Ford Motor Co is injecting $3.8bn into its global pension plan this year and plans to increase its bond investments in an attempt to de-risk.
The cash injection detailed in Ford's annual securities filing with the Securities and Exchange Commission (SEC), is 2.5 times bigger than its contribution over 2011, which totalled $1.5bn.
The second-largest automaker in the US also said 80% of its US pension plans will be invested in bonds within "the next several years."
"We believe this is a prudent way to further minimize the volatility of our pension assets relative to the liabilities," Ford spokesman Todd Nissen told Reuters.
Ford has a defined benefit retirement plan for its members in the US and also provides pension benefits to non-U.S. employees and retirees, primarily in Europe.
According to information held by Pension Funds Online the global fund currently already invests about $6.3bn of its $18bn holdings in bonds. The US (defined benefit (DB)) fund, worth £40bn, currently invests $2.8bn in bonds.
The manufacturer's plans seem to be an attempt to fend of the threat of uncovered liabilities as well as to deal with the low interest rates, increased market volatility and lower profit expectations.
In its annual report the company states: "The benefit plans impose significant liabilities on us that are not fully funded and will require additional cash contributions, which could impair our liquidity.
"At 31 December 2011, our US and worldwide DB plans were underfunded by a total of $9.4bn and $15.4bn respectively. If our cash flows and capital resources were insufficient to fund our pension or OPEB obligations, we could be forced to reduce or delay investments and capital expenditures, suspend dividend payments, seek additional capital, or restructure or refinance our indebtedness."
In the report, Ford says it expects its pension assets to match future benefit obligations in the next few years. This would greatly help Ford's Reuters recently reported Citigroup analyst Itay Michaeli as having said that if Ford were to have its pension plans fully funded by around 2015, then its share price could spike to $24, nearly double its current level.
Ford is not the only large company which planned to inject a large sum of cash in its pension scheme, earlier this year aircrafts manufacturer Boeing said it would add $1.5bn to its pension scheme this year, nearly three times as much as it did last year.
Boeing explained the extra pension expense as a result of lower interest rates on its pension fund investments in recent years.
First published 27.02.2012
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