US:Ford retirees fight cuts
Ford retirees fight cuts
Group wants judge to block changes to health care benefits because automaker plans to invest in Mexico.
David Shepardson / Detroit News Washington Bureau
Health care cuts
Ford is awaiting final court approval of a plan to have hourly retirees pay more of their health care costs.
About the plan:
Maximum expense would be $370 annually for individuals and $752 for families.
Those who receive pensions of less than $8,000 will not have to pay the new fees.
Source: Detroit News research
WASHINGTON -- A group of Ford Motor Co. retirees who object to a plan to raise their health care costs have asked a federal judge to block the change because of reports that the automaker plans to make a major investment in Mexico.
"It's scandalous that Ford wants to take its retirees' health care money and build a factory in Mexico," said Mark Baumkel, a Bingham Farms attorney representing the retirees. "It's insulting to the whole state of Michigan. To whatever extent this deal had the smell of old spoiled fish, that smell is about 10 times worse when you learn about their plans for Mexico."
In a court filing June 30, Ford said any investment it makes in Mexico or elsewhere is irrelevant to the deal negotiated with the United Auto Workers to cut retiree health care costs as part of its financial turnaround. Ford also plans to cut 30,000 jobs and close 14 factories by 2008.
"Ford's investments in plants in Mexico and elsewhere does not diminish the public interest served by the settlement of this case," Ford said in the filing. "Ford is taking steps throughout the company to address its financial crisis."
Ford has acknowledged that it plans to upgrade three factories in Mexico, without putting a value on the projects, but said reports that it would invest as much as $9 billion there are inaccurate. That figure was included in a presentation leaked to the media last month that was prepared by Ford of Mexico chief Louise Goeser. At the time, sources familiar with the presentation and Ford's expansion plans told The Detroit News the document was essentially Goeser's "wish list" for Mexico operations and the plan was not approved by Ford.
"Ford has not made any decisions about building a new plant in Mexico," spokeswoman Marcey Evans said Thursday.
Under the proposed health care deal between Ford and the UAW, hourly retirees will pay no more than $370 a year for individuals and $752 per family. That figure could not rise more than 3 percent a year. Currently, Ford's hourly retirees do not pay any fees for health care coverage.
The agreement was ratified by the UAW in December, with 51 percent of active Ford members voting for it. Court approval is required because the UAW cannot negotiate on behalf of retirees.
Ford had hoped to get final court approval in time to execute the cuts by July 1. Ford has asked U.S. District Judge Paul Borman to approve the deal by July 14 to allow implementation by Aug. 1.
The deal is expected to translate into an annual pretax savings to Ford of $650 million, for cash savings of about $200 million annually. It also will reduce Ford's overall retirement obligations by $5 billion.
"It's not chump change," Evans said.
Evans said it's unclear if the delay in implementing the changes will affect the company's 2006 earnings, but that may be addressed when the company reports second-quarter results later this month.
Ford spent $3.5 billion last year to provide health care to 590,000 people, including employees, retirees and dependents. The automaker's health care costs have soared 67 percent since 2000 and the company spends $1,100 per vehicle on health care -- more than it spends on steel.
Baumkel was unsuccessful in representing General Motors Corp. retirees who had objected to a similar deal to reduce GM's health care costs that was approved in March.
In a sign of Borman's continuing review of Ford's case, he issued an order June 29 that allowed him to review a confidential financial document.
The document is an actuarial study of a trust set up to defray some retiree health care costs conducted for the UAW, Baumkel said. Because the document is confidential, he isn't at liberty to disclose its contents, he said.
Under the health care deal, Ford will contribute $108 million to the trust between now and 2012. Each current employee will contribute on average $2,000 annually. The trust will also receive 8.75 million shares of Ford stock.
By contrast, GM plans to contribute $3 billion to a similar trust over five years. To help reverse North American automotive losses that reached $1.6 billion last year, Ford is also trimming the benefits of salaried employees and retirees.
Retirees and beneficiaries who receive $8,000 or less in pension benefits -- about 32,000 out of 170,000 UAW retirees -- will not be required to pay any additional fees.
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....