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UAW Deal Key For Ford & Big 3

Monday, 23 Feb 2009 | 11:50 AM ET
CNBC.com

With the UAW and Ford announcing they have agreed on a plan to re-work funding of union's Voluntary Employee Beneficiary Association (VEBA), it is an important step not only for Ford, but GM and Chrysler as well.

The UAW has agreed to take up to 50% of the remaining VEBA Payments from Ford in company stock instead of cash. This will slow down the cash drain at Ford and could potentially set up the UAW VEBA fund for a huge benefit, if shares of Ford ever rebound. Given the economy, the stock market, and the question about the viability of the Big 3, I realize there are no guarantees on Ford's stock rebounding. Still, this is a big move for the auto maker, the UAW, and potentially GM and Chrysler.

GM and Chrysler both need to re-work their VEBA agreements with the UAW. The Ford deal provides at least a template. The real question is whether 50% payment in stock will be enough for the Obama Auto Team and GM bondholders. Remember, those bondholders are worried about a debt exchange that leaves them with diluted shares. Some bond holders have expressed concern the UAW might get 50 cents on the dollar for what they are owed by GM, while debt holders may only be offered 30 or 35 cents on the dollar.

  • UAW, Ford Reach Deal Over Retiree Health Care
  • Treasury Considers Auto Funding Options

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  • Phil LeBeau is a CNBC auto and airline industry reporter based in the Chicago bureau and editor of the Behind the Wheel section on CNBC.com.

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