Ford, UAW settle lawsuit over retiree health care trust
Ford Motor Co., the United Auto Workers union and lawyers representing retired workers have reached a legal agreement to shift retiree health care costs from the company to a union-administered trust fund.
By Agencies |
DETROIT: Ford Motor Co., the United Auto Workers union and lawyers representing retired workers have reached a legal agreement to shift retiree health care costs from the company to a union-administered trust fund.
The company revealed the agreement Friday in a filing with the U.S. Securities and Exchange Commission.
Ford also said that on Wednesday it issued two notes totaling $6.3 billion (euro3.98 billion) that will help fund the trust. The trust will take responsibility for the company's roughly $23.7 billion (euro14.97 billion) retiree health care obligation as early as Dec. 31, 2009.
Ford and the UAW agreed to the trust as part of national contract negotiations last fall.
The union and lawyers representing retired workers filed a lawsuit last November seeking federal court approval of the trust. Ford also wants court approval. The settlement was dated March 28, according to Ford's filing.
Ford spokesman Mark Truby said the court settlement is a legal step to put details of the national agreement with the UAW into place, and the terms have not changed.
Under the new four-year contract, Ford will fund the trust, called a voluntary employees beneficiary association (VEBA), with a combination of $13.2 billion (euro8.34 billion) in cash and notes.
The company's contribution breaks down to $2.7 billion (euro1.71 billion) in cash, $3.8 billion (euro2.4 billion) from an existing VEBA, a $3.3 billion (euro2.08 billion) note convertible into about 363 million new shares of Ford stock, a $3 billion (euro1.89 billion) second lien term note and $400 million (euro252.64 million) in deferred payments.
Ford said it expects a net cash flow benefit of $1 billion (euro630 million) per year once the retiree health care costs are shifted to the trust.
The cash flow benefit includes health care cost savings of $1.6 billion (euro1.01 billion) per year, offset by the cost of contributions to the trust, called a voluntary employees beneficiary association, Ford has said.
The VEBA still must be approved by a federal judge, and Ford would continue to be responsible for retiree health care until the trust takes over, the company said.
A federal judge on Wednesday gave preliminary approval to Chrysler LLC's trust agreement with the UAW, and General Motors Corp.'s trust was given tentative approval last month.
The company revealed the agreement Friday in a filing with the U.S. Securities and Exchange Commission.
Ford also said that on Wednesday it issued two notes totaling $6.3 billion (euro3.98 billion) that will help fund the trust. The trust will take responsibility for the company's roughly $23.7 billion (euro14.97 billion) retiree health care obligation as early as Dec. 31, 2009.
Ford and the UAW agreed to the trust as part of national contract negotiations last fall.
The union and lawyers representing retired workers filed a lawsuit last November seeking federal court approval of the trust. Ford also wants court approval. The settlement was dated March 28, according to Ford's filing.
Ford spokesman Mark Truby said the court settlement is a legal step to put details of the national agreement with the UAW into place, and the terms have not changed.
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Under the new four-year contract, Ford will fund the trust, called a voluntary employees beneficiary association (VEBA), with a combination of $13.2 billion (euro8.34 billion) in cash and notes.
The company's contribution breaks down to $2.7 billion (euro1.71 billion) in cash, $3.8 billion (euro2.4 billion) from an existing VEBA, a $3.3 billion (euro2.08 billion) note convertible into about 363 million new shares of Ford stock, a $3 billion (euro1.89 billion) second lien term note and $400 million (euro252.64 million) in deferred payments.
Ford said it expects a net cash flow benefit of $1 billion (euro630 million) per year once the retiree health care costs are shifted to the trust.
The cash flow benefit includes health care cost savings of $1.6 billion (euro1.01 billion) per year, offset by the cost of contributions to the trust, called a voluntary employees beneficiary association, Ford has said.
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The VEBA still must be approved by a federal judge, and Ford would continue to be responsible for retiree health care until the trust takes over, the company said.
A federal judge on Wednesday gave preliminary approval to Chrysler LLC's trust agreement with the UAW, and General Motors Corp.'s trust was given tentative approval last month.
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