2012 statement of VEBA includes $3 billion in unfunded obligations

Article by Anita Panait, on October 24, 2013

VEBA, a United Auto Workers union retiree health-care trust, is still facing $3 billion in unfunded obligations, according to its amended 2012 financial statement. Unfunded obligations for the year earlier were over $5 billion. VEBA’s amended statement shows that its benefit obligations dropped by $414.9 million to $13.4 billion during 2012.

The net value of the trust’s assets surged to $10.3 billion, boosted primarily by an increase in the estimated value of its 41.5-percent holdings in Chrysler Group LLC. Italian carmaker Fiat S.p.A. owns the remaining 58.5 percent. The shortfall means that VEBA has to maximize the value of its stake in Chrysler to cover the projected cost of retirees’ health care. The trust, however, cannot agree with Fiat-Chrysler CEO over the price of its stake, moving VEBA to compel him to file in September for a Chrysler initial public offering.

Marchionne has been attempting to merge Fiat and Chrysler to create a global carmaker large enough to compete against major players like Toyota, General Motors and Volkswagen. The process of setting a value in the public offering may help break the stalemate between VEBA and Fiat, but the Italian carmaker has already warned that an IPO may deteriorate its relationship with Chrysler.

Over a third of the value of VEBA’s assets is in Chrysler stock, according to the amended statement. VEBA provided health-care coverage for 61,214 people at the end of 2012, compared with 63,171 a year earlier. VEBA gained stake in Chrysler holding as part of the carmaker’s 2009 government-financed bankruptcy that handed control of the carmaker to Fiat.

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