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Automotive Aftermarket Manufacturing

GM, Delphi Retirees Worry About Pensions, Benefits

John Dailey has received his monthly pension checks without interruption since he retired in 2002 after 27 years with General Motors Corp. and three years with Delphi Corp., which became independent of GM in 1999.

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From the Dayton Daily News

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DAYTON, OH — John Dailey has received his monthly pension checks without interruption since he retired in 2002 after 27 years with General Motors Corp. and three years with Delphi Corp., which became independent of GM in 1999.

Still, the news of Delphi’s bankruptcy reorganization, GM’s multibillion-dollar losses and the U.S. auto industry’s general malaise this year gives him cause to wonder what the future holds for his retirement benefits.

“People are just waiting to see what happens,” said Dailey, 55, of Fairborn, OH.

He and thousands of others are awaiting the outcome of complex negotiations involving Delphi, its labor unions and General Motors.

Delphi, which says the obligation of retirement benefits was a major reason it wound up in bankruptcy court, paid $625 million last year for funding those benefits and must pay $1.1 billion for 2006 by June 30.

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GM made a commitment that it would guarantee the post-retirement benefits of GM workers who transferred into Delphi if something happened to Delphi by 2007. GM hasn’t said how much it will contribute, but has estimated the amount could reach $12 billion. GM remains the biggest customer for Delphi’s auto parts.

Delphi says it would like to continue funding its pension plan, but won’t make a decision on that for months, not until it works out its request for wage concessions from its unions and finds out what GM’s contribution will be.

“You have to have a company that’s able to afford it, going forward,” said Robert Miller Jr., Delphi’s chairman and CEIO

MIller was CEO of Bethlehem Steel when that bankrupt company shifted $3.7 billion in pension obligations to the federal government.

The safety net is the Pension Benefit Guaranty Corp. (PBGC), the federal agency created by the 1974 pension law to insure traditional pension plans funded by private employers. Delphi has said the PBGC remains an option if the company is able to persuade the bankruptcy court that Delphi cannot emerge from court-supervised reorganization without shedding the expenses of retirement benefits.

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Delphi has about 12,000 retirees nationally, 10,000 of whom are represented by its biggest union, the United Auto Workers.

There are as many as 20,000 GM retirees in the region, according to the International Union of Electronic Workers- Communications Workers of America, another major Delphi union.

GM’s benefits guarantee and the availability of the pension agency, if needed, should be reassuring for retirees, said Henry Reichard, chairman of the IUE-CWA Automotive Conference Board in Dayton,OH, which represents Delphi employees at eight plants nationwide.

“I believe our pensions are safe. I wouldn’t say that if I didn’t think so,” Reichard said. “We have said from the outset that protecting our pensions, health care and some form of a living wage are our top priorities, and that hasn’t changed.”

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Still, there are concerns. Although President Bush has urged employers to live up to their commitments to retirement benefits and Congress is working on new legislation governing pension plans, major employers are still dumping huge obligations on the pension agency. United Airlines’ transfer of a $6.6-billion pension obligation to the PBGC and US Airways’ handing off of a $3-billion pension obligation have occurred during this past year.

Companies in bankruptcy proceedings, like Delphi, can go ahead with a “distress termination” of a pension plan only after persuading the court they could not otherwise survive with those expenses.

The PBGC would then take over the program. Under the law in 2005, it would guarantee a traditional pension plan’s benefit for a person retiring at 65 for up to $45,616 a year. That amount rises to $47,659 in 2006. Those maximum guarantees are lower if a person retires earlier or includes survivor benefits for a spouse.

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But the PBGC insures only the basic pension, not retirement health benefits or supplemental pension pay provided to people who retire before they are old enough to qualify for Social Security benefits. GM’s guarantee could reach the health benefits and pension supplement, union officials said.

The PBGC’s current obligations are $23 billion more than its assets can cover, a problem that Congress must eventually resolve.

“This is a tricky issue. No one knows what the solution is,” said Michael Melbinger, a Chicago lawyer who specializes in advising companies on how to handle pension obligations.

The pension agency doesn’t receive general tax revenues. It is financed by insurance premiums paid by companies that sponsor pension plans, plus investment returns on assets the agency receives from pension plans it takes over.

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On Monday, Congress passed a measure as part of its massive budget bill that would require companies to pay a $3,750 fee per employee if they turn their pensions over to the PBGC, and increased the per-employee premium companies pay for coverage.

If the PBGC takes over a pension plan, the law spells out who gets priority for the money to be allocated.

People who are already retired come first, followed by those who are eligible to retire but simply haven’t chosen to, followed by active workers who have not reached retirement eligibility.

Dailey, the GM-Delphi retiree, said he hasn’t received any updates from Delphi or his union, United Steelworkers Local 87, but realizes there are issues to be worked out.

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Dailey receives a monthly, pre-tax pension check of $2,730, plus retirement benefits of life insurance and health insurance under his union’s contract. He supplements his income with a part-time job as a maintenance employee at a church school.

Active workers are eligible to retire after 30 years of service, but have their own concerns about Delphi’s future.

Bill Hall has a total of 12 years service with GM and now Delphi, and works at Delphi’s air compressor plant in Moraine, OH. The IUE member hopes to work 30 years and retire.

Hall, 37, a married father of two who lives in Centerville, OH, said he has no interest in a buyout offer some co-workers have accepted.

He said it involves accepting a $40,000 check from Delphi in exchange for leaving the company and giving up any claim to retirement benefits.

“I won’t be taking it,” he said. “To quit work and go to school for a year or two would not be very good. I have to pay bills.”

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Rank-and-file workers have reason for concern until Delphi and its unions work things out, Hall said.

“We’re real uncertain, because nobody’s made concrete decisions,” he said.

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