Nov. 21 (Bloomberg) -- Ford Motor Co. retirees face a greater risk of paying for their own medical expenses than workers at General Motors Corp. under a newly ratified union provision that may threaten Ford's relations with its workers.

The labor agreements allow money-losing U.S. automakers to unload retiree health-care obligations through a fund created by the United Auto Workers. Almost half of the $13.6 billion Ford agreed to contribute into a Voluntary Employee Beneficiary Association, or VEBA, is pledged against either Ford shares or assets, according to the company. That compares with about 14 percent of GM's $32 billion.

Ford's disclosure, made last week after U.S. factory employees approved the deal, shows that the second-largest U.S. automaker offered short-term job guarantees in exchange for weaker commitments to retiree benefits. That higher risk undermines UAW President Ron Gettelfinger's contention that the fund will shield workers from potential bankruptcy and may come back to haunt labor relations at a precarious time for Ford.

The Ford funding ``does not achieve one of the primary goals of the UAW -- a separation between the financing for retiree health care and the fate of Ford,'' Fitch Ratings credit analyst Mark Oline said in an interview from Chicago. Fitch rates Ford B, or five steps below investment grade.

Ford's Record Loss

Neither company is in imminent danger of bankruptcy. Yet Dearborn, Michigan-based Ford lost a record $12.6 billion in 2006 and is ceding share in its home market for a 12th straight year.

GM's $39 billion loss last quarter, most of it due to an accounting change, was the fourth-biggest among Standard & Poor's 500 companies since 1990. The Detroit automaker, No. 1 in U.S. sales, hasn't had an annual profit since 2004.

Ford fell 29 cents to $6.95 at 4:01 p.m. in New York Stock Exchange composite trading. It was the shares' lowest closing price this year.

``As time goes on with this VEBA, people are going to have a lot of concerns, and that may cause problems in the plants,'' said Gary Walkowicz, a UAW Local 600 worker at Ford's F-150 pickup plant in Dearborn who campaigned against the contract. He said he didn't realize how much of Ford's contribution was tied to the automaker's survival.

When the VEBAs take effect on Jan. 1, 2010, Ford and GM will end their obligation to pay an estimated $70.7 billion in retiree health-care costs.

``We believe it was the best solution to funding the VEBA,'' said Ford spokeswoman Becky Sanch. UAW spokeswoman Christine Moroski declined to comment.

Plants Stay Open

As part of the agreement, approved last week by a 79 percent ``yes'' vote, Ford agreed to keep five plants open until 2011 that it had intended to close and committed to new models in many factories. Two-thirds of GM workers passed its deal.

``The situation is unusually tough at Ford and the UAW knew that,'' said Harley Shaiken, a labor professor at the University of California at Berkeley. ``From the union's standpoint it is securing jobs.''

Ford will use a $3.3 billion bond convertible to Ford shares that matures in 2013 and a $3 billion, 10-year, second lien against the company's assets to pay part of the $13.6 billion.

A second lien means that other debts are repaid from available assets first in any bankruptcy. The $6.3 billion in funding hinges on Ford's survival for full payment, Oline said.

Dearth of Wizards

``In this industry at our level, there are not a lot of financial wizards that will understand the significance of a first lien or second lien,'' said Eugene Morey, president of UAW Local 849 in Ypsilanti, Michigan, which represents an auto-parts plant Ford is closing at the end of 2008.

``Most people just want to know what it is going to cost them,'' said Morey, who supports the VEBA.

Ford in December pledged most of its assets, including the trademark blue oval logo, for $23.4 billion in funding to keep operating as it tries to return to profit. That includes a $7 billion secured loan and an $11.5 billion revolving line of credit. Ford hasn't yet tapped the $11.5 billion.

Ford expects to spend $12 billion to $14 billion of the money it borrowed last year.

If Ford seeks bankruptcy protection, Ford's assets may cover from 70 percent to 90 percent of the $18.5 billion in debt, said Robert Schulz, a fixed-income analyst at Standard & Poor's in New York. It's likely that no assets, or very little, would remain to cover the $3 billion note, he said. S&P also rates Ford B.

Chrysler LLC, which is contributing $8.8 billion for a $16 billion liability, isn't required to give the same details as Ford or GM because the automaker is now privately held.

``The GM structure is better for the workers,'' said Pete Hastings, an analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``Ford's structure is better for Ford, the way it's structured, than for the workers.''

To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net.

Last Updated: November 21, 2007 16:10 EST