Ford's pension plan funding slides in 2012

The funded status of Ford Motor Co.'s. pension plans slumped in 2012 as lower interest rates in Europe inflated the value of plan liabilities.

At year-end 2012, Ford's pension plans were underfunded by $18.7 billion, compared with $15.4 billion a year earlier. In the United States, the automaker's pension plans were underfunded by $9.7 billion, compared with $9.4 billion at year-end 2011, according to financial reports Ford released Tuesday.

Investment returns on assets held by its U.S. pension plans jumped 14.2% in 2012, compared with a 7.2% increase in 2011. Ford did not disclose investment returns on non-U.S. pension plans.

Ford also disclosed that it settled $1.2 billion of its U.S. pension plan obligations through a trail-blazing program it unveiled in April in which it offered to about 90,000 U.S. salaried retirees and former employees the opportunity to convert their monthly pension annuity into a cash lump-sum payment. Since Ford disclosed that program, about a dozen other major employers have made similar annuity to lump-sum benefit conversion programs.

Through such de-risking programs, employers reduce the size of their pension plan obligations, reducing their exposure to swings in interest rates and investment results that can make it difficult for them to project future contributions.

Ford did not disclose its pension plans' assets and liabilities. Such disclosure will come in several weeks when the automaker releases its 10-K report for 2012.

At year-end 2011, Ford's U.S. pension plans — including plans covering salaried and union employees and retirees — had a funded ratio of 80.7%, with $39.41 billion in assets and $48.82 billion in liabilities. That compares with a funded ratio of 85.8% at year-end 2010, when the U.S. plans had $39.96 billion in assets and $46.65 in billion in liabilities.