GM rightly favored Delphi UAW pensions over salaried, Rattner says

GM rightly favored Delphi UAW pensions over salaried, Rattner says
Nick Bunkley
Automotive News | September 11, 2013 – 10:13 am EST

Steven Rattner, the former auto czar who led the government bailout of General Motors and Chrysler, says GM was right to boost pensions of hourly retirees at Delphi Corp. while cutting off salaried retirees because it had already fully funded the salaried retirees’ pensions and needed to avoid angering the UAW.

Rattner plans to testify in defense of GM’s decision today in Washington during a hearing held by the House Oversight and Government Reform Subcommittee on Government Operations.

“The UAW was an absolutely critical party to bring to the negotiating table,” Rattner says in written testimony submitted to the committee and posted on its Web site. “They had the power to hold up a deal in bankruptcy or to strike, either of which could have been devastating to GM’s efforts to get back on its feet and in turn, to the U.S. economy. This disparity in bargaining leverage may not seem fair, but it was the reality.”

Rattner, who helped guide GM through bankruptcy protection in 2009 with the assistance of a $51 billion federal bailout, contends that giving so-called “top-ups” to salaried retirees “would have been like paying for the pensions twice.” Before spinning off Delphi into an independent supplier in 1999, GM fully funded pensions for salaried employees but not for hourly workers, who at that time negotiated for a top-up agreement, he explains.

Honoring that deal was “commercially reasonable,” Rattner says in his testimony. Giving similar benefits to salaried employees, who did not have a similar agreement, “while generous, would not have been consistent with the goals of restoring GM to viability or protecting U.S. taxpayers’ investment,” Rattner says.

Delphi, which emerged from a four-year bankruptcy in 2009, terminated the pension plans for some 70,000 of its retirees, leaving a $7.2 billion deficit. The government’s Pension Benefit Guaranty Corp. then took over the plans, assuming liability for about $6 billion of the shortfall.

The salaried pensioners have continued to fight that decision in the courts ever since.

To see other testimony prepared for today’s hearing, click here.

Rattner: “The UAW was an absolutely critical party.”

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