Monday, October 10, 2005

More Bad News

More Alarming News

“The Senate is nearing a floor vote on a pension reform bill, but lawmakers are more focused on the financial health of the PBGC than the ailing companies. That means a new law will most likely require bigger -- not smaller -- pension payments from troubled companies. Opponents of this approach say it would force a death spiral that almost ensures bankruptcy and the termination of the pension plan. The PBGC's pension burden is reaching a crisis stage after numerous failures in the steel and airline industries in recent years. The agency acts like an insurer, and it is funded by premiums paid by companies that offer traditional pension plans. The news is not as bad for 19,500 Delphi hourly workers who used to be General Motors Corp. workers. Those employees will be protected by a clause negotiated between GM and the UAW at the time Delphi was spun off in 1999. GM is supposed to make up the difference between what the PBGC pays out and what they would have been entitled to. But the GM-UAW deal is convoluted, and Delphi is required to reimburse GM for those costs. ‘It certainly creates some exposure for GM, but we have not been able to estimate the exposure,’ said GM spokeswoman Toni Simonetti.” 10-0905

The latest bombshell to rock an already wobbly AmeriKKKan economy is the giant auto parts manufacturer Delphi Corp has filed for Chapter 11 bankruptcy protection. Delphi was spun off from General Motors in 1995 and is a key vendor and supplier for parts. This bankruptcy comes at a time when all the major US auto makers are facing their own financial problems. Ford and GM’s bond rating have been reduced to junk in recent months by two major bond rating agencies, Moody’s and Stand and Poor. We don’t hear much about things like this because the corporate media tends to suppress this information for fear the public might start asking questions. The Delphi Corp is headed by a man named Robert S. (Steve) Miller. Delphi workers should be alarmed knowing that as CEO of Bethlehem Steel, Miller also stewarded that company into federal bankruptcy. There he was able to default on Bethlehem’s pension costs by passing those obligations off onto the Pension Benefit Guaranty Corp., a federal agency that protects workers whose pension plans are terminated. For Bethlehem it was a stroke of genius because it got the company out from under $3.6 billion dollars in pension obligations to the company’s 95,000 workers and retirees. Miller left Bethlehem Steel and ended up at Delphi Corp one the top corporations in AmeriKKKa which was formerly known as the Automotive Components Group (ACG) which was renamed Delphi Automotive Systems as a separate entity from its parent corporation GM. The name was changed again to Delphi Corp in 2002. Miller, in addition to his history at Bethlehem Steel was also involved in the restructuring and bail out of Chrysler in 1979. He was a key member of the Lee Iacocca team. Over the years, Miller has become the guru of financial crisis and corporate bankruptcy. Now at Delphi he is navigating that company through the troubled waters of bankruptcy and recovery. While this may be good news to Delphi’s anxious shareholders, it does not bode well for the company’s hourly workers and retirees.
Unionized working class folks around the nation should be concerned about what is happening at Delphi, Delta and Northwest Airlines. For those of you who don’t remember Delta and Northwest Airlines recently defaulted on their pension obligation when they filed for bankruptcy in federal court. The problem with that in addition to the need to attempt to keep major players in an airline industry that is already in financial trouble afloat, their workers and retirees may face the prospects of losing their pension or receiving a lot less than they contracted for .Both Delta and Delphi have passed their pension responsibilities onto the Pension Benefit Guarantee Corp a quasi-government insurer that collects payments from employers to cover the possibility of pension terminations and defaults. However the problems at Delta, Northwest and Delphi are exacerbated by the fact the PBGC is itself facing a substantial shortfall in revenue. Reports are the current deficit of the PBGC stands at a whopping $30 billion dollars. Various agencies are bickering over the exact figure but the fact remains the PBGC is facing a shortfall of billions of dollars at a time when more and more industries’ (steel, the airlines and auto) under-fund their own employee pension programs and then when they get into financial difficulty dumps their pension obligations onto the PBGC (and ultimately the taxpayer). This is a form of class warfare, especially when you consider the CEOs of these failed companies are receiving record yearly compensation packages in the millions of dollars. For the CEO in a capitalist system, their first obligation is to the stockholders. Next comes the creditors, and last on the totem pole come the workers and retirees! The PBGC was bailed out in the early ‘90's. Now thanks to the stratagem of defaulting on their pension obligations to their workers, the lowest priority of the owning class, AmeriKKKa is facing the situation again in 2005. Currently there is legislation being worked on to ‘fix” the problem of pension under-funding and the drain on PBGC. An article on the Women Matter Website explaining what the PBGC is and what it does also shares news about legislation the writer hopes will solve the problem. “Finance Committee Chairman Charles E. Grassley of Iowa (R) and Michael B. Enzi of Wyoming (R) worked with Max Baucus of Montana (D) and Edward M. Kennedy of Massachusetts (D) to create a bill that’s likely to pass in the Senate. The legislation would require companies to fund their plans 100 percent instead of taking money out of pension funds and "smoothing" it over. "Smoothing" is a term critics use to refer to an accounting technique that hides the true amount in the pension funds. The Senate bill would require companies to be measured according to the quality and safety of their bonds, or bond ratings. Companies with low bond ratings would be required to put more money into their pension funds and companies in bankruptcy would not be allowed to increase their retirement benefits. Further, the bill requires companies to pay a higher insurance premium to the PBGC. The rate would be $30 per year per participant, up from $19. Lawmakers hope that this extra revenue will loosen the budget and prevent drastic cuts.” According to the article the House version is coming along more slowly and Bu$h administration has not weighed in on this issue.
Given the corporatist bent of this administration and the judges it is appointing to the federal courts don’t look for anything that will benefit working folks. Keep your eyes and ears open for further developments on this front because whether we work in the auto or airline industries or not, their economic health and stability impacts us all.



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