Former auto czar Ron Bloom will be facing some tough questioning on the GM bailout and Delphi bankruptcy.
Former White House “Car Czar” Ron Bloom will be one of those called to testify in what could be an angry Congressional session looking into the long-term impact of the General Motors bailout.
Among other things, lawmakers are expected to focus on the decision to abandon the pension program run by Delphi, GM’s former parts subsidiary. Delphi, which underwent the longest corporate bankruptcy in U.S. history, walked away from a program that covered about 70,000 retirees. Some have lost as much as 65% of their benefits.
Among others called to testify will be Vince Snowbarger, the deputy director of the Pension Benefit Guaranty Corp., the agency created to assume control of failed pension programs. Delphi’s pension program was underfunded by $7 billion, and the PBGC will cover $6.1 billion of that – making it the second-largest failed pension program ever assumed by the agency.
While Delphi did not receive a direct federal bailout, its survival – and eventual emergence from Chapter 11 – depended on its ongoing relationship with GM. That was enough to bring it under the umbrella of the House Oversight and Government Reform Committee, which will be holding a Wednesday hearing titled, “Lasting Implications of the General Motors Bailout.”
As part of the eventual bankruptcy settlement, GM invested $1 billion to “top up” the union side of the Delphi pension program. In all, GM invested $3 billion of its own bailout to help pull Delphi out of Chapter 11 in late 2009.
The partsmaker has traditionally been one of GM’s largest suppliers, though it has shifted its business strategy since emerging from bankruptcy protection and has dramatically broadened its customer base, cutting sales to GM sharply in the process.
While hourly workers were largely protected by GM’s investment, hourly workers suffered significant pension cuts. Among other things, they have lost medical and life insurance coverage, and monthly cash payments were sharply reduced, as well.
Salaried employees have an ongoing lawsuit in U.S. District Court in Detroit aimed at recovering their lost benefits – and a group organized by retirees has been sharply critical of the Obama Administration’s handling of the overall bailout and, in particular, the government’s approval of GM’s selective investment in Delphi’s union pension program.
When you cut people’s medical and life insurance coverage, cut their pension, Medicare, Medicaid, Social Security, to where they have maybe enough money just for the basic needs and no extra money to spend on other things, this helps our economy how?
Here’s the flip side: what would have happened if Delphi was left to try to pull out of bankruptcy on it’s own? I am not taking sides, just asking the question.
Paul A. Eisenstein
Publisher, TheDetroitBureau.com
Maybe it is just me, but I feel that a lot of the Delphi workers should fall under the GM umbrella entirely. In my town, Delco was spun off into Delphi, and a lot of high seniority GM Delco workers were spun right along with it. At first, in the mid 90s, the Delphi deal was nothing more than a GM corporate realignment, as I remember, and I think a lot of Delphi GM employees were blindsided by the actual spinoff. I feel sure that there were procedures in place to leave the Delphi plants and transfer back to GM after the spinoff, but there were so many cross-agreements between GM and Delphi that a lot of workers just thought that Delphi was actually still part of GM, just taking under-the-table money from GM so GM could get components plants off their books under the guise of Delphi. As a matter of fact, I knew of people with GM rights who had the choice of staying with GM and transferring to other GM plants in other states or staying “home” here in Indiana and going to a Delphi plant, and many made that choice, again under the assumption that Delphi was just a GM ploy. What I am trying to say is that I believe that there are a lot of Delphi workers who spent the majority of their working lives at GM, many actually had thirty years or more at GM, and that Delphi was in fact operating with a lot of GM funding and under the GM umbrella, and that these GM “orphans” should end up with GM benefits at retirement. Just my opinion.
I have a number of friends that were GM employees spun off with Delphi who would agree with you.
Paul E.