Rising Interest Rates Good For Ford?

People generally believe that rising interest rates are bad for corporations. After all, an increase in interest rates results in higher borrowing costs. However, Ford recently stated that an increase in interest rates may actually benefit the company. The reason has to do with Ford's pension liabilities. In order to calculate the present value of future pension benefits, a company must discount the future cash flows. As you know by now, a higher interest rate results in a lower present value. Since the discount rate used to calculate the present value of pension liabilities is based on a market rate, rising interest rates will result in a lower present value for these liabilities. When examining how any factor will affect a corporation, it is important to examine all of the side effects, not just one particular effect. Of course, one effect not mentioned in the article is that higher interest rates may negatively affect consumers willingness to borrow, reducing auto sales in general.