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GM Bankruptcy Could Cripple White-Collar Retirees

"Not fair, right or legal," critics contend.

by on Jun.03, 2009

GM retirees could lose much of their benefits as the result of their bankruptcy.  Senior executives, such as now-retired V.Chairman Bob Lutz, could lose millions, enough, he admitted, to make it hard to afford another jet.

GM retirees could their benefits during bankruptcy proceedings. Senior execs, such as now-retired Vice Chairman Bob Lutz, will lose millions, enough, he admitted, to make it hard to afford another jet.

The proposed fast-track sale of  the productive assets of General Motors Corporation to the  “New GM”  as part of  bankruptcy proceedings calls for the UAW to get  notes and GM stock in lieu of $20 billion in cash owed to a heath care trust  for retirees. The stock is potentially worth nothing or maybe a fortune  if — big if — the company and the economy revive. Even so, it is highly likely that some benefits will have to be trimmed and or eliminated in the future.

For  salaried retirees, however, the equation is different.  They’re in to get nothing – except the promise from the company that critical benefits will not be cut or eliminated critics say.

“That’s not fair, right or legal,” contends GM Retiree Association  president John Christie. “If GM wants a record-speed drive through bankruptcy, we need to make sure salaried retirees aren’t run over on the way to the finish line.”

“It is critical for salaried retirees to have an effective voice through a committee,” said Dean Gloster of Farella Braun & Martel, the San Francisco law firm recruited by the GMRA to watch out for the interest of salaried retirees.  “Going through Chapter 11 without representation,” he added, “is like going to a gunfight without a gun and the result would be just as final and predictable.”

GM spokesman Tom Wilkinson said the automaker intends to honor commitments made to salaried retirees.  However, GM is working with the U.S. Treasury to reduce some retiree benefits, including executive pensions, company officials acknowledged. The UAW has already agreed to substantial reductions in benefits.