The UAW’s Defined Benefactor
http://tinyurl.com/mbh9km

Another taxpayer donation to GM and the auto workers union.

Welcome to the General Motors bailout, part three—or is it four, or
five? It’s hard to keep up, but this week the federal Pension Benefit
Guaranty Corporation took over the pension liabilities of Delphi, the
auto-parts spinoff of GM that has been working its way through Chapter
11 since 2005. As with the previous taxpayer rescues, this one includes
a special favor for the United Auto Workers.

Under the agreement, the PBGC will assume some $6.2 billion in pension
liabilities from Delphi, including both hourly and salaried employees.
That’s the second biggest pension bailout in PBGC history, and it takes
billions of liabilities off the books for GM. As Delphi’s former parent,
GM had agreed to take responsibility for billions of dollars of Delphi’s
pension obligations to its hourly employees.

It will be months before Delphi employees know what percentage of their
expected pension they’ll receive, but not all pensioners are created
equal in this arrangement. UAW employees will have their pensions made
whole by GM, which insists it is merely fulfilling its end of a deal
made with the UAW in 1999 (when it spun off Delphi) to cover any future
pension shortfall. Few such obligations usually survive bankruptcy, but,
nah, we’re sure politics had nothing to do with it. Less fortunate are
smaller unions and Delphi’s salaried employees, whose pensions may see
drastic reductions and who already lost their health care and life
insurance plans on April 1. They would seem to lack the UAW’s clout
inside GM and the Obama Administration.

In a letter to the House Financial Services and Senate Banking
committees, Michigan Democrats Bart Stupak and Dale Kildee and
Republicans John Boehner and James Sensenbrenner, among others, have
asked for Congressional hearings on the disparity. Pension benefits, the
letter warned, “could be cut by as much as 70%, if not eliminated
entirely, for 15,000 retirees.”

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PBGC spokesman Jeffrey Speicher says that 85% of people who get benefits
receive the entire amount they’ve earned, though he acknowledges that
number is misleading in some scenarios. In a plan like Delphi’s “with
lots of early retirees, more people will see greater reductions.” OK,
but then why is the UAW special? (Forgive the rhetorical question.)

By our math, this puts the taxpayer contribution to GM’s survival at
nearly $70 billion: Some $50 billion for the serial rescues of GM
itself, another $12.5 billion for its GMAC credit arm, and now $6.2
billion from the PBGC.

Meanwhile, the Administration is putting the PBGC, an ostensibly
independent agency, at further financial risk. After Delphi filed for
bankruptcy, the agency put liens on its overseas assets, providing an
offset in case it had to take on the company’s pension liabilities. Now,
lo and behold, the liens have been removed, allowing Delphi to sell its
assets in bankruptcy court. GM will pay PBGC $70 million for the favor
of releasing its liens, which Mr. Speicher says totalled about $200
million. Nifty deal for GM, though not for taxpayers.

When the PBGC was created in 1974, Democrats running Congress assured
everyone there was no taxpayer risk because the agency would be funded
by fees from pension plans, as well as by the assets of plans the
company takes over. But like Fannie Mae, we are learning that sooner or
later these government guarantees always come due. Now the PBGC has a
$33.5 billion deficit even before Delphi, and more bankruptcies are
headed its way. Mark it down as one more way the taxpayers are being put
on the hook for GM, the UAW and Michigan’s 17 electoral votes in 2012.