AKRON—Goodyear is moving to a liability-driven investing strategy for its U.S. pension plan in a bid to eliminate defined-benefit pension plans, company executives said during an investor presentation Feb. 12.
Darren Wells, Goodyear executive vice president and chief financial officer, said the move to "pre-fund" and "derisk" the plans affects approximately $1 billion in unfunded liabilities for plans that are currently frozen as well as $1.7 billion in unfunded liabilities for any plans that might be frozen in the future.
For fiscal 2012, Goodyear contributed $454 million to its U.S. pension plans.
Goodyear froze its U.S. salaried pension plans on Dec. 31, 2008, and U.S. hourly pension plans were closed to new employees covered by the United Steelworkers master labor contract on Aug. 29, 2009.
Goodyear's view, Wells said, is that it should take the step of "freezing in our other plans as well," which will require discussions with the company's workforce.
"I think the closer we get to fully funded, the closer we're going to be to being fully invested in fixed income," Wells said. "And I think the ultimate idea is that once the plans are fully funded that we would have an asset portfolio that would be made up of bonds that would closely mirror the bonds that are used to calculate our discount rate. So that if there is a move in the interest-rate curve, the gain on the assets would offset any loss related to discount rate and vice versa."
In Goodyear's 10-K filing with the SEC on Feb. 12, the company said it expects to contribute $275 million to $325 million to its worldwide pension plans in 2013.
As of Dec. 31, the U.S. pension plans had assets of $4.1 billion and projected benefit obligations of $6.76 billion, for a funding ratio of 60.7 percent, according to 10-K.
The company's actual asset allocation as of Dec. 31 was 62-percent equities, 32-percent fixed income, 5-percent cash and short-term securities and 1-percent alternatives. Its targets are 70-percent equities and 30-percent fixed income.