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Billions in UAW Liabilities off Ford Balance Sheet

Deal has $9.5 billion or more in debt, warrants for 362 million shares of stock, and sends more than $4 billion in cash to VEBA.

by on Jan.04, 2010

Good reason to smile, as liabilities decrease, stock values tend to rise.

Ford Motor Company (F) announced today that on December 31, 2009, it completed the transfer of its UAW retiree health care liabilities to the UAW Retiree Medical Benefits Trust or “VEBA Trust.”

Because of a series of complex financial transactions and a court approved settlement with the UAW, Ford has removed billions in liabilities off of its balance sheet, while apparently incurring about $7 billion in incremental debt on its balance sheet.

“This takes a significant amount of uncertainty away from those in the equity markets trying to value Ford stock, both now and in the future,” said analyst Joe Phillippi, of AutoTrends consulting. “Wall Street hates unknowns,” Phillippi concluded.

Ford stock closed today at $10.28 a share, up 28 cents or +2.8%.


The big question facing Ford’s UAW workers is whether the trust is anywhere near solvent enough at these funding levels to provide benefits as health car costs continue to rise at what the Obama Administration says are unsustainable rates.