DELPHI Future of retirees' pensions unclear GM foresees $11B obligation at most

One report says GM has a 30 percent chance of filing for bankruptcy.
THE VINDICATOR
By DON SHILLING
VINDICATOR BUSINESS EDITOR
More than 1,200 area Delphi Corp. retirees have pensions with an uncertain future.
These pensions are among the 12,000 nationwide that Delphi is trying to jettison in an effort to cut costs.
General Motors Corp. may have to assume their pensions if Delphi backs out, but no details have been released.
Scott Opincar, a business restructuring expert with the McDonald Hopkins law firm in Cleveland, said the amount that GM is responsible for is unclear and likely to take a long time to resolve.
GM said it is studying the issue and believes its obligations for Delphi pensions and retiree health-care expenses range from zero to $11 billion. GM is connected to the Delphi plan because it used to be Delphi's parent company.
GM's future debated
In the meantime, there is talk that GM could be forced into bankruptcy because of these costs and its own obligations to retirees.
Robert "Steve" Miller, Delphi chief executive, said this week that both GM and Ford could be in bankruptcy within a few years if they don't cut labor costs.
Ronald Tadross, analyst with Banc of America Securities, estimates GM has a 30 percent chance of filing for bankruptcy within two years. That's up from 10 percent before the Delphi filing, he said in a report issued this week.
Opincar said he doesn't expect a bankruptcy filing from GM soon. Instead, the automaker will look for cost-saving measures from the United Auto Workers in contract negotiations in 2007, he said.
If GM can't get the concessions it wants, a bankruptcy filing is possible, he said.
Delphi's debts
Meanwhile, the federal Pension Benefit Guaranty Corp., which insures private pensions, said Tuesday that Delphi's pension plan is underfunded by $10.8 billion. The agency said it would cover up to $4.1 billion of that, if necessary.
Some companies in bankruptcy are able to transfer their pension obligations to the PBGC. The agency continues benefits, although sometimes they are paid at reduced levels.
Miller told The Wall Street Journal that no decision has been made about trying transfer obligations to the PBGC. He said he felt a moral obligation not to terminate the plan and added that it's harder to cancel a pension plan than many people think.
Delphi is continuing to seek wage and benefit concessions from UAW.
If talks fail and Delphi enacts cuts through the court, a strike is possible, Opincar said. A strike could shut down Delphi and cripple the industry because Delphi is one of the world's largest suppliers.
The UAW represents most of Delphi's 33,000 unionized employees in the United States, even though Delphi's 3,800 hourly workers in the Mahoning Valley are represented by the International Union of Electrical workers.
Packard retirees
Ann Cornell Vickers, a spokeswoman for Delphi Packard Electric Systems, said the locally based division is working to get a better handle on its number of retirees. The payment of their benefits previously was turned over to a contractor, she said.
Most of the division's thousands of retirees are under GM's pension plan because GM was the parent company of Delphi until 1999. When Delphi was split off, there was a window that allowed workers to choose whether to retire under Delphi or GM.
Cornell Vickers said 1,800 hourly workers retired in 1999, and most are thought to have selected GM because they were more comfortable with that company.
About 1,200 hourly workers retired when Packard offered retirement incentives in 2001 and 2003, so they are covered under the Delphi plan.
Also, the salaried ranks of Packard have been reduced from 2,100 to 1,250 since 2000. That reduction of 850 people included retirements, transfers and resignations, Cornell Vickers said.
Earlier this year, Delphi told its salaried workers that it will not pay for their health care insurance once they are eligible for Medicaid, starting in 2007. The company picks up the insurance cost for hourly retirees even after they are Medicaid-eligible.
shilling@vindy.com