Ford 2006 Annual Report Download - page 99

97
Notes to the Financial Statements
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NOTE 23. RETIREMENT BENEFITS (Continued)
The amounts in Accumulated other comprehensive income/(loss) that are expected to be recognized as components
of net expense/(income) during the next year are as follows (in millions):
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Plan Contributions and Drawdowns
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 2006, we made $800 million of cash contributions to our funded pension plans. During 2007, we expect to
contribute from available Automotive cash and cash equivalents $2.2 billion to our worldwide pension plans, including
about $400 million of benefit payments paid directly by us for 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 2007.
Health Care and Life Insurance. In 2006, we withdrew $2.1 billion from the VEBA. During 2007 we expect to withdraw
$900 million from the VEBA as reimbursement for U.S. hourly retiree benefit payments.
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):
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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 most investment managers have discretion to invest globally within their respective
mandates. A diverse array of investments 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 five percent of the total market value of our assets in major worldwide plans (including
U.S., U.K., Canada, Germany, Sweden, Netherlands, Belgium, and Australia) during 2006 and 2005.
Investment managers are permitted to use derivatives as efficient substitutes for traditional securities and to manage
exposure to foreign exchange and interest rate risks. Interest rate and foreign currency derivative instruments are used
for the purpose of hedging changes in the fair value of assets that result from interest rate changes and currency
fluctuations. Derivatives may not be used to leverage or to alter the economic exposure to an asset class outside the
scope of the mandate to which an investment manager has been appointed.