Ford 2009 Annual Report Download - page 118

Notes to the Financial Statements
116 Ford Motor Company | 2009 Annual Report
NOTE 18. RETIREMENT BENEFITS (Continued)
OPEB. We, and certain of our subsidiaries, sponsor plans to provide OPEB for retired employees, primarily certain
health care and life insurance benefits. During 2009, the Ford UAW Hospital-Surgical-Medical-Drug-Dental-Vision
Program ("H-S-M-D-D-V Program") covered hourly employees represented by the UAW and hired before
November 19, 2007. UAW-represented individuals hired after November 19, 2007 are eligible to participate in a separate
health care plan that provides defined contributions made by Ford to individual participant accounts.
The Ford Salaried Health Care Plan covers substantially all other Ford employees in the United States hired before
June 1, 2001. U.S. salaried employees hired on or after June 1, 2001 are covered by a separate plan that provides for
annual company allocations to employee-specific notional accounts to be used to fund postretirement health care
benefits. We also provide company-paid postretirement life insurance benefits to U.S. salaried employees hired before
January 1, 2004 and all U.S. hourly employees. Our employees may become eligible for benefits when they retire;
however, benefits and eligibility rules may be modified from time to time.
Effective August 1, 2008, the Company-paid retiree basic life insurance benefits were capped at $25,000 for eligible
existing and future salaried retirees. Salaried employees hired on or after January 1, 2004 are not eligible for retiree basic
life insurance. Our obligation decreased by about $850 million and ongoing expense was reduced by about $125 million
annually beginning in 2009 as a result of this benefit change.
Settlement of UAW Retiree Health Care Obligation
On July 23, 2009, we entered into an amendment to the 2008 UAW Retiree Health Care Settlement Agreement (the
"Settlement Agreement"). The Settlement Agreement established a new VEBA trust (the "UAW VEBA Trust") that on
December 31, 2009 would assume the obligation to provide retiree health care benefits to eligible active and retired UAW
Ford hourly employees and their eligible spouses, surviving spouses and dependents (the "Benefit Group"). The
amendment to the Settlement Agreement (the "Amended Settlement Agreement") described below was approved by the
U.S. District Court for the Eastern District of Michigan on November 9, 2009. The Amended Settlement Agreement
provides for smoothing of payment obligations and provides us the option to use Ford Common Stock to satisfy up to
approximately 50% of our future payment obligations to the UAW VEBA Trust.
Pursuant to the Amended Settlement Agreement, on December 31, 2009, we fully settled our UAW postretirement
health care obligation, irrevocably transferring our obligation to provide retiree health care for the Benefit Group to the
UAW VEBA Trust in exchange for the transfer of certain assets. The trustees of the UAW VEBA Trust have established a
new retiree health care plan (the "New Plan") for the Benefit Group that will be responsible for administering these
benefits, and the New Plan will be a closed plan.
On December 31, 2009, pursuant to the Amended Settlement Agreement we transferred to the UAW VEBA Trust the
following assets and thereby fully discharged any obligation we had to provide retiree health care benefits to the Benefit
Group:
• A non-interest bearing Amortizing Guaranteed Secured Note maturing June 30, 2022 with a par value of
$6.7 billion ("New Note A"). The fair value of New Note A at December 31, 2009 was $3.1 billion after a
scheduled payment of $1.3 billion, a partial prepayment of $500 million, and payment of a true-up amount of
$150 million were made on December 31, 2009;
• A non-interest bearing Amortizing Guaranteed Secured Note maturing June 30, 2022 with a par value of
$6.5 billion ("New Note B"). The fair value of New Note B at December 31, 2009 was $3.9 billion after a
scheduled payment of $610 million was made on December 31, 2009;
• Warrants that expire on January 1, 2013 to purchase 362,391,305 shares of Ford Common Stock at an
exercise price of $9.20 per share. The fair value of the warrants at December 31, 2009 was $1.2 billion;
• Assets of the H-S-M-D-D-V program ("Plan Assets") consisting of cash and marketable securities. The fair
value of the Plan Assets at December 31, 2009 was $3.5 billion; and
• Assets in the Temporary Asset Account ("TAA") consisting of cash and marketable securities. The fair value
of these assets at December 31, 2009 was $619 million.