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Pension Agency Presses Delphi, GM
online.wsj.com
Pension Agency Presses Delphi, GM
U.S. to Go to Court
Unless Auto Maker
Absorbs Liabilities
By JEFFREY MCCRACKEN
September 11, 2008
THE FEDERAL government's pension-insurance agency, frustrated by missed pension payments and the lack of a resolution with bankrupt auto-parts titan Delphi Corp., said it would go to court Friday to secure a claim on an additional $900 million in Delphi assets.
The move comes after Delphi missed payments of several hundred million dollars to its pension plan in June and July. The new claims involve Delphi's foreign operations, which are believed to be profitable. Delphi filed for bankruptcy in October 2005 and has struggled to emerge from it.
The Pension Benefit Guaranty Corp. is trying to increase pressure on Delphi and its former parent, General Motors Corp. On Tuesday, the agency sent its second letter in the past month to GM and Delphi executives urging GM to absorb at least $1.5 billion in Delphi pension obligations before Sept. 30. That date is important, according to the PBGC, because afterwards a new pension law takes effect and would make a deal much more costly.
The agency sent its first letter in mid-August, but felt GM and Delphi were dragging their feet and had missed some previous dates to complete a transfer of pension obligations.
The letter to Delphi and GM executives comes as GM and other Detroit auto makers are making a plea to lawmakers in Washington for as much as $50 billion in federal loans. GM's chief executive, Rick Wagoner, will be in Washington on Friday for an energy summit, and is expected to address the issue of government aid to the auto makers.
"I can't speak for the rest of the government, but I assume if GM is asking for assistance from the government generally, the status of the GM-Delphi pension situation would be highly relevant," said PBGC Director Charles E.F. Millard.
Mr. Millard said the agency will hold off on the $900 million claim if GM and Delphi file documents with the U.S. Bankruptcy Court by Friday agreeing to a deal where GM's pension absorbs between $1.5 billion and $3.4 billion in Delphi pension liabilities.
Delphi's pension plan, which covers about 85,000 people, had obligations of $14.05 billion at the end of 2007, but was underfunded by $3.3 billion, according to Securities and Exchange Commission filings. GM's $70 billion pension plan is overfunded by $18 billion, but much of that is already committed to paying off United Auto Workers medical claims, funding employee buyouts and other pending obligations.
Delphi's problems have already cost GM about $11 billion in cash and write-downs. GM racked up losses of $18.8 billion through the first half of the year.
A Delphi spokesman said via email that "we've been engaged in productive discussions and have routinely advised the PBGC of our progress and will continue to do so."
A GM spokeswoman said, "We are engaged and trying to work through a number of issues to help Delphi come up with a plan that allows them to emerge from bankruptcy."
Write to Jeffrey McCracken at jeff.mccracken@wsj.com
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