Ford 2009 Annual Report Download - page 120

Notes to the Financial Statements
118 Ford Motor Company | 2009 Annual Report
NOTE 18. RETIREMENT BENEFITS (Continued)
We measured the fair value of the warrants issued to the UAW VEBA Trust using a Black-Scholes model and an
American Options Model (Binomial). Inputs to the fair value measurement included an exercise price of $9.20 per share,
and a market price of $10 per share (the closing sale price of Ford Common Stock on December 31, 2009). The fair
value of the warrants reflects a risk-free rate based on a three-year U.S. Treasury debt instrument and a 40% volatility
assumption which was derived from a historical volatility analysis and present market (implied) volatility assumptions
commensurate with the exercise term of the warrants, and adjusted for transfer and registration restrictions of the
underlying shares.
We independently validated several of our assumptions by obtaining non-binding quotes regarding volatility,
prepayment features, and yields from several financial institutions and published analysts' reports regarding the market
outlook for Ford.
The UAW Benefit Trust
In 2005, we entered into an agreement with the UAW ("2005 Agreement") and a class of employees and retirees to
increase retiree health care cost sharing under the H-S-M-D-D-V Program as part of our overall cost reduction efforts.
The 2005 Agreement established an independent Defined Contribution Retiree Health Benefit Trust ("UAW Benefit Trust")
which served as a non-Ford sponsored VEBA. The UAW Benefit Trust was used to mitigate the increased cost sharing
for the Benefit Group and was accounted for as a separate plan from the H-S-M-D-D-V Program.
Pursuant to the Settlement Agreement, we made a third contribution of $43 million to the UAW Benefit Trust on
January 1, 2009. The terms of the 2005 Agreement were superseded by the terms of the Amended Settlement
Agreement and the UAW Benefit Trust was terminated on January 4, 2010.
Benefit Plans – Expense and Status
The measurement date for all of our worldwide postretirement benefit plans is December 31. Our expense for defined
benefit pension and OPEB plans was as follows (in millions):
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