The United Auto Workers and Ford Motor Co last week reached a new agreement on modifications to the payment requirements for a retiree health care trust fund, and the union is likely to use the agreement as a template for talks with General Motors Corp. and Chrysler.

Ford said the tentative agreement gives it the option to use stock for up to 50 per cent of its $13.2 billion obligation to fund the Voluntary Employee Beneficiary Association, or VEBA. The bargain essentially relieves the company of the cash requirement, but makes health care a far riskier proposition for retirees. The agreement must still be ratified by union members and win court approval.

"The modifications will protect jobs for UAW members by ensuring the long-term viability of the company," UAW President Ronald A Gettelfinger said in a statement.

While details of the agreement have not emerged, the proposal that half the retiree health funding could come in stock represents a significant concession from the union. The alternative, however, could have been worse, because if the companies go into bankruptcy, the retirees risk getting even less.

''We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value,'' Joe Hinrichs, Ford's group vice president, of global manufacturing and labor affairs said in a statement.

The agreement also requires Ford to pursue restructuring actions with other stakeholders. Ford has previously defined stakeholders to include bondholders, employees, suppliers and dealers.

The union and Ford previously announced a tentative agreement to modify other aspects of its 2007 labour contract, but Ford had said all agreements were contingent on reaching an agreement on how to fund the VEBA.

GM and Chrysler LLC have received $17.4 billion in government loans and are required by those loan agreements to ask the UAW to accept stock payments instead of cash payments to fund their VEBAs.

Ford, which has not applied for government loans, also asked the UAW to agree to modifications to fund the VEBA.

Ford owes $13.6 billion to the health-care trust. Although Ford is in a better position than GM and Chrysler, it just reported a $14.6-billion loss for 2008, the largest loss in the company's 105-year history.

Obama task force
The agreement was reached as the Obama administration's auto industry task force begins to grapple with the question of whether GM and Chrysler should be granted billions more in government loans. The group plans to meet with GM chief executive G Richard Wagoner Jr and chief operating officer Frederick A Henderson on Thursday.

Yesterday, the administration named private equity executive Steven Rattner, 56, to lead the panel. Rattner is a co-founder of the private equity firm Quadrangle Group, and brings business acumen to the auto industry task force. The group includes the secretaries of transportation, commerce, labour and energy, along with top officials from the president's council of economic advisers, the office of management and budget and the environmental protection agency.

Members of the presidential auto task force are exploring an array of funding options for the auto industry besides additional government loans. Officials said the ultimate approach remains unresolved.

One of the key issues for the automakers and the Obama administration is how to reduce the cost of negotiated wages and other benefits, which tend to be higher than those paid to American workers at plants owned by foreign carmakers. The massive size of the trust fund is considered one of the major competitive disadvantages of the U.S. industry.

GM has estimated that it owes $20 billion to the health trust and Chrysler $10 billion apart from Ford's $13.2 billion.