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Ford, Chrysler may not match GM's health care terms

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Ford Motor Co. and Chrysler LLC are negotiating with the United Auto Workers over the amount they would put into a retiree health care trust and may not contribute as much as General Motors Corp. did, two people briefed on the talks said Friday.

The issues is one of several differences that could derail the UAW's plans to get Ford and Chrysler to match GM's terms, the people said. The people requested anonymity because the negotiations are private.

GM and the UAW reached a tentative agreement last week after a two-day strike. The union's 74,000 GM workers now are voting on the contract, which must be ratified by a majority of members to take effect. Ford and Chrysler have indefinitely extended their contracts and are awaiting word from the UAW on which automaker will go next in the talks.

UAW spokesman Roger Kerson declined comment Friday.

Under the tentative contract, GM would put its retiree health care obligations into a trust to be managed by the UAW. The trust is known as a voluntary employees beneficiary association, or VEBA. GM has approximately $51 billion in retiree debt but isn't required to put the entire amount into the VEBA

Under the contract, GM would put $24.1 billion into the VEBA in January 2008 and pay an additional $5.4 billion to cover retirees' health care costs until the VEBA takes over in 2010. GM also would contribute a $4.37 billion note convertible to GM stock and would make a maximum of $1.6 billion in payments to the VEBA anytime the fund's level is insufficient to provide benefits for at least 25 years.

The people briefed on the talks said GM's formula might have to be changed to meet Ford's and Chrysler's needs. The VEBA benefits GM more than Ford and Chrysler because GM has the most retirees and surviving spouses, at nearly 340,000. Ford has 124,000 and Chrysler has 78,000, according to the UAW.

GM also has an older work force with more employees on the verge of retirement. According to the UAW, 63.5 per cent of GM workers will be eligible to retire in five years, compared to a third of the work forces at both Ford and Chrysler.

But the VEBA isn't the only area in which the sides differ. Chrysler is seeking health care concessions that the UAW has already granted to Ford and GM, while industry analysts say it is imperative for Ford to close more factories and further reduce its work force.

Ford and Chrysler also may not want to match the job security promises made by GM, which promised new products for 16 U.S. plants in its agreement. Under a restructuring plan announced last year, Ford said it would close 16 facilities by 2012, and the company has only identified 10 of those facilities so far.

Ford spokeswomen Marcey Evans and Chrysler spokeswoman Michele Tinson would not comment on the contract talks.

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Ford, Chrysler may not match GM's health care terms
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