• Jan 4, 2010

Everything's coming up roses for Ford. That's what we keep hearing in the news anyway. Ford can now add one more feather to its cap of accomplishments with today's announcement that it has completed transferring all of its retiree healthcare obligations to the VEBA trust run by the United Auto Workers union. The official press release from Ford after the jump is dense, but the gist is that Ford has made its required payments to the VEBA fund and thrown in an extra $500 million payment that isn't due until later for good measure. That last part not only gets The Blue Oval ahead of the game, but also demonstrates the degree of confidence that Ford has in both its turnaround plan and what its balance sheet will look like in the coming years.

The net effect of this news is that Ford can practically erase retiree healthcare off its books. Sure, the company takes a big hit now with the billions of dollars it just paid into the UAW-run VEBA account, but over the long term Ford won't be forced to roll the rising cost of retiree health care into the price of its vehicles. Both General Motors and Chrysler LLC have the same obligation as Ford to pay into VEBA accounts and transfer control of retiree healthcare to the UAW, but neither has completed that process to date.

[Source: Ford | Source Image: Bill Pugliano/Getty]

Show full PR text

FORD TRANSFERS ITS UAW RETIREE HEALTH CARE LIABILITIES TO VEBA TRUST AND PRE-PAYS VEBA DEBT

DEARBORN, Mich., Jan. 4, 2010 – Ford Motor Company announced today that on Dec. 31, 2009, it completed the transfer of its UAW retiree health care liabilities to the UAW Retiree Medical Benefits Trust ("VEBA Trust").

Pursuant to a court-approved settlement agreement, the transfer of these liabilities was implemented by Ford transferring on Dec. 31 the following assets to the VEBA Trust:

  • An Amortizing Guaranteed Secured Note maturing June 30, 2022, with an original principal amount of $6.7 billion with a corresponding estimated present value of $4.8 billion ("New Note A");
  • An Amortizing Guaranteed Secured Note maturing June 30, 2022, with an original principal amount of $6.5 billion with a corresponding estimated present value of $4.7 billion ("New Note B" and, together with New Note A, the "New Notes");
  • Warrants expiring on Jan. 1, 2013, to purchase 362 million shares of Ford Common Stock at a price of $9.20 per share;
  • Assets in a Temporary Asset Account consisting of cash and marketable securities with an estimated value of $620 million; and
  • Assets in Ford's internal VEBA trust consisting of cash and marketable securities with an estimated value of $3.5 billion.

Also on Dec. 31, Ford made the following payments on the New Notes:

  • A scheduled payment of $1.4 billion on New Note A;
  • An additional pre-payment of $500 million on New Note A; and
  • A scheduled payment of $610 million on New Note B, which was paid in cash, in lieu of Ford's option of making New Note B payments in Ford Common Stock. Had Ford chosen to pay in stock, the shares would have been issued at the 30-day volume weighted average price of $9.13, while Ford Common Stock closed at $10 on Dec. 31.

As a result of these actions, the New Notes will represent about $7 billion in incremental debt on Ford's balance sheet.

"The transfer of these health care liabilities to the VEBA Trust is the culmination of several years of work and will significantly improve our competitiveness in the U.S.," said Lewis Booth, Ford's chief financial officer. "We have removed a substantial health care liability from our balance sheet and have significantly reduced health care expenses. We also have shown confidence in our liquidity and One Ford plan by pre-paying $500 million of debt owed to the VEBA Trust."

Additional details about this transaction are included in Ford's Current Report on Form 8-K filed today with the U.S. Securities and Exchange Commission.

# # #

About Ford Motor Company

Ford Motor Company, a global automotive industry leader based in Dearborn, Mich., manufactures or distributes automobiles across six continents. With about 200,000 employees and about 90 plants worldwide, the company's automotive brands include Ford, Lincoln, Mercury and Volvo. The company provides financial services through Ford Motor Credit Company. For more information regarding Ford's products, please visit www.ford.com.



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    • 1 Second Ago
  • 28 Comments
      • 5 Years Ago
      If we have Universal Coverage, every US company could get those healthcare costs (not just retiree costs) off their books which would let them compete with foreign companies a hell of a lot easier.
        • 5 Years Ago
        That's why companies in Europe are so cost competitive that they are using the U.S. for their cheap labor. (See Mercedes plant in Alabama, BMW plant in South Carolina, etc.)
        • 5 Years Ago
        That will only make the whole system just as bad, not make the UAW/VEBA situation better.

        Bureaucratic over-promising is shown in this very case, to be wasteful, and very expensive.

        Government healthcare shoves that VERY SAME PROBLEM into high gear for the whole economy, not just union labor.

        we need to go in the opposite direction. Insurance is not supposed to cover incidentals and everyday costs anyway. Insurance, including health insurance is supposed to mitigate the risk of unlikely, catastrophic events, not every little tylenol, or doctor visit for a sniffle.

        Catastrophic insurance only would be significantly cheaper. lack of state restrictions would also cut the price by a huge amount. You'd have health insurance commercials like car insurance commercials... one company undercutting others on price with cavemen and lizards, and what-not.

        Otherwise, to continue the metaphor, your car insurance would cover door dings and stone chips, and fuel fill ups, and owning a car would be just as big of a bureaucratic mess as all-encompassing health care coverage.

        You'd have to fill out forms in triplicate, and pay a co-pay every time you go to the gas station, or the mandatory maintenance facilities... neither of which you would see the true cost of, as they would collude with the insurance companies, to make sure both pockets are lined.

        Meanwhile, your automatic monthly car insurance premiums go up... until you can't afford it, and ask the government to further spread that cost pool out to ALL taxpayers, not just car drivers, regardless of mileage, regardless of risk, regardless of economics, and enforced by law on everyone to pay the higher costs... and to also line the pockets of government and lobbyists, as well... now two pockets become four, that you are paying to line with your cash, and you don't have the option not to.

        That is what they are doing with health care. Something you would NEVER let them do with your car insurance, nor your homeowners insurance, nor your life insurance, nor your grocery bill, or your energy bills.

        But they will, scratch that, ARE, doing that. It is in conference committee now, and they are just chomping at that bit to put it on the oval office desk, and he's chomping, too, to sign it.

        Mandates and requirements are not freedom. Bureaucrats are not charitable, nor efficient.
        • 5 Years Ago
        @rooster

        You don't understand the concept of currency fluctuation and exchange rates, do you?
        Yeah, didn't think so, but thanks for trying.
        • 5 Years Ago
        Yes and no; universal health care will still need to be paid for and the only way to do that is to raise taxes both on personal income and businesses. That maneuver would spread out the cost of health care so that it was absorbed more evenly than it has been historically at Ford and GM, but in the end it's just moving liabilities around and the cost of the car would still be higher than if they were to off load them into an independent entity like they have.
        • 5 Years Ago
        @paul34

        I think you are quite mistaken - if you think that you aren't already paying for uninsured people, then you are the one that is quite naive. It would be cheaper to pay for EVERYONE, than the half-ass system we have now where uninsured people wait for an easily treated problem to turn into an expensive disaster to get treatment. An ounce of prevention is worth a pound of cure. Add to that, that many times those uninsured turn to emergency services which are vastly more expensive than a simple doctor's visit. Those emergency visits cost money - lots of money, and you, and everyone else will ultimately pay for it.

        What I don't get, is why the hell should we be paying a 30% premium to an insurance company that does NOTHING. Not one thing. They aren't doctors. They aren't drug companies. All they do is process paperwork, and for that, they think that they should be raking in billions and billions of dollars in profits. Why does that industry even exist when all it does is tack on added costs for everything with nothing in return? If it costs $X to pay for health insurance, then cover that with $X more taxes - but since you would be covering EVERYONE, your total costs would be reduced.

        It's comical, and rather pathetic, to think that people have fallen for the insurance industry's scare tactics and misinformation so much that they would actually WANT to waste their money on an industry that only gets in their way when trying to get treatment and ultimately costs them more money. That's like after settling on a price for a new car, you demand that you pay 30% MORE for no good reason.
      • 5 Years Ago
      F' Matt. He's a tool.

      Ford is firing on all cylinders.

      in before all the effen Trolls
        • 5 Years Ago
        @Matt

        I understand that each person can have their own likes and dislikes! Heck, I loath plenty of cars and manufacturers but here's the thing; your comments are usually unfounded, inaccurate, clearly biased and for lack of a better phrase; those of a 12 year old. I'm not trying to be insulting, I'm just letting you know that this is likely the general opinion on the majority of your comments. With that said, I understand that you have a passion but you cannot live in ignorance and comment with information which is so far off that it's seen as blatant misinformation because most will discount everything you ever say.

        So lets break it down...

        "Yeah...until the plugs blow out!!"
        I can't even imagine what you're talking about here. If you mean spark plugs blowing out of the engine you'd be saying that the engine is insanely powerful so it doesn't really quantify your disdain.

        "Unfortunately for Ford...they may be firing on all cylinders now...but it's only a 20cylinder engine."

        So it's unfortunate for Ford that they are firing on all cylinders? How's that work? I's only a 20 cylinder engine? Isn't that 3 to 4 times the cylinders of most motors? Again you make it sound like they have big motors that rock!

        "With their boring, bland product that's not selling"
        Do you mean the F150 Raptor, The Mustang, The new Taurus the new Lincoln Line, the New Fiesta? Which is as boring as the Prius, Accord or Malibu? I think none!

        "massive debt load"
        I bet you didn't know that Ford has 24 Billion in cash even though they have debt! Which is more than their debt so they are solvent and growing.

        "4+ BILLION dollar loss on Volvo..."
        Did you consider that Volvo tech is now in the entire Ford, Lincoln and Mercury lineup? So 4 Billion in R&D for what are among the safest and highest crash tested cars on the road. Yeah they lost money on the brand, but as a company they gained!

        "Ford is not in good shape."
        You're terribly misinformed.

        In closing, if you could backup anything you said with current fact, like if you were on a Toyota post and said "Toyota frames rust and Toyota cars and trucks accelerate on their own thus killing people, then you'd be on to something. Or maybe something like "Toyota hides information from the public when their cars ignite into flames" or "Their gas pedals stick to the floor on 3.5 million cars making the entire transit system of the US unsafe to be on" then you'd have something to go on... See how I wrote that stuff? It's all true but clearly has a biased undertone / overtone. BUT its all true!

        Anyway.... Hope you grow up...
        • 5 Years Ago
        Yeah...until the plugs blow out!!

        Unfortunately for Ford...they may be firing on all cylinders now...but it's only a 20cylinder engine.

        With their boring, bland product that's not selling, massive debt load, 4+ BILLION dollar loss on Volvo...Ford is not in good shape.
        • 5 Years Ago
        If you buy a car for 20,000 and sell it 10 years later and get 10,000 isnt that more or less the same? So what they lost money on the brand, depreciation sucks. Ford got a lot of good stuff out of Volvo.
      • 5 Years Ago
      Ford is the brightest spot among the big three.
      • 5 Years Ago
      The UAW always tried to maintain a certain amount of rough parity between the auto makers. Its in the spirit of 'equality'. But its really a negotiation strategy. Before heavy foreign competition, maintaining parity removed any long term competitive disadvantage to caving to union demands. If GM granted them a couple more days off in the past, the UAW would eventually obtain the same agreement with Ford and Chrysler. If Ford gave them an 10% raise, they would eventually pull up GM and Chrysler to match. Maybe not right away but within a few years.

      This has more to do with getting them on track to converge to parity than any silver tongue negotiation skills from Ford's top brass.
      • 5 Years Ago
      Health insurance costs are a big part of what drives jobs out of this country. Could this be at least part of the reason every other 1st world country has national health?
        • 5 Years Ago
        YAH our government will take care of us.
        LOOK at the great job they did with these
        POST OFFICE
        AM TRACK
        MEDICARE
        FANNY MAY
        FREDDIE MAC
        and many more ventures
        All loosing money... an who pays for their great decisions
        WE DO
        • 5 Years Ago
        And are also going broke under it, and rationing care?
        • 5 Years Ago
        Since every other country manages to do it. It can be done. I lived in Canada for 3 years. Those rationing / wait rumors are nonsense. The most admired Canadian figure of all time is the guy who came up with their national health. (PS Fox news isn't news).
        • 5 Years Ago
        All provinces run their own healthcare. Basic coverage is guaranteed under the Canada health act, anything over and above that is up to the provinces to decide for themselves. It's not nearly as bad as the Globe and Mail make it out to be.

        Per capita costs are lower in Canada, there is no paperwork to fill out beyond showing your healthcard, and there is no rationing, but there is triage, those with the greatest need get treated first. You always have the option to go to private clinics for many services or go to the US, but you have to get your own private coverage or pay out of pocket if you want. You can also buy supplemental private insurance which covers eyecare, dental, and medication for a few bucks a month, private hospital room etc. Mine is provided through my employer.

        I've dealt with the US and Canadian systems. Hands down, I prefer the Canadian system.
      • 5 Years Ago
      Ford must feel like a homeowner getting ahead on the mortgage by a couple of years. Yes, that would make me quite cheerful too!
        • 5 Years Ago
        Unfortunately, they're up against two companies that have been propped up by a government that doesn't give a damn if you pay your bills and your taxes. If you can't pay, they'll pay for you. If you can pay, but miss one payment, they'll fine you and take your house.
        • 5 Years Ago
        I have enough money to pay off my house right now. But it doesn't make financial sense to do so when my loan is at such a low rate and the interest is deductible.

        Paying ahead isn't always the smart thing to do. This can be the case for companies also.
      • 5 Years Ago
      Congrats to Ford, in before the troll came in.
      • 5 Years Ago
      I thought GM satisfied the VEBA transfer with equity? That's how the UAW ended up being the largest shareholder.
      • 5 Years Ago
      A year or so ago when the UAW agreed to accept health care costs I just knew in my heart of hearts this was only because they had been assured by the incoming Democrats that there would be universal health care. There was just no way the UAW was going to assume this kind of liability without this assurance.

      The question is, when we get this rationed care, will the UAW have to turn over this giant pot of money they've received from the auto industry, to the government? This could be a VERY BIG win, win for the UAW.
        • 5 Years Ago
        Lined pockets. Lots of them.

        Except yours. There are cobwebs in yours and mine.
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