The Treasury Department had a hand in deciding which employees received their pension benefits and which did not as part of the Delphi Corp. bankruptcy, a federal inspector said this week.
Six pension plans were terminated after Delphi filed for bankruptcy in 2005, but questions remained about why certain union employees were allowed to keep their retirement benefits and others were not and what role the Treasury department had in the decision.
Various employee groups that were cut out of the deal have been fighting for four years to try and get back the money they believe they are owed.
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GM was facing default when the government agreed to step in in late 2008. In exchange for about $50 billion in investments, the Treasury became the majority owner with a 61 percent stake in the GM that emerged from bankruptcy in July 2009, according to the report.
The Government Accountability Office delved through bankruptcy filings, Treasury officials' depositions and company reports to the Securities and Exchange Commission. It also looked at documents from various groups that had a stake in the pension plans.
Delphi, which was a global supplier of mobile electronics and transportation systems, was a spinoff from General Motors in 1999. The Pension Benefit Guaranty Corp. terminated Delphi's six pension plans in July 2009. The plans were underfunded by an estimated $7.2 billion, and PBGC planned to cover about $6 billion.
Because of earlier deals struck before the company was spun off from GM, GM agreed to pay "top-ups" – the difference between what PBGC will pay and the total benefits that were promised – to covered employees with a number of unions, if the Delphi plans were ever terminated or frozen.
At the time of these agreements, Delphi's salaried plan was fully funded while Delphi's hourly plan was not. GM said at the time of the spinoff that because the salaried plan was fully funded, it was Delphi's responsibility.
The top-up agreements with the three largest unions ultimately were preserved through the resolution of the bankruptcies of both GM and Delphi.
The GAO said because Delphi's pension plans were terminated with insufficient assets to pay all accrued benefits, and because PBGC must adhere to statutory limits on the benefits it guarantees, many Delphi employees will receive a reduced pension benefit from PBGC compared with the benefits promised by their defined benefit plans. Those Delphi employees receiving the top-ups will have their reduced PBGC benefit supplemented by GM while others will not, the GAO said.
As GM's primary lender in bankruptcy, Treasury played a significant role in helping GM resolve the Delphi bankruptcy, the government audit found.
The GAO said court filings and statements from GM and Treasury officials suggest that Treasury deferred to GM's business judgment on decisions about the Delphi pension plans — that is, their sponsorship and the decision to honor existing top-up agreements.
According to public records and Treasury officials, Treasury agreed with GM's assessment that the company could not afford the potential costs of taking over sponsorship of the Delphi hourly plan, but that the company had solid commercial reasons to honor previously negotiated top-up agreements with some unions.
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