Ron Gettlefinger, UAW president, is fighting to maintain health care.

The United Auto Workers union is moving to ratify its tentative agreement with the Ford Motor Company, which could save the auto maker as much as $1.6 billion in payments this year. The Ford workers will be the first to vote on a new round of contract concessions that could place a huge — and potentially controlling — block of shares in the hands of the union. This could establish a pattern at Chrysler and General Motors, both of which are attempting to limit cash payments to the fund that will be managed by the union to pay for health care.

“The UAW Ford National Council voted unanimously to recommend to the membership for ratification of proposed modifications to the 2007 UAW-Ford National Agreement,” the union says in a statement.  Under the 2007 contract Ford was to pay the union more than $13.2 billion to remove health care liabilities from its balance sheet. This year’s payment was supposed to be $3.2 billion.

The Council met in Detroit last week to discuss the stock swap that arose from an understanding reached with Ford earlier in February. Ratification votes on the contract changes must be finished by March 9. While Ford has not asked for government aid, it has used the deep recession in the industry to seek concessions from the union and is seeking government support for suppliers.

Joe Hinrichs, group vice president, Global Manufacturing and Labor Affairs, Ford Motor Company, says the tentative agreement gives Ford “the option” of using Ford common stock for up to 50% of the payments into the Voluntary Employee Beneficiary Association (VEBA) in lieu of cash for each payment.

However, at current stock prices, the roughly $1.6 billion worth of common stock would place a huge piece of Ford — roughly 25% at current prices — in the hands of the independent VEBA board. The board was created in 2005 to finance and administer the health care of Ford’s blue collar work force. Ford’s market capitalization is roughly $4.8 billion, and it has more than 2.3 billion outstanding shares. The Ford family currently controls the company through “Class B” shares that give it voting rights far in excess of the small quantity of stock actually held.

Of the 11 members of the VEBA board, union officials confirm that five are appointed by the United Auto Workers. The other six trustees are supposed to be “independent,” though their nomination is clearly subject to union review.

The VEBA board, however, is not exactly a model of transparency, according to Steve Diamond a professor of law at the University of Santa Clara, California, who filed a complaint with the Securities Exchange Commission in 2007, charging the union and auto makers had not fully disclosed critical information about the VEBAs. Diamond says he’s not even sure the union has the right to negotiate with Ford over the VEBA fund. “Where are the trustees,” he says. “They are the only ones that should have a say over the cash flow into the fund,” he says.

However, the SEC, while it acknowledged receipt of the complaint, never took any action. “The might have talked to the union and the ‘Big Three’ but I don’t know that,” Diamond says. The SEC, of course, is under attack for lax or non-existent enforcement practices during the Bush Administration. The Bernard Madoff pyramid scheme that amounted to billions dollars of out right theft is but one example of where the SEC ignored complaints.

The UAW enjoys better relations with Ford than with either Chrysler or GM, and the union is using the negotiations with Ford to potentially shield itself from demands for even more concessions on VEBA payments from the other two auto makers. The revised Ford contract also eliminates two paid holidays; two one-time, productivity bonuses due next year; ends quarterly cost-of-living wage adjustments; and puts new limits on supplemental unemployment benefits that workers have been paid for more than half a century.

The UAW is offering the Ford VEBA agreement to both Chrysler and GM. Parallel agreements would leave the union with substantial stakes in both of those companies, according to the numbers. Daimler has valued Chrysler’s shares at zero and GM’s shares are currently trading at a market cap substantially less than $10.5 billion it owes the VEBA under the terms of the 2007 contract.