"We are going to have some very strict controls in the trust agreement," UAW President Ron Gettelfinger told the Reuters Autos Summit in Detroit on Tuesday. "My biggest concern in the establishment of this (trust) is that we have the groundwork or framework in place, if you will, to ensure that we have the proper people in place to make sure we take care of business."

Detroit’s three U.S. automakers all signed a landmark health-care deal with the union, under which responsibility for retiree health care would shift to a new UAW-aligned trust fund known as a voluntary employee beneficiary association.

The trust needs court approval and U.S. Securities and Exchange Commission accounting clearance before taking effect in 2010 under just-completed labor agreements between the union and the automakers.

Gettelfinger said union representatives were currently putting together a list of all the issues the UAW needed to address to set up a framework for the VEBA ranging from the independence of trustees to the objectives for fund managers who were to be brought in.

He said the UAW would focus first on establishing a similar VEBA at auto parts supplier Dana Corp. before January and then shift its focus to the bigger trust fund.

"It will be a slow process," Gettelfinger said. "But by the time I leave here as president this thing’s going to be well established, and it’s going to be off and running."

The key investment priorities for the trust fund would be protecting its solvency and generating cash flow in order to ensure that it can provide health care for at least 80 years for UAW-represented workers and retirees, Gettelfinger said.

The UAW could become the single biggest shareholder in Ford Motor Co. and General Motors since the health-care trust is being financed partly through convertible debt.

Gettelfinger said it was not clear if the VEBA trustees would make the decision alone or in consultation with the UAW about whether to convert the debt to shares equivalent to as much as 16 percent of GM stock and 15 percent of Ford stock.

Buyout negotiations coming in 2008

Gettelfinger said the union expects to begin talks with the Detroit automakers next year on buyouts and early retirement offers for union-represented factory workers.

Gettelfinger also said the union would not negotiate mid-contract changes to the just-completed labor pacts with the automakers before they expire in 2011.

"I think this contract will live out its life. There have been a lot of major changes made in this agreement," he said.

Gettelfinger said he expects buyout offers to be negotiated in 2008 for GM, Ford and Chrysler LLC.

"I’m sure it will come up at all three. But we’ve still got a lot of work to do before we get to that piece of it," Gettelfinger said.

GM’s GMAC problem

Gettelfinger also said today he is concerned by GM’s exposure to the mortgage lending arm of former finance unit GMAC and would seek a meeting with executives at the automaker for more information.

"It’s a concern," Gettelfinger said. "It’s a pretty big concern."

He added, "Things have kind of unfolded here pretty quickly."

GM shares closed down almost 8.5 percent on the New York Stock Exchange on Monday, the largest one-day percentage decline for GM shares in over two years.

Bonds of GMAC’s home mortgage unit, Residential Capital, also plunged on Monday, and the cost to insure GMAC bonds rose. Investors said ResCap, the No. 2 independent U.S. mortgage lender, may need further capital injection to avoid violating loan agreements.

Debating private equity

Gettelfinger said that while he remained suspicious of private equity firms, there were few options when Chrysler was sold to one of the most prominent, Cerberus Capital Management LP.

So far Cerberus had kept the commitment it made to the union, Gettelfinger said, but he repeated his criticism of buyout firms for buying companies, stripping them down and selling them.

"Private equity firms, a lot of them, they’re vultures; a lot of them are strip and flip," Gettelfinger said. "I think that can be said as a matter of fact. There are some of those folks that I almost feel dirty when they leave a room after I have met with them."

Gettelfinger in the past has railed against financial buyers such as Cerberus, but stunned analysts and some of his own membership earlier this year by backing the firm’s purchase of Chrysler Group.

He acknowledged the seeming contradiction, saying that maybe he was "speaking out of both sides of my mouth." But he said: "If you look at what was on the table at the time, as far as the Chrysler deal, there wasn’t a lot of options out there."

Gettelfinger said Cerberus founder Stephen Feinberg had pledged to stay out of direct involvement in the latest labor contract negotiations with the UAW, and he had kept this commitment.

The union leader also said that job cuts announced by Chrysler after the new contract had been ratified by members were not a complete surprise, given weakness in the U.S. autos market. "We knew there were going to be adjustments," he said.