Pentagon Seeks $178 Million from Loral : Aerospace: The agency says the money represents excess pension assets that Ford Motor kept when it sold its aerospace unit to Loral.


The Defense Department is seeking to recover $178.3 million from an over-funded pension program that Loral Corp. used to acquire a Ford Motor Co. defense subsidiary last October, according to documents obtained by The Times.

In a letter dated Dec. 21, the Defense Logistics Agency, which oversees Pentagon contracts, asked Loral to return $178.3 million in excess pension assets that Ford Motor retained as partial payment for the sale of Ford Aerospace Corp. in Newport Beach.

Loral spokeswoman Elizabeth Allen said Friday that the New York-based defense electronics firm believes that the government is not entitled to the money. She declined further comment. Mark Miller, a spokesman for Ford Motor, said the contracting party is now Loral, which assumed the obligations of Ford Aerospace.

“While neither we nor Loral Aerospace believes the government is entitled to the money referred to in the letter, the letter was sent to Loral and any questions should appropriately go to Loral Aerospace,” Ford Motor said in a statement.


Ford Motor kept a “windfall” of $213.3 million of an unspecified surplus in the pension plan before transferring the plan to New York-based Loral, according to agency documents obtained by The Times under the Freedom of Information Act. The Pentagon agency is not seeking recovery of the entire $213.3 million because a portion involves pension assets generated from commercial operations that the government cannot legally claim. “Such a scheme violated the contractor’s responsibilities to the government and to the tax-paying public at large,” the agency said in a follow-up letter Jan. 8.

In many defense contracts, a portion of the government’s payment to the contractor is earmarked for employee benefits. The government recently has begun claiming excess assets in terminated pension plans.

The pension fund issue arose last fall when Loral acquired Ford Aerospace for $715 million. At the time, sources said, Loral beat out two other bidders, in part by allowing Ford Motor to keep a portion of Ford Aerospace’s over-funded pension plan.

The documents released this week show that by allowing Ford to keep such a large share of the over-funded amount, Loral was able to raise the value of its bid to $928.3 million.


The agency’s Jan. 8 letter to Ford Aerospace said the company was not in compliance with pension law and asked Loral to respond to the government’s request within 30 days. Agency officials declined to comment on further action the government will take.