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Saturday, April 28, 2012

Ford offers pension buyouts to 90,000 retirees and former workers

 Ford Motor Co. said Friday its net income fell by 45 percent in the first quarter as European sales plummeted and the company paid higher taxes.

The company announced it will try to cut its pension costs by offering lump-sum payments to about 90,000 U.S. white-collar retirees and former employees. Ford said it is the largest such offer in U.S. history. Payouts will start later this year and come from pension plan assets. Ford doesn't yet know how much the plan will cost.

Ford earned $1.4 billion, or 35 cents per share, in the first quarter. That was down from $2.5 billion, or 61 cents, a year earlier.

Ford said nearly half the decrease was due to paying a higher tax rate. The company recently moved tax credits and other assets back onto its books, after moving them off in 2006 when it wasn't making a profit. Ford is now paying a 32.5-percent tax rate, compared with 8 percent a year earlier.

Ford also said it could expand the program to its hourly union employees, subject to an agreement with the United Auto Workers union.

The automaker has a U.S. pension obligation of about $49 billion.

The strategy could reduce both Ford's pension obligations and assets, said Robert Schulz, an auto analyst at Standard & Poor's. But it unclear how many will take up the offer.

"This is relatively untested and how many people will take it and what the final outcome will be is hard to judge," said Schulz. "We view it as a modest positive in the long run even if it doesn't have an immediate impact."

It also lets workers avoid the risk of future problems in the auto industry by cashing out now, while the company is doing well.

The automaker continues do to well in the U.S., the company announced Friday, posting for the quarter its highest operating profit in North America in more than a decade.

Although its U.S. market share fell to 15.2% in the quarter from 16% a year earlier, it is making more money per car sold.

Ford's North American business logged an operating profit of $2.1 billion, compared with $1.8 billion a year earlier.

Brian Johnson, an analyst at Barclays Capital, noted that Ford's 11.5% operating profit margin in North America was particularly strong.

Overall, Ford earned $1.4 billion, or 35 cents a share, down 45% from the $2.6 billion, or 61 cents, a year earlier.

Sales also slid, falling 2% to $32.5 billion from $33.1 billion.

Operating profit in South America slid to $54 million from $210 million.

Ford's European operations lost $149 million, compared with a profit of $293 million a year earlier. The automaker was hurt by the Eurozone debt crisis and poor economic conditions in the region. This year, Ford expects to incur a loss in Europe of $500 million to $600 million, Shanks said.

Ford's Asian operations lost $95 million, compared with a profit of $33 million in the same period last year.

"Our team delivered a solid performance during the first quarter, with particularly strong results in North America, despite a challenging global external environment," said Alan Mulally, Ford's chief executive.

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