A United Auto Worker retiree medical fund created to reduce healthcare costs and increase services for more than 700,000 people reported a $20.7 billion difference between assets and future liabilities, Bloomberg reported Wednesday (via Automotive News). The shortfall increased by more than $16 billion over the last report.
A similar system proposed for Fiat Chrysler Automobiles workers in the union’s first proposed contract — which was rejected by workers nearly 2-to-1 — was scrapped in the second contract.
Accounting for future inflation and longer average lifespan are to blame for the increased shortfall, according to the report. (Read More…)
Automakers may try to negotiate a massive health care co-op with the United Auto Workers — similar to the one it has with its retirees — and potentially change private health care in the U.S., Bloomberg is reporting.
At issue are the roughly 300,000 workers and beneficiaries, and 750,000 retirees and their families who rely on the UAW for health care.
The pool of more than one million workers and their families could give the Big Three unprecedented negotiating power with U.S. hospitals and clinics.
Though Chrysler-Fiat CEO Sergio Marchionne had previously said that an initial public offering of Chrysler stock could take place by the end of 2013, the Italian automaker announced that stock sale will not take place before the new year. “The Board of Directors of Chrysler Group … has determined that it will not be practicable for Chrysler Group to launch and complete an initial public offering prior to the end of 2013,” Fiat said in a statement.
The UAW has enlisted the help of the German IG Metall labor union in its effort to organize Volkswagen’s U.S. operations. Now Fiat has apparently gotten the union that represents its Italian workers, Fim Cisl, to reach out to UAW officials in an effort to resolve the issue of just how much Fiat is going to pay the UAW’s retiree health benefits trust for the 41.5% of Chrysler the VEBA owns. Fiat and Chrysler CEO Sergio Marchionne wants to merge the two companies and that can’t be done without buying that stock. Fiat and the VEBA sides are more than a billion dollars apart. (Read More…)
After Fiat and Chrysler’s retired UAW workers’ health care benefits trust were unable to agree on a price for the Voluntary Employees Beneficiary Association‘s 41.5% share in the Auburn Hills automaker, at the trust’s request Chrysler has filed initial paperwork for a public stock offering to sell part of the VEBA’s stake, about 16% of overall Chrysler shares, the first time in over a decade that the public will be able to own shares in Chrysler, which formerly was wholly owned by Cerberus and before that Daimler. Fiat certainly would rather the IPO not take place now as it complicates Fiat and Chrysler CEO Sergio Marchionne’s plans for the Italian automaker to acquire full ownership of Chrysler. The benefits trust has the legal right to force Chrysler to make the stock offering so the VEBA can cash out on the shares it received in exchange for giving up financial claims against Chrysler during the company’s bankruptcy and bailout by governments in the United States and Canada. (Read More…)
On Friday, Sergio Marchionne, who heads Fiat and Chrysler, told reporters in Milan, Italy that he hasn’t gotten any closer to making a deal with the UAW’s retiree health care trust for Fiat to purchase the VEBA’s shares in Chrysler and take full ownership of the Auburn Hills automaker. The UAW health care trust owns 41.5% of Chrysler and the two parties have not been able to agree on a price. The trust is demanding $5 billion for its shares. Marchionne told the LaPresse news agency, concerning the UAW trust’s suggested price, “They should buy a lottery ticket.” (Read More…)
Sergio Marchionne’s plans to merge Chrysler and Fiat have been delayed because Fiat failed to convince a Delaware Chancery Court judge to set the value of Chrysler stock owned by the UAW’s health care fund known as VEBA. Judge Donald Parsons rejected Fiat’s request to find that a call-option agreement covering at least 54,000 Chrysler shares valued the stock at slightly less than $140 million. That decision means that the dispute over the shares’ value will now proceed to trial. (Read More…)
Fiat can’t wait for a full merger with now again cash-rich and profitable Chrysler, but it will wait until its legal dispute with the UAW’s VEBA healthcare trust has been resolved. “We intend to wait for the Delaware verdict before moving forward on the merger” with Chrysler, Fiat Chairman John Elkann told Reuters. (Read More…)
The 12-person protest that took place at Chrysler’s Warren, Michgan truck plant got little notice in the automotive news cycle, save for a couple of mentions on the usual aggregators. In truth, it’s not the juiciest story to sell in this click-driven wasteland, though these stories tend to raise the most interesting questions. This example highlights an issue that is going to dog the UAW for some time – how will the UAW control their workers when they are also the owners?
Sergio Marchionne can’t wait to get his hands on the 41.5 percent of Chrysler, which are in the hands of the UAW’s VEBA trust. Once Fiat is in total control, Fiat and Chrysler could be merged, and the cash could be used to … but you know the drill from years back. Currently at stake are 3.3 percent. Fiat has a call option, but the UAW trust doesn’t want to fork the shares over. (Read More…)
The Voluntary Employee Beneficiary Association, or VEBA, was initiated as a way to get retiree healthcare costs off the books of Detroit’s auto makers. While VEBA makes balance sheets look better, they are still an exorbitant legacy costs for the Big Three, and things are about to get a lot worse.
News that the government will sell only $6b-$8b worth of its GM equity has been joined by an even more surprising GM IPO announcement: GM will buy the Treasury’s entire $2.1b holding of preferred stock in the initial offering. GM has not announced how much it will pay for the stake, and the Detroit News reports that it’s not yet clear if GM will also buy some $400m in preferred stock held by the Canadian and Ontario governments. We’re also getting word via Twitter that GM will put $4b in cash and $2b worth of its stock into its overdrawn UAW pension fund, as well as making a $2.8b payment to the UAW VEBA account. With a $5b line of credit secured, GM says these and other steps will reduce its debt by $11b over an unspecified timeline. And speaking to Reuters, GM CEO Dan Akerson made it clear what the point of these moves are:
It’s up to people like you and me, the burden we share, that we deliver on the promise and return the investment to the American taxpayers. We are going to do our level best to make that happen, and we will only do that by expanding our industrial base and entering new markets and being a better competitor.
Of course, we’ll have to see what value The General places on the preferred stock to know how seriously Akerson should be taken. After all, talk is cheap and money isn’t. [UPDATE: It appears that GM will buy the preferred stock for $25.50 each, essentially giving the Government its book value of $2.14b]
When the music finally stopped at Old GM, the UAW’s VEBA fund was left holding a lot of IOUs. On those merits, the union’s benefit trust was given about 17.5 percent of the equity in the bailed-out and re-organized New GM. UAW leadership has always maintained that having its membership’s benefits staked on the company’s financial performance would not change its mission, and that VEBA’s representative on GM’s board, Steve Girsky, would operate free from union influence. And one hopes he would, considering he’s being paid well to advise CEO Ed Whitacre. But the tension between GM’s IPO sprint and the UAW’s non-VEBA interests never goes away, and the Wall Street Journal [sub] is reporting that the latest spat is over the old hobbyhorse of buyouts.