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Ford pledges salaried bonuses, union retiree fund to cash in from stock rights

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Ford pledges salaried bonuses, union retiree fund to cash in from stock rights

UAW's VEBA may raise $1.27 billion



Ford's 21,300 salaried employees received assurances they would receive bonuses for 2010 if Ford meets certain targets, according to a copy of an e-mail sent to workers and obtained by the Free Press.

The news comes after Ford's salaried workers learned earlier this month that their previously promised merit pay increases would average about 3% this year.

The new bonus plan puts all of Ford's salaried employees in the U.S. and Canada under the same incentive plan as upper management, said Ford spokesman Marcey Evans.

"This plan is designed to pay out if the objectives are met for the full year," she said.

The amount of the bonus under the new incentive plan depends on meeting companywide and individual objectives.

Ford's salaried workers last received a bonus for 2007, ranging from several thousand dollars to $15,000 or more.

The potential for 2010 bonuses, which would be paid out next year, illustrates how far Ford has come since it posted a record loss of $14.6 billion in 2008. Other signs of progress were evident Monday:

• Ford said it would pay $3 billion of its $34.5 billion in debt.

• The UAW's health care trust fund said it would sell 362 million warrants, which give the owner the option to buy Ford shares at $9.20 a piece. Ford stock closed Monday at $13.57 per share.

The sale by the UAW's Voluntary Employees Beneficiary Association, or VEBA, is to begin at 8 a.m. today and is to conclude by the end of the day .

It's designed to capitalize on the meteoric rise of Ford's stock price. In November 2008, the shares were trading at $1.26 each.

On Monday, Ford's stock closed at $13.57 per share.

"For a whole host of reasons, we think it is now an appropriate time to conduct a sale" of the warrants, Samuel Halpern, president of Independent Fiduciary Services in Washington, D.C., said Monday.

Halpern, whose investment advisory firm is advising the UAW's retiree trust, said the goal of the auction is to diversify the UAW trust fund's holdings.

The trust set a minimum price for each warrant at $3.50.

Each warrant gives the buyer the right to purchase a share of Ford stock at $9.20.

If all the warrants were purchased at the minimum price, the trust would receive $1.27 billion.

However, the warrants could fetch an even higher price if the buyers believe Ford stock could soar higher.

During 2007 contract talks, the UAW agreed to manage the future health care costs of Ford's retirees. The move allowed Ford to remove billions of liabilities off its balance sheet.

However, Ford renegotiated the payment terms with the union last year because of financial strains. That allowed Ford to pay the union with stock warrants rather than cash.

Ford transferred the warrants to the trust on Dec. 31. Ford will not receive any of the proceeds from the sale, and the automaker still owes about $7 billion to the VEBA.

Ford, the only domestic automaker to avoid bankruptcy last year, earned a profit of $2.7 billion in 2009, as the turnaround plan overseen by President and CEO Alan Mulally has begun to show results.

Ford has gained market share in the U.S. and Europe. On Sunday, it announced a deal to sell Volvo for $1.8 billion. On Monday, Ford said it can afford to pay off $3 billion of its debt.

"Ford stock and the stock market in general have been on a tear, so despite the fact that Ford's near-term prospects look good, it makes sense for the UAW to take some profits off the table," Gimme Credit analyst Shelly Lombard said Monday.



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