When Ford Motor Co. and General Motors Co. hand over health care for hourly retirees to the United Auto Workers on December 31, they also will hand over checks totaling nearly $2.5 billion.
As a first installment on a $13.2 billion obligation, Ford is scheduled to pay $1.9 billion to a UAW-administered health care trust. That total includes at least $1.3 billion in cash, with the remainder in Ford stock.
GM and Chrysler Group have less onerous terms, largely because of concessions they extracted from the UAW on the eve of their Chapter 11 bankruptcy filings last spring.
GM, which had a $20 billion VEBA obligation before the concessions, is scheduled to pay $585 million to its UAW trust fund December 31.
Chrysler’s first-year cash payment, pegged at $315 million, is due July 15.
First VEBA Fund Payments From Ford and GM to the UAW
|GM||$585 million||12/31/09 |
Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Michigan, said the payments,although much less than those negotiated during the 2007 UAW contract talks, are still substantial for companies trying to weather the worst auto recession in 25 years.
After the negotiations in 2007, UAW president Ron Gettelfinger said the VEBAs would provide top-flight benefits to hourly retirees for at least 80 years. Gettelfinger has now backed away from that assertion.
“That 80-year timeline has fallen off the table because of the meltdown, because of the company [GM] going into bankruptcy,” he told Reuters this month.
GM had about 493,000 UAW retirees and surviving spouses in August. Ford finished 2008 with about 175,000, and Chrysler had 93,434 in July.
Ford, which lacked the threat of bankruptcy as leverage for greater UAW concessions, has the largest total VEBA obligation of the Detroit Three: $13.2 billion over about the next decade. Ford can pay about half of it in stock.
GM has agreed to pay its UAW VEBA with a promissory note of $2.5 billion and $9 billion in preferred stock. Chrysler owes a note of $4.6 billion. With other equity consideration, the Chrysler UAW VEBA now owns 55 percent of Chrysler, and the GM UAW VEBA now owns 17.5 percent of GM.