Ford Completes $13.2b Health Care Liability Transfer To VEBA

Edward Niedermeyer
by Edward Niedermeyer
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ford completes 13 2b health care liability transfer to veba

Ford has wrapped up some much-needed financial wrangling today, as it struggles with with its monstrous pile of debt. According to Automotive News [sub], Ford transferred $13.2b in debt and about $4b in cash to the UAW-run health care trust fund, completing a long-awaited liability consolidation. $1.4b of the transfer was a scheduled payment on a $6.7b note, while $500m more was a prepayment on that note. Ford paid $610m (cash) on another $6.5 billion note, transferred $620m from a temporary account and $3.5b from an internal VEBA fund and handed over warrants to purchase 362 million shares of Ford common stock at $9.20 per share. All together, the move reportedly adds $7b in debt to Ford’s balance sheet.

Ford’s CFO hailed the move, which culminates a process began with the 2007 UAW contract, saying it “will significantly improve our competitiveness in the US.” If nothing else, the move does show that Ford is less worried about its liquidity than we may have thought: both the pre-payment and the use of cash rather than stock to pay the scheduled VEBA payment indicate confidence in the balance sheet. And unlike the huge amounts of “equity” in GM and Chrysler owned by VEBA, Ford’s stock is actually worth money. In fact, Ford’s stock is currently worth about a dollar more per share than VEBA’s $9.20 option price, meaning VEBA will probably convert them soon for a quick profit. After all, they’ll be waiting quite a bit longer for their GM and Chrysler stock to be worth more than the paper it’s printed on.

Edward Niedermeyer
Edward Niedermeyer

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  • Buickman Buickman on Jan 04, 2010

    very positive news from a company with a clue. steady and honest leadership with franchisees that aren't winding down. Have You Purchased Any Ford Stock Lately? I predict $18 per common share by end of summer.

    • ASISEEIT ASISEEIT on Jan 04, 2010

      Yes I agree. Ford seems to be a company that actually wants to stay in business!

  • Runfromcheney Runfromcheney on Jan 04, 2010

    Wait.. doesn't this mean that Ford has removed 13 Bil of debt from its balance sheet?

    • Lw Lw on Jan 04, 2010

      Nope.. they take on more debt, but they get the cash flow benefit of never paying for health care for all those UAW folks. Let the VEBA health care rationing begin! (at least for the UAW retirees that have ZERO voting rights) ;-)