In a complicated settlement, the Pension Guaranty Benefit Corporation (PGBC) has assumed the pension obligations of auto parts manufacturer Delphi Corp., formerly owned by General Motors.
Delphi, which recently closed plants in Ohio and other states, has been in bankruptcy the past four years. However, it has continued to make pension contributions.
The PGBC has been watching closely all the while, placing liens on offshore accounts not covered by the bankruptcy ruling.
Delphi has been looking for a buyer and claimed the PGBC’s hard line was scaring off prospects. The tough stance was also at odds with the Obama administration’s plan to fast track GM’s bankruptcy and get the auto industry back on its feet.
Now that the PGBC has taken over the pension fund, the oversight pressure is off, but not everyone is happy.
Many of Delphi’s unionized workers are former GM employees. When GM spun off Delphi, it promised the United Auto Workers union it would make up any pension shortfall the new company might have. GM reiterated that promise to the PGBC during the settlement negotiation.
Delphi’s nonunion employees, however, are up in arms, noting that retirees almost always wind up settling for reduced benefits when PGBC takes over a pension.
Their fear: That the PGBC won’t be around long enough to continue paying full retirement benefits. It collects premiums from its insured pensions in the same way the FDIC insures bank deposits. Currently, it can meet its obligations, but it is running a $33.5 billion deficit in total.