Loral to Let Ford Tap Pension Plan at Aerospace Unit
Loral Corp., the New York defense electronics company that is buying Newport Beach-based Ford Aerospace, has agreed to let Ford Motor Co. withdraw about $100 million from the Ford defense subsidiary’s pension fund, sources said.
The fate of the Ford Aerospace pension fund has been a subject of intense speculation for the company’s thousands of employees and pensioners since Ford earlier this month agreed to sell the defense unit to Loral for $715 million in cash and other obligations.
Ford employees and retirees have expressed fears that Loral would raid the pension fund, estimated by sources to be over-funded by up to $400 million.
Ford Motor spokesman Thomas Rhoades earlier this week said the company is not transferring the entire surplus to Loral, but he declined to say how much it will keep. He said Ford would transfer enough of the surplus to keep the Ford Aerospace pension over-funded for “years to come.”
Ford Aerospace employs 17,000 people worldwide, including 2,700 at the Aeronutronic division, a missile manufacturing plant in Newport Beach. The company also makes satellites and other space systems at a plant in Sunnyvale.
Over-funded pensions are those that have funds in excess of the amount that is anticipated to be paid out later to company’s retirees. The over-funding can occur for a number of reasons, such as an unexpectedly strong performance of a company’s investments.
The issue of over-funded pensions has been of considerable interest to Congress and employee rights groups as corporate raiders have sometimes viewed the plans as an easy source of cash.
The Pentagon also has been watching attempts by defense contractors to tap surplus pension funds, maintaining that in some instances the government should have claim to the funds. A spokesman for the Pension Benefit Guarantee Corp., the federal agency that oversees pension plans, said this week that the government is following the Ford Aerospace pension situation.
The Employee Retirement Income Security Act (ERISA) prohibits an employer from withdrawing assets from an existing pension plan. Some companies have circumvented that requirement by terminating the pension plans.
Ford officials could not be reached for comment Friday on whether the company plans to cancel the pension plan. But Ford spokesman Richard W. Judy told the Washington Post that Loral and Ford are discussing the matter.
Elizabeth Allen, a Loral spokeswoman, said Loral has no plans to terminate the pension plan and would not say what the company would do if Ford decided to cancel the Ford Aerospace plan.
In a separate development, the Department of Justice said Friday that Ford Aerospace agreed to pay $2.8 million to settle civil charges that it overbilled the Air Force for labor costs on four contracts. The contracts involved maintenance of Air Force satellites at a Ford Aerospace facility in Sunnyvale, and technical services for the North American Air Defense radar tracking facility at Cheyenne Mountain, Colo.
