United Auto Workers will sell its 55% stake in the reorganized Chrysler as soon as possible to fund a trust that will cover retirees' health care costs, UAW President Ron Gettelfinger said Monday, the AP/Houston Chronicle reports.
Chrysler owes about $10.9 billion to the UAW-operated voluntary employees' beneficiary association, which will cover health benefits for about 82,000 retirees and their spouses, as well as future retirees. The trust will start paying out in 2010.
Gettelfinger expressed confidence in the fund but said that it "will be on life support initially." Dental and vision benefits for retirees already have been cut from the VEBA, and further cuts are possible, he said (Johnson, AP/Houston Chronicle, 5/4). The fund will start with $1.5 billion from an existing health care trust, and will receive about $300 million from Chrysler next year. Gettelfinger added that all money from the sale of the Chrysler stock will go to the VEBA (Bennett, Wall Street Journal, 5/5).
Although the Chrysler deal grants the VEBA a seat at the board of the new company, that position would carry very little influence because it must vote with a majority of independent directors, according to Gettelfinger. Gettelfinger said of the deal, "Of all of the alternatives that were out there in front of us, clearly this is head-and-shoulders above anything else." He also discounted criticisms from Chrysler's bondholders who said the agreement was unfair because it gave the union a better deal. He said that UAW is taking a large risk in using stock to fund the trust because the stock has little value. "Let's be honest, it's zero today. The equity is going to be stressed," Gettelfinger said, adding, "This isn't about finance, it's about people that expected health care benefits for life" (AP/Houston Chronicle, 5/4).
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