UAW lets Ford use stock to finance health care trust fund
DETROIT -- The United Auto Workers union said Monday it reached a tentative deal with Ford Motor on how the company will finance a trust that will pay retiree health care expenses.
The union says that a 2007 agreement with the automaker about funding for the union-run trust had been modified.
Ford said the agreement allows the company to settle each scheduled payment to the trust with up to 50% of Ford stock. Previously, Ford was required to make the multimillion-dollar payments in cash.
"We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value," said Ford spokesman Mark Truby in a written statement.
This is the second time this month Ford — which is not seeking federal loans — has reached an agreement with the UAW on cost-cutting initiatives. Earlier this month the UAW struck a deal with Ford on other contract concessions after talks with GM and Chrysler briefly broke down.
Chrysler and GM so far have received a total of $17.4 billion in loans and are seeking a total of $39 billion.
The loan terms set a target for Chrysler and GM to exchange half their cash payments to the trusts, called voluntary employee beneficiary associations, or VEBAs, for equity in the companies.
The VEBAs were established as part of the landmark 2007 contract reached with the UAW.
The trusts would pay health care bills for about 800,000 UAW retirees, spouses and dependents and move billions in liabilities off the companies' books. GM expects to save about $3 billion a year, while Ford says it will save $1 billion annually.
Ford owes $6.3 billion to its VEBA at the end of this year. GM has to pay roughly $20 billion into its health care trust, while Chrysler must pay around $9.9 billion.
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