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UAW Trust Enjoys Rise in Ford Stock

March 30, 2010
2 min to read


A union-controlled trust to provide health care for retired auto workers is likely to be one of the largest beneficiaries of the surge in Ford Motor Co. shares, The Wall Street Journal reported. On Tuesday, the Retiree Medical Benefits Trust for retired United Auto Workers members will launch a one-day public auction to sell more than 362 million stock warrants. Each warrant is good for one share of Ford's common stock at $9.20 each. Ford won't receive any direct proceeds but the trust could net $1.5 billion, much more than expected last year when the stock traded below $2 a share. Ford shares were trading at $13.57 each at 4 p.m. Monday on the New York Stock Exchange. Separately, Ford said it will make a $3 billion payment on a revolving loan in April, helping reduce its overall debt to $31.3 billion. On Sunday, Ford signed an agreement to sell its money losing Volvo unit to Chinese car maker Zhejiang Geely Holding Group Company Ltd. for about $1.8 billion, well below Ford's original purchase price of $6.4 billion. The warrant sale, coupled with the Volvo purchase agreement and debt reduction, underscore the steps Ford is taking to improve its finances. Ford was the only major U.S. auto maker to forego government bailout and bankruptcy reorganization last year. Ford expects this week to post a strong double-digit increase in its March U.S. sales, the company disclosed in a Securities and Exchange Commission filing Monday. Some analysts believe the union-led decision to sell its stock options could be a sign that Ford's stock market performance has crested. But a person familiar with the auction told The Wall Street Journal there were other factors at play. The trust, run by the Voluntary Employee Beneficiary Association, or VEBA, had the right to sell the warrants anytime after Dec. 31, 2009. But the U.S. Department of Labor only last week approved the Ford warrants deal, essentially keeping a lid on any sale until now. In addition, this person said, the value of such warrants generally degrades over time, another factor which played into the VEBA's decision to sell.

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