GM retirees pinching pennies

September 28, 2009

GM retirees pinching pennies

Bankruptcy throws uncertainty into plans

By Bill O’Brien
Traverse City Record-Eagle

TRAVERSE CITY — Duane D’Arcy always considered himself a “happy-go-lucky Irish guy.”

The tag seemed to fit. He retired in 1993 after a rewarding 33-year career as a General Motors Corp. supervisor, and returned to live in northern Michigan, where he’d met his wife in the mid-1950s.

Down to bare bones

The couple looked forward to a comfortable, secure retirement, and counted on benefits accumulated after Duane’s tenure with what for decades stood as the world’s largest automaker.

“We thought everything was going to be rosy, with no problems whatsoever,” D’Arcy said. “We thought we were pretty well covered.”

These days, D’Arcy considers himself neither happy nor lucky. He’s among tens of thousands of GM retirees and their families staggered in recent months by the company’s reorganization efforts.

Retirees watched as their health insurance vanished, extended care coverage and other benefits disappeared, and life insurance crumbled — in some cases to pennies-on-the-dollar value.

Retirement now is anything but carefree for folks like D’Arcy, who’s burning through his retirement nest egg to pay for everyday living expenses, and for costs tied to his wife’s health problems.

At 76, and to make ends meet, D’Arcy recently refinanced his mortgage for another 30 years.

“If I hadn’t refinanced my house, we’d be going down the drain right now,” D’Arcy said. “We’ve restructured our finances, and cut them back as far as we can. It’s not the life we envisioned.”

“It’s been very, very traumatic.”

D’Arcy’s struggle is just one example of life-altering challenges faced by retirees from GM and other automakers across Michigan and the nation, said Karen DeOrnellas, a former Michigan GM worker who’s part of a recently organized group that advocates for GM retirees.

“There are a lot of people out there who will not be able to keep their homes, or buy their medications,” DeOrnellas said. “It’s demoralizing and depressing for retirees.”

A GM family

D’Arcy’s father worked at GM for more than 40 years. So did his uncles and his children.

“My whole family was GM,” D’Arcy said.

He worked as a materials handling supervisor at a plant in Willow Run, following a four-year Air Force stint in the mid-1950s at a tiny base in Empire. He took a Dale Carnegie course to boost his management skills and volunteered to teach it to GM coworkers.
“I always tried to give 110%,” he said.

D’Arcy accepted an early retirement offer in 1993, a year before his plant was to close. He moved north and worked part-time at other local jobs, including a lumberyard and office supply store.

“Things were going well,” he said.

But it began to unravel in 2008 amid GM’s financial deterioration. By July 2008, salaried GM retirees age 65 and over learned their health care coverage would be canceled by Jan. 1, 2009, in lieu of a $300 monthly pension boost. But supplemental coverage D’Arcy purchased to replace his GM benefits cost him more than $700 a month, a wrench tossed into his retirement planning.

“I didn’t expect to live in luxury. But I expected to be able to go on vacation once in awhile … to go on with my life,” D’Arcy said. “My dad must be rolling over in his grave, seeing what they’ve done.”

Richard Gielow, who moved to his family’s three-generation farm in Peninsula Township after retiring in 1990 as a senior engineer in GM’s Cadillac division, also worries about his would-be golden years.

“Financially, we’re in pretty good shape, but that’s now,” said Gielow, acknowledging his financial situation isn’t as dire as other GM retirees.

GM, though, recently reduced its maximum life insurance payout to $10,000, slashing coverage that to some employees amounted to hundreds of thousands of dollars. Retirees may supplement their benefits through a private insurer at their own cost, but death benefits for the first two years equal only the amount of premiums paid.

“Everybody has been affected by the life insurance reduction,” DeOrnellas said. “There wasn’t a lot of warning.”

GM also eliminated retirees’ extended care coverage, insurance Gielow purchased for years that provided up to $50,000 a year for supplemental insurance coverage or to pay for expenses like nursing home care.

“That was a big blow. I was kind of depending on that coverage,” Gielow said. “Here I am, 74, to even start looking for (extended insurance), there is no way at this age I could afford it.”

On Jan. 1, 2010, salaried retirees, surviving spouses and dependents also will lose dental, vision and extended care benefits, and retain only medical and prescription drug coverage with substantially higher copays and monthly contributions, according to GM.

Pensions are covered by the Employee Retirement Income Security Act and thus far have not been reduced.

’Rapid negotiations’

Several benefits cuts stemmed from GM’s June bankruptcy, when the automaker listed assets of $82.3 billion, compared to nearly $173 billion in liabilities.

GM gutted benefits company-wide, but unionized employees worked out a separate agreement that protected much of their pay and benefits. Salaried employees, though, held little bargaining power as GM and officials in Washington pushed to quickly resolve the automaker’s reorganization and free it from bankruptcy.

GM counts an estimated 122,000 salaried retirees, compared to nearly 400,000 unionized retirees.

“There was a series of fairly rapid negotiations,” DeOrnellas said. “The salaried retirees were really not involved at all.”

Dean Gloster is a bankruptcy attorney with a San Francisco-based law firm that represents the General Motors Retirees Association. Under federal law, Gloster said the “new GM” that emerged from bankruptcy isn’t legally responsible for past debts and obligations.

“The truth is, the outcomes can be devastatingly unfair,” Gloster said.

The retirees association filed a motion in U.S. bankruptcy court to establish a benefits committee on behalf of GM’s salaried employees. But federal bankruptcy Judge Robert Gerber rejected the proposal.

“The retirees were not even permitted to be a speed bump as (GM) drove out of bankruptcy,” said Gloster, who’s received e-mails from GM retirees across the country who struggle with the drastic changes.

“In some cases, it’s just heartbreaking,” Gloster said.

Some GM retirees and their survivors suspect GM isn’t done. Debra Dodd of South Lyon worries about her mother, Traverse City resident Virginia McIntyre, whose husband died in 1986 after a career at GM.

She was able to buy supplemental insurance with the extra $300 in pension payments, but Dodd said more benefit cuts will create a hardship.

“It would really mean a lifestyle change for her,” Dodd said. “I’m sure we haven’t seen the last of it.”

D’Arcy also frets.

“I’m still scared to death something else is going to happen,” he said. “GM isn’t out of the woods yet, and if General Motors goes down, we go down.”

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