The Detroit Free Press reports that GM retirees could face pension interruptions thanks to the General's dumping of obligations to bankrupt supplier Delphi. Salaried employees who never worked for Delphi had their pensions handed over to the troubled GM spinoff in 1999, and had wondered what was happening when checks began arriving with Delphi's name on them. But puzzlement is giving way to concern, as the federal Pension Benefit Guarantee Corp has warned that Delphi is some $3.5b in the hole on its pension obligations. And no wonder, considering GM saddled it with pension obligations from several closed and sold factories as a spin-off goodbye present in 1999, a move pension experts call "legal." As in there ought to be a law against it. Meanwhile, hundreds of the non-Delphi retirees have received letters from the supplier saying their pensions are at risk, thanks to Delphi's bankruptcy. Delphi is supposed to transfer $1.5b in (hourly retiree) obligations back to moneybags GM, but mysteriously that hasn't happened yet, prompting the PBGC's concern with the situation. Though Delphi's bosses swear up and down that they're committed to honoring pension obligations, if the transfer doesn't happen by September 30 when new PBGC rules go into effect, Delphi will likely find itself in pension default. Which means hundreds of workers who never even worked for Delphi would be at the mercy of the PBGC. And those same new rules mean the PBGC will likely not honor most planned payment step-ups and early retirement benefits. "I don't want a handout," says one retiree. "I want General Motors to pay my pensions like they told me they were going to do."
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With the recent Delphi announcement to layoff 600 people, mostly in Kokomo, Indiana, there was also the announcement that they could not roll over their pension until Delphi comes out of chapter 11 (but not into chapter 7). Those who were laid off earlier in the year can do so, but not the newly announced ones. Also, if you elected to retire and not be laid off, Delphi still holds your pension. Talk about a hand full of scrotum…
Do any of these folks have 401(k)s or IRAs? Let’s hope so because Social Security makes TANF look like Beatles royalties.
“I don’t want a handout,” says one retiree. “I want General Motors to pay my pensions like they told me they were going to do.”
I’m tying to see what the difference might be. Does this individual expect taxpayers to make good on a “promise” if GM does not?
Stockholders are promised a rate of return, they lose when a company goes under. Everybody suffers and pays for bad decisions. GM’s Bored [sic] of Indirectors should take notice and change out all the leadership right now.
“I don’t want a handout,” says one retiree. “I want General Motors to pay my pensions like they told me they were going to do.”
I’m tying to see what the difference might be. Does this individual expect taxpayers to make good on a “promise” if GM does not?
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You really don’t see the difference? He said GENERAL MOTORS.
It’s the game of musical chairs. Someone is going to be the old maid. And someone else is going to pay. Who will be stuck without a chair? Should we guess that a huge bunch of retired UAW-workers will be stuck in their golden years without a pension? What’s the odds? Who will bet on this?
Those workers should get what they wer promised! If GM don’t pay then the government should pay. What do we pay taxes for! Those workers are entitiled to that pension from the years of hard work they gave this country.
DetroitIronUAW
You pay taxes the same way we all do. If there’s an excess in your pension fund does it get distributed to all workers who didn’t contribute? Your taxes go to Social Security. That’s what you get from the government. I am sorry that your funds have been mismanaged, but it’s certainly not my fault and I am not going to pay for your pension unless you pay for mine.
# DetroitIronUAW :
August 27th, 2008 at 1:00 pm
Those workers should get what they wer promised! If GM don’t pay then the government should pay. What do we pay taxes for! Those workers are entitiled to that pension from the years of hard work they gave this country.,
Would you kindly explain in a rational manner why I should pay? As a taxpayer, pensions owed to employees of a private company are the business of the private company, not the business of the government nor my hard earned dollars.
Most taxpayers dream of having pensions as rich as retired autoworkers. You’re implying I should pay more money in taxes from my small retirement to pay you guys. Has it ever occurred to the Detroit retirees that a good part of the problem was unbridled greed for wage and retirement increases?
It’s killing the golden goose so now the employees and the companies are looking at the government to continue the gravy train.
Sad situation.
DetroitIronUAW
Those workers should get what they wer promised! If GM don’t pay then the government should pay.
The government doesn’t even pay their own military retirees what they were promised. Why should they show preferential treatment to retired auto workers?
Question – when GM spun off the operations that became Delphi, wasn’t there a provision that if the new company filed for bankruptcy or hit financial difficulty after a certain date (for some reason, 2009 sticks in my mind), GM was no longer on the hook for retiree pensions and benefits?
In other words, GM was betting that the company would last longer than it actually did, and ended up getting burned?
The way GM handled this whole farce just stinks, in my opinion.
Wow! wow! wow! How on earth that is legal I know ‘friggen idea. Some lawyer sure earned his pay that day.
Moving liabilities to other companies. This is the same stunts that Enron pulled. But seeing how this was done in 1999, back when Enron was doing the same, then I guess it WAS legal.
Good News!!! I kept my job at Delphi
Bad News…. I kept my job at Delphi
actually the PBGC is funded by a tax on corporate contributions to defined benefit plans
http://www.pbgc.gov/
like many govt programs though, it could fail financially someday and need taxpayer support
the biggest “haircut” when the PBGC takes over a plan is for highly compensated pensioners (airline pilots for example). Also those who retired before age 65 are proportionally reduced.
yeah! And nobody can understand why some of us won’t take the big buyout.100k a free car and a pension for life?Your nuts Mikey take the money and run.I hear that every day.Feel free to call mikey nuts.
I’ll take my 75k a year and take my chances.
In all ways save, legal, General Motors owes no one any pension or retirement, if that decision was based on the employee(s) threat to harm/close down or otherwise cause harm to the employer. This is the case with Unions. They use the law to illegally do harm to business. Therefore, as such all such co-erced/forced/threat style decisions are not valid.
Uhh Dr D. I believe its the salaried non UAW retirees that GM shafted. So come again on how they are owed nothing. How is the UAW to blame for that?
indi500fan:
the biggest “haircut” when the PBGC takes over a plan is for highly compensated pensioners (airline pilots for example). Also those who retired before age 65 are proportionally reduced.
Yup. Steelworkers took the same haircut. Also, PBGC plans offer NO medical coverage for early retirees.
That said, the whole freakin’ Delphi situation is a soup sandwich. These people contributed to the GM plan. They should get paid by GM (until GM goes tango-uniform).
DetroitIronUAW :
August 27th, 2008 at 1:00 pm
Those workers should get what they wer promised! If GM don’t pay then the government should pay. What do we pay taxes for! Those workers are entitiled to that pension from the years of hard work they gave this country.
And there in encapsulates, very well, the reason why GM Ford and Dodge are dead!
Okay, so you have a car that no one will buy. You try and try, but the deal you offer is acceptable to no one. Then this guy comes along and says he will pay you, overtime, for your overpriced POS car. You draw up contracts, sign them, and off he goes with your car.
When he stops fulfilling his end of the deal because he never had a snowball’s chance of making your outlandish payment scheme, don’t be surprised when the rest of us aren’t all teary eyed about your new financial trouble.
For anyone not clued in yet, the contract for the car deal was a UAW contract. It was a ripoff, and the only people willing to take it couldn’t make it work. That would be 2.8 management who haven’t been strong enough to run the company well enough to meet their promises to the UAW for thirty years.
Had the price for the car been more reasonable, and had the employees done better financial diligence on their employer and union representatives rather than blindly swallowing such a silly scheme, none of this would be a problem today.
How is that for tough love?
Edit: Damn, I missed the “salaried” part too. So, here is the new version for those fools.
You sell your questionable house to a guy on time. You don’t bother to check that the buyer has the ability to keep paying. You stake your financial future on the fact that he will continue to pay, even though you know that the neighborhood is full of thugs who will make him pay them just to keep using his new house. You don’t bother to tell him about all the things you know are screwed up before you leave town. Now you aren’t getting his mortgage payment, and the house is worthless if you foreclose. Once again, are we supposed to care?
Folks; The pension sustainability problem is not limited to the auto industry. It’s a problem for every privite industry and their workers. And eventually it will even be a problem for public employees.
I am a retired school teacher in California. My pension is guaranteed by the state. It is obvious to me that my pension is much more generous than it should be, based on sound actuarial practices. But the teachers have a strong union, and the politicions catered to us. As long as we can reach into the pockets of the taxpayers and extort money from them, we are fine. Although, in my opinion, that eventually has to stop. It is not a fair situation when you compare our pensions to retirees living on social security or privite pensions.
Those of you with privitely funded pensions can’t do what public employee pensioners can. Your pension money comes soley from the company you worked for. It only exists if the company paying it is a viable enterprise that can stay in business. The problem with the auto industry is that the Big 3 auto companies are no longer viable enterprises. GM no longer has 50%+ of the motor vehicle sales in the US. The Big 3 are not building vehicles that the public wants to buy. The price of oil is not ever coming down to what we’d like. And the US economy can not support 3 big automakers anymore. They are headed toward bankrutcy, with one or more of them probably going out of business.
Unfortunately for auto workers, your pensions are going to disappear along with the companies. That certainly puts a tremendous hardship on you. But to expect the taxpayers to bail you out is not a reasonable idea. When you compare your privite pensions to social security benefits, yours are much more generous. How can you expect someone who will collect the meager ss benefits to reach into their pockets to help pay for your much more generous pension.
I can understand the anger and frustration with your distressing pension problems. However, there are really no villains in the situation. GM is being forced to downsize by market conditions and is just not able to continue to fund pensions as they once did. Sadly, the old days are gone forever.
aged pensioner
I disagree. The problem is not the GM is a fraction of what it used to be. The problem is the timing of pension contributions.
GM should have set aside enough pension contributions as they are earned. This is what pensions are supposed to do. However, they uncontributed. And the PBGC let them do it.
In other words, for every employee that was entitled to benefits, they should have started making sufficient contributions from day 1, and then continue to do so as the employee earned benefit entitlements.
Otherwise, the pension is nothing but a Ponzi scheme (like the SS system).
aged_pensioner,
I have to correct you. The pension problem is not a problem in every industry. I have worked for several technology companies, and none that I know of still have a pension system. For the most part, only union workers and government workers still have jobs which primarily use a pension rather than a 401k or similar system.
I recognized the risks of this system and it was a part of my decision not to stay in the military.
Government workers are somewhat safe, but union workers are just waiting to get burned. Their are lots of companies profitably making cars in the the USA, but none of them are dominated by UAW workforces. The silly pensions are just one of the problems that the UAW have forced on the 2.8.
yankinwaoz
I don’t believe GM could ever have put enough away to satisfy a defined benefits pension plan. The employees would have had to accept much lower wages to pay for the pension fund set-aside. And, in my opinion, it still wouldn’t have worked. ALL defined benefits plans are ponzi schemes. Just as you indicated social security is.
Social security depends on the industrial productivity of the entire nation as a whole. A GM pension ultimately depends on the productivity of the GM company and the viability of any investments in the pension fund. In truth, all pensions, whether from, social security, GM, 401K’s, public employee plans, etc, depend on the future productivity of the entire country. What is happening to the GM workers and their pensions now, is what is in store on a much, much, larger scale, for future social security recipients.
It never was realistic for us to think that so many retirees could live well for so many years of retirement. Eventually we are all going to be forced to accept lower pension benefits and perhaps work longer before retirement. The GM situation is a forerunner of what is to come for all workers. I know that it doesn’t help your situation, but you should know that you will not be alone. In the future we will all be experiencing what you are going through now.