UAW hopes to gain from rising Ford stock

[TonyV]

Updated: 12:11 p.m. today
UAW hopes to gain from rising Ford stock
BY BRENT SNAVELY
FREE PRESS BUSINESS WRITER

Ford said today that the UAW’s health care trust fund has decided to place 362 million warrants, which are similar to stock options, for sale on the open market — a move that gives the UAW an opportunity to diversify its holdings and take advantage of Ford’s rapidly rising stock price.




Ford also said today that it has decided to use $3 billion to pay down a portion of its debt. The payment would reduce Ford’s total debt from about $34.5 billion to $31.5 billion.


Ford plans to make the payment by April 6 on its $8.1-billion line of credit.


In February, 2009 when General Motors and Chrysler were on the verge of bankruptcy and numerous suppliers were in danger of collapsing Ford decided to access its entire line of credit.


Today, Ford said it decided to pay $3 billion back to its lenders, “in light of the improved state of the capital markets and global economic conditions.”


The UAW’s retiree health care trust fund decided to sell its 362 million warrants because diversify its holdings, said Samuel Halpern, president of Independent Fiduciary Services in Washington, D.C., which is an investment advisory firm for the UAW’s trust.


“For a whole host of reasons we think it is now an appropriate time to conduct a sale,” Halpern said.


Each warrant gives the holder the right to buy one share of Ford stock at an exercise price of $9.20. The trust set a minimum price for each warrant at $3.50.


The combined $12.70 that a buyer would pay is below Ford’s closing stock price on Friday of $13.86 a share.


Ford’s stock was trading at $13.71 per share at 11:30 today, or more than five times higher than its 52-week low of $2.38 per share on March 30, 2009.


Ford will not receive any of the proceeds from the sale and Ford has about $7 billion in future obligations that it must pay into the VEBA.


Ford granted the UAW the warrants on Dec. 31 as part of an agreement to transfer Ford’s future retiree health care obligations to the UAW’s health care trust fund.


The retiree trust fund is the UAW’s Voluntary Employees Beneficiary Association, which is more commonly called a VEBA. The UAW agreed to manage the future health care costs of its retirees through the VEBA during 2007 contract talks.


Last year, the Ford and the UAW agreed to modify Ford’s payment terms and the modifications included Ford’s agreement to grant the UAW the 362 million stock warrants.


Contact BRENT SNAVELY: 313-222-6512 or [e-mail]