07-25-2009, 05:16 PM
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Head Coach
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Join Date: Apr 2004
Posts: 14,761
Points: 158,462.56
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Total Points: 158,462.56
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Delphi and PBGC settle pension dispute - WSJ.com
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Welcome to the General Motors bailout, part three—or is it four, or five? It’s hard to keep up, but this week the federal Pension Benefit Guaranty Corporation took over the pension liabilities of Delphi, the auto-parts spinoff of GM that has been working its way through Chapter 11 since 2005. As with the previous taxpayer rescues, this one includes a special favor for the United Auto Workers.
Under the agreement, the PBGC will assume some $6.2 billion in pension liabilities from Delphi, including both hourly and salaried employees. That’s the second biggest pension bailout in PBGC history, and it takes billions of liabilities off the books for GM. As Delphi’s former parent, GM had agreed to take responsibility for billions of dollars of Delphi’s pension obligations to its hourly employees.
It will be months before Delphi employees know what percentage of their expected pension they’ll receive, but not all pensioners are created equal in this arrangement. UAW employees will have their pensions made whole by GM, which insists it is merely fulfilling its end of a deal made with the UAW in 1999 (when it spun off Delphi) to cover any future pension shortfall. Few such obligations usually survive bankruptcy, but, nah, we’re sure politics had nothing to do with it. Less fortunate are smaller unions and Delphi’s salaried employees, whose pensions may see drastic reductions and who already lost their health care and life insurance plans on April 1. They would seem to lack the UAW’s clout inside GM and the Obama Administration.
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By our math, this puts the taxpayer contribution to GM’s survival at nearly $70 billion: Some $50 billion for the serial rescues of GM itself, another $12.5 billion for its GMAC credit arm, and now $6.2 billion from the PBGC.
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Meanwhile, the Administration is putting the PBGC, an ostensibly independent agency, at further financial risk. After Delphi filed for bankruptcy, the agency put liens on its overseas assets, providing an offset in case it had to take on the company’s pension liabilities. Now, lo and behold, the liens have been removed, allowing Delphi to sell its assets in bankruptcy court. GM will pay PBGC $70 million for the favor of releasing its liens, which Mr. Speicher says totalled about $200 million. Nifty deal for GM, though not for taxpayers.
When the PBGC was created in 1974, Democrats running Congress assured everyone there was no taxpayer risk because the agency would be funded by fees from pension plans, as well as by the assets of plans the company takes over. But like Fannie Mae, we are learning that sooner or later these government guarantees always come due. Now the PBGC has a $33.5 billion deficit even before Delphi, and more bankruptcies are headed its way. Mark it down as one more way the taxpayers are being put on the hook for GM, the UAW and Michigan’s 17 electoral votes in 2012.
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dayton has a thread on the disaster that is the PBGC
the "good news" is gm is the tax payer, right? i guess...
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