Needless to say, we argued strenuously that Ford does not have the right to modify your benefits, even after the
expiration of an existing labor agreement. While we feel confident of that position, going to court always involves
risk. We wanted to avoid the uncertainty that would be created had we been forced to rely on the courts to resolve the
matter.
In addition, while we believe that Ford is both legally and morally obligated to pay retiree medical benefits, the
company’s obligation is largely unfunded. Continued benefits depend on Ford’s financial health. If Ford, which lost
$12.6 billion last year, were to file for bankruptcy, retiree medical benefits could be cut or eliminated entirely. Unlike
pension benefits, there is no required funding – and no government backstop – to protect retiree medical benefits. We
have seen thousands of retirees at other companies lose their retiree medical benefits completely when the employer
that promised to pay them sought “protection” in the bankruptcy courts.
We do not ever want to see UAW Ford retirees in that position.
Instead, we insisted that Ford agree to a funding plan that would secure retiree benefits for the long term. We are
pleased to report we have achieved that objective.
We have obtained financial commitments from Ford, totaling over $15.4 billion, to pay for retiree health care
benefits. This includes Ford’s agreement (subject to ratification and court approval) to contribute $13.2 billion to
establish a funding mechanism that will protect your retiree medical benefits – at current levels – through establishment
of a Voluntary Employee Beneficiary Association (VEBA).
The VEBA will operate as an independent trust and will become operational in 2010; until that time, Ford will
continue to pay for retiree health care benefits, at a projected cost of $2.2 billion.