Auto Pension

Pension Plans in the Automotive Industry
   You need to do more than just kick the tires.

-----------------------------------------------------------------

"Requiring companies to fully report their pension and health care obligations on their balance sheets would . . . reduce shareholder equity by 6% for S&P 500 firms . . . . Old-line firms, such as those in the auto and aerospace industries, will be hit the hardest."

--  Investor’s Business Daily, September 29, 2006

"We're not going to accept any additional plant closures," Ranick said. "We don't buy the overall strategy that they can shrink this company to profitability."

-- USW spokesman Wayne Ranick at Goodyear Tire
   Dow Jones Newswires, October 2, 2006

"You have to be mindful if the workers at GM and Delphi didn't have a union, we wouldn't be hearing about a GM buyout, we wouldn't be seeing negotiation in bankruptcy court about their retirement. Instead, we'd be hearing about layoffs and dumped pensions and companies that just cut and run."

-- AFL-CIO President John Sweeney

The Detroit News, September 4, 2006

-----------------------------------------------------------------

What’s New . . .

Delphi released increased buyout acceptance numbers this week, bringing to 20,100 the number of its production workers who have decided to leave this year either through buyouts or early retirement packages.

The nation's largest auto parts supplier, Delphi filed for Chapter 11 bankruptcy protection in October. Delphi workers taking early retirement were offered a lump sum payment of $35,000, while others will be given buyout packages ranging from $40,000 to $140,000. Employees accepting buyouts would give up all benefits except for vested, accrued pensions.

Meanwhile, other upstream suppliers are attempting to deal with labor overhead in a shrinking market.

American Axle, based in Detroit, has offered union workers at five auto parts plants up to $100,000 to leave the company because of declining demand from automakers. The company gets 77 percent of its sales from General Motors. American Axle builds almost all of the axles for GM’s light trucks and its sales in that category have declined 13 percent this year.

Goodyear Tire and Rubber faces a potential strike as 14,000 union workers resist pension and health care cuts.

* * *

On September 15, one day before Ford Motor Co. was expected to make public an accelerated restructuring plan that will likely include additional plant closures and massive job cuts,  the nation’s second-biggest  automaker announced it will offer buyout and early-retirement plans to all of its hourly U.S. employees.

That covers more than 75,000 Ford employees. At the end of last year, the company employed about 82,000 hourly workers, but some 6,500 have already taken previous buyout and early-retirement offers.

The buybacks are aimed at helping Ford cut costs as company sales continue to be impacted by fierce competition from Asian automakers.

Following up, the UAW said the offers are available to all active Ford workers represented by the union.

* * *

Detroit's automakers have been intensifying their efforts to eliminate ineligibles from their health plan benefit rolls. Audits by Ford Motor Co. and DaimlerChrysler AG's Chrysler Group have already stopped payments to more than 86,000 individuals whom the companies have determined are ineligible, and General Motors is undertaking a similar audit program.

Most of those removed appear to be former dependents and spouses of employees or retirees who had been collecting benefits they were not entitled to. In some cases, individuals have been forced to reimburse plans. Companies say such moves are necessary to protect those who are legitimately entitled to coverage.

* * *

On Thursday, Aug. 17, President Bush signed into law the Pension Protection Act of 2006, which he called the "most sweeping reform" of US pension law since the enactment of the Employee Retirement Income Security Act (ERISA) in 1974. The compromise measure will have broad impact on the way future pension plans are structured and funded. It will affect pension outcomes, not only for tens of thousands of employees whose plans are currently hanging on the contents of the bill, but for millions of Americans who do not follow pension issues closely.

Affected groups everywhere are weighing in with commentary. With some 44 million Americans covered by private pension plans, bipartisan support for private sector reform was made possible by not stirring up a hornet’s nest of debate about stricter funding guidelines for public employee defined-benefit plans, which remain generous and are woefully underfunded. In any case, the bill may well signal the end of the era private defined-benefit pension plans. As recently as 25 years ago, more than 80 percent of large and medium-sized companies offered such plans. Today, fewer than a third do.

* * *

Late in the day on August 3, the Senate approved a compromise Pension Reform Bill and sent it on to the White House. It tightens rules for employers with defined-benefit pension plans – 21% of all workers-- and clamps down on companies that have fallen in arrears in meeting their funding obligations. Half the workers in private industry who have no pensions are not covered by the legislation, nor are government workers who have generous publicly funded pension plans.

With underfunding of DB plans now estimated at $450 billion, the bill requires companies to bring such plans to 100 percent funding within seven years, although certain major airlines are given a longer period. Plans that are seriously underfunded face restrictions, such as a ban on increasing benefits, and must make accelerated catch-up contributions. President Bush, who has taken a tough stance on forcing full funding of company promises, is expected to sign the legislation shortly.

Recent Auto Industry Pension News

Firms must recognize pensions, retiree health care on balance sheets

Is Chrysler an exception?

Strike threat by USW at Goodyear Tire

American Axle Offers Buyouts

70% of workers leaving Delphi

How much should come from union members?

Chrysler loss announcement rocks the industry

What’s behind the buyouts?

In the end, automaker hopes to be small, nimble

Ford aims to cut union workforce

Ford buyouts offered to all

After deep cuts, GM expects to see profits on small cars

Big Three intensify policing of health care benefit rolls

Tenneco to freeze pensions

Auto union workers accept pay, benefit cuts at Ill. Mitsubishi plant

Evolution of pensions in the auto industry

Bush signs pension reform bill into law

GM reduces pension tally by $3.9 billion 

Pension bill: Many changes, mostly positive

Ford Plans Sharp Production Cuts
As Part of Accelerated Turnaround

Congress Reforms Corporate Pensions

Varied Response to Passage of Pension Bill

Plan may hasten shift away from pensions

GM Pares Obligations For Pensions, Health Care

Thousands of Delphi Packard workers take buyout

Proposed alliance worries labor

CONGRESS: Negotiators are close to pension assistance

Ghosn Negative on Potential Auto Alliance

Wagoner Pushes for Reforms in Health Plans

Trends in Managing Your Retirement Money

Rich Pensions for Corporate Chieftains

Early Retirements at Delphi

Congress Still Grappling With Pension Bill

Nissan Board Will Explore GM Alliance

Kerkorian Makes His Move on GM

$1.6M in bonuses to 5 top executives preceded Chapter 11

US Auto Industry Decline: Lessons from GM and Ford

Increasing Retirement Security Through Automatic IRAs

GM buyouts: 'win-win in a bad situation'

GM Gains $1 Billion in Savings as 35,000 Workers to Leave

Local UAW leader expects 'way over half' to leave under attrition plan

Gettlefinger speaks truth to power

UAW forced to face changing realities

Foreign Competition Forces US Autoworker Concessions

The UAW behind the 8-ball

UAW Pension Questions & Answers

So you’re an auto worker ...

How are auto pensions structured?

Is your pension up to specs?

Does your pension have enough gas?

Where do I go to find out about my pension?

Contact info for auto companies

So you’re an auto worker ...
Chances are, you’re a member of a union; that union plays a large role in negotiating and administering your pension plan; and your pension could be running on empty.

According to an Oct. 25 article in Bloomberg, “Most analysts agree that the automakers are headed in the same direction as bankrupt airlines, steelmakers and other old-line manufacturing companies unless a plan is devised to shrink their liabilities or pay them.”

So if you haven’t done so already, you should contact your union representative to find out what is being done to protect your pension.

For up-to-date information about events affecting your pension right now, take a look at our Recent Articles section.

Back To Top

How are auto pensions structured?
As an auto worker, you probably have a single-employer plan, because auto workers, for the most part, don’t switch companies. Although there are some multi-employer plans for UAW members, only about 6,000 workers are covered under them. If you are one of the 302,500 UAW members at the Big Three, Visteon, or Delphi, you have a negotiated defined benefit plan, with your “back-end” benefit payments based on your years of service.

Most auto industry pension plans have a board of trustees, in which labor and management are represented. This board manages the pension fund. The board is responsible for making sure that the benefits promised match up with expected investment returns of the plan.

Back To Top

Is your pension up to specs?
Today, auto pension plans are not in the best of shape. The American auto industry confronts a host of financial problems: Very high fixed costs (e.g., GM says its cost per hour for U.S. employees was $78.39 in 2003), global excess capacity, rising gas prices, and price deterioration due to costly rebates.

Even though their market share is declining, the Big Three still have to pay for benefits of current and future retirees. They face huge healthcare and pension obligations that can’t be downsized and are rising faster than ever. Those costs are driving many auto companies toward bankruptcy.

There is also a simple problem of demographics. The auto work force is aging and retiring. GM/Delphi already has 2.5 pensioners for every active worker and 60 percent of UAW members in that firm will be eligible to retire within 5 years; each car and truck sold by the Big Three carries $900-$1,900 in legacy costs, and that’s before rebates running in the thousands.

Analysts who follow the auto industry say one of the Big Three could be driven into bankruptcy by pension and health costs within 10 years. So you have to pay close attention.

Back To Top

Does your pension have enough gas?
Pension plans in the automotive industry are more under-funded than plans in any other industry. General Motors, in fact, has the largest benefit shortfall of any U.S. company. And, as a whole, the auto industry’s shortfall of $60 billion takes up roughly 20% of the total U.S. pension-funding shortfall. Moreover, the Big Three may be understating their pension liability by a collective $40 billion.

Companies are taking steps to address this problem. For example, GM’s pension plan was under-funded by $19.3 billion at the end of 2002, but the company has largely eliminated the shortfall through the sale of $17.8 billion of assets and bonds. Ford finished 2003 by cutting its U.S. unfunded liability to $3.4 billion (although its worldwide figure is worse). The company plans to pay over a billion into its worldwide pension plans in 2004. But nothing is certain, and pension security still depends upon a recovering economy, world stability and a number of other factors.

Back To Top

Where do I go to find out about my pension?
Good intentions and complex legal mandates are not enough to protect your retirement income. Individuals should take steps to inform themselves about their company pension plans – through your company’s Human Resources organization and through your local union representatives.

This website has been designed to help you. Click to our easy-to-follow “Understanding Your Pension” section for more detailed information.

You can also click here to see contact information for the major automotive companies.

Back To Top

Contact Information for Automotive Companies
Here is a list of office contact information for the major automotive companies. Where possible, we have included phone numbers or web addresses of the relevant pension, benefits, or human resources departments:

Major Automotive Companies:

---------------------------------------------------------------------

Visit our Pension Legal Help section were you will find a listing of the six regional pension counseling and information projects sponsored by the Administration on Aging (AoA). 

Back To Top