Federal judge approves Ford health care trust plan
DETROIT (Reuters) - Ford Motor Co may shift billions of dollars of health care obligations for retired hourly workers to a trust fund overseen by the United Auto Workers union in 2010, a federal judge ruled on Friday.
The creation of a Voluntary Employee Beneficiary Association fund, or VEBA, for UAW workers was a centerpiece of a labor contract reached last year between Ford and the union that is intended to help restore Ford's profitability.
The agreement, which will result in the transfer of about $23 billion of health care obligations, was approved by a U.S. District Court judge in Detroit. General Motors Corp and Chrysler LLC reached similar agreements with the UAW.
Ford, which posted an $8.7 billion net loss in the second quarter, has announced plans to restructure its North American manufacturing base to focus more on small fuel efficient vehicles and less on large trucks and SUVs.
"The court is well aware that there are real risks to the class associated with the settlement that it finally approves today," Judge Robert Cleland wrote in a decision approving a class action settlement required to establish the VEBA.
"However, like the parties, the court has evaluated these risks in light of the even greater risks of not settling this dispute," Cleland wrote.
Cleland said Ford's health care obligations had forced the automaker to divert resources from business operations and eroded investor confidence at a point where it needed to make critical investments.
"We are pleased the U.S. District Court today approved the Ford VEBA Trust, which is an important step in improving our competitiveness and is key to our ongoing transformation," Ford said in a statement.
The trust fund is expected to cover about 200,000 UAW-represented Ford retirees and their surviving spouses in the United States, the company said.
At the time it was agreed to, Ford said it expected to save about $2 billion annually in health care expenses from the deal and roughly $13.2 billion of funding for the trust would come from cash, convertible and secured notes and an existing fund.
(Reporting by David Bailey, editing by Richard Chang)
