The UAW’s VEBA health care trust fund currently owns 17.5 percent of GM and 55 percent of Chrysler, but with IPO plans still nebulous at both, the fund is short on options for improving cash flow. Remember, the union doesn’t want to own these companies… it would have preferred cash, thanks. But since bailout negotiations allowed the automakers to fund their VEBA obligations with stock and warrants, VEBA has little choice but to monetize them. And while GM and Chrysler limp towards an eventual IPO, VEBA’s 362.4m Ford stock warrants are actually doing pretty well relative to their $9.20 exercise price. So it’s no huge surprise to hear [via Automotive News [sub]] that VEBA is planning on dumping its entire allotment of Ford warrants, in a move that could be worth “at least” $1.27b. And it’s no coincidence that this news comes on the same day that Ford is announcing a $3b debt prepayment, and the day after its sold Volvo to Geely for $1.8b.
By flooding the market with stock, the UAW’s announcement is keeping Ford stock below $14 (which it reached in pre-trading before the market opened today), essentially wiping out any stock price benefit from the debt and Volvo news. In fact, at the time of publishing, Ford’s stock is actually down about 2.5 percent on the day, despite the good brand sale and debt news. Of course it’s impossible to say that this is solely due to the UAW’s warrant auction, but there is sure to be much back-slapping around Solidarity House right now. After all, how often do you get to make over a billion bucks and slap down the stock price of a competitor firm at the same time?