Auto Retiree Groups Push to Keep Benefits

By ALEX P. KELLOGG and SHARON TERLEP        APRIL 17, 2009

White-collar retirees of the Big Three auto makers and supplier Delphi Corp. are banding together in hopes of preserving their benefits and pensions.

Representatives of more than 200,000 salaried retirees from General Motors Corp., Chrysler LLC, Ford Motor Co. and Delphi this week plan to renew a push for a meeting with the Obama administration's auto task force.

Retirees at GM and Chrysler fear they could be stripped of many benefits in the government-led reorganization of those two companies. In March, Delphi, which has been stuck in bankruptcy protection for more than three years, cut the health-care benefits of its salaried retirees.

"We do have a vision of what happens...because Delphi has gone through it," said Michael Kane, a spokesman for the National Chrysler Retirement Organization. "So we're not just raising our arms saying 'we're frightened.' "

Salaried retirees are among the most vulnerable groups in restructurings and bankruptcies because they typically aren't represented by unions, and companies are generally free to slash their retirement packages.

Representatives of salaried retirees from GM, Chrysler, Ford and Delphi are scheduled to discuss ways of protecting their retirement packages in a conference call on Friday, members of the groups said.

Under the government's direction, GM and Chrysler could follow Delphi into bankruptcy court. GM has until June 1 to work out new labor terms with the United Auto Workers union and a debt-reduction agreement with its bondholders. Chrysler has only until May 1.

Salaried retiree groups have asked to meet with the auto task force but haven't yet been granted a meeting.

Over the years, GM has increased the share retirees must pay for their health care and, starting this year, GM eliminated medical coverage for retirees and dependents older than 65, who are eligible for Medicare. In lieu of company-funded benefits, GM gives these retirees a "medical expense credit" to help offset additional costs.

"We have been neglected," said Jack Dickinson, president of the GM National Retiree Association who also runs a Web site www.overthehillcarpeople.com for GM retirees.

The white-collar retirees typically pay a larger share of their medical benefits than their hourly counterparts, but still have generous benefits relative to the overall work force.

GM's salaried retirees for years have seen increases in their premiums and co-pays as the auto maker raced to slash its crushing health-care burden.

The groups formally joined forces late last month to make sure their concerns are heard. In a letter to Treasury Secretary Timothy Geithner and National Economic Council Director Larry Summers, dated March 24, the groups argued that, "just like their union counterparts, nonunion workers contributed greatly to building our economy and this nation."

On Wednesday, Sen. Sherrod Brown (D., Ohio) wrote a letter on behalf of the groups to Mr. Geithner. Sen. Carl Levin (D., Mich.) sent a similar letter earlier this month.

The groups' biggest problem is that they have few bargaining chips. Unlike the UAW, salaried retirees aren't locked into labor contracts requiring protracted negotiations. Instead, their contracts often include clauses that allowed benefits to be cut. "We're the people who invented the stuff, built the stuff, designed the stuff," said Dennis Black, interim chairperson at Delphi Salaried Retirees Association. "But we're not represented."

Write to Sharon Terlep at sharon.terlep@dowjones.com

Updated: 04/12/09 07:18 AM

GM retirees worry that their pensions might be cut

By Holly Rosenkrantz - BLOOMBERG NEWS

Den Black, a retired General Motors Corp. engineering executive, says he’s worried and angry. The government- supported automaker is going bankrupt, he says, and he’s sure some of his retirement pay will go down with it.

“This is going to wreck us,” said Black, 62, speaking of GM retirees. “These pledges from our companies are now garbage.”

As the biggest U. S. automaker teeters near bankruptcy, workers and retirees like Black are bracing for what may be $16 billion in pension losses if the Pension Benefit Guaranty Corp. has to take over the plans, according to the agency.

As many as half of GM’s 670,000 pension-plan participants might see their benefits trimmed if that happened, an actuary familiar with the company’s retirement programs estimates.

The possibility that GM might dump its pension obligations is likely to intensify debate over the treatment of executives of companies that receive U. S. aid. GM Chief Executive Officer Rick Wagoner, ousted by the Obama administration last month, may receive $20.2 million in pensions, according to a regulatory filing.

“The core issue is fairness,” said Harley Shaiken, a labor professor at the University of California at Berkeley. “To have workers lose a significant amount of their pension after giving a lifetime to building a company is devastating under any circumstance. It’s made all the more worse by the symbolism of a $20 million payoff at the top.”

Measured by participants, GM’s pension plan would be the largest taken over by the PBGC, a quasi-government corporation created by Congress in 1974 to protect pension programs of bankrupt companies.

Dealing with pensions may be one of the thorniest issues facing President Obama in a GM bankruptcy. Unions including the United Auto Workers rallied behind his candidacy, spending $52 million to help elect him last year, according to Washington-based Open- Secrets.org, which tracks campaign spending.

“It’s going to be a very political decision,” said John Casesa, who follows the auto industry as managing partner of Casesa Shapiro Group, a New York consulting firm. “I’m not really sure how this will go.”

GM’s pension system had a $20 billion shortfall as of Nov. 30, 2008, based on numbers the company provided the PBGC, said Jeffrey Speicher, a PBGC spokesman. By law, the agency would be able to make up only $4 billion of that, he said.

“The rest would be lost,” Speicher said.

Current and future retirees of Chrysler LLC, the other U. S. automaker on life support, would forgo $7.1 billion, Speicher said. Chrysler’s plan is underfunded by $9.3 billion, and the agency would cover $2.2 billion, he said.

Chrysler’s plan, with 250,000 members, would be the second-largest taken over by the PBGC. The biggest to date was the 120,000-member United Airlines plan, absorbed by the PBGC in 2005. The agency had an $11.2 billion deficit itself as of Dec. 31.

The $16 billion that would be lost by GM workers and retirees is a “big deal,” said Frank Todisco, senior pension fellow at the American Academy of Actuaries in Washington. “That’s a significant haircut on one’s benefits.”

The maximum amount that PBGC can pay retirees 65 or older is $54,000 a year. They would lose anything they get over that amount. Beneficiaries under 62 would be likely to lose a supplement of $15,000 to $18,000 paid by the GM plans to bring pensions up to $36,000 annually, according to the actuary with knowledge of the plans, who declined to be identified discussing potential cuts.

GM declined to disclose pension benefits or discuss what might happen to them should it file for bankruptcy.

“We won’t speculate on the matter,” said Renee Rashid-Merem, a spokeswoman for Detroit-based GM, which has received $13.4 billion in U. S. aid and asked for as much as $16.6 billion more.

Obama on March 30 gave GM until June 1 to come up with deeper cuts in debt and labor costs than proposed by Wagoner to avert bankruptcy. He gave Chrysler until May 1 to form an alliance with Italy’s Fiat SpA.

“Our goal, of course, is to do everything realistic to protect workers and their pensions,” said White House spokesman Bill Burton.

“We expect Chrysler’s pension plans to be nearly fully funded and have ample liquidity to continue benefit payments as required,” said Michael Palese, a spokesman for the Auburn Hills, Michigan-based company.

Christine Moroski, a United Auto Workers spokeswoman, declined to comment.

Black, the former engineering executive, says he worked at GM for 34 years and for two years at Delphi Corp., the bankrupt auto-parts supplier formerly owned by the automaker.

“If GM loses the pensions, it would mean 25 percent of my source of income would evaporate,” said Black, who declined to say what his retirement pay is. “I would have to go back to work.”

Returning to work may not be an option for other GM retirees, Black said. “I’ve talked to lots of folks who would be devastated,” he said.

Not all companies that go bankrupt dump their pension obligations, said Speicher, the PBGC spokesman. Northwest Airlines Corp. emerged from bankruptcy in 2007 without terminating its plans, he said.

GM’s plan also is in relatively better shape than others, because it’s about 87 percent-funded, according to the actuary, compared with the typical pension plan’s 60 percent to 70 percent funding.

“The question of whether GM’s pension obligations are too great to allow it to operate effectively is a complicated one, and far from obvious,” said Andrew Oringer, an employee-benefits lawyer at White & Case LLP in New York.

“Nobody really knows” what would happen with GM pensions in a bankruptcy, said Jack Dickinson, president of an advocacy group for GM retirees called Over the Hill Car People.

The “PBGC doesn’t want to touch it, they’ve got their own problems,” said Dickinson, 65, who worked for 34 years in sales and management at GM. “We’re just hoping they take a hands-off approach. We depend on that money; We earned it, and it’s part of our compensation.”

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Wednesday, March 26, 2009

Salaried retirees ask for hearing by White House auto task force

David Shepardson / Detroit News Washington Bureau

WASHINGTON -- A group of automotive salaried retirees wants the Obama Administration's auto task force to hear its views.

The presidents of the General Motors Corp., Ford Motor Co., Chrysler LLC and Delphi Corp. salaried retirees associations sent a letter Tuesday to the co-chairs of the Obama auto task force, Treasury Secretary Tim Geithner and National Economic Council director Larry Summers, urging them to heed the needs of more than 200,000 automotive industry salaried retirees.

"You must realize that, just like their union counterparts, non-union workers contributed greatly to building our economy and this nation. We worked countless hours of overtime, often without compensation, helping to strengthen and build our companies. We earned our pay and benefits over the years sacrificing our time and our family life in the belief that we would be able to have a secure retirement for ourselves and our families," the letter says.

"We were promised a secure retirement by our companies. However, they have not kept their promises. In the past few years, the trend to reduce the benefits of non-union employees and particularly retirees has increased dramatically. Since 2006, the Detroit 3 (Chrysler, Ford and GM) have reduced or eliminated life insurance, have terminated health care insurance for non-union retirees on Medicare and have instituted cost-sharing provisions far in excess of those imposed upon union represented employees and retirees."

The letter noted that Delphi Corp. recently won permission to eliminate health insurance and life insurance for about 15,000 salaried retirees starting April 1. Delphi's retirees have sought to block the move in court, which will save the company more than $70 million annually and reduce the company's long-term liability by $1.2 billion.

Chuck Austin, president of the National Chrysler Retirement Organization, said all they were requesting was to be heard.

"Salaried retirees have been ignored in all of the discussions. We've already given up too much, and they should be fair," said Austin, 67, of Lake Orion, who retired from DaimlerChrysler in 2004 after 40 years with the automaker.

The Treasury Department didn't immediately respond to a request for comment.

You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.

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Salaried auto retirees push for benefits

Meeting sought with auto panel

BY JUSTIN HYDE
FREE PRESS WASHINGTON STAFF  - March 26, 2009

WASHINGTON -- A coalition of salaried retirees from Detroit automakers and Delphi Corp. asked Wednesday to meet with President Barack Obama's auto task force, saying the firms should be required to preserve benefits for white-collar retirees as part of any rescue.

Salaried retirees have faced several cuts in recent years as the companies slashed costs, while benefits of hourly retirees are protected by UAW contracts. Last year, General Motors Corp. said it would end regular health care benefits for 97,000 white-collar retirees, saying they would have to use a combination of Medicare (when they become eligible at age 65) and a supplemental insurance plan instead.

In a letter to Treasury Secretary Tim Geithner and National Economic Council director Larry Summers, the groups say the task force should set aside money to help pay for the benefits of 200,000 white-collar retirees, require the companies to maintain health care and shore up pension plans.

"We believe any policies and procedures put in place should represent equality of sacrifice," the letter said. "However, it is clear that nonunion retirees have given up far more of their benefits and security than any other group."

The request was sent by four groups representing white-collar retirees at GM, Ford Motor Co., Chrysler LLC and Delphi.

The UAW has agreed to changes in its contract with current workers, and to take stock instead of cash for its retiree health care trust fund, raising the risks that the trusts could run low of money in the future and be forced to cut benefits. The union has resisted calls to reduce the benefits hourly retirees receive.

The administration is expected to unveil a framework for additional aid to GM and Chrysler within days.

Contact JUSTIN HYDE at 202-906-8204 or jhyde@freepress.com.

http://www.freep.com/article/20090326/BUSINESS01/903260347/1210/BUSINESS/Salaried+auto+retirees+push+for+benefits