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Delphi pension flap could hurt new GM

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Delphi pension flap could hurt new GM

The hotshots planning General Motors Co.'s initial public offering probably aren't giving much thought to some 20,000 retirees from the automaker's old parts unit.

Maybe they should, because the retirees could come back to bite GM.

On Friday, in a little-noticed court ruling in Detroit, a federal judge agreed to let lawyers for Delphi Corp. salaried retirees move ahead with a lawsuit. They allege their pensions were wrongfully dumped on the quasi-governmental Pension Benefit Guaranty Corp., ostensibly to speed GM's emergence from bankruptcy.

In fact, all of Delphi's pension plans -- hourly and salaried, United Auto Workers, United Steelworkers and International Union of Electrical Workers -- were "rejected" in bankruptcy. But GM and its bosses at the Treasury Department elected to use taxpayer dollars to "top up" the union plans while leaving salaried folks to the unforgiving PBGC payout schedule.

The net effect is that some retirees say their payouts are being cut by as much as 70 percent, and as many as 5,000 more of Delphi's active salaried work force can look forward to similar treatment. The difference is that they're still drawing paychecks for full-time jobs.

The disparate treatment is worse than unfair. It's also immoral, perfect grist for a public campaign to undermine the credibility of GM and showcase the government's arbitrary treatment of different classes of people at the precise time when neither GM nor Team Obama needs the negative publicity.

The politics and economic anxieties of the times favor the retirees, not GM and the government. Second, a recurring pro-union bias of the Obama administration is on full display here, even as nearly 93 percent of the nation's private-sector work force does not belong to unions. Third, but for the intervention of U.S. District Judge Arthur Tarnow, the administration and the PBGC would keep the rationale of its deliberations secret.

Not anymore, which tells you almost everything you need to know about whether the details in this sordid chapter of the GM-Delphi-UAW-Treasury bankruptcy are on the up-and-up. That's why resolution of the Delphi salaried pension flap could yet pose a material problem for the new GM.

How? Several expensive ways, potentially:

Vows from 20,000 Delphi retirees and their families to never again buy another GM vehicle are bad enough. Persuading their friends and neighbors to refrain, too? Not good, either. Would there be a significant multiplier effect? If so, how much? Could it get so ugly that GM could not ignore the issue, as it appears to be doing now?

At some point, a persistent campaign against GM and the government paymasters who made the crucial decisions in the tense negotiations to get both GM and Delphi out of bankruptcy could become a marketing problem with market share implications. And that, in turn, could affect the calculations of would-be investors.

If such a campaign gains traction, powered by revelations from documents unearthed in the discovery process, pressure could build on GM to craft a settlement with the salaried retirees. One problem: A deal would risk new civil claims from secured creditors scalped during the GM bankruptcy cram-down.

Also not good, especially for an automaker desperately trying to revive sales with brands tarnished by bankruptcy, bailouts and the "Government Motors" rap. Imagine the circus, because the pension claims of salaried employees -- retired Delphi employees, to boot -- typically are subordinate in bankruptcy to secured creditors.

The gambit by Delphi's salaried retirees may be a legal long shot, if the lawyers are correct. But since when has this messy workout been about the law?

From The Detroit News: http://www.detnews.com/article/20100928/OPINION03/9280321/1148/auto01/Delphi-pension-flap-could-hurt-new-GM#ixzz10pOzjqJx

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