UAW reaches health care trust fund deal with Ford
In a deal that could set the pace for the entire auto industry, Ford Motor Co. and the United Auto Workers union came to terms over reducing billions of dollars in payments due a trust for retiree healthcare coverage.
In related news, financier Steven Rattner will become an advisor to the Treasury Department and join the Obama administration’s panel overseeing the auto bailout.
The Ford pact, announced Monday, will allow the automaker to make as much as half its payments to the fund in equity rather than cash. Ford’s obligations to the fund, known as a voluntary employees’ beneficiary association, or VEBA, total $13.2 billion, a huge amount in the current economy.
Reducing its obligations to the VEBA “will allow Ford to become competitive with foreign automakers’ U.S. manufacturing operations,” said Joe Hinrichs, Ford’s head of global manufacturing and labor affairs.
The deal is certain to be watched closely by General Motors Corp. and Chrysler. Under terms of the $17.4 billion in federal loans the companies received in recent months, both must reach a deal to reduce their cash obligations to the fund by March 31.
GM owes $20.4 billion to the VEBA, while Chrysler owes $8.8 billion. Both hope to cut their cash commitment in half.
Last week, both submitted revised restructuring plans to the Treasury Department, including signed deals with the UAW to reduce labor costs, but both omitted agreements on VEBA payments, saying they were still negotiating.
Ford hasn’t asked the government for aid, but that hasn’t prevented it from benefiting from the crisis. Last week Ford said it had struck a similar deal to reduce costs.
All three automakers signed a union contract in late 2007 that was designed to significantly reduce the long-term costs owed to retirees. A key component of that deal was establishing the VEBA, under which the union, rather than the automakers, would administer healthcare to retired employees and dependents.
But with car sales collapsing, it became evident the automakers wouldn’t be able to meet even reduced obligations.
The UAW has lately been in negotiations with all three automakers, agreeing to a host of concessions.
“We appreciate the solidarity, understanding and patience the members have demonstrated throughout the bargaining process,” UAW President Ron Gettelfinger said Monday.
Word that Rattner would be joining efforts to save the automakers wasn’t unexpected. His name had been floated as a candidate for a “car czar” position since early January.
Last week the White House said it wouldn’t name just one person to oversee the bailout; rather, it will use a panel, including Treasury Secretary Timothy F. Geithner, economic advisor Lawrence H. Summers and Ron Bloom, an experienced labor negotiator.
Rattner, a former reporter with years of experience in finance, is co-founder of Quadrangle Group, a private equity fund with expertise in mergers and acquisitions.
The fund announced his departure Monday in an e-mail. “The Obama administration’s selection of Steve represents a distinct honor for him and a rare opportunity for him to help facilitate our country’s economic recovery,” the company e-mail said.
Shares of Ford rose 15 cents to $1.73 on Monday, while GM was unchanged at $1.77. Chrysler is privately held.