Pensions GM Dumped On Delphi Now In Peril

Edward Niedermeyer
by Edward Niedermeyer

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."

Edward Niedermeyer
Edward Niedermeyer

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  • Aged pensioner Aged pensioner on Aug 28, 2008

    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.

  • Yankinwaoz Yankinwaoz on Aug 28, 2008

    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).

  • Landcrusher Landcrusher on Aug 29, 2008

    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.

  • Aged pensioner Aged pensioner on Aug 29, 2008

    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.