VEBA Trust

Health Care Benefits for Hourly Retirees

As part of the 2007 labor agreement, the UAW and Ford agreed to establish a new entity called the Voluntary Employee Beneficiary Association (VEBA) Trust. This independent Trust would assume responsibility for providing retiree healthcare benefits to eligible UAW Ford employees and their dependents, the cost of which would be funded through a $14.8 billion contribution by Ford, including $7 billion of debt. This agreement excludes coverage for employees hired after the effective date of the 2007 agreement.

The creation of the independent VEBA trust reduces ongoing legacy costs and strengthens Ford’s balance sheet by transferring responsibility and risk associated with UAW-retiree health care costs. By helping to bring our costs closer to those of other global automakers, it made us more competitive. The $13 billion funding commitment reduced the labor cost gap between Ford and the transplant automakers from what had been more than $20 an hour to less than $10 an hour.

In 2009, the UAW and Ford modified the 2007 collective bargaining agreement in order to contribute to Ford’s restructuring efforts. The modifications included revisions to the VEBA funding structure and the timing of Ford’s contribution to the VEBA in order to improve Ford’s flexibility.

Due to Ford’s improved operating cash flow, the company chose to complete the funding of the entire debt obligation to the UAW VEBA by October 2010 — 12 years before it was required to retire the debt.

In order to be competitive and sustain profitability, Ford must continue to manage and reduce overhead in ways that benefit all stakeholders.

VEBA Highlights

• All Ford UAW represented employees hired and/or retired by the effective date of the 2007 Collective Bargaining Agreement are covered.
• Ford remained responsible for hourly post-retirement healthcare through the end of 2009.  Responsibility transferred to the VEBA trust on Jan. 1, 2010.
• UAW may not negotiate to increase Ford funding or otherwise seek to obligate Ford to provide additional contributions to the VEBA, make any other payments for the purpose of providing retiree health care, or provide retiree medical benefits through any other means.
• Ford transferred $14.8 billion worth of assets to the UAW VEBA Trust on December 31, 2009, including $7 billion of debt to be paid by Ford.
• Although final payments were not required until 2022, Ford paid off all debt to the UAW VEBA in October 2010.