Ford Motor Co., Dearborn, Mich., will have the option of making $6.5 billion of its total $13.1 billion in VEBA contributions in company stock under an agreement ratified by UAW members, according to a Ford statement today.
Ford would lose its option to pay in stock if its price falls below $1 a share or if it receives an audit qualification on its viability, but in either case it would retain “the right to defer payment over five years and pay in stock,” the statement said.
Ford’s stock was priced at $1.97 in midday trading. Its market capitalization was $4.7 billion.
Also, Ford agreed to provide the VEBA with $150 million in risk protection for any loss on shares delivered through 2011, and to issue warrants enabling the VEBA to purchase 362 million shares at $9.20 a share. Ford has 2.4 billion shares outstanding.
Fifty-nine percent of production workers represented by the United Auto Workers and 58% of UAW-represented skilled-trades workers voted for the agreement, the UAW said in a statement.
Under the ratified agreement, Ford will restructure its VEBA debt obligations into a $6.5 billion note payable in Ford stock or cash at the company’s option and a $6.6 billion note payable in cash, both due 2018, the Ford statement said.
The ratification is part of a joint Ford and UAW memorandum of understanding, subject to approvals by the U.S. Labor Department, SEC and U.S. District Court in Detroit, enabling the company to end its legacy retiree health-care obligation by funding a new Volunteer Employee Beneficiary Association health-care trust. The approvals are expected before the VEBA, which the UAW will control, is scheduled to begin Jan. 1, said Mark Truby, Ford spokesman.
