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Mr. Embargo
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$26 billion cash reserve prevents any need for loans, CEO says

By Jeff Plungis / Detroit News Washington Bureau

WASHINGTON — In another sign that corporate America’s pension funding crisis is easing, Ford Motor Co.’s chairman and CEO said Monday the No. 2 automaker would easily cover its pension obligations.

"We have a terrific cash balance," said Bill Ford Jr. "I’ve said all through the year I didn’t see the pensions for us as an issue that was by any means unmanageable. We’ve had terrific returns on the pension fund this year."

Ford’s comments come as other company pension plans get a boost from rising stock prices, reversing a two-year decline.

At the beginning of the year, the federal government’s Pension Benefit Guarantee Corp. estimated companies were $80 billion behind in pension payments.

Detroit’s three automakers, which have relatively old work forces and a huge number of retirees, were particularly vulnerable. But recently, with improvements in the stock market, the automakers have been seeing better returns in their pension investments.

General Motors Corp. on Friday said it had succeeded in closing a $19.3 billion pension funding gap. GM earlier this year floated $13.5 billion in corporate bonds to help restore the fund’s balance. It is also devoting $4.1 billion in proceeds from the sale of Hughes Electronics Co. to the pension fund.

Ford Motor Co. faced a $7.1 billion pension gap at the end of September.

But Ford said the company’s cash reserves gave it a cushion that will help it avoid any kind of bond sale.

"We have $26 billion-plus in cash," Ford said. "We don’t have to do any borrowing or any kind of flotation to handle our pension issues. We have enormous liquidity, probably greater than any corporation in the country."

Earlier this year, GM and Ford joined a coalition of companies pressing Congress to change the rules for calculating pension liability. The companies argued current pension rules require future obligations to be calculated using an artificially low Treasury bond rate, causing billions of dollars to be diverted into the funds. Congress has not acted on the rate change yet.

Ford said he continued to support the change, even with improving pension finances.

Ford made his comments in Washington after he personally delivered a new Jaguar X-Type sports sedan to outspoken stockholder and financial newsletter publisher Evelyn Y. Davis. Ford is the fifth Detroit CEO to personally deliver the keys of a new car to Davis.
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