form8k.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date
of
Report: November 15, 2007
(Date
of
earliest event reported)
FORD
MOTOR COMPANY
(Exact
name of registrant as specified in its charter)
Delaware
(State
or
other jurisdiction of incorporation)
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1-3950
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38-0549190
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(Commission
File Number)
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(IRS
Employer Identification No.)
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One
American Road, Dearborn, Michigan
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48126
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area code 313-322-3000
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
140.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17
CFR 240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange
Act (17
CFR 240.13e-4(c))
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Item
1.01. Entry into A Material Definitive Agreement.
On
November 3, 2007, Ford Motor Company (“Ford”) and the International Union,
United Automobile, Aerospace and Agricultural Workers of America (the “UAW”)
entered into a Memorandum of Understanding – Post-Retirement Medical Care (the
“MOU”) and a new national collective bargaining agreement governing the wages,
hours and terms and conditions of employment for UAW-represented employees
(the
“National Agreement”). On November 14, 2007, the UAW announced that
the MOU and the National Agreement had been ratified by the UAW membership
employed at Ford. The MOU is subject to a number of conditions as
described below. A copy of the MOU is attached to this Form 8-K as
Exhibit 10, and the following description of the MOU is qualified in its
entirety by reference to the MOU.
The
MOU
is subject to the occurrence of several uncertain events in pending litigation,
including class certification, settlement, and court approval as described
below. On November 9, 2007, the UAW and certain Ford retirees filed
suit against Ford in the United States District Court for the Eastern District
of Michigan challenging Ford’s announced intention to unilaterally alter retiree
health benefits and asserting that they have vested rights to such
benefits. UAW v. Ford, Civil Action No. 2:07-cv-14845 (E.D.
Mich.) (Borman, J.) (“Hardwick II”). The parties to the MOU
intend to negotiate and, if possible, to enter into a detailed settlement
agreement and other related agreements (the “Final Settlement Agreement
Documentation”) to effect the transactions contemplated by the
MOU. The Final Settlement Agreement Documentation will require
negotiation with, and the approval of counsel retained by, the individual named
plaintiffs in Hardwick II and in earlier related litigation, UAW v.
Ford, Civil Action No. 05-74730 (E.D. Mich.) (Borman, J.)
(approving 2006 settlement), aff’d, 497 F.3d 615 (6th Cir. 2007)
("Hardwick I"). In the event a settlement is reached in
Hardwick II, it would then be submitted to the United States District
Court for the Eastern District of Michigan for approval as an amendment to
the
class settlement approved by the Court in Hardwick I (the “2006
Settlement Agreement”). Certain provisions of the MOU will be carried
out after the later of (i) the date the District Court issues an order approving
the MOU and the Final Settlement Agreement Documentation and (ii) the date
on
which Ford has successfully completed its discussions with the Securities and
Exchange Commission ("SEC") regarding accounting treatment with respect to
the
New VEBA, as defined below (the “Effective Date”). All remaining
provisions of the MOU and the Final Settlement Agreement Documentation will
be
carried out on the later of the date when all appeals from the District Court’s
order have been exhausted (the “Appeal Completion Date”) and January 1,
2010 (the “Implementation Date”).
New
Retiree Health Care Plan
The
MOU
provides that as of the Implementation Date, Ford's obligations for providing
UAW retirees in the “Covered Group” with post-retirement medical benefits,
including but not limited to hospital, surgical, medical, prescription drug,
vision, dental, and hearing aid, as well as the cost of administering such
benefits and $76.20 of the Medicare Part B premium (the “Retiree Medical
Benefits”), shall be terminated and a new retiree health care plan (the “New
Plan”) shall be established and maintained by either an independent committee or
a joint labor-management committee and shall be funded by a newly established
Voluntary Employee Beneficiary Association trust (the “New VEBA”), which shall
be responsible for payment of all such Retiree Medical Benefits. The
“Covered Group” is comprised of: (a) all members of the class defined in
the 2006 Settlement Agreement; (b) all future retirees as such term is
defined in the 2006 Settlement Agreement who are retired as of the date the
2007
UAW-Ford National Agreement becomes effective (the "CBA Effective Date");
(c) all currently active UAW-represented employees of Ford with seniority
as of the CBA Effective Date who retire with eligibility for post-retirement
medical coverage; (d) all UAW retirees from any other closed or divested
Ford-UAW business units as of the date of the MOU to the extent Ford is
responsible for their retiree medical coverage; (e) upon retirement after
the date of the MOU, all active UAW-represented employees of any other closed
or
divested Ford-UAW business if Ford would have responsibility for their retiree
medical coverage; and (f) spouses, surviving spouses, and dependents of such
current or former Ford-UAW employees who are eligible for Ford-provided retiree
medical coverage.
Prior
to
the Implementation Date, Ford will continue to provide Retiree Medical Benefits
to UAW retirees and their eligible spouses, surviving spouses and dependents
on
the basis set forth in the 2006 Settlement Agreement. Also
prior to the Implementation Date, Ford will take certain actions on (i) January
1, 2008 (as described below in subsections A, C and D), (ii) April 1, 2008
(as
described in subsection E) and (iii) shortly after the Effective Date (as
described in Section B) to execute the terms of the MOU. The New Plan
and the New VEBA, when approved and implemented, will supersede the terms set
forth in the 2006 Settlement Agreement, and assume responsibility as of the
Implementation Date for all Retiree Medical Benefits for the Covered Group
for
which Ford was previously responsible.
New
VEBA Trust
The
New
VEBA will be established effective on the Implementation Date. The
New VEBA will be qualified under Section 501(c)(9) of the Internal Revenue
Code, as amended, and comply as applicable with the Labor-Management Relations
Act of 1947 (the “LMRA”). Funding for the New VEBA will begin within
10 days after the Implementation Date, and will come from a number of
sources:
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A.
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Existing
Internal VEBA. Effective January 1, 2008 all assets in the
Ford-UAW Benefits Trust (the "Internal VEBA") shall be invested by
Ford in
a manner consistent with the long-term nature of the health care
liabilities and, subject to the termination of the MOU, Ford will
not
disburse any assets from the Internal VEBA until the Implementation
Date.
On the Implementation Date, Ford will then transfer the assets in
the
Internal VEBA or an amount equal to the balance in that account to
the New
VEBA.
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B.
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Existing
External VEBA. The assets and liabilities of the DC VEBA established
for mitigation purposes under the 2006 Settlement Agreement (the
“External
VEBA”) will be transferred to the New VEBA after the transfer of
assets of the Internal VEBA. In the meantime, Ford will make
the remaining $35 million and $43 million contributions under the
2006 Settlement Agreement in 2008 and 2009, respectively, and a $33
million contribution within five days of the Effective Date to satisfy
a
contribution obligation based on an increase in value of Ford common
stock
under the 2006 Settlement Agreement, to the External
VEBA.
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C.
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Temporary
Asset Account– Cash. On January 1, 2008, Ford or a
wholly-owned subsidiary of Ford will establish a temporary asset
account
(the “TAA”) and Ford will deposit or contribute a contingent cash payment
equal to the difference between $6.473 billion and the value of the
Internal VEBA on January 1, 2008 plus interest on the amount of the
contingent cash payment at the rate of 9% for the period from
January 1, 2008 to the date of
deposit.
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Ford
will transfer the assets in the TAA related to these deposits or
an amount
equal to the balance in the TAA related to these deposits to the
New VEBA
after the transfer of the assets and liabilities of the External
VEBA.
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D.
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Temporary
Asset Account– Convertible Note and Second Lien Term
Note. On January 1, 2008, Ford will issue into the TAA
an unsecured, convertible note and a second lien term note as described
below.
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The
unsecured convertible note will have a principal amount of $3.334 billion,
bear
interest at 5.75% per annum payable semiannually and mature on January 1,
2013
(the “Convertible Note”). Ford may redeem the Convertible Note at any
time beginning three years after issuance. The Convertible Note may,
at the option of the holder, be converted at any time into 362,391,304
shares
of
Ford common stock (the “Converted Stock”), however, the Converted Stock may not
be sold or otherwise transferred except under one of the following
circumstances: (1) if Ford provides notice that it is redeeming the
Convertible Note; (2) within three months before the maturity date; or
(3) if, in any quarter, the closing market price of Ford common stock is at
least $11.04 for at least 20 trading days of the last 30 trading days in
the
preceding calendar quarter. In addition, the Final Settlement
Agreement Documentation will include a lock-up restriction providing that
the
Convertible Note and/or the Converted Stock may not be sold or hedged before
the
Implementation Date without Ford's prior written consent (which consent shall
not be unreasonably withheld). After the Implementation Date, the
Convertible Note or the Converted Stock may be sold subject to the restriction
on the sale of the underlying Ford common stock described above and certain
other volume restrictions. Subject to the lock-up provision described
above, at any time after District Court approval of the terms of the MOU,
the
UAW may cause Ford to register the Convertible Notes for a public offering
no
more than once per year and to participate in public offerings of securities
by
Ford, under certain circumstances. In addition, subject to the
lock-up provision, (i) at any time after District Court approval of the terms
of
the MOU, the UAW may cause Ford to privately place the Convertible Note on
terms
acceptable to the UAW, and (ii) after the Implementation Date, the New VEBA
may
privately place the Convertible Note, in each case subject to volume limitations
of a principal amount of the Convertible Note equivalent to 100 million shares
per quarter and 200 million shares per year. In addition, in private
transactions the New VEBA may not sell (1) a block of Converted Stock that
would be more than 2% of the outstanding shares of Ford common stock to a
single
buyer, or (2) any Converted Stock to a holder of more than 5% of the
outstanding shares of Ford common stock that has intention to influence Ford’s
directors or management. The trustee of the New VEBA will vote
Converted Stock held in the New VEBA in the same proportion as the votes
cast by
all other stockholders in a given election. The Trustee may sell the
Convertible Note or the Converted Stock to a tender offeror only if the tender
offer has been recommended by an independent committee of the Ford Board
of
Directors. After the cash and other investments in the TAA have been
transferred to the New VEBA, the Convertible Note (or another convertible
note
with identical terms other than the date of issuance) will be transferred
to the
New VEBA, as permitted by law governing contributions of employer securities
to
a benefit plan and a VEBA.
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The
second lien term note will have the principal amount of $3 billion,
bear
interest at 9.50% per annum payable semiannually and mature on January
1,
2018 (the "Second Lien Term Note"). Fifty percent of the
principal amount of the Second Lien Term Note shall be payable on
each of
January 1, 2017 and January 1, 2018. The Second Lien Term Note
will be pre-payable by Ford at par value at any time without
penalty. The Second Lien Term Note shall be transferable
in whole or in part at any time after such note has been contributed
to
the New VEBA, subject to available exemption from the registration
requirements under the federal securities laws. No registration
rights will be granted with respect to the Second Lien Term
Note. Ford will designate the Second Lien Term Note as Second
Priority Additional Debt in accordance with and subject to the
terms of the Credit Agreement dated as December 15, 2006, among Ford,
the
Lenders parties thereto and JPMorgan Chase Bank, N.A., as Administrative
Agent (the "Credit Agreement"), and the Loan Documents (as defined
in the
Credit Agreement). As such, payment of the principal of and
interest and any premium on the Second Lien Term Note will be (i)
secured
on a second lien basis with the Collateral pledged by Ford and its
Subsidiary Guarantors to the Lenders under the Credit Agreement and
Loan
Documents and (ii) guaranteed by the Subsidiary Guarantors under
the
Credit Agreement. Holders of the Second Lien Term Note will be
subject to, among other things, the intercreditor provisions of the
Collateral Trust Agreement relating to the Credit
Agreement.
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E.
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Base
Amount Contributions. On April 1, 2008, Ford will make an initial
contribution of $52.3 million to the TAA. Thereafter, for
each of the fourteen succeeding years, Ford will contribute to the
New
VEBA (or to the TAA for periods prior to the Implementation Date)
by April
1 of each year $52.3 million (a “Base Amount
Contribution”). At any time, Ford may pre-fund all future
annual Base Amount Contributions by paying the applicable buyout
amount
provided in Appendix A of the MOU. Ford will transfer the
assets in the TAA related to the initial $52.3 million deposit and
additional Base Amount Contributions deposited in the TAA or an amount
equal to the balance in the TAA related to such deposit and Base
Amount
Contributions to the New VEBA in conjunction with the transfer to
the New
VEBA described above in subsection C, “Temporary Asset
Account-Cash”.
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In
the
MOU, the UAW and Ford acknowledged that Ford’s obligations are fixed and capped
and that Ford is not responsible for, and does not provide a guarantee
of the asset returns of the funds in the TAA or the New VEBA. In
the event the assets of the New VEBA are not sufficient to fully fund the
obligations of the New Plan, the committee responsible for the management and
operation of the New VEBA and New Plan may reduce benefits to plan
participants.
Health
Care Reform
The
MOU
provides that Ford will publicly support federal policies to improve the quality
and affordability of health care, and will work cooperatively with the UAW
toward that goal. Ford and the UAW have agreed to form a National
Institute for Health Care Reform to be effective on or after the Effective
Date,
which would conduct research and analyze the current medical delivery system
in
the United States, develop targeted and broad-based reform proposals to improve
the quality, affordability, and accountability of the system and educate the
public, policymakers and others about how these reforms could address the
deficiencies of the current system. Subject to the participation of
other U.S. vehicle manufacturers and their financial support on a pro rata
basis, Ford agreed to make five annual $1.0 million contributions for this
purpose.
Future
Contributions
The
MOU
provides that the UAW and the Covered Group may not negotiate to increase any
of
Ford’s funding obligations under the MOU. In addition, the UAW
agreed that it will not seek to obligate Ford to (1) provide additional
contributions to the New VEBA, (2) make any other payments related to
providing retiree medical benefits to the Covered Group, and (3) provide
retiree medical benefits through any other means to the Covered
Group. Employees may in the future contribute earnings that
they received from wages, profit sharing, COLA or signing bonuses, to the extent
that the UAW may propose.
Accounting
Treatment
The
MOU,
the Final Settlement Agreement Documentation, and the Effective Date are
contingent on Ford securing satisfactory accounting treatment for its
obligations to the Covered Group for retiree medical benefits. Ford
intends to discuss the accounting for such obligations and for the New VEBA
with
the Staff of the SEC, and if Ford believes based on such discussions that
accounting for the transactions contemplated by the MOU may be other than
(1) a settlement as contemplated by SFAS No. 106 – “Employers’
Accounting for Postretirement Benefits other than Pensions,” as amended, or
(2) a substantive negative plan amendment that would be reasonably
satisfactory to Ford, then the UAW and Ford will attempt to restructure the
arrangement to achieve such accounting. If the parties cannot
restructure the arrangement on terms that Ford reasonably believes will provide
such accounting, the MOU will terminate.
Conditions
Precedent
The
MOU
is subject, in its entirety, to obtaining a class certification order in a
form
acceptable in form and substance to Ford, the UAW and class counsel; obtaining
District Court approval in a form acceptable in form and substance to Ford,
the
UAW and class counsel; amendment of the 2006 Settlement Agreement pursuant
to
the MOU on terms acceptable in form and substance to Ford, the UAW and class
counsel; Ford’s completion of discussions with the Staff of the SEC regarding
accounting treatment with respect to the New VEBA and the Retiree Medical
Benefits for the Covered Group as set forth in the MOU, on a basis reasonably
satisfactory to Ford; if applicable, a determination by Ford that the New VEBA
satisfies the requirements of Section 302(c)(5) of the LMRA; and the occurrence
of the Effective Date.
Termination
The
MOU
will terminate if: (i) the Implementation Date has not occurred by
December 31, 2011 and Ford and the UAW do not agree to an extension of time
to reach the Implementation Date; or (ii) the conditions precedent set
forth in the MOU are not met by December 31, 2011 and Ford and the UAW do
not agree to an extension of time to meet the conditions precedent.
On
November 15, 2007, Ford conducted a conference call with members of the
investment community and news media relating to the National Agreement,
including the MOU. A copy of the presentation is attached to this
Form 8-K as Exhibit 99. Audio replays of the presentation are
available through Friday, November 23, 2007 by dialing toll free
(888) 286-8010 or by dialing (617) 801-6888 internationally. The
passcode for replays is 14302902.
ITEM
9.01 Financial Statements and Exhibits.
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Memorandum
of Understanding Post-Retirement Medical Care
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Investor
Presentation made on November 15,
2007
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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FORD
MOTOR COMPANY
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(Registrant)
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Date:
November 15, 2007
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By:
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/s/Peter
J. Sherry, Jr.
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Peter
J. Sherry, Jr.
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Corporate
Secretary
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EXHIBIT
INDEX
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Exhibit
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Description
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Memorandum
of Understanding Post-Retirement Medical Care
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Investor
Presentation made on November 15,
2007
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