8-KRegulation FD

FORD MOTOR CO 8-K Report, Regulation FD Disclosure (Jan 22, 2020)

Filed January 22, 2020For Securities:FF-PCF-PDF-PB

Summary

Ford Motor Company filed an 8-K report on January 22, 2020, to disclose an expected pre-tax remeasurement loss of approximately $2.2 billion related to its pension and other postretirement employee benefits (OPEB) plans for the quarter ended December 31, 2019. This loss, primarily driven by lower discount rates and partially offset by strong asset returns, is expected to reduce net income by approximately $1.7 billion on an after-tax basis. Importantly, Ford utilizes the mark-to-market method for accounting for these benefits, recognizing such gains and losses as 'special items' that do not impact ongoing operational results. Consequently, this remeasurement loss will not affect the company's total Company adjusted EBIT or adjusted earnings per share. The filing also clarifies that this accounting adjustment did not impact cash in 2019 and does not alter pension contribution expectations for 2020. The report also noted an increase in the underfunded status of pension and OPEB plans, largely due to the lower discount rates impacting unfunded plans.

Key Highlights

  • 1Ford expects a significant pre-tax remeasurement loss of approximately $2.2 billion for Q4 2019 related to pension and OPEB plans.
  • 2The majority of the loss ($2.0 billion) stems from pension plans outside the United States.
  • 3The loss is primarily attributed to lower discount rates, partially offset by asset returns exceeding assumptions.
  • 4The after-tax impact is an expected reduction in net income of approximately $1.7 billion.
  • 5Crucially, this remeasurement loss is treated as a 'special item' and will NOT impact Adjusted EBIT or Adjusted EPS.
  • 6The filing states that the loss did not affect 2019 cash flow and does not change 2020 pension contribution expectations.
  • 7The underfunded status of pension and OPEB plans is expected to increase at year-end 2019, primarily due to lower discount rates.

Frequently Asked Questions

The primary disclosure is an expected pre-tax remeasurement loss of approximately $2.2 billion for the fourth quarter of 2019 related to Ford's pension and other postretirement employee benefits (OPEB) plans. This is expected to reduce net income by $1.7 billion after tax.

No, the filing explicitly states that this remeasurement loss is considered a 'special item' and will not impact Ford's total Company adjusted EBIT or adjusted earnings per share. This indicates that the company views this as a non-operational accounting adjustment.

The loss is primarily driven by lower discount rates used in accounting for the pension and OPEB plans compared to year-end 2018. This was partially offset by asset returns on these plans that exceeded the company's assumptions.

The filing clarifies that the remeasurement loss did not impact Ford's cash in 2019 and does not change the company's expectations for pension contributions in 2020. It is purely an accounting adjustment.