Post by TonyV on Apr 2, 2010 0:57:45 GMT -5
UAW stock warrant auction raises $1.78B
Proceeds go to VEBA to provide health care coverage for Ford retirees and dependents
Robert Snell and Bryce G. Hoffman / The Detroit News
A United Auto Workers health care trust fund raised $1.78 billion from Tuesday's auction of its 362 million Ford stock warrants.
The proceeds will go to the UAW Retiree Medical Benefits Trust, also known as the UAW voluntary employees' beneficiary association. The trust is responsible for providing health care coverage for Ford Motor Co.'s 200,000 hourly retirees, spouses and eligible dependents.
The automaker said Wednesday that the trust Tuesday sold warrants to buy the shares for $5 each. The deal is expected to close on or about April 6.
The health care trust, established in 2007, protects coverage for hourly retirees, while stripping billions in retiree health care costs from Ford's books. General Motors Co. and Chrysler Group LLC also turned to VEBA coverage for their union retirees.
The VEBA began paying Ford retiree health care costs in January.
The trusts were a risk for the UAW because of the uncertainty surrounding the company's stock price.
But in the case of Ford, it was a wise decision, said Gary N. Chaison, a professor of industrial relations at Clark University in Massachusetts.
"It shows that the risk the UAW took was worth it," he said Wednesday. "It's a good ending. Better than a lot were saying in the past."
Each warrant gives the holder the right to buy a Ford share at $9.20.
The warrants were essentially valueless when Ford gave them to the union as part of a deal that allowed the Dearborn automaker to cover a portion of its retiree health care obligations with company stock.
"Ford is pleased that the UAW VEBA's warrants in Ford stock have proven to be valuable," said Ford spokesman Mark Truby. "Our plan as a business is to deliver profitable growth for all Ford's stakeholders."
Ford still owes the VEBA approximately $7 billion, but it is ahead of schedule on making its payments to the union.
The Dearborn-based automaker has funneled $2.5 billion to the VEBA, which already had $3.5 billion, mainly from previous trusts set up by Ford.
Ford shares dropped 71 cents Wednesday, or 5.35 percent, to $12.57.
rsnell@detnews.com (313) 222-2028