Ford 2009 Annual Report Download - page 143

Notes to the Financial Statements
Ford Motor Company | 2009 Annual Report 141
NOTE 22. EMPLOYEE SEPARATION ACTIONS
As part of our plan to realign our vehicle assembly capacity to operate profitably at the current demand and changing
model mix, we have implemented a number of different employee separation plans. The accounting for employee
separation plans is dependent on the specific design of the plans.
Under certain labor agreements, we are required to pay transitional benefits to our employees who are idled. For
employees who will be temporary idled, we expense the benefits on an as-incurred basis. For employees who will be
permanently idled, we expense all of the future benefits payments in the period when it is probable that the employees will
be permanently idled. Our reserve balance for these future benefit payments to permanently idled employees takes into
account several factors: the demographics of the population at each affected facility, redeployment alternatives, estimate
of benefits to be paid, and recent experience relative to voluntary redeployments.
We also incur payments to employees for separation actions. The costs of unconditional voluntary employee
separation actions are recorded at the time of employee acceptance, unless the acceptance requires explicit approval by
the Company. The costs of conditional voluntary separations are accrued when all conditions are satisfied. The costs of
involuntary separation programs are accrued when management has approved the program and the affected employees
are identified.
Automotive Sector
Transitional Benefits
Our collective bargaining agreements with the UAW and the CAW require us to pay a portion of wage and benefits for a
specified period of time to idled employees who meet certain conditions. We have established a reserve for employee
benefits that we expect to provide under our collective bargaining agreements. The following table summarizes the activity
in the reserve:
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During the first quarter of 2009, we reached an agreement with the UAW to modify our collective bargaining agreement.
We renegotiated Job Security Benefits, modified Supplemental Unemployment Benefits, and established a new Transition
Assistance Plan. This change in the contract benefits combined with a change in our plans to redeploy employees in our
operations reduced our reserve. Additionally, in the fourth quarter of 2009, we announced the closure of our St. Thomas
Assembly Plant in Canada, which resulted in an increase to the reserve.
During 2009, 2008, and 2007 we recorded in Automotive cost of sales a reduction of expense of $40 million,
$346 million, and $80 million, respectively.
Separation Actions
UAW Voluntary Separations. We established a separation reserve for costs associated with separation actions
recorded at the time of employee acceptance of a voluntary termination. At December 31, 2009 and 2008, this reserve
was $51 million and $162 million, respectively. The ending balance in the reserve primarily represents the cost of
separation packages for employees who accepted separation packages but have not yet left the Company, as well as
employees who accepted a retirement package and ceased duties but remain on our employment rolls until they reach
retirement eligibility.