Ford 2004 Annual Report Download - page 88

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NOTES TO THE FINANCIAL STATEMENTS
A one percentage point increase/(decrease) in the assumed health care cost trend rate would increase/(decrease) the
postretirement health care benefit obligation by approximately $5.2 billion/$(4.2) billion and the service and interest
component of health care expense by $330 million/$(260) million. The actual retiree health care cost trend for 2004 was 9%.
Plan Contributions
Our policy for funded plans is to contribute annually, at a minimum, amounts required by applicable laws, regulations, and
union agreements. We do from time to time make contributions beyond those legally required.
Pension. In 2004, we made over $2.3 billion of cash contributions to our funded pension plans. During 2005, we expect to
contribute $2.8 billion to our worldwide pension plans, including about $300 million of benefit payments paid directly by
the Company in respect of unfunded plans. Based on current assumptions and regulations, we do not expect to have a legal
requirement to fund our major U.S. pension plans in 2005. We also do not expect to be required to pay any variable-rate
premiums for our major plans to the Pension Benefit Guaranty Corporation in 2005.
Health Care and Life Insurance. In 2004, we contributed $2.8 billion to our previously established VEBA for U.S. hourly retiree
health care and life insurance benefits. During 2005, we expect to contribute $200 million to the VEBA.
Estimated Future Benefit Payments
The following table presents estimated future gross benefit payments and subsidy receipts related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (in millions):
Plan Asset Information
Pension. Our investment strategy for pension assets has a long-term horizon and is tolerant of return volatility, in keeping with the
long-term nature of the liabilities. The target asset allocation for our major plans worldwide generally is 70% equities, 30% fixed
income. The present allocation to alternative investments (e.g., private equity) is below 1%. All assets are externally managed and
investment managers have discretion to invest globally within their respective mandates. A diverse array of investment processes
within asset classes reduces volatility. Most assets are actively managed; manager skill and broad mandates have generally
produced long-term returns in excess of common market indices. Ford securities comprised less than one-half of one percent of the
value of our worldwide pension plan assets during 2004 and 2003.
Pension Benefits Health Care and
U.S. Plans Non-U.S. Plans Life Insurance
2004 2003 2004 2003 2004 2003
Assumptions Used to Determine Net Benefit
Cost for the Year Ending December 31
Discount rate 6.25% 6.75% 5.61% 5.65% 6.25% 6.75%
Expected return on assets 8.75% 8.75% 8.38% 8.40% 6.20% 6.00%
Average rate of increase in compensation 4.50% 5.20% 3.98% 3.98% 4.50% 5.20%
Weighted Average Asset
Allocation at December 31
Equity securities 72.7% 72.2% 62.4% 63.7% 54.3% 0.0%
Debt securities 26.7% 26.3% 36.4% 34.5% 45.7% 100.0%
Real estate 0.0% 0.2% 0.9% 1.1% 0.0% 0.0%
Other assets 0.6% 1.3% 0.3% 0.7% 0.0% 0.0%
NOTE 22. Retirement Benefits (Continued)
Pension Benefits
U.S. Plans Non-U.S. Plans Health Care and Life Insurance
Benefit Payments Benefit Payments Benefit Payments Subsidy Receipts
2005 $ 2,740 $ 1,290 $ 1,660 $ -
2006 2,800 1,300 1,790 (80)
2007 2,870 1,320 1,930 (90)
2008 2,940 1,350 2,060 (100)
2009 2,990 1,410 2,180 (110)
2010 - 2014 15,320 7,840 12,270 (650)