Friday, April 24, 2009
GM, Chrysler retirees seem to have questionable coverage from PBGC in case of bankruptcy
Peter Whoriskey has an alarming story in The Washington Post today (Friday, April 24, 2009), “Auto Retirees Brace for Hardship: Pension and Health Benefits May Suffer Under Bankruptcy”, link here. The rumored "orderly bankruptcies" of the two big auto manufacturers may not be very orderly after all.
The pension plans of both General Motors and Chrysler are significantly underfunded, but what is alarming about the Post story is that the PBGC (Pension Benefit Guaranty Corproation) insurance seems to cover only a portion of the underfunding. Previous reports have suggested that most workers were “safe” with insurance of pensions to over $40000 a year. Now that seems much less so. And furthermore, it looks like a bankruptcy of both companies, at least, could lead to a need for a bailout of PGBC. At least, there will be significant political pressure to make the people to took “early retirement” and who are often in their 50s or early 60s now whole.
This is turning into a moral dilemma to be sure.
There are also serious questions about retiree health insurance.
I have owned a GM car only once, a Chevette bought (new) in 1979 and it fell apart. I owned a (new) Dodge Colt from 1983 to 1986.
GM is set for a nine-week furlough this summer. What happens to PGBC if a lot of suppliers go under?
Picture: My Colt, winter 1985; old snapshots of condo. It does snow in Dallas.