Appeals court upholds pension cuts to retired GM execs

Appeals court upholds pension cuts to retired GM execs
Thu, Aug 8

A federal appeals court on Wednesday rejected a lawsuit by more than 100 retired General Motors executives over cuts to their retirement benefits.

As a condition of the U.S. Treasury’s $49.5 billion GM bailout in 2009, the bankrupt automaker was required to cut, by two-thirds, executive pensions that exceeded $100,000 a year.

The retired executives who sued include a number of former GM vice presidents, including John G. Middlebrook, who was vice president and general manager of vehicle

brand marketing. He also was a general manager of the Chevrolet Division and helped launch GM’s now-shuttered Saturn division.

Others who sued include Richard C. Nerod, retired president of GM-Latin America, Africa and Middle East; and Donald W. Hudler, a GM vice president and former president of Saturn.

The plaintiffs contended GM misquoted terms of its executive retirement plan and shouldn’t have included benefits from the separate salaried retirement plan when determining if they were subject to the reduction.

A three-judge panel of the Sixth Circuit U.S. Court of Appeals based in Cincinnati unanimously ruled in GM’s favor, upholding U.S. District Judge George Caram Steeh’s 2011 ruling dismissing the suit, saying the retirees interpretation of the language was “implausible.”

In its eight-page ruling, the appeals court acknowledged a “slight misquoting” by GM in responding to the retirees, but said it was clear that the cuts apply.

GM said the suit was without merit and that it had followed the terms of the executive pension cuts as laid out by the Obama administration.

For former top executives, GM saved $221 million by ending a portion of its Supplemental Employee Retiree Plan. Most top executives’ pensions were cut by two-thirds, including former GM CEO Rick Wagoner, whose pension fell from roughly $20 million to about $8.5 million. The cuts were imposed to ensure that all stakeholders had to accept concessions as part of the automaker’s bankruptcy.

The government initially owned 61 percent of the “new” GM but has since reduced its ownership stake to about 13 percent. GM became a publicly traded company again in November 2010. The Treasury expects to complete its stock sell-off by the end of March.

Overall, GM saved $4.6 billion by trimming pension and retiree health care benefits during its bankruptcy reorganization, the company said in a filing in 2010.

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