The world’s second largest automaker said its US pension fund experienced a down year in 2002, returning a negative 9.7%. Worldwide, Ford said its pension plans were underfunded by $14.5 billion in 2002, according to a Reuters report.
Ford also announced expectations for 2003 pension expenses to increase $270 million. This forecasted increase comes as Ford announced a change in the assumptions for future returns on its US, Canadian and British plans to 8.75% from 9.5%. The $270 million pretax expense for 2003 would be $460 million higher than 2002 when Ford was still realizing carry-over gains from the plan from previous years.
Additionally, the carmaker said it contributed $500 million to its plans earlier this week and would contribute another $500 million in the first half of 2003, altering earlier plans of a contribution in 2004. However, the company reiterated it was still on track to produce a $9 billion improvement in profits by mid-decade, the target set in its turnaround plan launched last year after a $5.45 billion loss in 2001.
Comparatively, General Motors Corp (GM) said its pension costs would triple in 2003 to $3 billion, as stock market declines increased its pension underfunding to $19.3 billion in 2002. This came in addition to news that GM would be lowering its future pension assumptions from a 10% rate of return to 9%.
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