Outside of Warren in northeast Ohio, Bruce Gump looks at his neighbor’s new Mercedes-Benz, wondering how his own retirement might have been different.
Both he and his neighbor worked for Delphi, the Troy-based auto parts supply giant spun off of General Motors in 1999. The difference is that Gump, 70, was a salaried engineer. His neighbor, an hourly worker, was represented by a union.
As such, GM made sure the neighbor got the fullpension he was promised by both it and Delphi, even as the Obama administration, with billions in taxpayer funding, steered GM through a quick-exit bankruptcy in 2009, while shedding many of the automaker’s other long-term liabilities.
About 20,000 salaried workers got no such assurance from GM or the government. Their benefits were first frozen, then cut.
It’s not that unusual, of course, for employees to see their expected retirement checks reduced, in some cases drastically, when the government-chartered Pension Benefit Guaranty Corp. (PBGC), the insurer of last resort for the nation’s private retirement plans, steps in to take over plans in cases of bankruptcy or other financial distress, as it did with Delphi.
What’s different in Delphi’s case is that one set of its workers — members of the UAW and other labor organizations — got assurances that GM, from which Delphi was spun off, would see their reduced payments “topped up” to the full promised amount by the automaker, while another set — the salaried workers — didn’t.
In the past, the PBGC went as far as the U.S. Supreme Court to protect its right to reject such “top-up” agreements. But in the case of GM, Delphi and the union employees, it went along, leaving the salaried workers to stew, wondering why they were left out, especially since, in 2009, it was their own government with the authority to tell GM what it expected from the company.
“I did a lot to help the company and I tried to do my best at it for just over 33 years,” said Gump, who left Delphi as a senior engineer in 2009 and says he’s getting about a third less in retirement than he had expected. “The thing that galls us, that disappoints us and makes us afraid for the future, is the way the government treated us.”
For more than a decade, Gump and a dedicated group of former engineers, managers, office staff and secretaries, known as the Delphi Salaried Retirees Association (DSRA), have been battling what they consider bureaucratic injustice and legal indifference.
That group includes people like 74-year-old Ron Beeber, a gregarious former lobbyist who, when he’s not working at a historical society in Pentwater in west Michigan, is drumming up support for the organization. It includes people like Chuck Cunningham, also 74, a former senior executive who splits time between Vero Beach, Florida, and Boyne City, and has spent a decade reading copious pages of documents as part of a long-ranging court battle the retirees are asking the U.S. Supreme Court to consider this fall.
There is also the chance of legislation to aid them, which could be tucked into a $3.5-trillion budget reconciliation bill being discussed, or Congress’ end-of-the-fiscal-year package, which could be hammered out this fall.
But nothing is guaranteed. Nothing has ever been guaranteed.
As it does with other plans it assumes, the PBGC in 2009 began a process that saw the salaried retirees’ benefits cut, the DSRA members say, by anywhere from 30%-70%, based on calculations done by the agency. Benefits are capped based on the year a plan is terminated and the age of the worker at that time. In 2009, a 65-year-old retiree could get $4,500 a month, no more — a good-sized check. But a 50-year-old, when he or she retired, could get no more than $1,575 a month from the plan and may get less than that, depending on the agency’s calculations
That amount never changes, regardless, in most cases, of previously made promises by the employer.
Or, as in the case of Delphi’s union employees, there is some other arrangement.
The argument put forth by the salaried workers has been that if their government put up billions to create a new, leaner GM in 2009 that allowed it to effectively save the pensions of union workers, including tens of thousands of those working for Delphi, which wasn’t officially part of GM, then they deserved the same consideration.
“We feel like what happened was unfair, that it was done arbitrarily,” said Beeber, who, like Gump and Cunningham, expected to be doing something else in retirement. “A lot of people say you guys just got screwed.”
And that unfairness, they say, has had consequences: Some retirees lost homes, others considered suicide. Some people put off expensive medical treatment and died.
At least one retiree initially saw his monthly payment cut to the point where he gave up the benefit his wife would receive when he died, so they could receive a larger monthly check to pay the bills — only to leave her with nothing when he did die some years later.
“Now she’s left with nothing … for all those decades of service,” said Gump. “Only because he committed the unforgivable sin of not being in a union.”
Retirees have lots of supporters but have seen little change
There’s no dearth of people who agree with the argument, if not the sentiment.
Last fall, both then-President Donald Trump and current President Joe Biden made a campaign issue of it in the Midwest, where Delphi had many of its facilities and where many of the beneficiaries reside. Michigan Gov. Gretchen Whitmer has written letters on the retirees’ behalf, as have officials in Ohio, New York and elsewhere. So have dozens of members of Congress.
Even the UAW has said the salaried retirees should receive their full pensions.
It hasn’t paid off so far.
An 11-year-long court battle dead-ended last year with a federal appeals court rejecting the retirees’ claim and finding the PBGC did nothing wrong in terminating the retirees’ plan over their objections and without a court order and cutting their benefits. That set the stage for the retirees’ petition to the Supreme Court.
Other potential defendants, including members of Obama’s auto task force, have long since been dismissed from the case, with a judge in Detroit concluding the retirees failed to prove — beyond their contention otherwise — that they were legally discriminated against by those officials or that if they were treated differently, the U.S. Treasury had any obligation to protect them.
There is no guarantee the Supreme Court will take up the case. Meanwhile, after Trump told his administration to look into what could be done for the retirees last fall just weeks ahead of the election, he never mentioned it again. Biden told a TV reporter in Ohio last fall that he was sympathetic to the retirees’ plight, and that “people work like hell for their pensions” and should see them protected. But two weeks ago, his administration sent a letter to legislators who had asked about the issue, telling them it could do nothing.
It would take Congress to act, the letter said.
Whether it will remains to be seen, given that the issue has been kicking around in congressional hearings and elsewhere for more than a decade. Reports by the Government Accountability Office and the inspector general who oversees the plan under which GM was rescued have been issued on the discrepancy over the years, the latter concluding that the auto team clearly could have pressed GM to make the salaried workers’ pensions whole. That report noted one auto team official telling the inspector general, “I don’t think that anybody thinks bankruptcy is fair.”
The 8,000-member DSRA has made some strides: It has created health care and life insurance plans to help retirees and secured over the years extensions of a tax credit against health care payments made by some PBGC beneficiaries. It has managed to raise enough money to pay all its legal bills.
But there has been nothing approaching legislation that would return their full benefits.
Earlier this year, Congress passed as part of Biden’s COVID-19 response plan some $90 billion in aid for multiemployer pension plans that are struggling. Those are largely union plans, however, such as the Central States plan that protects retired Teamsters.
Single-employer plans, such as the Delphi salaried workers, aren’t part of it.
“This is the sort of contradictory stuff for 12 years that’s turned my hair white,” said Beeber.
U.S. Rep. Dan Kildee, D-Flint Township, who represents an area once identified heavily with GM and Delphi, has been part of the fight for the retirees in the current Congress, where Democrats are in the majority, joining other lawmakers, including Ohio Reps. Mike Turner, a Republican, and Tim Ryan, a Democrat.
So far, however, Kildee has said it’s unclear how much it would cost to restore the salaried retirees’ pensions, how it could be done legislatively and what piece of legislation — if any — it could be attached to where it would garner enough support across the House and Senate.
As for what he hoped to attach it to, he said, “Any train leaving the station.”
“We’ve got to get these folks restored,” Kildee said “These people should have been taken care of (in 2009) and it was wrong.”
No simple matter of blame or how to fix retirees’ concerns
Delphi was created at a time in the late 1990s when GM and other U.S. automakers were struggling, the idea being that GM could cut costs by streamlining its operations.
But it needed the agreement of the UAW and other unions to accomplish that, and it needed Delphi for parts. As such, the two companies were always linked closely.
Throughout the early 2000s, Delphi struggled, but Beeber remembers it as a time when there was a great deal of camaraderie.
“The people were really nice. I had known a few of them,” he said. “Coming from a bigger structure, it was some of the best years, trying to win customers for Delphi from other companies. … It was a good spirit.”
Delphi entered bankruptcy in 2005. GM continued to honor its promise to protect union pensions, but made no such promise to the salaried employees, whose plan, at the time, was well-funded. When GM found itself in dire need, in late 2008, just months after promising millions to Delphi’s union workers for their retirement plans, everything was up in the air. But one thing was certain: GM’s exit from bankruptcy was going to involve Delphi —and the parts needed to make cars and trucks — as well.
Ultimately, GM purchased Delphi’s steering division and several of its plants. Delphi, which once had more than 200,000 workers worldwide, shrank, with pieces being sold off. What’s left is called Aptiv, focusing on technology involving self-driving cars and headquartered in Ireland.
The salaried workers argue that when GM entered bankruptcy, its funding secured by the Obama administration, the automaker’s promises to Delphi’s union workers should have been no more guaranteed than anything else under Delphi’s umbrella — including the promises that had been made to them.
And while they don’t begrudge the UAW and other unions the payments GM has made to their members to make their pensions whole, they also believe, and have argued in court and in Congress and elsewhere, that the different treatment was politically motivated, the unspoken connection being that between unions and the Democratic Party.
But for as simple as that argument is, the questions regarding how exactly it happened and who should be blamed — and how it should be fixed — seem to almost be endless.
It’s even a question as to how much the retirees have been denied.
What retirees are getting, versus what they would have gotten, may vary greatly
As is typical for the PBGC and the plans it takes over, the PBGC makes an initial calculation for benefit levels, which are then recalculated in a process that can, and did in the salaried retirees’ case, take years.
For many retirees, like Beeber, that recalculation improved their monthly benefits greatly. But there’s still a catch.
The PBGC, in court documents, has claimed that three-fourths of Delphi’s salaried retirees are getting their “full benefits.” But it refused to explain to the Free Press what precisely that means, since, by law, benefits are capped at a certain amount.
“They’ll never give anybody any factual information,” Cunningham said of the PBGC, which cited ongoing litigation in refusing to answer the Free Press’ questions, even though some of those questions had nothing to do with the retirees or their lawsuit. “I know we have a lot of people who belong to the DSRA and to my knowledge none of them are receiving their full benefits.”
In terms of who deserves the blame for letting the salaried workers’ additionally promised benefits go unfunded while Delphi’s union workers had their plans — which were also assumed by PBGC — “topped up” to the promised levels by GM, there is something of a circular debate.
What is clear is that ultimately both GM and Obama’s auto task force felt UAW workers would be needed to make vehicles — and their parts — for the automaker when it exited bankruptcy. The union wouldn’t accept otherwise. It had extracted such a promise from GM for its Delphi workers even before GM entered bankruptcy.
Without the same leverage, no such promise ever existed for the salaried workers. If anything, the court record makes clear PBGC was against any kind of “top up” arrangement for anyone, feeling that such policies make it easier for companies to underfund plans, figuring they will get a break on payments if the PBGC takes them over. In the case of GM and its bankruptcy — and the union workers — it appeared it wasn’t given much of a choice, with the company and perhaps the U.S. auto industry in the balance. GM eventually agreed as part of the bankruptcy to “top up” not only the UAW’s plans but those of other unions as well.
The Obama administration maintained it only wanted taxpayer funding to go to what was absolutely necessary to rescue the company. Auto task force officials suggested it was GM that felt it had no financial responsibility to the salaried retirees and, apparently, didn’t press the matter.
Steve Rattner, who ran the auto task force, told an inspector general who looked into the Delphi retirees and GM restructuring, “We didn’t think there was anything defensible (in picking up the Delphi salaried workers’ costs). We felt bad, but we didn’t think it was justifiable.”
Said Beeber, “They know the stuff (these workers) did for GM and Delphi … if it wasn’t for them, the (union) hourly workers couldn’t go and produce anything. It was all part of one big effort. It robs them (the salaried employees) of their dignity.”
Twelve years later, the political and legal fight continues
As part of its petition to the Supreme Court, the retirees argue that the PBGC operates with too much deference, with too little oversight.
The retirees say they were denied due process when — in 2009, four years after Delphi entered bankruptcy but just months after GM entered its own — the PBGC first went to court for an order to terminate the Delphi salaried plan and take it over, only to have the agency reach an agreement with Delphi to do so without an order before their objections could be heard.
Courts since then, however, have concluded that federal law allows the PBGC to do just that, whether the retirees like it or not.
Cunningham and the others also say they can show their plan was relatively well-funded the year before the PBGC took it over, with assets to cover more than 80% of the plan’s liabilities. PBGC put that coverage at about 55% but has maintained in court that even if that were not the case, without someone to assume Delphi’s contribution to the plan, it would have eventually went under, leaving it to the agency to take over.
As such, with the plan’s termination and assumption by the PBGC, the salaried retirees’ plan’s $2.5 billion in assets and liens against Delphi — worth some $700 million, Cunningham said — were, as with other terminated plans, subsumed into the PBGC’s overall fund to help pay benefits not just to Delphi’s salaried retirees but those of all single-employer plans that have been terminated.
“We think we got a raw deal in the lower courts … but that happens,” said Cunningham, who believes the plan was far better funded than the PBGC calculated and that the benefit of those assets should have gone to its retirees, not others. As for a Supreme Court ruling, he said, “The court has reversed double (negative) rulings before. We think they just might do this one.”
It’s still a long shot.
Then there is the question of legislation to help the retirees and what that might look like.
For one thing, it’s not clear that any such legislation has been passed before that would specifically aid one retirement plan amid the thousands terminated that currently have benefits administered by the agency: It’s a question the PBGC declined to answer. Then there’s the question of how much it would cost. Cunningham and others suggest that, with the stock market gains seen in recent years, their original assets should — theoretically — be worth far more than they were and that no additional funding may be needed to give them a “top up.”
On the other hand, the cost could be hundreds of millions of dollars. When it took over the plan, the PBGC said the plan had unfunded liabilities of upwards of $2 billion. Kildee, who sits on the House Ways and Means Committee, is among those trying to sort out a number, and a path forward, with the PBGC.
There are always worries that doing so could create a precedent. But the opposite is true, too. Or, as Gump said, “Who else is next that the government says, ‘These people don’t mean anything to us so they lose.'”
Cunningham’s fight, meanwhile, has never been about his or his wife’s well-being. Both retired as senior executives, with Cunningham having left as head of Delphi’s electronic distributions systems division, its largest. He used to spend months jetting around the world for GM and then Delphi, managing product lines.
Why would he devote so much time to reading legal documents, preparing for court battles, testifying before lawmakers?
“A lot of of these people worked for me. That’s why I’ve been doing it and am doing it,” he said. “This has nothing to do with (our) financial situation. … When you know you’re right, you don’t give up.”
“Don’t make this about me,” he said. “This is about a group of people who deserve to get their pensions back. I’m just a minor part of that. … These people made a career for me. The least I can do is try.”
This article originally appeared on Detroit Free Press: For Delphi’s former salaried workers, retirement has been a long fight for fair treatment