Local UAW Leaders Approve Tentative Ford Contract

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 07 Nov 2007 - 8:00 PDT

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Local United Auto Workers leaders representing Ford Motor employees on Monday by voice vote unanimously approved a tentative four-year contract agreement that follows the pattern set by General Motors and Chrysler Group and includes the creation of a voluntary employees' beneficiary association, the AP/Philadelphia Inquirer reports (Krisher/Durbin, AP/Philadelphia Inquirer, 11/6). Under the VEBA, Ford would transfer billions of dollars in retiree health care liabilities to a UAW-controlled trust. According to reports, Ford would not contribute as high a proportion of cash to the VEBA as GM and Chrysler. Ford instead would invest cash in its plants to improve flexibility that will allow them to produce more than one type of car model. The company would make up the remainder of its contribution to the VEBA in equity and convertible debt (Kaiser Daily Health Policy Report, 11/5).

The Wall Street Journal reports that the "vote by local leaders suggests a potentially easier passage than at Chrysler, where approval of a similar pact was more narrow than expected." UAW President Ron Gettelfinger said that he wants the ratification vote by Ford's 54,000 rank-and-file members to conclude by Monday.

Contract Details
Ford will contribute $13.2 billion to the VEBA, with $6.5 billion in cash, $3 billion in a secure note and $3.3 billion convertible note and annual payments totaling $450 million, the Journal reports. At today's rates, the convertible note could give the union a stake in the company as high as 18%, at least four times the size of the Ford family's share (Kosdrosky/Spector, Wall Street Journal, 11/6). The VEBA will remove nearly $23 billion in retiree health care liabilities from Ford's books, according to the Detroit News. Ford will pay about $2.2 billion in retiree health benefits through 2010, when the VEBA is expected to become operational.

In addition to the VEBA, Ford also negotiated a two-tier wage system, as did GM and Chrysler, but Ford's is less restrictive (Hoffman/Aguilar, Detroit News, 11/6). Ford also agreed not to close more than the 10 plants already slated to shut down during the life of the four-year contract, although there are "various exceptions," according to the Journal (Wall Street Journal, 11/6). Derrick Kuzak, global product chief at Ford, said, "It's very fair to our employees and retirees, and takes us another step to full competitiveness." Gettelfinger said, "We have no doubts or reservations about Ford's survival. Ford will survive" (Detroit News, 11/6).

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