks like Mr. Bloomberg is putting a different spin on the numbers. I sense the funding for pensions is not in the $4.1 B deficit like the article makes out. I would rather believe Lewis Booth's explaination, have Bloomberg double counted somewhere? Or is it just mischievous manipulation of data? Edited February 6, 2009 by jpd80 Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted February 6, 2009 Share Posted February 6, 2009 From the press release: Ford went from a $3B surplus to a $4.1B shortfall in pension funding over the year. Ford also invested $4.6B cash in the VEBA. Quote Link to comment Share on other sites More sharing options...
jpd80 Posted February 6, 2009 Author Share Posted February 6, 2009 Thank you, it's pretty obvious now...... Quote Link to comment Share on other sites More sharing options...
theoldwizard Posted February 6, 2009 Share Posted February 6, 2009 For a person living on a Ford pension, this is old news ! Ford and every other company with a large pension fund was hit hard by the approximate 40% drop in the stock market. While there are actually federal laws that mandate funding levels for pension, there is also a "loophole" (Isn't there always !) Pensions can go to an "underfunded" status by simply requesting permission from the Secretary of Treasury. This "clause" is there so as not to cause an economic hardship to companies in the event of a major downturn in the economy. Quote Link to comment Share on other sites More sharing options...
theoldwizard Posted February 6, 2009 Share Posted February 6, 2009 (edited) ...Ford also invested $4.6B cash in the VEBA. UAW just accepted a $2.0B I.O.U from Ford. Good at least until the end of 2009. Edited February 6, 2009 by theoldwizard Quote Link to comment Share on other sites More sharing options...
LSFan00 Posted February 6, 2009 Share Posted February 6, 2009 An employer may terminate a plan if it demonstrates to the pension benefit guarantee corp. that the costs of continuing the plan will cause the employer to fail. MUCH more importantly/likely, if Ford decides it needs a break just for this year (and perhaps the next 2), they've gotta apply to the Secy' of the Treasury within 2.5 months of the end of their last year. (a) Waiver of requirements in event of business hardship If an employer, or in the case of a multi-employer plan, 10 percent or more of the number of employers contributing to or under the plan are unable to satisfy the minimum funding standard for a plan year without temporary substantial business hardship (substantial business hardship in the case of a multiemployer plan) and if application of the standard would be adverse to the interests of plan participants in the aggregate, the Secretary of the Treasury may waive the requirements of section 1082(a) of this title for such year with respect to all or any portion of the minimum funding standard other than the portion thereof determined under section 1082(B)(2)© of this title. The Secretary of the Treasury shall not waive the minimum funding standard with respect to a plan for more than 3 of any 15 (5 of any 15 in the case of a multiemployer plan) consecutive plan years. The interest rate used for purposes of computing the amortization charge described in subsection (B)(2)© of this section for any plan year shall be-- (1) in the case of a plan other than a multiemployer plan, the greater of (A) 150 percent of the Federal mid-term rate (as in effect under section 1274 of title 26 for the 1st month of such plan year), or (B) the rate of interest used under the plan in determining costs (including adjustments under section 1082(B)(5)(B) of this title), and (2) in the case of a multiemployer plan, the rate determined under section 6621(B) of title 26. (B) Matters considered in determining business hardship For purposes of this part, the factors taken into account in determining temporary substantial business hardship (substantial business hardship in the case of a multiemployer plan) shall include (but shall not be limited to) whether-- (1) the employer is operating at an economic loss, (2) there is substantial unemployment or underemployment in the trade or business and in the industry concerned, (3) the sales and profits of the industry concerned are depressed or declining, and (4) it is reasonable to expect that the plan will be continued only if the waiver is granted. © ``Waived funding deficiency'' defined For purposes of this part, the term ``waived funding deficiency'' means the portion of the minimum funding standard (determined without regard to subsection (B)(3)© of section 1082 of this title) for a plan year waived by the Secretary of the Treasury and not satisfied by employer contributions. (d) Special rules (1) Application must be submitted before date 2\1/2\ months after close of year Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted February 6, 2009 Share Posted February 6, 2009 For a person living on a Ford pension, this is old news ! Ford and every other company with a large pension fund was hit hard by the approximate 40% drop in the stock market. While there are actually federal laws that mandate funding levels for pension, there is also a "loophole" (Isn't there always !) Pensions can go to an "underfunded" status by simply requesting permission from the Secretary of Treasury. This "clause" is there so as not to cause an economic hardship to companies in the event of a major downturn in the economy. Ford's pension fund lost about 11% of its value in 2008. Gained about 10% in 2007, though. Quote Link to comment Share on other sites More sharing options...
theoldwizard Posted February 6, 2009 Share Posted February 6, 2009 (edited) Ford's pension fund lost about 11% of its value in 2008. Gained about 10% in 2007, though. True ! Technically, it was "over funded" at the end of 2007 ! Actual 2008 numbers have not been "officially" posted (like I said, being a retiree, I watch this stuff !) Edited February 6, 2009 by theoldwizard Quote Link to comment Share on other sites More sharing options...
fordworker Posted February 6, 2009 Share Posted February 6, 2009 Ford is BROKE. No matter what you think they are. They need $4 bills now for the pension fund and they will need more later. There is NO way they can pay there share of the VEBA. They mortgaged every thing already if they go bankrupt then they will go straight to chapter 7 as the banks will call there default and own everything and the banks will then auction the company off piece by piece. GM is not mortgaged out ford is. Ford will be in default like Mulally said to congress if they miss 1 payment. They will need govt. loans. Quote Link to comment Share on other sites More sharing options...
silvrsvt Posted February 6, 2009 Share Posted February 6, 2009 GM is not mortgaged out ford is. GM is still in worse shape then Ford and still has very diffcult time ahead..they still haven't have it wrapped around their heads that they need to be a much smaller company they are now... Quote Link to comment Share on other sites More sharing options...
SVTCobra Posted February 6, 2009 Share Posted February 6, 2009 If Ford infuses money into the Pension Plan, and the stock market rebounds, do they get to recoup money if it then becomes over funded? I work for IBM and they recently halted their Pension Plan and switched to funding our 401k instead. This way the onus of the fund is on the employee rather than the employer. Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted February 6, 2009 Share Posted February 6, 2009 If Ford infuses money into the Pension Plan, and the stock market rebounds, do they get to recoup money if it then becomes over funded? I work for IBM and they recently halted their Pension Plan and switched to funding our 401k instead. This way the onus of the fund is on the employee rather than the employer. It shows as net income, and Ford may be able to raid the fund if it's overfunded, but I don't think they would, as it's not very sound fiscally. Quote Link to comment Share on other sites More sharing options...
grbeck Posted February 6, 2009 Share Posted February 6, 2009 It shows as net income, and Ford may be able to raid the fund if it's overfunded, but I don't think they would, as it's not very sound fiscally. Couldn't Ford just reduce future contributions to reflect the rebound? Quote Link to comment Share on other sites More sharing options...
RichardJensen Posted February 6, 2009 Share Posted February 6, 2009 Couldn't Ford just reduce future contributions to reflect the rebound? Yeah, they could do that too. But in a situation where, say Ford needed to contribute $1B, and they were short on cash, but the pension was overfunded $4B, they could (I think) draw from the overage. Quote Link to comment Share on other sites More sharing options...
Extreme4x4 Posted February 7, 2009 Share Posted February 7, 2009 Ford is BROKE. No matter what you think they are. They need $4 bills now for the pension fund and they will need more later. There is NO way they can pay there share of the VEBA. They mortgaged every thing already if they go bankrupt then they will go straight to chapter 7 as the banks will call there default and own everything and the banks will then auction the company off piece by piece. GM is not mortgaged out ford is. Ford will be in default like Mulally said to congress if they miss 1 payment. They will need govt. loans. Good grief. As wescoent has said, when Ford drew on their credit line, JP didn't just throw the money at them. They once again looked at their situation, to insure that Ford could make their payments................ before they gave them the money. Ford getting their money, tells you all you need to know about JP's decision. Wescoent has also said that GM is technically bankrupt, and should already be in liquidation. They tried to get the same loans that Ford got, and were laughed at. They had no plan, and thought they should just get the money because they are GM. GM isn't mortgaged like Ford............. because noone in their right mind would give them the money. BTW, they currently are mortgaged in another fashion................ as they owe US billions. Yes, Fords (and all other automakers at this time) financial situation is not good. GM's is beyond hideous. Quote Link to comment Share on other sites More sharing options...
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