File this one under the “stealth bailout” file. GM dumped a number of its own pension obligations onto Delphi when the parts supplier was spun off in 1999. Now, the Detroit News reports that Delphi is abandoning $6.25 billion worth of obligations to the Pension Benefit Guarantee Corporation, the second largest such takeover by amount. But the 70,000 affected Delphi workers and retirees will still miss out on an estimated $800 million in payments. And what does GM have to say about all this? The General’s statement (via webnewswire) betrays a guilty conscience:
There have been questions about General Motors Company’s responsibility toward Delphi’s pension plans, given that many of those covered were GM employees prior to GM spinning off Delphi in 1999. General Motors Corporation made appropriate provisions for the plans at the time of the spin-off, and Delphi became responsible for the plans from that point forward.
See how that works? Who cares that GM spun Delphi off as a means of jettisoning pensions. Once the deal was done it was Delphi’s problem. Move along now, nothing to see here . . .
As a result of bargaining at the time of the spin-off, General Motors Corporation did agree to top-up pension benefits for certain limited groups of hourly employees and retirees in the event that the Delphi hourly pension plan was terminated. As with other union agreements that it has assumed from the old GM, General Motors Company will honor these commitments.
General Motors Company and PBGC have reached a preliminary agreement whereby the PBGC would receive a $70 million cash payment from GM, as well as a portion of future distributions to GM from the new company that acquires Delphi assets upon resolution of its bankruptcy. GM expects to receive such distributions in return for capital contribution to the new company. Details will be communicated after the Delphi bankruptcy agreement is finalized.
There, aren’t you feeling better?