UAW To Sell Its Ford (NYSE: F) Stock Warrants

The United Auto Workers Union announced it will sell all the stock warrants it owns for Ford Motor Co. in an effort to raise cash for the union’s retiree healthcare trust.  The UAW is hoping to raise $1.3 billion from the sale of 362 million stock warrants.

The union said the trust will auction begin auctioning off the shares on Tuesday, with a minimum price per warrant set at $3.50.  The warrant gives the owner the right to purchase Ford stock at $9.20 a share.  Shares of Ford are trading at $13.46 on Monday.

The retiree healthcare trust was created by the UAW and Ford in late 2007 when the automaker was dealing with financial issues.  The creation of a trust allowed Ford to remove the costs of retiree healthcare from its books, a move that proved to be even more fortuitous following the healthcare reform recently passed by Congress.

That piece of legislation has caused several big corporate names, such as AT&T, to announce they will take charges up to $1 billion in the current quarter in order to accommodate tax changes on how Medicaid costs are expensed.  The expenses are mainly related to benefits for retirees.

Ford said the creation of the trust saves about $500 million a year.  The UAW’s retiree healthcare trust covers costs on about 200,000 retirees and their spouses.

Despite the cost savings, Ford has a massive debt load, owing $32 billion overall.  The company basically put up all its assets as collateral in 2007 to secure a $23.4 billion credit line when it kicked off its restructuring effort.