Delphi likely won't get delay for pensions

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The federal agency that takes on defaulted pension plans has a deficit.

WASHINGTON (AP) — Pension legislation expected to pass the Senate today won't give Delphi Corp. extra time to pay $2.7 billion it owes for employees' future pensions, as the struggling auto-parts maker and others had originally hoped.

The company asked lawmakers for a special payoff period for the $2.7 billion shortfall it has built up while under Chapter 11 bankruptcy protection. The law requires companies to make any pension payments put off during bankruptcy immediately upon emerging from bankruptcy, which Delphi expects to happen late next year.

Delphi attempted to change that part of pension law, and 19 lawmakers sent a letter to House leaders in support of the company's request. But lawmakers kept the requirement for immediate pension payments after bankruptcy. They did revise the law to allow companies to take up to seven years to make traditional pension payments.

After the House rejected its request, Delphi said it might be able to find other ways to avoid passing its pension obligations on to taxpayers. It can apply for waivers from the Internal Revenue Service, which requires collateral in exchange for extra time to pay a single year's pension obligations.

Delphi employed 45,000 U.S. workers and had 19,000 retirees before buyouts and early retirements began this year. There were 17,679 employees and retirees in Ohio. Delphi is General Motors Corp.'s biggest supplier after spinning off from GM in 1999.

Delphi wants to sell or close 21 of its 29 U.S. plants, including six of its 10 plants in Ohio.

Petition from legislators

The lawmakers, including seven in auto-heavy Michigan and Ohio Rep. Deborah Pryce, the fourth-ranking House Republican, had warned that without special help, Delphi "could be forced to default its pension plan, passing the burden onto taxpayers and leaving retirees with only a portion of the benefits they were promised."

But when the House bill came to a vote last Friday, only one of the letter writers, Rep. Henry Bonilla, R-Texas, voted against it.

When companies abandon their pension plans, the Pension Benefit Guaranty Corp. is the federal agency that takes over. It is running a deficit of $22.8 billion, raising concern that it could need a taxpayer bailout.

The bill lets Delphi reduce its overall pension obligation by the amount GM agreed to pay under an agreement to share buyout costs. A spokesman for House Majority Leader John Boehner, lead sponsor for the House bill, said it did enough to help Delphi.

"The pension bill provides Delphi, along with other manufacturers in the auto industry, additional assistance in meeting their pension obligations," Boehner spokesman Don Seymour said.

The United Auto Workers, which represented 24,000 Delphi workers before the buyouts began, supported Delphi's efforts to get some special relief from Congress. But when that didn't come, UAW praised the bill for striking a general balance between relief for employers and full and timely payments for pensioners.

Delphi has said it wants to freeze its hourly pension plan Oct. 1 and its salaried plan Jan. 1. Negotiations with its unions are continuing.

Delphi has asked a federal bankruptcy court in New York to void its contract with UAW, and the union has prepared to strike if that happens, a move that could cripple GM.

Friday, August 4, 2006