Ford Expects (Unjustified) Pretax Profit Boost From Pension Shift – WSJ

We have no objection to the shift in pension fund accounting. But that should have little impact on the company’s overall financials and certainly no impact whatsoever on employee and executive bonuses, which should be exclusively based on contributions to operational productivity.

Ford Motor Co. is changing how it accounts for pension plans, a move that should boost company earnings, makes profitability in Europe more likely and better represents the health of the automotive group’s underlying performance….

The change sweeps away billions of dollars in pension-plan losses from previous years that Ford had yet to factor in to future results, and allows the auto maker to approach coming years with a cleaner slate. Investors tend to largely ignore a company’s historical financial performance once it is too far in the past, instead focusing on future earnings potential.

The move also strips the pension losses out of Ford’s core automotive operating units, giving those units’ earnings a lift. The effect may be most significant in Europe, where the revisions will move the company from a loss to a profit for the first nine months of 2015, putting it in a stronger position to book its first full-year European operating profit since 2010.​

Ford said the move won’t immediately affect the bonuses for company officers tied to the auto maker hitting certain financial benchmarks because it will use pre-revised 2015 results for those calculations. Hourly employees​represented by the United Auto Workers, however, will get bigger profit-sharing bonuses for 2015, because their payouts will be tied to the revised North American results.

via Ford Expects Pretax Profit Boost From Pension Shift – WSJ.

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