From Milwaukee Journal Sentinel
Pension benefits would continue to be paid to thousands of retirees after Tower Automotive is sold, under a deal reached with the private-equity firm that is seeking to buy the bankrupt auto parts supplier.
Unions representing the Milwaukee workers had negotiated a deal with Tower Automotive last year but had to negotiate again with Cerberus Capital Management, which is seeking to buy Tower for $1 billion.
"They agreed to take over the pension plan and without any modifications or any changes to the benefits, which is huge," said Donald Schrauth, former president of the Smith Steel Workers DALU 19806 in Milwaukee.
Though pension benefits will continue, health insurance benefits for more than 2,000 retirees are scheduled to terminate by the end of next year.
The health care coverage would have ended under Tower, though probably not as soon, Schrauth said. Tower had agreed to pay a set amount toward health insurance benefits until that money ran out, he said.
Tower’s sprawling manufacturing complex on the north side of Milwaukee, which housed one of the auto industry’s first assembly lines in the early 1900s, was closed last year as part of the Tower bankruptcy.
The aging plant and its longtime work force were the primary source of "legacy costs" that Tower sought to limit when it filed for bankruptcy in 2005. If Tower had continued to pay health-insurance benefits to its local work force, the company forecast in a court filing that it would continue losing money until 2010.
Cerberus is rapidly expanding its presence in the auto industry, having recently announced it would buy Chrysler Group from DaimlerChrysler AG. It has also pursued bankrupt parts supplier Delphi Corp. of Troy, MI.
The deal with the unions and other retirees removes an obstacle to Tower’s emergence from Chapter 11 bankruptcy proceedings. Cerberus wants to complete its purchase of Tower by July 31.
Tower laid out the definitive agreements related to the termination of retiree benefits in a June 15 court filing. While Cerberus would accept Tower’s union contracts, neither Cerberus nor any other buyer would assume liability for retiree health benefits, the company said in its filing in U.S. Bankruptcy Court in New York.
In return for the termination of retiree medical benefits at a Milwaukee plant, Cerberus and Tower would pay $5.9 million in installments through Oct. 1, 2008, and permit a $133.3 million unsecured claim for Tower workers against affiliate R.J. Tower. Tower would pay about $6 million more over more than four years for retirees elsewhere and allow approximately $30 million in claims against R.J. Tower.
Copyright (c) 2007, Milwaukee Journal Sentinel