Volvo to Pay Mack Trucks Retirees $525M Class Action Settlement

Volvo AB has agreed to pay $525 million to more than 9,300 retirees to settle a class action lawsuit that accused its Mack Trucks, Inc. unit of illegally reducing their lifetime health benefits.

The Volvo Mack Trucks class action lawsuit centered on whether Mack had the right to reduce the benefits of its retirees at a time when it was struggling financially. Mack was subsequently bought by Swedish company Volvo in 2001.

The proposed class action settlement reduces medical coverage to the 9,368 retirees, but it funds a new health-care plan for them. Under the proposed Mack retiree settlement, the $525 million would be paid in five annual installments into a trust to fund a new health care plan, court papers showed. The new health plan will reduce some benefits and shift some costs to the retirees, the judge wrote, but it would still provide “substantial benefits.”

“The settlement significantly reduces uncertainties regarding the availability of future medical coverage,” wrote U.S. District Judge R. Barclay Surrick. “The settlement secures upfront cash funding from Mack, rather than notes, securities or other obligations, which are all dependent on Mack’s future financial performance.”

Surrick also noted that if Mack were to become insolvent, the retirees’ beneficiary association would be insulated from the claims of Mack’s creditors.

Surrick granted preliminary approval of the Volvo Mack Trucks settlement on May 12, and scheduled a Final Approval Hearing for September 7 to determine if it is fair and adequate.

The case is Rachilla et al v. Mack Trucks, Inc. et al., U.S. District Court, Eastern District of Pennsylvania, No. 07-03737.