Ford Motor Company announced on Monday morning that it has reached a tentative agreement with the United Auto Workers (UAW) union on modifications to the Voluntary Employee Beneficiary Association (VEBA) retiree health care trust.

Ford said the agreement provides it with the option to settle with Ford common stock up to 50 percent of the payments into the VEBA in lieu of cash. Ford will consider each payment when it is due and use its discretion in determining whether cash or stock makes sense at the time, balancing the liquidity needs and preserving shareholder value.

The VEBA agreement, together with the agreement reached on February15 by Ford and the UAW to modify certain operating provisions of the 2007 National Labor Agreement, is subject to ratification by the active UAW-Ford membership and other conditions, including pursuing restructuring actions with other stakeholders. Additionally, the VEBA agreement requires court approval.

"The agreements, if finalized, will allow Ford to become competitive with foreign automakers' US manufacturing operations, and are critical to our efforts to operate through the current deep economic downturn without accessing government loans and continue to fully invest in our ONE Ford product plan," said Joe Hinrichs, Ford vice president of Global Manufacturing and Labor Affairs.

UAW President Ron Gettelfinger also announced this agreement. "The modifications will protect jobs for UAW members by ensuring the long-term viability of the company," he said in a statement.

Ford becomes the first of the Big-Three Detroit automakers to secure union concessions on the key issue. GM and Chrysler are expected to follow the deal because their bailout applications are required to get concessions from UAW and stakeholders to cut costs.