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.
The potential cuts, which haven’t been finalized, could impact salaried retiree life insurance, salaried retiree health care, executive non-qualified pensions, executive retiree life insurance and non-UAW hourly life insurance, “and we are still working on how to accomplish this in the most appropriate way,” GM said, in a statement on its web site.
Among the items subject to discussion is a $22 million pension obligation owed former chairman and CEO Rick Wagoner. As GM was going down in flames, last winter, Wagoner missed out on a golden parachute and could lose a substantial portion of his pension, unlike executives in financial firms that the government bailed out for far more taxpayer dollars.
“We are currently in discussions with the U.S. Treasury regarding the reductions and we will communicate to the affected employees and retirees as soon as this matter is resolved,” said GM spokeswoman Renee Rashid-Merem.
“Some of those plans are going to be reduced,” said Rashid-Merem, who also noted that some non-qualified pensions for executives and executive retiree life insurance could also be reduced in value. The non-qualified plans are not protected by federal regulations under the Pension Benefit Guarantee Corp., a federal unit designed to cover pensions shed by companies undergoing bankruptcy – such as the American steelmakers that folded in the 1980s and ’90s.
GM vice chairman Robert Lutz has already filed a claim in the Chrysler bankruptcy for benefits that he is owed under a non-qualified pension plan. Lutz admitted, in a conversation with TheDetroitBureau.com, last week, that he doesn’t expect to gain much, with his claim, other than “legal fees.”
Former Chrysler chairman Lee Iacocca also has lost his car and part of his pension in the Chrysler bankruptcy. Lutz’s and, presumably, Iacocca’s claims for non-qualified plan benefits will have to be settled from the assets left behind in the old Chrysler, which will be liquidated by the bankruptcy court while the New Chrysler Group chugs along largely debt-free.