UAW Fund: $45 Billion For Investing

"... a newly independent fund born out of the remaking of the Detroit auto business three years ago is busy figuring out where to place its roughly $45 billion in assets. That doesn't include ownership stakes in two of the three U.S. auto makers. The new pool is sure to tantalize money managers across the country, some of which, like BlackRock Inc., have already gotten business from the fund, called the UAW Retiree Medical Benefits Trust. The trust has put out requests for proposals to manage parts of its global stocks and fixed-income portfolios.

In contrast, Calpers had assets of $193 billion as of 9 June 2010.

Known as a VEBA, for voluntary employee beneficiary association, in January the trust became one of the world's largest such funds after accepting large stakes in General Motors Co., Ford Motor Co. and Chrysler Group LLC as part of a cost-cutting deal with the auto makers. The VEBA relieves the car companies of responsibility of lifelong health-care benefits for 800,000 retired auto workers and their spouses.

The fund trust still owns 68% of Chrysler common stock and 17.5% of GM common stock plus warrants for an additional 2.5%. Because of its holdings, the VEBA has a seat on each company's board, giving the union a voice in the running of the companies through the trust.


To create the UAW VEBA, GM transferred $23.6 billion while Ford contributed $15 billion and Chrysler handed over $6.8 billion. Those payments are in addition to the common stock and warrants awarded at each of the car companies to the trust.

In his retirement speech at Cobo Hall in downtown Detroit on Monday, UAW President Ron Gettelfinger credited the creation of the VEBA with helping the auto makers survive the sharp downturn in auto sales in 2008 and emerge from the bankruptcies at Chrysler and GM last year.

He said that the union was able to preserve most of the health-care benefits for retirees, concluding that "this was unprecedented" during a time of bankruptcy reorganization.

Mr. Henry declined to say whether the current level of benefits could be sustained in the decades to come.

"The UAW Retiree Medical Benefits Trust has sufficient assets to provide medical benefits to all covered retirees for the foreseeable future," Mr. Henry wrote in the email exchange. "Our operation commenced just over five months ago and we are still gathering data on our short history of benefit payments."