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Trust cashing in Ford stake

Associated Press / March 30, 2010

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DETROIT — After watching Ford Motor Co. stock climb to a five-year high, a United Auto Workers trust fund is cashing in, selling the rights to an 11 percent ownership stake in Ford to raise at least $1.3 billion for retiree health care.

More than 200,000 Ford retirees depend on the trust fund for health care coverage. Some analysts say that even with the $1.3 billion, the union-run trust is in danger of running out of cash.

It began paying health care costs for retired factory workers and their spouses in January after the company transferred to it cash and other assets valued at $14.8 billion. The fund will auction one of those assets, warrants to buy 362 million shares, starting today. Warrants, like stock options, give the holder a right to buy shares.

Ford shares have grown more than 10 times in value as the company avoided bankruptcy protection and government aid, won accolades for its vehicle quality, and reported a full-year profit for 2009.

Shelly Lombard, at the New York bond research firm GimmeCredit, said the trust is wise to sell the warrants now.

“It just makes perfect financial sense to take some money off the table,’’ she said. “You never know what the market’s going to do.’’ She also notes one of Ford’s chief rivals, Toyota, is struggling.

Ford, General Motors Co., and Chrysler Group all set up retiree health care trusts as part of their 2007 labor negotiations.

Post-bankruptcy, GM’s UAW trust fund got a 17.5 percent stake in GM; Chrysler’s got a 55 percent stake in Chrysler. But those stakes have little value until the companies sell stock to the public again. GM’s trust covers 700,000 retirees and spouses, and Chrysler’s covers 120,000.