UPDATE: Ford In Pact To Amend Retiree Health Plans
24 February 2009 - 3:35AM
Dow Jones News
Ford Motor Co. (F) said Monday that it had reached a tentative
deal over unionized retiree health benefits Monday, increasing the
chances that General Motors Corp. (GM) and Chrysler LLC can secure
their own concessions.
United Auto Workers President Ron Gettelfinger announced the
revised pact following other changes to work rules reached with the
three Detroit auto makers last week.
Ford, which faces $13.6 billion in legacy health costs, said up
to half of its future payments to a retiree fund could be made in
stock rather than cash under the terms of the pact.
The proposed terms mirror those contained in the federal loan
guarantees extended to GM and Chrysler, which the auto makers have
to meet by March 31. Ford has not sought U.S. government aid.
All three U.S. automakers reached deals in 2007 to transfer
legacy health costs into trust funds known as Voluntary Employee
Beneficiary Associations, or Vebas, which they have funded with
cash.
The liquidity drain from the payments has weakened their
competitive position versus overseas automakers, and provided a key
focus for the restructuring efforts at GM and Chrysler.
"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 in a statement.
Ford shares rose more than 20% at one point, and were recently
up 13.3% at $1.79. GM shares were up 5.1% at $1.86. GM and Chrysler
were not immediately available for comment.
Renegotiating the healthcare obligations due to UAW members and
their spouses is a key part of the restructuring plans presented by
GM and Chrysler to the U.S. government last week as part of
survival strategies aimed at keeping both out of bankruptcy
protection.
The pact will likely set a benchmark for ongoing talks with GM -
which owes $20 billion to its Veba - and Chrysler. The UAW will
provide further details on the Ford plan to local leaders this
week. It is also subject to member and court approval.
GM bondholders will be scrutinizing any deal reached with the
UAW after some complained last week that they were being asked for
an overly large sacrifice.
-By Jeff Bennett, Dow Jones Newswires; 248-204-5532;
jeff.bennett@dowjones.com