Ford Motor Co., Dearborn, Mich., and the United Auto Workers today reached a tentative agreement giving the company discretion to fund up to 50% of a total of $784.5 million in VEBA contributions using Ford stock.
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, according to a Ford statement.
The agreement is part of a joint Ford-UAW memorandum of understanding, subject to ratification by active UAW members at Ford and U.S. District Court approval, enabling the company to end its legacy retiree health-care obligation by funding a new Voluntary Employee Beneficiary Association, expected to have assets of $13.2 billion.
Under the memorandum, the new union-run VEBA will consist of $3.5 billion in assets transferred from a Ford VEBA and $2.5 billion in assets from a Ford-UAW temporary fund. Ford will make annual installment payments totaling $784.5 million through 2022, in addition to a $3 billion note due in 2018 and a $3.3 billion note, convertible into Ford stock, due in 2013.
A separate health care plan consisting of defined contributions made by Ford was set up for UAW-represented employees hired after Nov. 19, 2007.
Bill Collins, Ford spokesman, confirmed the amount for which Ford has discretion to contribute stock. Christine Moroski, UAW spokeswoman, declined to comment.