#veba

As if to confirm that GM’s benefit obligation situation could actually be worse than today’s GAO report lets on, Automotive News [sub] is reporting that the UAW has sued GM over $450m in unfunded healthcare obligations for Delphi retirees. GM promised to fund a $450m Voluntary Employee Benefit Association for Delphi retirees in 2007, and Delphi’s bankruptcy court confirmed the commitment in last October. But, according to the UAW suit:

the UAW made a written demand that the company honor its contractual obligation to make the foregoing payment [last October… but] that UAW demand was rejected and since that time the company has failed and refused to make the contractually required payment.

That obligation apparently was not voided by GM’s bankruptcy, although The General’s spokesfolks have yet to officially comment on the UAW’s suit.

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.

A lot of what you hear about Steve Girsky sounds decidedly positive: an outspoken critic of GM, Girsky lasted less than a year as Rick Wagoner’s “ roving aide-de-camp,” reportedly due to frustration with management heel-dragging. He even earned TTAC’s “lesser-of-two-evils” endorsement to be Presidential Car Czar over Steve “Chooch” Rattner. When he was appointed to be the UAW rep on GM’s board, representing the union’s VEBA trust which owns 17.5 percent of GM’s stock, he was lauded as someone who could keep his union allegiances at bay. But as special advisor to GM CEO/Chairman Ed Whitacre, Girsky had better be prioritizing GM’s best interests. Reuters reports that he’s being paid a cool $900k in stock grants for his advice. That’s in addition to $200k director’s salary and reimbursement for “living expenses and travel to and from Detroit.” Not bad considering the fuss people are making over compensation at TARP-recipient financial institutions.

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.