Source of GM payments concerns retirees
That’s because GM plans to pay incentive payments to retirement-eligible workers from the pension fund that supports all retirees.
GM’s special attrition program took on special importance this week when the automaker announced it would cut second-shift production at the Janesville plant starting in July. The move is expected to result in the loss of at least 750 jobs, which will be cut on the basis of seniority.
Knowing that GM will cut jobs in July, many Janesville workers are likely to take a longer look at the retirement or buyout offers. Workers must decide by May 22 whether to accept GM’s offer.
GM spokesman Dan Flores confirmed that the automaker would use the pension fund to make payments of $45,000 and $62,500 to retirement-eligible production workers and skilled-trades workers, respectively.
Lower-seniority workers who sever ties to GM and leave the company will be paid either $70,000 or $140,000, depending upon their years of service. Flores said the buyout packages are being paid with corporate money.
According to GM’s financial filings, the automaker’s U.S. pension plan was over-funded by $18.8 billion at the end of 2007.
“We and GM are the ones who funded it,” said one Janesville retiree who worked for GM for 37 years and asked that his name not be used. “All that time, my money went to fund it.
“It’s robbing Peter to pay Paul. If GM wants people to leave, let them pay for it, not us.”
The Janesville retirees are not alone. They and others around the country fear for the future, saying that uncertain financial markets can easily turn an over-funded account into one that’s under-funded and incapable of meeting its obligations to retirees.
Flores said the pension fund is in no danger.
“The time to do this is when it is over-funded,” he said. “If there was any risk to our current retirees, we would not be doing this.
“We know we have pension obligations that we have to meet.”
Chrysler has joined GM in tapping its pension fund to pay retirement incentives, a technique that’s been widely used outside of the automotive industry but rarely, if ever, inside it.
The automakers have said that retirement incentives paid from the pension funds will not be treated as taxable income to the new retirees. But the cash buyouts of younger employees will be taxed because they are being paid directly from the automakers.
A Chrysler spokeswoman said the automaker worked closely with the United Auto Workers in crafting the packages, which are designed to trim payrolls.
“The UAW certainly understood where this money was coming from,” Flores said.
Officials with UAW Local 95, which represents Janesville GM workers, said they are aware of the source of the payments but haven’t heard much discussion among local workers or retirees.
The local retirees said that many hourly employees considering the current retirement offer might not be aware that GM’s one-time incentive payments will deplete a fund that’s intended to pay the pensions of all GM retirees.
That fund, they said, is also threatened by the thinning ranks of the UAW, which reached a membership peak of 1.5 million in 1979 but has dropped ever since. Fewer members means fewer people supporting the fund, they said.
Also troubling is that they have no say in union matters that involve them, the retirees said. An example is the incentive payment arrangement negotiated in last fall’s national agreement between the UAW and domestic automakers.
“When the pension program came about in 1969 or 1970, we were on the picket line for a long time to get the benefits we have today,” said another local retiree. “Some of those benefits, such as health insurance co-pays, have gone up. That doesn’t bother me so much as that I don’t have a voice in the things that affect me.”
The man, who retired in 2006, said active workers—not retirees—should control contracts and other in-plant issues.
“I’m not asking for anything more, but I sure want to keep what I’ve got.”