PBGC Prophesies Delphi Pension Disaster

Edward Niedermeyer
by Edward Niedermeyer
pbgc prophesies delphi pension disaster

We've reported that Delphi was a little tardy on making its required pension contributions. Some $323m short, to be precise. Even so, Delphi said it wouldn't be transferring its obligations to the Pension Benefit Guarantee Company (PCBG). The Detroit News reports that the PBGC is switching into proactive mode. "We will act forcefully to protect Delphi's pension plans," the PCBG's director warned. "Especially in light of the company's decision not to seek renewal of its pension funding waivers." Charles E.F. Millard ain't just whistling Dixie. "We will draw down certain letters of credit and keep liens in place on the company's assets until Delphi has successfully emerged and made its pension plans whole." As Delphi won't be seeking an extension of it's pension-funding obligation waiver from the IRS, the PBGC will cash some $173m in Delphi credit when the deadline expires (23rd of May). Delphi spokesfolks say the company "expects to be able to meet its pension funding strategy through a combination of cash contributions and transfers of certain unfunded pension liabilities to a plan sponsored by GM." Delphi's skipped $2.3b in pension contributions since declaring bankruptcy in 2005. At the end of 2007, the former GM parts division was carrying an unfunded pension obligation of $3.3b. So who's gonna end up with that hot potato?

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  • Menno Menno on May 13, 2008

    Studebaker redux. A friend of mine is a retired Chrysler engineer. He says he and all the other ex-employees are getting the screw job right now, with Chrysler simply pulling their "guaranteed" medical insurance benefits (on top of medicare, of course) though when I asked him, he felt confident that the basic pension payments can't stop. Hope he's right, for his sake. As for me, I'm not trusting anyone to save for my retirement (assuming I don't simply have to work until dying-in-harness). I'm buying/stashing a little physical silver away every pay day, in a safe. In addition to the (who-knows-what-will-happen-or-if-anything-will-be-worth-bupkis) 401k. And social (in)security.

  • 50merc 50merc on May 13, 2008

    Ponzi schemes look great early on. But continuing the Big 3's sumptuous retirement benefits requires either fully funding benefits (too costly, now) or unending growth and prosperity (already disproven). Only a sovereignty can keep a Ponzi scheme going indefinitely--and then it usually requires devaluing the currency. For countries like Spain or Italy, it'll wind up in repudiation of liabilities. (Nations don't go bankrupt, but they can welsh on internally-held debt.) menno, your friend needs some expert advice. He can start, however, with this: http://www.pbgc.gov/workers-retirees/benefits-information/content/page13181.html

  • Matthew Potena Matthew Potena on May 14, 2008

    All US citizens... grab your wallets, because they are coming for them!

  • Jim K Jim K on May 14, 2008

    Menno.....how are u buying that physical silver? Sounds like a good idea that I wouldn't mind looking into.