GM Raids Pension Fund: $11.6b for Buyouts, VEBA
Sunday? Sunday! That’s the day The Detroit Free Press chose to tell the world that GM’s recent accounts contain a time bomb: the revelation that the company raided—sorry, “borrowed from”—its employee pension fund to buy out United Auto Workers employees and pay into their health care fund. Even though we’ve become used to gigantic numbers, the sums involved are staggering. “Details are emerging about how General Motors Corp.’s U.S. pension funds went from a $20-billion surplus at the end of 2007 to a $12.4-billion deficit 12 months later.” I make that a $32.4-billion swing. It’s also approximately $11.4 billion more than GM’s CFO estimated its pension deficit, as declared in The General’s December pre-bailout report.
The GM pension funds’ erosion last year included $11.3 billion in value because of investment losses; $2.9 billion for hourly and salaried attrition programs, and another $8.7 billion for increases in benefit payments as part of changes to retiree health care and a deal regarding Delphi’s bankruptcy . . .
GM said it used $2.3 billion from the hourly pension fund to pay for buyouts in its UAW special attrition program, which encouraged thousands of workers to voluntarily leave the company as a cost-cutting move. The company also used $2.7 billion for the retiree health care trust—called a VEBA, or voluntary employee beneficiary association. GM spent another $2.3 billion for Delphi’s hourly pension program.
Also, as part of GM’s decision to cut company health care benefits for salaried retirees 65 or older, it increased pension benefits to retirees at a cost of $3.7 billion. The company spent another $600 million on white-collar retirement incentives.
The rest of the pension funds’ declines were attributed to service and interest costs, as well as changes in the discount rate and actuarial assumptions ($2.2 billion because people are living longer than expected).
The Pension Benefit Guaranty Corp. raised the red flag on GM’s pension funding last fall. And for good reason. And now union members (650k are “covered” by the fund) are scared shitless.
“They robbed it blind to pay off the people to get them to leave,” said Paul Heller, a GM salaried retiree from Washington, Mich. “I’ve got a retiree club that’s absolutely sick about it.”
More by Robert Farago
Comments
Join the conversation
What's going to happen to Canadian GM workers in Ontario re there Pension, one of two things, the Premier who wants to continue to be elected will cave in and have the Taxpayers here take the hit or he will let the retired GM Workers carry the can more or less, after all they made good money while they worked, surely they were wise to put Money away for a rainy day eh? We should all know after the Budget comes down on the 26th of March!
On June 1, General Motors released information that they plan on reducing their pension plan liabilities by an expected 26 billion dollars. GM hopes to accomplish this by offering selected U.S. GM retirees an option to take a lump-sum payment, while other retirees may continue to collect monthly pension benefits. Additional plan details have been outlined as a guide at this website: http://www.gmpensionbuyout.net. Because of the plan complexities and the July 20, 2012 deadline, it is suggested that affected plan members seek advice from a qualified financial advisor.