Examining The Delphi Bankruptcy'S Impact On Workers and Retirees

EXAMINING THE DELPHI BANKRUPTCYS
IMPACT ON WORKERS AND RETIREES
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH,
EMPLOYMENT, LABOR AND PENSIONS
COMMITTEE ON
EDUCATION AND LABOR
U.S. HOUSE
OF
REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION
HEARING HELD IN WASHINGTON, DC, DECEMBER 2, 2009
Serial No. 11142

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COMMITTEE ON EDUCATION AND LABOR

GEORGE MILLER, California, Chairman
Dale E. Kildee, Michigan, Vice Chairman
Donald M. Payne, New Jersey
Robert E. Andrews, New Jersey
Robert C. Bobby Scott, Virginia
Lynn C. Woolsey, California
Ruben Hinojosa, Texas
Carolyn McCarthy, New York
John F. Tierney, Massachusetts
Dennis J. Kucinich, Ohio
David Wu, Oregon
Rush D. Holt, New Jersey
Susan A. Davis, California
Raul M. Grijalva, Arizona
Timothy H. Bishop, New York
Joe Sestak, Pennsylvania
David Loebsack, Iowa
Mazie Hirono, Hawaii
Jason Altmire, Pennsylvania
Phil Hare, Illinois
Yvette D. Clarke, New York
Joe Courtney, Connecticut
Carol Shea-Porter, New Hampshire
Marcia L. Fudge, Ohio
Jared Polis, Colorado
Paul Tonko, New York
Pedro R. Pierluisi, Puerto Rico
Gregorio Kilili Camacho Sablan,
Northern Mariana Islands
Dina Titus, Nevada
Judy Chu, California
John Kline, Minnesota,

Senior Republican Member
Thomas E. Petri, Wisconsin
Howard P. Buck McKeon, California
Peter Hoekstra, Michigan
Michael N. Castle, Delaware
Mark E. Souder, Indiana
Vernon J. Ehlers, Michigan
Judy Biggert, Illinois
Todd Russell Platts, Pennsylvania
Joe Wilson, South Carolina
Cathy McMorris Rodgers, Washington
Tom Price, Georgia
Rob Bishop, Utah
Brett Guthrie, Kentucky
Bill Cassidy, Louisiana
Tom McClintock, California
Duncan Hunter, California
David P. Roe, Tennessee
Glenn Thompson, Pennsylvania
Mark Zuckerman, Staff Director

Barrett Karr, Republican Staff Director
SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS

ROBERT E. ANDREWS, New Jersey, Chairman
David Wu, Oregon
Phil Hare, Illinois
John F. Tierney, Massachusetts
Dennis J. Kucinich, Ohio
Marcia L. Fudge, Ohio
Dale E. Kildee, Michigan
Carolyn McCarthy, New York
Rush D. Holt, New Jersey
Joe Sestak, Pennsylvania
David Loebsack, Iowa
Yvette D. Clarke, New York
Joe Courtney, Connecticut
Tom Price, Geogia,

Ranking Minority Member
John Kline, Minnesota
Howard P. Buck McKeon, California
Joe Wilson, South Carolina
Brett Guthrie, Kentucky
Tom McClintock, California
Duncan Hunter, California
David P. Roe, Tennessee
(II)
C O N T E N T S
Page
Hearing held on December 2, 2009 ........................................................................

Statement of Members:
Andrews, Hon. Robert E., Chairman, Subcommittee on Health, Employment, Labor and Pensions ............................................................................
Prepared statement of ...............................................................................
Kildee, Hon. Dale E., a Representative in Congress from the State of
Michigan, prepared statement of .................................................................
Letter, dated November 4, 2005, to the White House ............................
Letter, dated July 10, 2009, to the chairmen and ranking members
of congressional committees ..................................................................
Letter, dated June 24, 2009, to the Secretary of the Treasury .............
Price, Hon. Tom, Ranking Minority Member, Subcommittee on Health,
Employment, Labor and Pensions ...............................................................
Statement of Witnesses:
Boehner, Hon. John, a Representative in Congress from the State of
Ohio; Minority Leader, U.S. House of Representatives, prepared statement of ...........................................................................................................
Brown, Hon. Sherrod, a U.S. Senator from the State of Ohio ......................
Cunningham, Charles, Delphi Salaried Retirees Association .......................
Gump, Bruce, Delphi Salaried Retirees Association .....................................
Additional submissions:
Letter from Joseph P. Rugola, dated November 25, 2009, to
the Ohio General Assembly ...........................................................
Resolution 2009-53, dated November 2, 2009, from the Champion
Township Trustees .........................................................................
Chart: Delphi Salaried Retirees Benefit Cuts Compared to GM
& Delphi Hourly Retirees .............................................................
Lee, Hon. Christopher, a Representative in Congress from the State
of New York ...................................................................................................
Letters submitted for the record ..............................................................
Ryan, Hon. Tim, a Representative in Congress from the State of Ohio ......
Stein, Norman P., senior consultant, Pension Rights Center, and Douglas
Arant professor of law, University of Alabama Law School ......................
Turner, Hon. Michael R., a Representative in Congress from the State
of Ohio ............................................................................................................
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EXAMINING THE DELPHI BANKRUPTCYS

IMPACT ON WORKERS AND RETIREES
Wednesday, December 2, 2009
U.S. House of Representatives
Subcommittee on Health, Employment, Labor and Pensions
Committee on Education and Labor
Washington, DC
The subcommittee met, pursuant to call, at 10:35 a.m., in room

2175, Rayburn House Office Building, Hon. Robert Andrews [chairman of the subcommittee] presiding.
Present: Representatives Andrews, Wu, Hare, Tierney, Kucinich,
Fudge, Kildee, Courtney, Price, Kline, Guthrie, and Hunter.
Also Present: Representative Ehlers.
Staff present: Aaron Albright, Press Secretary; Tylease Alli,
Hearing Clerk; Jody Calemine, General Counsel; Carlos Fenwick,
Policy Advisor, Subcommittee on Health Employment, Labor and
Pensions; David Hartzler, Systems Administrator; Ryan Holden,
Senior Investigator; Liz Hollis, Special Assistant to Staff, Director/
Deputy Staff Director; Broderick Johnson, Staff Assistant; Therese
Leung, Labor Policy Advisor; Richard Miller, Senior Labor Policy
Advisor; Alex Nock, Deputy Staff Director; Joe Novotny, Chief
Clerk; Meredith Regine, Junior Legislative Associate, Labor; James
Schroll, Junior Legislative Associate, Labor; Michele Varnhagen,
Labor Policy Director; Mark Zuckerman, Staff Director; Kirk Boyle,
Minority General Counsel; Casey Buboltz, Minority Coalitions and
Member Services Coordinator; Ed Gilroy, Minority Director of
Workforce Policy; Rob Gregg, Minority Senior Legislative Assistant;
Barrett Karr, Minority Staff Director; Alexa Marrero, Minority
Communications Director; Ryan Murphy, Minority Press Secretary;
Jim Paretti, Minority Workforce Policy Counsel; and Linda Stevens, Minority Chief Clerk/Assistant to the General Counsel.
Chairman ANDREWS. Good morning, ladies and gentlemen. Welcome to the subcommittee. We are very pleased to have four of our
distinguished colleagues with us this morning, and especially
pleased that so many people traveled a long distance to be here for
this very crucial issue that has, I think, been such a tragedy for
so many people. I also want to take a moment at the outset to formally welcome my friend and colleague, Dr. Price, from Georgia.
This is our first subcommittee hearing since he ascended to this
lofty position as the senior Republican member of the subcommittee. He and I have worked together on many issues over
since he has taken that position. But this is the first time that we
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sat together at the dais. And I welcome you. I am very, very glad
to be with you.
I especially want to commend Senator Brown and Congressman
Lee, Congressman Turner, Congressman Ryan and Congressman
Kildee for their active effort to make sure that this hearing took
place this morning. Mr. Ryan talked to me about this a very long
time ago. He has been particularly diligent in insisting that the
committee address this issue and we appreciate his leadership, as
well as the other three witnesses and Mr. Kildee. I frankly knew
only what I had read in the media about this issue until I learned
from my colleagues about this, and I must say to you that I wish
we werent having this hearing this morning. I wish that what had
happened is that the promises that these families relied on for decades, for generations had been honored, but they werent.
And in looking at the record that we are going to hear about this
morning, it occurs to me that this is a case where the law has undercut reasonable expectations of reasonable people. If you go back
to 2004 and you were a creditor of Delphi, if you supplied them
with some good or service, you could have protected yourself by insisting on cash on delivery if you sold them something. If you were
a bank lending money to Delphi, you could have protected yourself
by building into the interest rate or in the guarantee structure of
the deal something to foresee the day when you wouldnt get paid.
If you were a shareholder, you could have protected yourself by
either not buying the stock or selling it or some other way of protecting your position. The people who could not protect themselves
were the people who went to work day after day, week after week,
month after month, drew that paycheck, earned it, earned it and
anticipated that if God forbid the day ever came that the company
had some trouble, their pension would still be there. I think the
core issue here, if you go all the way back to the 2005 filing by Delphi and the 2008 filing by GM, that the committee has to at least
think about when we hear from the witnesses this morning is
whether the bankruptcy laws are fair in protecting the reasonable
expectations of reasonable people. As I see it, the people who could
not have protected themselves against this are the ones sitting in
the audience today. What are you going to do, quit your job after
you have been there 15 or 20 years because you think the company
might go under? My understanding is under this plan, you couldnt
have asked for a lump sum distribution of your pension because
the plan didnt permit it.
So if you knew as many Delphi employees and retirees probably
did know in 2004 and early 2005, that there was trouble ahead for
the company, unlike the creditors, unlike the banks, unlike the
shareholders, unlike the vendors, there was really nothing you
could do to protect yourself. So here we are, with tens of thousands
of people in a position where their reasonable expectations have
been thwarted.
I am not going to mislead anybody this morning by saying I
think there is some clear and easy solution to that problem. But
I do, again, want to commend our five colleagues, Mr. Kildee and
the four that are going to testify this morning, for being absolutely
dogged and intense about this issue. For making sure that the Congress will listen to these stories, will understand the facts of these
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cases and will find whatever resources we have to provide some
badly needed justice to the individuals involved in this situation.
I think that a lot of things are wrong in this country today. Lord
knows there are a lot of things wrong in this country today.
But I think the number one thing that people think is wrong is
that there has been a basic breach of the social contract in this
country between people who work for a living and people who are
supposed to honor their obligations to them. And there are, in this
case, tens of thousands of people who upheld your end of the bargain, went to work, followed the rules, did your job, did the things
that were expected of you and did them at a high level of excellence
and performance, and to have your expectations evaporate because
of circumstances beyond your control and unrelated to your performance is shameful.
I do not ascribe the blame to any political party for this problem
or to any sector of the economy. I think it is a problem that we mutually created and a problem that we have to mutually solve. So
I am very pleased this morning we have the chance to hear about
that solution.
And this time, I want to turn to my friend, the ranking member
of the subcommittee, for his opening statement.
[The statement of Mr. Andrews follows:]
Prepared Statement of Hon. Robert E. Andrews, Chairman, Subcommittee
on Health, Employment, Labor and Pensions
Good morning and welcome to the Health, Employment, Labor and Pensions Subcommittee hearing on Examining the Delphi Bankruptcys Impact on Workers and
Retirees.
We appreciate the attendance of todays witnesses in helping members of the subcommittee better understand the effect the bankruptcy of General Motors and Delphi Corporation has had on workers retirement benefits.
Holding jurisdiction over the Employee Retirement Income Security Actwhich
was established by Congress in 1974 to protect employee welfare benefitsthe
Health, Employment, Labor and Pensions Subcommittees concern is heightened
when the retirement benefits of American workers are subject to significant reduction.
The subcommittee is sympathetic to the plight of the health and retirement benefits of Delphi workers and retirees. In particular, those workers and retirees under
the Delphi Salaried Pension Plan, which are expected to see their retirement benefits reduced.
The purpose of todays hearing is to provide members of the subcommittee with
a first-hand account from aggrieved Delphi salaried retirees. Furthermore, the subcommittee will further educate members about the General Motors/Delphi Corporations bankruptcy proceedings, as well as highlight the exposure to risk workers
face; in this particular instance, their pensions.
The recent bankruptcy proceedings of General Motors and Delphi Corporations
demonstrate the degree to which employee pension benefits are exposed to either
a reduction or diminishment.
Present issues regarding pension obligations of auto parts maker Delphi go back
to 1999 when the company was spun off by General Motors. At the time, GM promised to takeover pension obligations for hourly workers if Delphi was ever in financial trouble. In October 2005 Delphi filed for bankruptcy protection.
Three years later, in September 2008, a deal was struck with Delphis unsecured
creditors and approved by federal bankruptcy court, authorizing the transfer of $3.4
billion of Delphi hourly employee pension obligations to GM. At the time, the move
averted putting the obligations into the hands of the PBGC.
At the beginning of June 2009 GM filed for Chapter 11 bankruptcy protection.
The GM bankruptcy filing interrupted the September 2008 agreement for GM to absorb the Delphi hourly employee pension obligations. Prior to filing for bankruptcy,
GM absorbed $2.5 billion in pension liabilities per the September 2008 agreement.
The termination of the plans makes the PBGC responsible for the benefits of 70,000
Delphi workers and retirees, including salaried employees and some hourly employ-
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ees. The PBGC predicts its total obligation for Delphis pension shortfall to be $6.2
billion.
In July 2009, the federal Pension Benefit Guaranty Corporation announced it was
taking over obligations for Delphi Corporations six pension plans, which covers over
70,000 workers and retirees. The corporation had separate plans for hourly employees and salaried employees, in addition to four smaller plans.
With respect to 47,000 hourly workers and retirees in the Delphi Hourly Pension
Plan, the PBGC expected to assume $4 billion of the $4.4 billion unfunded liability,
leaving a $400 million shortfall. The PBGC expects to cover $2.2 billion of the $2.6
billion in unfunded liabilities of the 20,000 workers and retirees in retirees in the
Delphi Salaried Pension Plan, leaving a $400 million shortfall.
I look forward to the testimony of all of our witnesses and thank them again for
participating in this important hearing.
Mr. PRICE. Thank you, Mr. Chairman. And I too want to just express to you my appreciation and look forward to the opportunity
to work with you on the wonderful issues of this subcommittee.
This is a great subcommittee with wonderful jurisdiction, and I am
honored to be the ranking member. I also want to recognize our
colleagues here and thank them for joining us this morning. It is
always great to hear from our colleagues who have firsthand
knowledge of what is going on in their district and how it affects
their constituents, and I appreciate the second panel as well for
taking time to come and share their experiences and their expertise.
Todays hearing marks the opportunity for us to examine truly
Delphi Corporations bankruptcy and the effects it had on its workers and retirees. I do look forward to hearing in detail how different types of workers and retirees will fair under Delphis bankruptcy, and what lessons we, as policymakers, might take away
from this experience as we move forward.
Before we begin, however, I would like to make two critical
points. First, as our witnesses will explain today, we should all be
deeply troubled to hear that certain specific workers appear to have
been treated differently in connection with the companys bankruptcy than others. Some employees and retirees appear to have
been given preferential treatment in the bankruptcy process and
they will enjoy full benefits. Many others, some of whom we will
hear from today, are facing dramatic cuts in their pension and
their health benefits. Under any circumstances, it is shocking to
learn that workers who worked side by side for the same company
could find themselves in completely, completely uneven situations.
Apparently some would suggest for purely political reasons. Second, and even more important, it is deeply troubling to me that the
role of the Federal Government in dictating this unfair outcome is
entirely unclear. What was that role? Since February of this year
when President Obama announced the creation of a presidential
task force on the auto industry, the Federal Government has been
intimately involved in reshaping this segment of our economy to an
unprecedented level. What the American people do know has been
pieced together through media reports and court filings, not from
the administration itself.
So much for the transparency and accountability that we heard
about. We do know that the Treasury Department and the Presidents hand-picked car czar were deeply involved in the negotiation
of the restructuring of General Motors. We do know that Wash-
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ington is now a majority shareholder in General Motors holding
some 60 percent of its stock. We do know that the PBGC, the Pension Benefit Guarantee Corporation, has terminated Delphis pension plans. The legality of this action is presently being challenged
in Federal court. And we do know that General Motors has agreed
to top up the pension of some workers, notably those in certain
politically powerful unions, while leaving other workers and retirees high and dry.
However there is so much more that the American people and
that we dont know at this point. What is the culpability of the
Federal Government in this situation? What role did the White
House and the auto task force play? How active was it in determining winners and losers? And what terms did they dictate? To
those questions we have no answers. Here we are today with an
opportunity to receive answers, and it defies logic, Mr. Chairman,
that the administration and its auto task force are not going to be
here before us this morning to explain their actions and their roles
in these decisions. We had hoped that the senior advisor to the
task force, Mr. Ron Bloom, would answer those questions.
Unfortunately it appears that the majority was not interested in
having Mr. Bloom present today. This is extremely disappointing.
And another example, I believe, of this administration failing to
live up to its promises of accountability and of transparency. But
more to the point, as a matter of substance, it leaves a huge gaping
hole in our understanding of the true facts surrounding Delphis
bankruptcy, and does a disservice to those who have so much at
stake in this matter.
So, Mr. Chairman, we look forward to another hearing to provide
an opportunity to gain that true transparency to the decisions that
were made. Political economies, politicians picking winners and losers are very dangerous. I am hopeful that this subcommittee will
be allowed to completely investigate what happened in this situation. The chairman mentioned that are a lot of things wrong in this
country. There are a lot of things right in this country.
But one of the things that I believe that is to the detriment of
this Nation is when politicians get involved in specific decisions
that pick winners and losers in what ought to be an agreement, as
the chairman mentioned, recognized and adhered to previously
made by free individuals and free situations. So I am honored to
be joining you this morning. I appreciate the panels before us.
Thank you.
[The statement of Dr. Price follows:]
Prepared Statement of Hon. Tom Price, Ranking Minority Member,
Subcommittee on Health, Employment, Labor and Pensions
Good morning and thank you, Chairman Andrews. I would like to begin by thanking our two distinguished panels for appearing today. We appreciate that they have
taken time out of their busy schedules to share their experiences and expertise with
us.
Todays hearing marks an opportunity to examine the impact of Delphi Corporations bankruptcy on its workers and retirees. I look forward to hearing in detail
how different classes of workers and retirees will fare under Delphis bankruptcy,
and what lessons we as policymakers might take away from this experience moving
forward.
Id also like to make two critical points before we proceed with testimony.
First, as our witnesses will explain today, I am deeply troubled to hear that different categories of workers appear to have been treated very differently in connec-
6
tion with this companys bankruptcy. Some employees and retirees appear to have
been given preferential treatment in the bankruptcy process and will enjoy full benefits. Many otherssome of whom we will hear from todayare facing dramatic
cuts in their pension and health benefits. Under any circumstances, it is shocking
to learn that workers who worked side-by-side for the same company could find
themselves in such uneven situations.
Second, and even more important, it is deeply troubling that the role of the federal government in dictating this unfair outcome is entirely unclear. Since February
of this year when President Obama announced the creation of a presidential Task
Force on the auto industry, the federal government has been intimately involved in
reshaping this segment of our economy to an unprecedented level.
What the American people do know has been pieced together through media reports and court filings, not from the Administration itself. We know that the Treasury Department, and the Presidents hand-picked car czar, was deeply involved in
the negotiation of the restructuring of General Motors. We know that Washington
is now a majority shareholder in General Motors, holding some 60 percent of its
stock. We know that the Pension Benefit Guaranty Corporation has terminated Delphis pension plansthe legality of which is presently being challenged in federal
court. And we know that General Motors has agreed to top up the pensions of
some workersnotably, those in certain politically powerful unionswhile leaving
other workers and retirees high and dry.
There is so much more that the American people do not know at this point. What
is the culpability of the federal government in this situation? What role did the
White House and Auto Task Force play? How active was it in determining the winners and losers? And what terms did they dictate? To those questions, we have
no answers.
Here we are with an opportunity to receive answers, and yet it defies logic that
the Administration and its Auto Task Force are not here before us this morning to
explain their actions and their role in these decisions. We had hoped the senior advisor to the Task Force, Mr. Ron Bloom, would answer those questions. Unfortunately, Mr. Blooms participation this morning could not be arranged.
This is disappointing and another example of this Administration failing to live
up to its promises of accountability and transparency. But, more to the point, as a
matter of substance, it leaves a gaping hole in our understanding of the true facts
surrounding Delphis bankruptcy, and does a disservice to those who have so much
at stake in this matter.
Thank you, Chairman.
Chairman ANDREWS. Without objection, opening statements from

any of the members of the committee will be accepted into the
record. It is my understanding that Mr. Kildee has a specific unanimous consent request that he wanted to make at this time.
Mr. KILDEE. Yes, Mr. Chairman. Thank you very much. I ask
unanimous consent that three letters, one to the President of the
United States, one to the full chairman of the committees in the
House and Senate who have jurisdiction over this, and one to the
Secretary of Treasury, Mr. Geithner, a letter circulated by myself
and Christopher Lee that they may be made part of the record.
Chairman ANDREWS. Without objection.
[The information follows:]
U.S. CONGRESS,
Washington, DC, July 10, 2009.
Hon. BARNEY FRANK, Chairman; Hon. SPENCER BACHUS, Ranking Member,
Committee on Financial Services, U.S. House of Representatives, Washington, DC.
Hon. CHRISTOPHER DODD, Chairman; Hon. RICHARD SHELBY, Ranking Member,
Committee on Banking, Housing and Urban Affairs, U.S. Senate, Washington, DC.
DEAR CHAIRMEN AND RANKING MEMBERS: We are writing to respectfully request
immediate committee hearings into the treatment of Delphi Corporations pension
obligations and its impact on thousands of retirees and their families in our states.
As a result of restructuring negotiations between Delphi Corporation, General Motors (GM) and the Treasury Departments Automotive Task Force, Delphis hourly
retiree pension obligations will be assumed by GM while Delphis salaried pension
obligations will default to the Pension Benefit Guaranty Corporation. This means
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salaried retiree pension benefits could be cut by as much as 70 percent, if not eliminated entirely, for approximately 15,000 retirees and their families across the country. With their health and life insurance benefits now discontinued, Delphi retirees
are depending on these promised pension benefits for their financial security.
Delphis hourly and salaried retirees worked side-by-side for many years, mostly
as GM employees. Yet now, facing the same painful circumstances, they are being
treated so differently and inequitably by their government. Collectively and separately, we have appealed to GM, Delphi and the Administration to intervene and
provide fair and equitable treatment for Delphis hourly and salaried retirees.
Also, given the fact that American taxpayers now hold a 60 percent stake in the
new GM, many Members have requested information from the Auto Task Force on
how this decision was reached, including all pertinent correspondence and communication between GM, Delphi and the Task Force. This is an important step to help
shed light on the decision-making in this case and to promote transparent and open
government.
In addition, we believe that Congress also has a responsibility to exercise its oversight authority in this matter. As the committees of jurisdiction, we are respectfully
requesting immediate congressional hearings into the disposition of Delphis retiree
pension obligations and a thorough examination of the decision that resulted in
these inequitable outcomes for hourly and salaried retirees.
We fully understand that the restructuring of Americas auto industry will require
shared sacrifice and responsibility, which makes the need for a congressional examination into the disparate treatment given to Delphis hourly and salaried retirees
all the more urgent and necessary.
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Since Delphis reorganization plan is scheduled for court action on July 23, 2009
we thank you in advance for your immediate consideration of this request.
Sincerely,
CHRISTOPHER J. LEE,
TIM RYAN,
JOHN A. BOEHNER,
BART STUPAK,
VERNON EHLERS,
DALE KILDEE,
DAVID CAMP,
CAROLYN KILPATRICK,
CANDICE MILLER,
MARCY KAPTUR,
THADDEUS MCCOTTER,
JOHN BOCCIERI,
DAN BURTON,
MARCIA FUDGE,
MIKE PENCE,
CHARLES WILSON,
MICHAEL TURNER,
PARKER GRIFFITH,
PETE HOEKSTRA,
TRAVIS CHILDERS,
STEVE AUSTRIA,
BENNIE THOMPSON,
STEVEN LATOURETTE,
ERIC MASSA,
JEAN SCHMIDT,
DAN MAFFEI,
PATRICK TIBERI,
LOUISE SLAUGHTER,
ROBERT ADERHOLT,
SILVESTRE REYES,
GREGG HARPER,
BRIAN HIGGINS,
GINNY BROWN-WAITE,
JIM MARSHALL,
F. JAMES SENSENBRENNER, JR.,
GARY C. PETERS,
ROBERT LATTA,
MARY JO KILROY,
J. RANDY FORBES,
STEVE DRIEHAUS,
JIM GERLACH,
MICHAEL H. MICHAUD,
MIKE ROGERS (MI),
JOHN CONYERS, JR.,
Members of Congress.
U.S. CONGRESS,
Washington, DC, June 24, 2009.
Hon. TIMOTHY F. GEITHNER, Secretary,
U.S. Department of Treasury, 1500 Pennsylvania Avenue, NW, Washington, DC.
DEAR SECRETARY GEITHNER: We are writing in regards to the recent involvement
by the U.S. Treasury Departments Automotive Task Force concerning the pension
obligations of Delphi Corporation.
We are concerned about the inequitable decision to default the Delphi Corporations salaried retiree pension plan to the Pension Benefit Guarantee Corporation
(PBGC), while General Motors agreed to assume the auto parts suppliers hourly retiree pension obligations. Through referral to the PBGC, salaried retirees pension
payments are likely to be cut drastically, as much as 70 percent by some estimates.
It is fundamentally unfair that two groups of retirees from the same company, who
worked side-by-side for so many years, and who are faced with the same unfortunate situation, are being treated so differently by the federal government.
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At a minimum, in the interest of transparency and accountability, we believe the
15,000 salaried Delphi retirees nationwidenot to mention the American taxpayers
who now own a 60 percent stake in the new GMdeserve a full and public explanation of how this inequitable decision was made.
For this reason, we respectfully request that you direct the Auto Task Force to
make public all documents concerning how this decision was reached, including all
pertinent documents, written communications and memoranda between the Automotive Task Force, General Motors, Delphi Corporation and their agents or representatives.
Thank you for your urgent consideration of this important matter. We look forward to hearing from you.
Sincerely,
CHRISTOPHER J. LEE,
BRIAN HIGGINS,
ROBERT LATTA,
DANIEL MAFFEI,
VERNON EHLERS,
MARY JO KILROY,
GREGG HARPER,
STEVE DRIEHAUS,
MICHAEL TURNER,
PARKER GRIFFITH,
MIKE ROGERS (MI),
SILVESTRE REYES,
TODD R. PLATTS,
ERIC MASSA,
GINNY BROWN-WAITE,
JIM GERLACH,
DAVID CAMP,
DAN BURTON,
PETER HOEKSTRA,
THADDEUS MCCOTTER,
CANDICE MILLER,
DALE KILDEE,
Members of Congress.
Chairman ANDREWS. At this time, I am going to introduce our

member panel very briefly since each of these gentlemen is known
to each of us. Senator Sherrod Brown, we welcome back to his
home in the House of Representatives. Sherrod is the Junior Senator from Ohio. He was elected to the Senate. He was demoted in
2006. He left the House for the Senate. Everybody picked that up.
He currently sits on the Senate Health, Education, Labor and Pensions Committee, the Banking, Housing and Urban Affairs Committee, and is chairman of its Subcommittee on Economic Policy,
the Veterans Affairs Committee and the Ethics Committee, the Agriculture and Nutrition Subcommittee, and as chairman of its subcommittee on Hunger, Nutrition and Family Farms. Sherrod, welcome back. It is always great to have you here.
Congressman Chris Lee is in his first term, representing New
Yorks 26th Congressional District. He currently sits on the House
Committee on Financial Services where I know there is votes going
on this morning. So we will try to accommodate that. He certainly
has made a very positive impression in his first term and we are
glad he is with us here as well.
Congressman Michael Turner is the Representative of the 3rd
District of Ohio after being elected in 2002. I believe he was mayor
of Dayton before that; is that right? He is a Member of the House
Armed Services Committee where he and I traveled together to
Iraq and was named as a ranking member on the Strategic Forces
11
Subcommittee, and is a member of the Readiness Subcommittee.
He also serves on the House Committee on Oversight and Government Reform where he serves on the National Security and Foreign
Affairs Subcommittee, as well as the Domestic Policy Subcommittee.
And we welcome Congressman Tim Ryan back to the committee.
He started here with us when he first joined the House. He was
elected to the Congress in 2002. He is now in his fourth term representing Ohios 17th District, which, I guess, Youngstown is the
largest community. He currently serves on the Subcommittee on
Labor, Health and Human Services, Education Related Agencies
Subcommittee on the legislative branch and the Subcommittee on
Energy and Water Development on the Appropriations Committee.
Tim, you have been tireless in making this hearing take place this
morning. We are glad to have you with us.
At this time we are going to go to our member panel. I would
say to the panelists that it is the custom of this subcommittee, although not the rule, that we dont engage in questions and answers
too much with the member panel so we can get to the citizens that
have come here. But obviously, if any members want to ask you a
question, we would be happy to have that and you are welcome to
make your statements, Sherrod, welcome.
STATEMENT OF THE HON. SHERROD BROWN,
A U.S. SENATOR FROM THE STATE OF OHIO
Senator BROWN. Thank you very much, Mr. Chairman and Ranking Member Price. Congratulations on your new position. And, Mr.
Chairman, thank you for your understanding of a complicated, yet
in many ways, very simple set of issues. So thanks for that. And
special thanks to Congressman Kucinich and Congresswoman
Fudge from Ohio who sit on the health panel too, and their work
on this, and especially Tim Ryan and Mike Turner, who have
joined all of us in Ohio in understanding how important this issue
is, not just for the Mahoning Valley and the Miami Valley, but our
whole State.
I appreciate the opportunity to speak out on behalf of representatives of the Delphi retirees and thousands of Ohioans who are paying the price of the Delphi bankruptcy and lost health care and
dramatically reduced pensions. For many workers and retirees in
my State and across the Nation there isas the chairman pointed
outa crisis of confidence in our social contract. Pension benefits
earned over a long lifetime of service are dramatically reduced in
the wake of bankruptcy. When PBGC assumes trusteeship of a
pension plan and can only pay benefits up to what is guaranteed
in law, final benefits can sometimes take months or years to calculate with the retiree responsible for any overpayment.
Earlier this week, I was in Congressman Kucinichs district and
at a steel plant. I talked to one retiree who owes literally $18,000
back to the PBGC because of a miscalculated overpayment. Early
retirement supplemental benefits, health benefits are not guaranteed. Retirees are in no position to make up for these losses when
their pension is assigned to the PBGC. They feel betrayed by the
system that gave them certain expectations as Chairman Andrews
pointed out in a system that is supposed to protect them. The Fed-
12
eral Government stepped in to bail out the auto industry. It was
the right thing to do. TARP financing has enabled General Motors
to quickly move through bankruptcy. TARP financing enabled GM
to address its pension obligations. TARP saved thousands of jobs
in a key sector of our economy. However, all too many workers, as
we know too well, who spent most of their careers as GM employees were left out.
Tom Rose, a Delphi retiree, who started his career with GM in
1969 summarized the sentiment of many Delphi retirees when he
told the Dayton Daily News our defined pension depended on a
trust that was broken. In the case of Delphi hourly employees
under certain collective bargaining agreements, GM agreed to
make up the difference between PBGC benefits and what the retiree earned. The Delphi salaried employees and some of the hourly
employees represented by the International Union of Operating Engineers, the International Brotherhood of Electrical Workers and
the machinists unions had no such agreement and are facing drastic reductions in their pension benefits.
So it is salaried workers and some union workers also. They are
simply looking for fair treatment. Other Delphi retirees are facing
the loss of their health benefits, which is why Congressman Ryan
and I introduced legislation with Representatives Fudge and Kucinich and Turner and other members of the Ohio delegation to fund
a voluntary employees beneficiary association, VEBA, to help them
with the cost of health care. They too are looking for fair treatment. At our Senate Health Committee hearing last month, we
heard testimony about how Delphi pushed many workers into early
retirement with the assurance that their pension benefits would be
safe. That simply was not true.
Now these retirees face the greatest losses in income. A 54-yearold Delphi salaried retiree named John wrote my office and said 31
years of effort to secure a pension are being ruined in the bankruptcy court. Creditors who only have several years of revenue at
risk are given higher priority. I have been looking for a job for 10
months without success. If my pension goes to PBGC, my family
will likely be living below the poverty level. The loss of pension and
health care benefits will add to the economic devastation of an area
already reeling from job losses. In the two areas in Ohio that have
probably been hit hardest by this awful recession are the areas represented by Congressman Ryan in the Mahoning Valley, Youngstown-Warren area and by Congressman Turner, the Miami Valley,
Dayton, SpringfieldDayton in his case in that area.
A Youngstown State University study estimates an annual fiscal
impact of nearly $58 million resulting in over 1,700 employment
losses. Protecting the pensions supports economic recovery, workers
at the steel plant in Cleveland, a different issue, but who lost significant PBGC money went back to work, three whom I met with
earlier this week have all been there more than 30 years, they
went back to work because they lost so much of their pension on
an issue that Congressman Kucinich worked so hard on and are in
PBGC and they had to go back to work as a result. If they had
been treated fairly and gotten their full pensions, if the company
had funded them, they would be retired, living relatively com-
13
fortably and new workers would be replacing them at the steel
plant.
Protecting retirement security is one of the purposes of the bailout of our financial system. We cant bail out an industry while
leaving thousands of retirees who have loyally served out in the
cold. We should be able to resolve this. Thank you, Mr. Chairman.
[The statement of Senator Brown follows:]
Prepared Statement of Hon. Sherrod Brown,
a U.S. Senator From the State of Ohio
Good Morning.
I would like to thank Chairman Andrews, Ranking Member Price, and all of the
Members of the Subcommittee for holding this hearing.
I appreciate the opportunity to join my colleagues in the House and the representatives of the Delphi retirees to speak out on behalf of the tens of thousands of Ohioans who are paying the price of the Delphi bankruptcy in lost health care and reduced pensions.
For many workers and retirees in Ohio and across the nation, there is a crisis
of confidence in our social contract. Pension benefits earned over a lifetime of service
are dramatically reduced in the wake of bankruptcy.
When PBGC assumes trusteeship of a pension plan, it can only pay benefits up
to what is guaranteed in law. Final benefits can sometimes take months or years
to calculate, with the retiree responsible for any overpayment.
Early retirement, supplemental benefits, and health benefits are not guaranteed.
Retirees are in no position to make up for these losses when their pension is assigned to the PBGC. They feel betrayed by the system that was supposed to protect
them.
The federal government stepped in to bail out the auto industry. TARP financing
has enabled General Motors to quickly move through bankruptcy. TARP financing
enabled GM to address its pension obligations. TARP saved thousands of jobs in a
key sector of our economy. However, some workers, many of whom spent most of
their careers as GM employees, were left out.
Tom Rose, a Delphi retiree who started his career with General Motors in 1969,
summarized the sentiment of many Delphi retirees when he told the Dayton Daily
News: Our defined pension depended on a trust that was broken.
In the case of Delphi hourly employees under certain collective bargaining agreements, GM agreed to make up the difference between the PBGC benefit and what
the retiree had earned. The Delphi salaried employees and some of the hourly employees such as those represented by the International Union of Operating Engineers, the International Brotherhood of Electrical Workers (IBEW), and the Machinists unions had no such agreement and are facing drastic reductions in their pension benefits. They are looking for fair treatment.
Other Delphi retirees are facing the loss of their health benefits, which is why
Congressman Ryan and I introduced legislation with Representatives Fudge, Kucinich, Turner, and other members of the Ohio delegation to fund a Voluntary Employees Beneficiary Association to help them with the cost of health care. They, too,
are looking for fair treatment.
At our Senate HELP Committee hearing last month, we heard testimony about
how Delphi pushed many workers into early retirement with the assurance that
their pension benefits would be safe. That was not true. Now these retirees face the
greatest losses in income.
John, a 55-year old Delphi Salaried retiree wrote my office, Thirty-one years of
effort to secure a pension are being ruined. In the bankruptcy court, creditors who
only have several years of revenue at risk are being given higher priority. I have
been looking for a job for 10 months without any success. If my pension goes to the
PBGC, my family will probably be living below the poverty level.
The loss of pension and health care benefits will add to the economic devastation
of an area already reeling from job losses. A Youngstown State University study estimated an annual fiscal impact of nearly $58 million, resulting in over 1700 employment losses.
Protecting the pensions supports economic recovery.
Protecting retirement security was one of the purposes of the bailout of our financial system.
We cannot bail out an industry while leaving thousands of retirees who have loyally served it out in the cold.
14
We should be able to resolve this.
Thank you for inviting me to testify.
Chairman ANDREWS. Thank you, Senator. It is great to have you

with us. Congressman Lee, welcome to the subcommittee.
STATEMENT OF THE HON. CHRISTOPHER LEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK
Mr. LEE. Thank you. I would like to thank the Chairman, Ranking Member Price and the rest of the subcommittee members for
giving me an opportunity to speak about an issue that is very near
and dear to me and many of the constituents that I represent here
in western New York. Mr. Chairman, you convened this hearing to
investigate the handling of Delphi Corporations pension obligations and I truly do commend you for doing so and as a result of
this restructuring, negotiations between Delphi, GM and the Treasury Departments auto task force, many Delphi workers and retirees have seen changes to their pensions. We all know that is very
evident.
However, as you are aware, these changes were not equally distributed among these current and former Delphi and GM employees. As a result of the restructured negotiations between Delphi
Corporation, GM and the auto task force, Delphis pension obligations will default to the Pension Benefit Guarantee Corporation.
However, certain hourly workers will experience little or no pension reduction because of the unprecedented agreement brokered
by the auto task force for GM to top up these pensions. You will
hear from members of the Delphi Salaried Retiree Association discuss this in further detail.
But what this decision means as to the pension benefits for salaried Delphi retirees could be cut as much as 70 percent for approximately 20,000 workers across this country. And that is just wrong.
Just in the last year alone, the last year alone, their health care
benefits gone, life insurance benefits gone, and now this. Delphi retirees have long depended on these benefits for their financial security and retirement. I have with me here today just in the last
week hundreds of pieces of correspondence that I received from
Delphi retirees from across the country in just one week.
Their stories, I have got to tell you, are painful to read. These
letters tell you the stories of men and women who have worked for
20, 30, even longer that GM and Delphi, doing their job day in and
day outer, building American products, helping our local economy
across the country. And these are places like western New York,
Ohio, Michigan. These men and women have worked for Delphi
with the promise of current and future compensation funded
through the efforts by these workers. They were depending on
these benefits for a safe, secure and healthy retirement. One such
person I want to make note of is a gentleman, David Chad from
Lock Port, New York. Worked for GM for 25 years, Delphi for another 10. He had anticipated retirement pension. His anticipated
retirement pension had already been cut by 30 percent from what
was originally promised by him by Delphi back in October of 2008.
He was promised health care benefits once he retired until he
reached the age of 65. And these are gone.
15
Now the PBGC is expected to dramatically reduce his pension
benefits on top of what was already cut in 2008. And he described
his personal situation like this. Uncertainty of benefits, no health
care and a 401(k) designed over 35 years ago to be supplemented
with a healthy pension. It has shattered his retirement plans. And
after carefully planning his retirement that he thought would begin
in his early 60s, he now expects to work until the age of at least
70. He is certainly not alone.
These are countless stories I have read and other stories like
these throughout the country. And I ask unanimous consent to submit these letters for the record.
[The letters, of which a sampling follows, have been entered into
the permanent record and are archived at the Committees office:]
16
17
Mr. LEE. Delphis hourly and salaried retirees worked side by

side for many years, mostly as GM employees. Yet they are now
being treated so differently and so inequitably by their government
and with some bearing a small burden while others take the lions
share. Many of my colleagues, including those sitting with me on
this panel today, have appealed to GM, Delphi and the administration to intervene and provide fair and equitable treatment for Delphis hourly and salaried retirees.
18
At a minimum, these decisions and how these decisions were
reached ought to be explained sufficiently to these workers. I want
to call your attention to an important congressional request that
demands the attention of this committee. On June 24th, more than
5 months ago, a bipartisan group of 22 Members wrote to Treasury
Secretary Tim Geithner to request that he direct the auto task
force to make public all documents concerning how the decision to
dispose of these pensions were reached, including relevant documents, written communications and memoranda between the Auto
Task Force, GM, Delphi and their agents and representatives. And
I also ask unanimous consent to have this put into the
Mr. LEE. Following the Senate Health, Education, Labor and
Pensions hearing, Pensions in Peril, which examined this issue, a
similar request was made. To date, we have not received a single
response back from Secretary Geithner on this request. And in
light of the administrations commitment to transparency and open
government and given that the American taxpayer is now a majority shareholder of GM, I believe it is the taxpayers who deserve answers and a full explanation as to how these inequitable decisions
were made.
On behalf of Delphis retirees and the American taxpayers who
are financing GMs recovery, I am here to seek the support of this
committee for this request and your assistance in demanding the
immediate release of these documents from the auto task force and
the Treasury Department. I am grateful that this committee is beginning to investigate what is truly happening here, but how can
proper oversight be performed on these decisions if the administration will not release the information it used to make the decisions.
Only through the public release of these documents can Congress
effectively exercise its oversight authority and responsibility. And
I thank the chairman and ranking member to have this opportunity to speak on my constituents behalf.
Chairman ANDREWS. Thank you. We appreciate your participation.
[The statement of Mr. Lee follows:]
Prepared Statement of Hon. Christopher Lee, a Representative in Congress
From the State of New York
Id like to begin by thanking Chairman Andrews, Ranking Member Price, and the
other members of the subcommittee for giving me the opportunity to testify here
today.
Mr. Chairman, you have convened this hearing to investigate the handling of Delphi Corporations pension obligations, and I commend you for doing so. As a result
of the restructuring negotiations between Delphi Corporation, General Motors, and
the Treasury Departments Automotive Task Force, many Delphi workers and retirees have seen changes to their pensions. However, as you are aware, these changes
were not equally distributed among these current and former Delphi and GM employees.
As a result of restructuring negotiations between Delphi Corporation, GM and the
Auto Task Force, Delphis pension obligations will default to the Pension Benefit
Guaranty Corporation. However, certain hourly workers will experience little or no
pension reduction because of the unprecedented agreement brokered by the Auto
Task Force for GM to top up those pensions. You will hear from members of the
Delphi Salaried Retiree Association to discuss this in further detail, but what this
decision means is that pension benefits for salaried Delphi retirees could be cut by
as much as 70 percent for approximately 20,000 retirees and workers across the
country. Just in the last year, their health and life insurance benefits have been
19
canceled, and now this. Delphi retirees have long depended on these benefits for
their financial security in retirement.
I have with me here today hundreds of pieces of correspondence I received just
in the last week from salaried Delphi retirees from across the country. Their stories
are painful to read. These letters tell the stories of men and women who worked
for 20 or 30 years or even longer for Delphi, building good American products and
contributing to their local economy and communities in Western New York, in Ohio,
in Michigan and elsewhere. These men and women worked for Delphi with the
promise of current and future compensation funded through the effort of each worker. They were depending on these benefits for a safe, secure and healthy retirement.
One such person is 53yearold David Chatt from Lockport, New York. David
worked for GM for 25 years and Delphi for an additional 10 years. His anticipated
retirement pension had already been cut by 30 percent from what was originally
promised him by action Delphi took in October of 2008. He was promised health
care benefits once he retired until he reached the age of 65, and these are gone.
Now the PBGC is expected to dramatically reduce his pension benefits, on top of
what was already cut in 2008. He described his personal situation like this: uncertainty of benefits, no health care, and a 401(k) designed over 35 years to be supplemented with a healthy pension, has shattered [his] retirement plans. After carefully planning a retirement in good faith that would begin in his early 60s, he now
expects to have to work until 70.
Hes certainly not alone. There are countless other stories like this in these letters, and I ask unanimous consent to submit these letters for the record. [WAIT for
response]
Delphis hourly and salaried retirees worked sidebyside for many years, mostly as
GM employees. Yet they are now being treated so differently and inequitably by
their government, with some bearing a small burden while others take the lions
share. Many of my colleagues, including those sitting with me on the panel today,
have appealed to GM, Delphi and the Administration to intervene and provide fair
and equitable treatment for Delphis hourly and salaried retirees. At minimum,
these decisionsand how these decisions were reachedought to be explained sufficiently to these workers.
I want to call your attention to an important congressional request that demands
the attention of this Committee. On June 24, more than five months ago, a bipartisan group of 22 Members wrote to Treasury Secretary Timothy Geithner to request he direct the Auto Task Force to make public all documents concerning how
the decision to dispose of these pensions was reached, including relevant documents,
written communications and memoranda between the Auto Task Force, GM, Delphi,
and their agents and representatives. I ask unanimous consent to have this letter
submitted for the record. [WAIT for response]
Following the Senate Health, Education, Labor, and Pensions hearing Pensions
in Peril which examined this issue, a similar request was made.
To date, we have not received a response from Secretary Geithner to this request.
In light of this Administrations commitment to transparent and open government,
and given that the American taxpayers are the majority owners of GM, I believe
that taxpayers deserve answers and a full explanation of how these inequitable decisions were made.
On behalf of Delphis retirees, and the American taxpayers who are financing
GMs recovery, I am here to seek the support of this committee for this request and
your assistance in demanding the immediate release of these documents from the
Auto Task Force and the Treasury Department. I am grateful that this committee
is beginning to investigate what happened here, but how can proper oversight be
performed on these decisions if the Administration will not release the information
it used to make its decisions? Only through the public release of these documents
can Congress effectively exercise its oversight authority and responsibility. I thank
the Chairman and Ranking Member in advance for their consideration of this long
overdue request.
I again thank the committee for the opportunity to testify here today and look
forward to working with you all to continue to pursue this matter.
Chairman ANDREWS. Congressman Michael Turner, welcome to

the committee.
20
STATEMENT OF THE HON. MICHAEL R. TURNER, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO
Mr. TURNER. Thank you, Mr. Chairman, Ranking Member Price.

Chairman Andrews, I want to thank you for your comments concerning this being an issue of trust and values. And, Ranking
Member Price, I want to thank you for your comments concerning
questions of the actions of this administration that facilitated this
result. The bankruptcy of Delphi Corporation has had a major impact on my community of Dayton, Ohio. The Dayton region is actually the birthplace of Delphi. The company was founded as the
Dayton Engineering Laboratories Company which evolved through
the hard work of Ohioans into Delco, a division of General Motors.
General Motors subsequently spun off Delphi, which, at one
point, was the largest parts supplier of General Motors. Mr. Chairman, my father worked in General Motors factories for over 40
years. When Delphi declared bankruptcy in 2005, the company decided to close or sell several facilities in my congressional district,
including 2 facilities in Dayton, as well as a facility in Kettering,
Moraine and Vandalia.
The job loss at these facilities has been estimated at over 5,000
jobs. The effect of these plant closures have been felt throughout
the Dayton region as many of our family members, neighbors and
friends were Delphi employees. The closure of these facilities also
has an impact beyond individual job loss. Whole neighborhoods
have been affected by Delphis bankruptcy through increased foreclosures and community services that have been affected as a result of an eroded tax base. The job loss associated with Delphis
bankruptcy was further increased by the closing of a General
Motorss plant in Moraine, Ohio, which resulted in the loss of 5,000
additional jobs. The job losses also extended to small manufacturers and suppliers throughout Ohio who lost Delphi and General
Motors as clients.
Since Delphi entered bankruptcy in 2005, many of us in Ohio
have worked on a bipartisan basis to assist those affected in the
State. I have worked with my colleague Senator Brown to help secure emergency assistance for auto workers and with Representative Tim Ryan to help provide trade adjustment assistance to dislocated workers. Todays hearing is in response to yet another loss
to my community at the hands of Delphi Corporation.
This summer, Delphi when they petitioned for the United States
Supreme Courts approval to turn over pensions for salaried retirees to the Pension Benefit Guarantee Corporation, resulted in an
additional loss to my constituents. These actions are resulting in
approximately 15,000 salaried Delphi retirees from across the country taking a severe cut in their promised pension benefits. I want
to go a little further. We keep talking about promises. Item these
are earned pension benefits. Benefits that as a result of their hard
work should have been there for them upon their retirement. By
some estimate, this means a 70 percent reduction in pensions and
for some retirees the news compounds the prior loss of health care
benefits.
Earlier this year, a bipartisan group of Ohio representatives petitioned the administration to help retirees from General Motors
plants in Dayton and Warren to receive insurance benefits. While
21
these retirees were not entirely made whole, some were able to receive a baseline of benefit protections. However, not all groups have
had these results. Delphi salaried retirees, as well as some of the
so-called splinter unions, it says IUOE, IBEW and IAM still face
benefit reductions.
Local leadership for the Delphi salaried retirees in my district estimate that nearly 1,000 retirees in the Dayton area will be affected by the bankruptcy courts decision. This treatment of salaried retirees is particularly troublesome in comparison to the benefits received by some in organized labor organizations.
I have worked along with the members of this panel to advocate
on behalf of both union and nonunion labor to ensure that all retired workers receive whatever benefits they were promised. Mr.
Chairman, all of these retirees, regardless of labor affiliation or
not, worked alongside each other during their careers. They should
not be treated differently in retirement. Salaried retirees made
their careers by supporting Delphi Corporation. Congress and
President Obamas administration owe it to these hard working
men and women to pursue aggressive oversight in this matter and
to work toward a solution.
Before I conclude, I would like to recognize Tom Rose, who drove
here from Dayton, Ohio to Washington, D.C. For todays hearing,
as well as the other retirees who are present, all of which, Mr.
Chairman, are attending this hearing in hopes of answers as to
how this issue can be addressed. They have my continued commitment to work with this panel on their behalf. Mr. Chairman, while
Delphi has been permitted to survive, their retirees continue to
struggle. This problem should not have been allowed to occur and
the administrations actions appear to have encouraged this result.
And this outcome only encourages companies in the future to
underfund their pensions and then to walk away from their obligations. I appreciate your holding this hearing today, and we look forward to additional answers. Thank you.
Chairman ANDREWS. Thank you very much, Congressman.
[The statement of Mr. Turner follows:]
Prepared Statement of Hon. Michael R. Turner, a Representative in
Congress From the State of Ohio
Thank you Chairman Andrews and Ranking Member Price for holding this hearing today and inviting me to testify.
The bankruptcy of Delphi Corporation has had a major impact on my community
of Dayton, Ohio.
The Dayton region is the birthplace of Delphi Corporation. The company was
founded as the Dayton Engineering Laboratories Company which evolved, through
the hard work of Ohioans, into Delco, a division of General Motors. General Motors
subsequently spun off Delphi Corporation, which at one point, was the largest parts
supplier to General Motors. Mr. Chairman, my father worked for General Motors
for over 40 years.
When Delphi declared bankruptcy in 2005, the company decided to close or sell
several facilities in my congressional district including two facilities in Dayton, as
well as facilities in Kettering, Moraine, and Vandalia. The job loss at these facilities
has been estimated at over 5000 jobs.
The effect of these plant closures has been felt throughout the Dayton region as
many of our family members, neighbors, and friends were Delphi employees.
The closure of these facilities also has an impact beyond individual job loss. Whole
neighborhoods have been affected by Delphis bankruptcy through increased foreclosures, and community services have been affected because of an eroded tax base.
22
The job loss associated with Delphis bankruptcy was further increased by the
closing of the General Motors assembly plant in Moraine, Ohio, which resulted in
the loss of five thousand additional jobs. The job losses also extend to small manufacturers and suppliers throughout Ohio who lost Delphi and GM as clients.
Since Delphi entered bankruptcy in 2005, many of us in Ohio have worked on a
bi-partisan basis to assist those affected in our state. Specifically, I have worked
with my colleague Senator Brown to help provide emergency assistance for auto
workers and with Representative Tim Ryan to help provide trade adjustment assistance to dislocated workers.
Todays hearing is in response to yet another loss to my community at the hands
of Delphi Corporation.
This summer, Delphi petitioned for, and the United States Bankruptcy Court
granted authority to turn over pensions for salaried retirees to the Pension Benefit
Guarantee Corporation (PBGC). These actions are resulting in approximately 15,000
salaried Delphi retirees from across the country taking a severe cut in their promised pension benefits. By some estimates, this means a 70 percent reduction in pensions, and for some retirees, this news compounds the prior loss of health care benefits.
Earlier this year a bi-partisan group of Ohio representatives petitioned the Administration to help retirees from General Motors plants in Dayton and Warren,
Ohio to receive insurance benefits. While these retirees were not entirely made
whole, some were able to achieve a baseline of benefit protections.
However, not all groups have had these results. Delphi Salaried Retirees, as well
as some so-called splinter unions such as the IUOE, IBEW, and IAM still face benefit reductions.
Local leadership for the Delphi Salaried Retirees in my district estimate that
nearly 1000 retirees in the Dayton area will be affected by the Bankruptcy Courts
decision. This treatment of salaried retirees is particularly troubling in comparison
to the benefits received by some in organized labor organizations.
I have worked along with all the members of this panel to advocate on behalf of
both union and non-union labor to ensure that all retired workers receive whatever
benefits they were promised.
Mr. Chairman, all of these retirees, regardless of labor affiliation or not, worked
alongside each other during their careers. They should not be treated differently in
their retirement.
Salaried retirees made their careers by supporting Delphi Corporation. Congress
and President Obamas Administration owe it to these hard working men and
women to pursue aggressive oversight in this matter, and to work toward a solution.
Before I conclude, I would like to recognize Tom Rose for driving from Dayton,
Ohio to Washington, DC for todays hearing, as well as the other retirees who are
in attendance. You have my continued commitment to work on your behalf.
Mr. Chairman, while Delphi has been permitted to survive, their retirees continue
to struggle. This problem should not even have been allowed to occur. I appreciate
your holding this hearing today as we look for additional answers.
Thank you.
Chairman ANDREWS. Mr. Rose said he had driven to be here

today. Can he stand? Welcome, sir. I am glad you are with us this
morning. Thanks for paying our salaries. We appreciate it. We
hope we can earn them for you today. Congressman Tim Ryan, welcome back to the committee. And thank you for your efforts to
make today a reality.
STATEMENT OF THE HON. TIM RYAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. RYAN. Thank you, Mr. Chairman. I would also like to thank
youit has been months since we had talked and you right out of
gate said yes, we will help you. And I appreciate you helping me
keep my commitment to the Delphi salaried retirees. So I appreciate that. Congressman Price, congratulations on the promotion.
Members of the Committee, Congressman Kucinich, Congresswoman Fudge from Ohio and Mr. Kildee, thank you for all your
help helping address this issue.
23
I would also like to thank Chairman Miller, who was a big part
of allowing this to happen here. And I would also like to thank
Ohios Governor, Ted Strickland, for his support, and Senator
Sherrod Brown for all his work on this issue, including a hearing
in the Senate and for particular reasons, the original Packard Electric was started in my district in Warren, Ohio by the Packard
Brothers.
So this has been a company that has been around for a long, long
time in Warren, Ohio. And now with this bankruptcy, it has all
come to a head here. And bankruptcy, as you know, has too often
been used as a means to jettison commitments as you stated earlier, made the workers and leave behind retirees and that needs to
change. One category of those left behind is the hourly retirees represented by the IUE-CWA, the United Steel Workers International
Association of Machinists, Teamsters, IBW, International Union of
Operating Engineers, and others who lost health care benefits and
pensions. While the IUE-CWA, USW and others had their pensions
topped off under agreement with GM, thanks to the efforts of this
administration and others, their health care benefits are in danger
of being lost.
And furthermore, some workers with the smaller unions have
still been left completely behind. The other category, which we will
hear about today, is the Delphi salaried retirees, who, I believe,
should have had their issues regarding both pensions and health
care dealt within the context of the GM bankruptcy.
Thankfully the PBGC will pay the retirees a large percentage of
their promised benefits. But even with that, many retirees will see
substantial losses. This is unacceptable and needs to be fixed. Furthermore, all retirees from Delphi will see substantial reductions in
or outright elimination of health care coverage. Without the stimulus bill, the situation would be even worse since many retirees are
eligible for an 80 percent health care tax credit.
I have spoken with many retirees who are now concerned about
how they would be able to afford their mortgages, their health care
costs and even their childrens college tuition bills, including Nick
Dragovich IUE-CWA local 717 in my district who drove out to be
at this hearing. Nick started at Delphi, then called Packard Electric shortly after high school and worked there through GMs ownership and the Delphi spinoff, putting in over 34 years of service.
In exchange for that service, he, like everyone else with Local 717,
has been bounced around by companies that do not want to honor
their commitments.
The harm of lost pensions and health care does not stop with the
direct losses. There are so many retirees in my congressional district that the losses will flow to everyone in the region. As Senator
Brown mentioned, a recent Youngstown State University study
state that the total losses to the Mahoning Valley could be over $57
million annually. Those losses translate into over 1,700 job losses
in our region. The bankruptcy system must be reformed to give a
higher creditor status to retirees.
Many of the creditors currently above retirees are in a position
to make informed decisions about the creditworthiness of borrowers
and set rates accordingly as you mentioned in your opening statement. Furthermore, we need to tighten ERISA and other pension
24
protection laws to preserve promised benefits. H.R. 1322, introduced by Congressman John Tierney, is a great example of exactly
what needs to be done to prevent more situations like Delphis and
what my region saw over the last 30 years in the steel industry.
An employee cannot possibly plan for unexpected cuts and promised benefits after the game has been played. Once again, we see
systematic misalignment of who pays for other peoples risks.
But unfortunately, even if these steps are taken, it is too late to
help many of my constituents. That is why I have introduced with
Congressman Sherrod Brown H.R. 3455 to establish a voluntary
employee beneficiary association for former Delphi employees. This
bill would use unspent money already authorized by the Emergency Economic Stabilization Act of 2008 to provide health coverage to both hourly and salaried retirees of the Delphi Corporation.
I ask that the text of these remarks and accompanying documents, including a letter from the President of the Ohio AFL-CIO,
John Rugola, be included in the record. And this is another example of how this is bipartisan and both union and nonunion folks
hanging together. So I ask that these be added to the record. And
I thank you again, Chairman Andrews, for your commitment that
you kept on behalf of our workers. Thank you.
[The statement of Mr. Ryan follows:]
Prepared Statement of Hon. Tim Ryan, a Representative in Congress
From the State of Ohio
Chairman Andrews, Congressman Price, and Members of the committee, thank
you for allowing me this time to address the Delphi bankruptcy and how it has affected my congressional district. Chairman Miller, thank you as well for your efforts
to bring attention to this matter. I would also like to thank Ohios Governor Ted
Strickland for his support, and Senator Sherrod Brown for all he has done on this
issue in the United States Senate. Bankruptcy has too often been used as a means
to jettison commitments made to workers and that needs to change.
Delphi was spun off from GM in 1999 as an independent parts supplier. Most of
the operations spun off had been a part of GM for twenty to thirty years. Within
a few years Delphi began a steep decline and filed for bankruptcy in 2005. At that
time roughly 150,000 people worked for Delphi, many of whom were represented by
collective bargaining agreements. The United Auto Workers, International Union of
Electronic, Electrical, Salaried, Machine and Furniture Workers, United Steel Workers, International Association of Machinists, Teamsters, International Brotherhood
of Electrical Workers, International Union of Operating Engineers, and others represented Delphi employees. Very few bankruptcy issues were resolved in a timely
manner, and the company languished in bankruptcy court for nearly 4 years.
During the time the company was in bankruptcy, the various pension funds fell
further and further behind on the balances required to meet their obligations. This
was compounded by an aggressive push for early retirement by Delphis management to trim the workforce. When Delphi terminated the pension plans and sent
their obligations to the Pension Benefit Guaranty Corp they covered approximately
70,000 workers and were under funded by over 7 billion dollars.
One category of those left behind include the hourly retirees represented by the
IUE-CWA, USW, IAMAW, Teamsters, IBEW, IUOE, and others who lost health care
benefits and pensions. While the IUECWA, USW and others had their pensions
topped off under agreement with GM, thanks to the efforts of this administration
and others, their health care benefits are in danger of being lost. Furthermore some
workers with the smaller unions have still been left completely behind.
The other category are Delphi salaried retirees who I believe should have had
their issues regarding both pensions and healthcare dealt within the context of the
GM bankruptcy.
Thankfully the PBGC will pay the retirees a large percentage of their promised
benefits, but even with that, many retirees will see substantial losses. The younger
retirees who were promised the largest early retirement benefits as part of the
25
buyouts Delphi forced on them will see the largest cuts as many of those payments
are not insured by the PBGC. Furthermore all retirees from Delphi will see substantial reductions in or outright elimination of health care coverage. Without the stimulus bill the situation would be even worse as many retirees are eligible for an 80%
credit
I have spoken with many retirees who are now concerned about how they will be
able to afford their mortgages, their health care costs, and even their childrens college tuition bills, including Nick Dragojevic, a member of the IUE-CWA local 717
in my district who drove out to be at this hearing. Nick Started at Delphi, then
called Packard Electric shortly after high school and worked there through GMs
ownership and the Delphi spin off putting in over thirty four years of service. In
exchange for that service, he like everyone else with local 717 has been bounced
around by companies that do not want to honor their commitments.
But it does not stop with the direct losses. There are so many retirees in my congressional district that the losses will flow to everyone in the region. A recent
Youngstown State University study stated that total losses to the Mahoning Valley
could be over 57 million dollars annually. Those losses translate into over 1,700 job
losses in my region. The costs to local governments will also be extraordinary
through lost revenue and increased need for services.
So the people least responsible for the bankruptcy of a company like Delphi are
in the end, the ones who lose their job over it. The bankruptcy system must be reformed to give a higher creditor status to retirees. Many of the creditors currently
above retirees are in a position to make informed decisions about the creditworthiness of borrowers and set rates accordingly. Retirees are in no position to make
those kinds of decisions. Just imagine what would happen if an employee walked
into the C.E.O.s office and said, Boss youre overleveraged and Im concerned about
future obligations so I would like a three percent raise in retirement benefits to
cover additional insurance on my exposure. They would be laughed out of the room,
but the banks, hedge funds, and other lenders who could do exactly that and often
fail spectacularly to do just that, are the ones protected by the bankruptcy code.
Furthermore we need to tighten ERISA and other pension protection laws to preserve promised benefits. H.R. 1322 introduced by Congressman John Tierney is a
great example of exactly what needs to be done to prevent more situations like Delphis and what my region saw in the steel industry. An employee cannot possibly
plan for unexpected cuts in promised benefits after the game has been played. They
cannot go back 25 years and invest more to cover the investment losses and mismanagement of their employer. Once again we see systematic misalignment of who
pays for other peoples risks.
But unfortunately, even if these steps are taken, it is too late to help many of
my constituents. That is why I have introduced H.R. 3455 with bipartisan support
to establish a Voluntary Employee Beneficiary Association for former Delphi employees. This bill would use unspent money already authorized by the Emergency
Economic Stabilization Act of 2008 to provide health coverage to both hourly and
salaried retirees of the Delphi Corporation. If we can use that money to save the
bacon of those that made the very errors calculating risk that put us in this position, surely we can use the leftovers to save the innocent bystanders who spent
years of their lives working for Delphi and GM.
I ask that the text of these remarks and accompanying documents be added to
the record. Once again, thank you to the committee for your time and attention.
Chairman ANDREWS. Thank you. And Mr. Dragovich, is he here

today that was mentioned? Welcome, sir. We appreciate you being
with us today as well and all of our guests this morning. At this
time, if any of the members on either side have questions for the
member panel, we welcome them. And then we would excuse them.
Mr. Tierney, did you have questions?
Mr. TIERNEY. I have one brief comment, Mr. Chairman, if you
will bear with me.
Chairman ANDREWS. Of course.
Mr. TIERNEY. Mr. Ryan, I want to thank you for your mention
of House Resolution 1322, which deals with retiree health benefits
and the obligation of companies to maintain those. I do want to
make the point however and invite Mr. Lee and Mr. Turner and
the minority ranking member over here to join on that bill if they
26
are serious about this. This is not a union bill versus a nonunion
bill. This deals with all people that are working and get
disfranchised on that. We have not had anybody from your side, except for Mr. Jones, sign on to that bill. So if we are serious about
doing something for this category of people, I hope you will join it
or give us a reason why you havent and then we can move forward
on that.
And there is language also in the health care bill that would be
supportive of this concept and I extend the invitation and look forward to engaging with your offices on it. Thank you.
Chairman ANDREWS. Thank you, John, for your good work on
this issue. Anybody else on our side? Mr. Kildee?
Mr. KILDEE. I was sold, I use the word, when this thing began
to dawn upon us what really had happened, that from the very beginning, this became a bipartisan matter. Christopher Lee met
with me on the House floor, suggested a letter and asked me if I
would co-sign it. And that gave me some hope this had risen above
some of the partisanship we find down there to a bipartisanship.
And I want to thank you especially, thank all of you, but you especially.
Chairman ANDREWS. Thank you, Mr. Kildee. Anyone on the minority side? Dr. Price, I know you have a unanimous consent request to propound.
Mr. PRICE. I do, Mr. Chairman. If I may, I ask unanimous consent that our colleagues off the committee be allowed to join us for
the second panel and be permitted to ask questions of the panelists.
Chairman ANDREWS. Without objection. Gentlemen, you are welcome to come up to the dais and participate in the hearing in that
way, each of you. Sherrod, you would be too.
Mr. PRICE. Well, I dont know about that.
Chairman ANDREWS. Of course he would. If I may, before you depart, let me say this to the members, we appreciate your testimony.
What I am hearing is a focus on two points, the first is that it is
the bipartisanship that each of you mentioned and Mr. Kildee just
mentioned, that we need to work together on this and we will continue to do that.
And the second is I understand the focus on the policy questions,
but I really do want our focus to be on trying to help these individuals who were hurt by this situation. It will do them no good if we
pass some law that helps somebody 15 or 20 years from now. We
really do want to focus to the extent that we can on the actual people who were actually injured by this and do the best we can for
them. So thank you, gentlemen. Please join us for the balance of
the hearing if you would like to. At this time we are going to ask
that the panel step forward, the second panel.
I am going to start to introduce the second panel as they come
forward to give us a little more time. The first witness will be Mr.
Bruce Gump. Mr. Gump is a member of the Delphi salaried retirement association. He is a former salaried employee of General Motors and Delphi. Mr. Gump, where do you live? What town are you
from?
Mr. GUMP. Warren, Ohio.
27
Chairman ANDREWS. Welcome. He comes from Warren, Ohio, to
be with us this morning. Mr. Charles Cunningham is a member of
the Delphi Salaried Retirement Association. Mr. Cunningham is a
former employee of GM and Delphi. He retired after 31 years of
employment with those corporations in 2002. Mr. Cunningham, you
are from where?
Mr. CUNNINGHAM. Warren, Ohio.
Chairman ANDREWS. From Warren as well. Welcome. I am glad
that you are with us. And returning to the committee is Dr. Norman Stein. Dr. Stein is a senior consultant with the pension rights
center and a Douglas Arant professor of law At the University of
Alabama Law School. After joining the faculty in 1984, he received
his BA from New College and his JD from Duke University.
Before we proceed, I also do want to make sure the record reflects that two of our other colleagues have played a major role in
making this hearing happen this morning. That is Mr. Kucinich
from Cleveland and also Ms. Fudge also from that area in Ohio. I
did not mean to neglect mentioning them earlier, but this has been
a team effort. And again, both Dennis and Marcia have expressed
their interest in this. And as is typical with each of them, has
taken this very seriously and very personally. And we appreciate
that. For the newcomers to the committee, here is the way the
rules work. The written statements that you have made will be a
part of the record of the hearing without objection.
So what you wrote will be part of the record. We ask you to try
to make an oral synopsis of your testimony to last about 5 minutes.
When you are done, we will have questions from the members of
the committee who will ask you about what you had to say so we
can learn from each other and hopefully find some solutions. In
front of you is a light box. The green light will go on when you
start talking. When you have about a minute left, the yellow light
will go on which tells you we would like you to try to wrap up.
Dont worry if you go beyond it a bit. There is no penalty for that
here. But we just ask you to be as brief as you could if the red light
goes on so that we can hear from as many members as possible.
The most productive hearings tend to be those where there can be
a lot of interaction between the witnesses and the members and we
would like to try to maximize that today. So we are very happy
that you are with us. And, Mr. Gump, we are going to start with
you. Welcome to the subcommittee.
STATEMENT OF BRUCE GUMP, MEMBER, DELPHI SALARIED
RETIREMENT ASSOCIATION, AND FORMER SALARIED EMPLOYEE OF GENERAL MOTORS AND DELPHI
Mr. GUMP. Good morning, Chairman Andrews and Ranking

Member Price and members of the committee. Thank you for the
opportunity to be able to describe the effect of the Delphi bankruptcy on our members. The DSRA is made up of highly educated
and qualified people who were employed as secretaries and technicians, engineers and salespeople, accountants and many other positions. They worked for Delphi with the promise of current and future compensation funded through the effort of each worker. They
all looked forward to a safe, secure and healthy retirement. The
salaried employees were told at the time Delphi was spun off from
28
GM, and again at the time bankruptcy was declared, that our pension and other post-employment benefits were a foremost priority
for the company.
In addition, PBGCs director, Charles Millard, said in May of
2008 that we will act forcefully to protect Delphis pension plans
and we will draw down certain letters of credit and keep liens in
place on the companys assets until Delphi has successfully
emerged and made its pension plans whole. These liens were on
Delphis foreign assets which were not included in the bankruptcy,
thus salaried employees were given assurances by both the company and the PBGC that our pension plan was being properly managed and protected when in reality the company was not adding
funds to the plan and in the end the PBGC did not protect the plan
by using their valuable liens.
I will leave the description of the legalities of the process up to
Mr. Cunningham, but suffice it to say for now that we have definitive evidence that the PBGC acted under powerful influence from
the Department of Treasury, the Secretary of which was charged
with the rescue of the auto industry and also happens to be a board
member of the PBGC to release the liens put in place to protect
Delphis pension plans.
Consequently, the plan was terminated in a very underfunded
condition. This will cause many participants pensions to be reduced by 30 to 70 percent and any supplements that were used to
coerce early retirement will be eliminated. Even though the hourly
pension plans were also transferred to the PBGC, they will not experience any pension reduction because of the unprecedented
agreement brokered by the auto task force for General Motors to
top up those pensions. Dr. Edward Montgomery and Ron Bloom of
the Auto Task Force explained the reason for this discrimination
against salaried retirees by telling us the administration had chosen to follow a commercial model in dealing with the auto industry
bankruptcies.
Since the salaried retirees had no commercial value to General
Motors or Delphi, we therefore received no protection or benefit
from the Auto Task Force. We believe this is a very dangerous
precedent to follow. Consider what would happen if the United
States Government chose to follow exactly the same thought process regarding health care or social security or even contract law.
As Congressman Ryan had written, because government assistance is taxpayer subsidized, additional considerations must be included beyond the usual business judgments that take place in the
bankruptcy courts. We believe the United States Treasury determined the standard of fairness when they helped GM fund the benefits of the unionized workers and that same standard should be
applied to all worker groups involved.
I will now take a moment to describe some of the effects of the
treatment of the workers in the communities. On average, the salaried retiree will lose about $300,000 over his or her lifetime because of the transfer of the PBGC. Some, including me, will have
incomes below the national poverty level. A woman who was forced
into retirement at age 54 after more than 30 years of dedicated
service had lost all of other health care insurance and will lose
more than half of her pension. She could barely afford to purchase
29
a high deductible health care insurance policy to provide some protection for herself and her self-employed husband. Two weeks later,
she learned that she might have cancer. Because of the high deductible policy she had, she had to bear the entire burden of the
costs of the tests that determined if she would live or die.
A study by Dr. Frank Akpadock of Ohios Youngstown State University showed that the local economy in the northeast Ohio region
known as the Mahoning Valley, already damaged by the loss of the
steel industry, will sustain an additional loss of $161 million per
year leading to about 5,000 additional nonautomotive, downstream
jobs that will be lost in that economy. That will cause the unemployment rate in my community to rise to more than 20 percent.
Taken to a national level, the result will be about 85,000 Americans who will see, through no fault of their own, their jobs simply
evaporate due to the unfair and inequitable treatment of the auto
industry worker groups.
In summary, we believe that Delphis salaried pension plan was
improperly terminated, the taxpayer provided funds supplied by
the Congress through the Department of Treasury were applied in
a discriminatory manner, based on an ill-conceived commercial
model and the liens put in place to protect the value of our pension
plan were eliminated because the Auto Task Force and GM were
in a hurry. We lost the protection of the United States Government
and significant portions of our pensions because it was inconvenient for the Auto Task Force to follow the rules. We ask only for
fair and equitable treatment for all worker groups in the auto industry bankruptcies.
We all have the same contract with our government. Thank you.
I would be happy to answer questions.
Chairman ANDREWS. Mr. Gump, thank you. You did a great job.
Very well said. And we are happy that you are with us this morning.
[The statement of Mr. Gump follows:]
Prepared Statement of Bruce Gump, Delphi Salaried Retirees Association
Good morning Chairman Andrews, Ranking Member Price and members of the
committee. Thank you for this opportunity to describe the effect of the Delphi Bankruptcy on our members.
The DSRA is made up of highly educated and qualified people who were employed
as secretaries, technicians, engineers, sales people, accountants, and many other positions. They worked for Delphi with the promise of current and future compensation funded through the effort of each worker. They all looked forward to a safe,
secure and healthy retirement.
The salaried employees were told at the time Delphi was spun off from GM and
again at the time bankruptcy was declared that our pension plan and other post
employment benefits were a foremost priority for the company. In addition PBGC
Director Charles Millard said in May of 2008 We will act forcefully to protect Delphis pension plans. And We will draw down certain letters of credit and keep
liens in place on the companys assets until Delphi has successfully emerged and
made its pension plans whole. These liens were on Delphis foreign assets which
were not included in the bankruptcy.
Thus salaried employees were given assurances by both the company and the
PBGC that our pension plan was being properly managed and protected, when in
reality the company was not adding funds to the plan, and in the end, the PBGC
did not protect the plan by using their valuable liens.
I will leave the description of the legalities of the process up to Mr. Cunningham,
but suffice it to say for now that we have definitive evidence that the PBGC acted
under powerful influence from the Department of the Treasury (the Secretary of
which was charged with the rescue of the auto industry and also happens to be
30
a Board Member of the PBGC) to release the liens put in place to protect Delphis
pension plans. Consequently, the plan was terminated in a very underfunded condition. This will cause many participants pensions to be reduced by 30% to 70%, and
any supplements that were used to coerce early retirement will be eliminated.
Even though the Hourly Retirees pensions were also transferred to the PBGC,
they will not experience any pension reduction because of the unprecedented agreement brokered by the Auto Task Force for GM to top up those pensions. Dr. Edward Montgomery and Ron Bloom of the ATF explained the reason for this discrimination against Salaried Retirees by telling us the Administration had chosen to follow a commercial model in dealing with the auto industry bankruptcies. Since the
salaried retirees had no commercial value to GM or Delphi, we therefore received
no protection or benefit from the Auto Task Force. We believe this is a very dangerous precedent to follow. Consider what would happen if the United States Government chose to follow exactly the same thought process regarding health care or
social security or even contract law. As Congressman Ryan has written: Because
government assistance is taxpayer subsidized, additional considerations must be included beyond the usual business judgments that take place in the bankruptcy
courts.
We believe the United States Treasury determined the standard of fairness
when they helped GM fund the benefits of the unionized workers and that same
standard should be applied to all worker groups involved.
I will now take a moment to describe some examples of the effects of this treatment on workers and communities:
The average Salaried Retiree will lose about $300,000 over his or her life. Some
will have incomes below the national poverty level.
A woman, who was forced into retirement at age 54 after more than 30 years of
dedicated service has lost all of her health care insurance and will lose more than
half of her pension. She could barely afford a high deductible health care insurance
policy to provide some protection for herself and her self-employed husband. Two
weeks later learned she might have cancer. Because of the high deductible policy,
she had to bear the entire burden of the tests to determine if she would live or die.
A study by Dr. Frank Akpadock of Ohios Youngstown State University showed
that the local economy in the NE Ohio region known as the Mahoning Valley, already damaged by the loss of the steel industry, will sustain an additional loss of
$161 Million per year, leading to about 5000 additional non-automotive jobs lost.
That will cause the unemployment rate in that community to rise to more than 20%.
Taken to a national level, the result will be about 85,000 Americans who, through
no fault of their own, will see their jobs simply evaporate due to the unfair and inequitable treatment of the auto industry worker groups.
In summary, we believe the Delphi Salaried Pension plan was improperly terminated. The tax-payer provided funds supplied by the Congress to the Department
of the Treasury were applied in a discriminatory manner based on an ill-conceived
commercial model, and the liens put in place to protect the value of our pension
plan were eliminated because the Auto Task Force and GM were in a hurry. We
lost the protection of the United States Government and significant portions of our
pensions because it was inconvenient for the ATF to follow the rules.
We ask only for fair and equal treatment for all worker groups in the auto industry bankruptcies. We all have the same contract with our government.
Chairman ANDREWS. Mr. Cunningham, welcome. We are happy

you are here as well.
STATEMENT OF CHARLES CUNNINGHAM, MEMBER, DELPHI
SALARIED RETIREMENT ASSOCIATION, AND FORMER EMPLOYEE OF GM AND DELPHI
Mr. CUNNINGHAM. Thank you, Chairman Andrews and Ranking

Member Price and the entire committee. It is great to have the opportunity to be here and testify. And Chairman Andrews, I agree
with you that dialogue is the best way to get an answer. So I am
going to try to keep this brief so we have time for dialogue.
Chairman ANDREWS. Please take your time, though, sir. Dont
rush. Say what you want to say.
31
Mr. CUNNINGHAM. I wont rush. I will just keep it brief. Okay?
I would like to expand a little bit on portions of Bruce Gumps testimony and really particularly relating to the Treasurys role in the
GM and Delphi bankruptcies and the ultimate effect on the salaried employees pensions. Delphi pension disposition was dictated
by the U.S. Treasury. And it was really dictated to meet the requirement of an expedited GM bankruptcy. The successful emergence of bankruptcy by GM required that Delphi, GMs largest
parts supplier, also emerge from bankruptcy as a viable entity. The
last obstacle in settling Delphis bankruptcy was Delphis pension
plan liabilities, although other options were considered, including
GM taking back all of Delphis pension plans, union and salaried.
The final solution dictated by the Treasury was to turn over all
plans to the PBGC. The Treasury then brokered a deal between
GM, Delphi and the PBGC for the PBGC to surrender its liens
against Delphis overseas assets valued at between $2 and $4 billion and accept only $70 million in payment from GM as well as
an unsecured claim which was essentially worthless. The PBGC
then began its termination process for Delphi pensions. Subsequently, the Treasury agreed to provide GM with the funding to
top off hourly UAW pensions to prevent the hourly people from
having their pensions reduced to the PBGC statutory limit. After
deliberation with GM and eventually the Treasury, the IUE-CWA
and the United Steel Workers also had their pensions topped up
by GM. This action promoted by the Treasury was not taken as a
result of contractual obligations. That is one thing that has been
talked about so many times that this was contractual. And honestly, I need the members of this committee to understand, this
was not a contractual obligation. In fact, in public documents, GMs
CEO or former CEO as of yesterday, Fritz Henderson, has stated
that these were not obligations contractually, but they were gratuitous contributions. And, in fact, most cases in bankruptcy, as I
hope our colleague on the panel would say, wouldthat these contractual obligations particularly those that were side agreements,
would have been dismissed in bankruptcy court. So this was a
purely political decision. For what reason I cannot tell you. I mean,
I can only speculate. But it was not done for contractual reasons.
The other 3 unions that were mentioned by the previous panel,
they all had contracts also and they also had side agreements. I
heard them argue that in bankruptcy court which I personally attended. So it wasnt contractual. There were other reasons for the
top-offs that were given to the 2 unions. As a result of these actions, directed by the Treasury, certain groups will receive their
full amount of earned pensions while others will be relegated to 30
to 70 percent of their pensions. A lot of our retirees are young and
a lot of them get larger reductions because of their age and because
of the amount of funding. What is equally disconcerting is that the
PBGC was obviously coerced into surrendering valuable liens. I
mean, they had a chance to get between $2 and $4 billion that was
substantial in this case to help fund these pensions and chose to
walk away from them so that Delphi was an assured parts supplier
to GM. These would have significantly improved our funding levels.
The assertions we are making are well supported in documents
found in the GM and Delphi bankruptcy proceedings, mandatory
32
SEC filings by GM and the administrative record of the PBGC. We
believe that further significant evidence concerning discrimination
against the Delphi salaried retirees exists in the Treasury and
automotive task force documents relating to the GM and Delphi
bankruptcies. We have requested these documents under the Freedom of Information Act over 2 months ago, but the production of
these documents by the Treasury has not been forthcoming. In fact,
a written request for these documents was also made by Senator
Enzi following the Senate hearing on pensions on October 29, 2009.
To date, this request has also been ignored. And as you heard earlier, a bipartisan group of the House Members had requested this
same information months and months ago. This is not transparency. This is not what we would expect from our government.
I think it is outrageous that we dont know why we were treated
in this manner or that our congressional leaders cant know it. We
are not looking for special treatment. We are only asking you as
elected officials to assist us in securing fair and equitable treatment guaranteed under our constitution. Nothing more, certainly
nothing less. Thank you.
Chairman ANDREWS. Mr. Cunningham, thank you for being so
persuasive and articulate. We appreciate it very much.
[The statement of Mr. Cunningham follows:]
Prepared Statement of Charles Cunningham, Delphi Salaried Retirees
Association
Good Morning, my name is Chuck Cunningham and I am a Delphi Salaried Retiree. I spent 28 years with General Motors and 3 years with Delphi before retiring
in 2002.
I would like to thank Chairman Andrews, Ranking Member Price and the entire
Health, Employment, Labor, and Pensions subcommittee for the opportunity to testify here today.
I would like to expand upon portions of Bruce Gumps testimony particularly relating to the Treasurys role in the GM and Delphi Bankruptcies and the ultimate
effect upon the salaried employees pensions.
The Delphi pension disposition was dictated by the U.S. Treasury to meet the requirement of an expedited GM bankruptcy. A successful emergence from bankruptcy
by GM required that Delphi, GMs largest parts supplier, also emerge from bankruptcy as a viable entity. The last obstacle in settling Delphis bankruptcy was Delphis pension plans liabilities. Although other options were considered, including GM
taking back all of Delphis pensions plans, union and salary, with the financial backing of the Treasury, the final solution, dictated by the Treasury, was to turn over
ALL the plans to the PBGC.
The Treasury then brokered a deal between GM, Delphi and the PBGC for the
PBGC to surrender its liens against Delphis overseas assets, valued at between $24 billion, and accept $70 million in payment, as well as, an unsecured claim which
was essentially worthless. The PBGC then began its termination of the Delphi pensions. Subsequently, the Treasury agreed to provide GM with the funding to top
off hourly UAW pensions to prevent the hourly people from having reduced pensions to the PBGC statutory limit.
After deliberation with GM, and eventually the Treasury, the IUE/CWA and the
United Steelworkers also had their pensions topped off by GM. This action, promoted by the Treasury Department, was not taken as result of contractual obligations but was gratuitous as described by GM CEO Fritz Henderson in public documents.
As a result of these actions, directed by the US Treasury, certain groups will be
receiving the full amount of their earned pensions while others will be relegated to
receive a reduced amount in accordance with the PBGC limitations. Many Delphi
salaried retirees will only receive somewhere between 30-70% of their earned pensions. What is equally disturbing is that the PBGC was obviously coerced into surrendering valuable liens which could have significantly improved the level of funding for all the plan participants.
33
The assertions we are making are well supported in documents filed in the GM
and Delphi bankruptcy proceedings, mandatory SEC filings by GM and the Administrative Record of the PBGC. We believe that further significant evidence concerning discrimination against the Delphi salaried retirees exists in the Treasury
and the Automotive Task Force documents related to the GM and Delphi bankruptcies. We have requested these documents under the Freedom of Information Act
over 2 months ago, but the production of these documents by the Treasury has not
been forthcoming. In fact, a written request was also made by Senator Enzi following the Senate Hearing on Pensions on Oct. 29, 2009 and, to date, this request
has also been ignored.
The Delphi salaried retirees are not looking for special treatment in this matter.
We are asking our elected officials to assist us in securing fair and equitable treatment guaranteed under our Constitution. Nothing more and, certainly, nothing less.
Thank you again for your time and attention. I will be happy to answer any questions you may have.
Chairman ANDREWS. Professor Stein, welcome back to the committee. You have been a great resource for us over the years. We
are happy you are back with us this morning.
STATEMENT OF NORMAN STEIN, SENIOR CONSULTANT, PENSION RIGHTS CENTER, AND DOUGLAS ARANT PROFESSOR
OF LAW, UNIVERSITY OF ALABAMA LAW SCHOOL
Mr. STEIN. Thank you, Mr. Chairman, Members of the subcommittee, for inviting me here to speak with you this morning on
the impact of Delphis bankruptcy and Delphis workers and retirees. The story of Delphis retirement and health commitments to its
employees and their extraordinary devaluation in bankruptcy is a
heart wrenching human story in an inordinately complex factual
and legal setting. It is a story that underscores both the success of
the PBGC program and some of its shortcomings. As such, it provides a moment to rethink the various compromises made in
ERISA and bankruptcy law between assuring worker pension expectations and constraining costs on plan termination.
What has happened and is happening to thousands of Delphi employees who have lost medical benefits and have suffered pension
reductions is tragic. And Congress should certainly consider providing relief to these hard working but hard hit Americans, but it
is critical that we view their loss in its larger historical and social
welfare context. The enactment of ERISA was in part a response
to the 1964 termination of the pension plan for American employees of Studebaker. At that time, there was no PBGC to ensure employee benefits from a terminated defined benefit plan. Plan participants in Studebaker and other companies received benefits from
available plan assets. And if there were not sufficient plan assets,
benefits were paid, reduced or eliminated in accordance with the
plan provisions allocating insufficient assets to various benefit categories. In Studebaker, the plan had enough assets to pay full benefits only to retirees. Other employees received nothing or next to
nothing. It was this tragedy that helped frame the need for a Federal insurance system for defined benefit plans and more generally
underscored the need for a Federal pension reform statute which
ultimately led to enactment of ERISA and the important protections in which millions of employees and retirees now rely. The
PBGC has been an extraordinarily effective agency over the last 3
decades. Without it, millions of employees would have suffered catastrophic losses, consigning many to poverty in old age. Even with
34
the distressingly large losses that some Delphi employees have suffered, every Delphi employee is better off because Congress created
the PBGC. And we should not lose sight that the losses in Delphi
are not typical. Historically, 85 percent of participants in terminating pension plans suffer no pension losses.
From the broader perspective the PBGC is an amazing success
story. And we need to ensure that PBGC has the strength and resources to continue its important mission and that effective funding
rules make unfunded plan terminations such as the one we are seeing today a rare occurrence.
I turn now to the PBGC guarantees and limitations on them and
how they affected Delphi employees and retirees. The PBGC guarantee program has undergone extensive modification since ERISAs
enactment in 1974, but the essentials of the actual benefit guarantees and limitations on them have been relatively stable. It is important to keep in mind that the limitations are statutory and
PBGC does not have discretion to vary the guarantees even under
the compelling circumstances that we have heard today.
PBGC guarantees are subject to two types of limitations. The
first is structural. The PBGC does not guarantee all plan benefits
but only what we might think of as basic retirement benefits. The
second is that these basic retirement benefits are subject to a dollar
limit, which in 2009, the year that the Delphi plan terminated, was
$54,000. The dollar cap applies to a benefit in the form of a single
life annuity commencing at age 65. If the benefit is taken before
65 or with a survivor annuity, the benefit guarantee is actuarially
reduced so that it will be lower than $54,000 a year.
So lets start with benefits that were not eligible for the PBGC
guarantees. These were normal retirement benefits that were not
vested; certain supplemental early retirement benefits which were
paid only until an employee becomes eligible for Social Security
benefits; and, finally, subsidized early retirement benefits, ifas of
the plans terminationan employee had met all the criteria for
the subsidy, which in the case of Delphi was, for most employees,
30 years of service.
Many employees, some of whom were only months away from
qualifying for a subsidized early retirement benefit, lost tremendously valuable pension benefits. Salaried Delphi employees then
lost benefits primarily in three ways. Many lost the opportunity to
qualify for the most valuable benefit under the plan, the subsidized
early retirement benefit, because they fell short of the 30-year requirement. Many lost their temporary supplemental benefits, and
some lost benefits because their basic benefits exceeded the maximum annual guarantee.
My written testimony includes a number of suggestions for legislative action that could improve the statutes protections of employees of the future. As you have mentioned, this is not going to be
very helpful to the Delphi employees who are here. But thank you
for the opportunity to speak with you, and also Congressman Andrews, teaching at Drexel, where I understand you are very good
friends with the Dean.
Chairman ANDREWS. I am indeed.
Mr. STEIN. I may need a note from you explaining why I missed
my train and will be an hour late for class.
35
Chairman ANDREWS. I will tell Dean Dennis that you have excuse to be at least an hour late, because we appreciate that you are
here.
Mr. STEIN. My students will be happy, I am sure, though.
Chairman ANDREWS. I am sure they will not be, but I appreciate
that. Thank you, each of the three panelists.
[The statement of Mr. Stein follows:]
Prepared Statement of Norman P. Stein, Senior Consultant, Pension Rights
Center, and Douglas Arant Professor of Law, University of Alabama Law
School
Thank you, Mr. Chairman and members of the committee, for inviting me here
to speak with you this morning on the impact of Delphis bankruptcy on Delphis
workers and retirees. I am a professor of law at both the University of Alabama and
the Earl Mack School of Law at Drexel University. I also work with the Pension
Rights Center on a variety of policy-related activities. I am, however, testifying on
my own behalf this morning and my views should not be attributed to any of the
organizations with which I am affiliated.
The story of Delphis retirement and health commitments to its employees, and
their extraordinary devaluation in bankruptcy, is a heart-wrenching human story in
an inordinately complex factual and legal setting. It is a story that underscores both
the success of the PBGC program and some of its shortcomings. As such, it provides
a moment to rethink the various compromises made in ERISA between assuring
worker pension expectations and constraining costs on plan termination, or put in
interrogative form, how should we allocate the economic fallout when a pension plan
terminates without adequate funding?
I have divided my testimony into three parts. The first part provides some historical background and context for thinking about the PBGC and the Delphi workers
and retirees. The second part provides an overview of the limits of PBGC pension
guarantees, with an emphasis on the losses suffered by Delphi salaried employees.
The third part suggests some statutory changes to ERISA and bankruptcy law that
Congress might consider in light of the Delphi bankruptcy.
Background and Context
What has happened, and is happening, to thousands of Delphi employees who
have lost medical benefits and have suffered pension reductions, is tragicand Congress should certainly consider providing relief to these hard-working but hard-hit
Americans. But it is critical that we view their loss in its larger historical and social
welfare context.
The enactment of ERISA was, in part, a response to the termination of the pension plan for American employees of Studebaker, when it shut down its United
States operations in 1964. At that time, there was no PBGC or other program to
ensure employee benefits from a terminated defined benefit plan. Plan participants
received benefits from available plan assets, and if there were not sufficient plan
assets, benefits were paid, reduced, or eliminated in accordance with the plans provisions allocating assets to various benefit categories.
In Studebaker, the plan had been inadequately funded and did not have enough
assets to pay full benefits only to those who had retired or were at retirement age.
Other employees received nothing or next to nothing.
It was this tragedy that helped frame the need for a federal insurance system for
defined benefit plans and more generally underscored the need for a federal pension
reform statute, which ultimately lead to enactment of ERISA and the important protections on which millions of employees and retirees now rely.
The PBGC has been an extraordinarily effective agency over the last three decades. Without it, millions of employees would have suffered catastrophic losses, consigning many of them to poverty in old age. Even with the distressingly large losses
that some Delphi employees have suffered, every Delphi employee is better off because Congress created the PBGC.
And we should not lose sight that the losses in Delphi are not typicalhistorically, 85% of participants in terminating plans have not suffered any pension loss.
From this broader perspective, the PBGC is an amazing success story and we
need to ensure that the PBGC has the strength and resources to continue its important mission and that funding rules make underfunded plans a rare occurrence.
36
The PBGC Benefit Guarantees and Delphi Salaries Employees
The PBGC guaranty program has undergone extensive modification since ERISAs
enactment in 1974, but the essentials of the actual benefit guarantees and limitations on them have been relatively stable. It is important to keep in mind that the
limitations are statutorythey are in the statute that PBGC administers 1and
PBGC does not have discretion to vary the guarantees even under the compelling
circumstances presented today.
PBGC benefit guarantees are subject to two types of limitations. The first type
of limitation is structural: PBGC does not guarantee all plan benefits, but only what
we might think of as the basic vested retirement benefit. The second limitation is
that this basic retirement benefit is subject to a dollar limit, which is stated in
terms of a benefit in the form of a single life annuity commencing at age 65. The
maximum guarantee amount for a life annuity commencing at age 65 is $54,000 for
plans terminating in 2009, when the Delphi plan terminated. The guarantee is actuarially reduced if the benefit commences before age 65 or if it includes a survivor
annuity.
So let us start with benefits that were not eligible for the PBGC guarantee. These
include:
(i) normal retirement benefits that were not vested;
(ii) subsidized early retirement benefits, unless as of the plans termination an
employee had met all the criteria for the subsidy (in Delphi, this was 30 years of
service, or a combination of age and service totaling 85);
(iii) some supplemental benefits that are paid only until an employee attains the
age of Social Security eligibility. (The idea is that once an employee attains Social
Security eligibility, these benefits are replaced by Social Security benefits, so that
retirement income remains stable despite the expiration of the supplemental benefits.)
Many employees, some of whom were only months away from qualifying for a subsidized early retirement benefit, lost tremendously valuable potential benefits.
I also note here that this is not simply a plan termination problem under Title
IV of ERISA. When a plan sponsor sells a division or divests a subsidiary, employees with long years of loyal service can lose subsidized early retirement benefits because they no longer work for the same controlled group, even though they continue
to work for the same company or division, doing exactly the same work they did
before, often in exactly the same location.
And of course, the $54,000 dollar maximum guarantee for benefits that are ensured by PBGC was reduced for employees who begin receiving benefits before age
65 or who took benefits in the form of a joint-and-survivor annuity.2 Again, this is
mandated by the statute that the PBGC administers.
Salaried Delphi employees, then, lost benefits primarily in three ways: many lost
the opportunity to qualify for the most valuable benefit under the planthe subsidized early retirement benefitbecause they did not have 30 years of service;
many lost a portion of their supplemental benefit; and some lost benefits because
they exceeded the maximum guarantee level.
Some Possible Statutory Changes
In light of the Delphi bankruptcy, Congressional might want to re-evaluate some
provisions of Title IV, pension law generally, and bankruptcy. Here are some candidates for such re-evaluation:
1. It might be time to adjust some of the features of the PBGC guarantee, particularly for employees and retirees who take benefits prior to normal retirement age
or as a joint-and-survivor annuity. An increase in the guarantee amount for married
participants who take a joint-and-survivor annuity would have the beneficial effect
of encouraging more participants to choose such annuities.
2. A relatively costless measure would be to allow employees who have lost their
jobs to begin receiving guaranteed benefits but to later suspend benefits, with a concomitant increase in the guarantee amount. An alternative might be to allow retirees to establish a tax-deferred savings vehicle to which they can contribute their
early retirement benefits until they reach age 65.
1 In
some cases, the limitations are in 30-year old regulations interpreting the statute.
2 When a company such as Delphi essentially disappears, it is often difficult for an employee
to wait until age 65 to begin receiving benefits, so they take the benefits immediately despite
the reduced guarantee level. And I can tell you from many conversations over the years, that
employees often do not understand why a benefit under the nominal guarantee level gets a
smaller guarantee amount, simply because they are married and take a joint-and-survivor benefit or because they begin receiving benefits before age 65.
37
3. Perhaps there should be some limited cost-of-living adjustments in the guarantee limits after plan termination, even if this is paid for by temporarily reducing
the annual increases to the guarantee amount that applies at plan termination.
4. The PBGC and participants in health and retirement plans might be given expanded protections in bankruptcy proceedings by improving their priority above
other unsecured creditors.
5. The problem of cliff-eligibility requirements for subsidized early retirement benefits, not only in underfunded plan terminations but also in cases of sales of subsidiaries or divisions or other corporate reorganizations, destroys important and reasonable employee expectations about when they are able to retire. It may be that when
an event such as plan termination or a corporate structural change occurs, employees should receive a pro-rata portion of the subsidy, based on how close they came
to fulfilling the eligibility requirements for such subsidies. In addition, or as an alternative, employees who continue working at the same desk after termination or
a corporate restructuring should continue to be able to qualify for the subsidy.
6. It may be time to re-examine the Title IV asset allocations to different classes
of benefits. The current allocations create a cliffpeople who are either retired or
could retire within 3 years of plan termination, can receive all of their benefits,
while employees just a day younger can have their benefits substantially reduced.
7. The Pension Protection Act amended ERISA to provide that the date of plan
termination is retroactive to the date a plan sponsor entered bankruptcy. Because
Delphi filed for bankruptcy proceedings prior to the effective date of that PPA provision, the date of plan termination was in 2009 rather than 2006. If the Delphi plan
termination date had been subject to this rule, the losses suffered by Delphi employees would have been far worse. This rule unfairly defeats employee expectations and
Congress might consider repealing it.
Chairman ANDREWS. I want to try to get us into the problemsolving mode here, if we can. And I think, Mr. Cunningham, Mr.
Gump, you may know these facts best of anyone in the room. It is
my understanding that the difference between the obligation assumed by the PBGC and making your group whole is the difference
between 4.4 billion and $4 billion; is that right?
Mr. CUNNINGHAM. No.
Chairman ANDREWS. Is that insufficient?
Mr. CUNNINGHAM. That is incorrect.
Chairman ANDREWS. What is the shortfall?
Mr. CUNNINGHAM. The shortfall is probably, as best we can tell,
in the neighborhood of $2.6, $2.7 billion.
Chairman ANDREWS. So it is substantial. What is the difference
that 400 million and the 2.6?
Mr. CUNNINGHAM. Well, the $400 million is the difference between what the PBGC says is not in there, after they put the 2 billion in for the plan. They keep talking about 2 billion. We would
think it would be 2.2. But no, I think you would find any actuary
tell you it was about $2.6,$2.7 billion, how much it is underfunded.
Chairman ANDREWS. Without treading on any proprietary information, there is litigation over this issue, correct?
Mr. CUNNINGHAM. Absolutely there is, yes.
Chairman ANDREWS. In the course of that litigation have you retained an actuary to come up with this number?
Mr. CUNNINGHAM. No, we have not. But we have done that, had
actuarial work done prior to that.
Chairman ANDREWS. Where I am going with this is I think the
legislation Mr. Ryan and others have initiated on the VEBA concept provides us with an interesting vehicle to try to solve your
problem, to try to solve the immediate problem. And I want some
grip on the scope of that solution. Your claim is that the foreign
38
assets against which the lien was released are worthwhat did
you say?
Mr. CUNNINGHAM. Between 2 and $4 billion. That can be found,
although we cant excuse that here today.
Chairman ANDREWS. Okay, I dont want you to discuss anything
that would imperil your litigation.
Mr. CUNNINGHAM. No, but I can tell you that that is in the
PBGC administrative record.
Chairman ANDREWS. Okay.
Mr. CUNNINGHAM. It was done by an independent agent, working
for the PGBC.
Chairman ANDREWS. They got an appraisal of the assets?
Mr. CUNNINGHAM. They got an appraisal of the assets.
Chairman ANDREWS. And that is a public record.
Mr. CUNNINGHAM. It is part of the PBGC record.
Chairman ANDREWS. And your testimony is that the assets were
in fact liquidated for like $70 million.
Mr. CUNNINGHAM. That is correct. In an unsecured claim, which
we know in the Delphi bankruptcy is worthless.
Chairman ANDREWS. So if we took the low-end valuation at 2 billion, and your testimony is 70 million, there would be a difference
there of $1.8-something billion.
Mr. CUNNINGHAM..93.
Chairman ANDREWS. And if there was a way that that could
somehow be recovered, or at least funded, that would close a lot of
the gap that exists, if not all.
Mr. CUNNINGHAM. It certainly would, Chairman. We would be
happy if you could do that today.
Chairman ANDREWS. I would be shocked if I could do that today.
I just wanted to get someyou know, lawsuits sometimes settle.
And I would never presume to suggest to people how they should
settle a lawsuit, but an interesting approach would be that I dont
think you need statutory authority to create a VEBA. I think you
can just create one. I am not sure about that. But if the VEBA
could be created as part of the settlement of the lawsuit and, in
part, funded, it would go part of the way toward closing this gap
that exists. Here is where I think we want to get. And this does
not help you immediately, but I think it is a fair picture of the goal.
Professor Stein, if defined benefit obligations of employers were
treated as the highest priority under the bankruptcy law, what
would have happened to Mr. Gumps and Cunninghams Delphi?
Mr. STEIN. It would depend in part on how high their priorities
were and what assets were secured. I think one of the questions
about foreign assets is they may have a very high face value, but
they may be subject to other liens
Chairman ANDREWS. But I am asking a slightly different
Mr. STEIN [continuing]. Other liens, and also, yes, some of the assets. You know, you have to factory in South America that has
some value as a going
Chairman ANDREWS. But is it fair to say that there would be a
lot more money available for their fund if they had higher priority
in the bankruptcy
Mr. STEIN. Actually I think there are two things. One is a higher
priority in bankruptcy and the ability to create liens prior to plan
39
termination. Currently they can only create liens for delinquent
contributions prior to plan termination. In bankruptcy, by the time
you get to plan termination, it is too late.
Chairman ANDREWS. I think the most creative solution to this
problem is one that would recognize that your class of people here
should be the first to benefit from a change in a broader law. In
looking at this case, I believe that to assume that the expectations
of pensioners should be on an equal or lesser playing field than
that of lenders and creditors and shareholders is really rather astonishing, because you are not in a position to protect yourself the
way they are. So, given that fact, and given the unusual governmental involvement here, because of the governments ownership
stake in GMwhich I hope is not repeated for lots of reasonsI
think it would give us the basis to maybe take Mr. Ryans legislation, work with it, and try to figure out a way to come to some solution that would have a practical impact for each of you. I cannot
promise you that, but I think he has given us a very promising
start that we could work from.
I want to recognize my friend, the Ranking Member.
Mr. PRICE. Thank you, Mr. Chairman, and I want to thank the
panelists, Mr. Gump, Mr. Cunningham especially, for your remarkably candid and compelling testimony about the challenges that
you are facing right now. And I am astounded at the unresponsiveness of members of the administration to give information about
how these decisions were made, and we all should be. So I want
to thank you for the information that you provided to us today.
Mr. Gump, regarding that evidence you say in your testimony
that We have definitive evidence that PBGC acted under powerful
influence from the Department of Treasury on the release of these
liens. Would you care to expand on that?
Mr. GUMP. I could. But if you wouldnt mind, I would ask you
to transfer that question to Mr. Cunningham who is actually closer
to that issue than I am. So, if you wouldnt mind.
Mr. PRICE. Yeah, let me do that as well. Let me make certain
that I didnt have another item on your testimony. Let me do that.
Let me go to Mr. Cunningham and talk about that evidence as
well. And discuss, if you will, a little more about the release of the
liens, why you think that occurred, and the nature of that evidence
that you discussed.
Mr. CUNNINGHAM. Okay. First of all, the Treasury involvement
is clear in the documents related to the GM bankruptcy, part of the
Bankruptcy Court files. I mean youll see them in the testimony,
youll see them all through the Bankruptcy Court filing in the GM
bankruptcy. And we haveI believe we have submitted some of
those to the committee. If not, we will get them to you, those specific pages.
We also have a tremendous wealth of information contained in
the PBGC administrative record that references the Treasury, references the various scenarios and how this occurred. Unfortunately, we are stilland this is another irony; we are still battling
with some other folks to be able to make those records public, even
though they are available to you folks. We have been asked not to
make them available in public. But they are there, they are there
on the administrative record of the PBGC. And the detail that
40
must be out there with the Treasury and the Automotive Task
Force would be tremendous. I mean we have verbal statements
from people, but not in writing.
Mr. PRICE. Do you have any sense of why this deal was cut?
Mr. CUNNINGHAM. Oh, absolutely. There is no reasonthere is
no question as to why the deal was cut. GM needed to exit bankruptcy early, that is number one. Number two is, in order for GM
to be successful post-bankruptcy, they had to have a viable Delphi,
because Delphi was still by far and large their largest supplier.
Delphi could not execute the sale to the DIP financers without having those overseas assets available.
If you look at the valuation in this company, the valuation of the
entire Department of the Interior of Delphi was exceeded by the
value of those overseas assets. It wasnt just a factory that would
be sold; these were ongoing commercial operations that were making profit. And in fact this was done on a net present-value basis,
which I considered to be very conservative. And I think it could be
worth between 5 and $7 billion, but their evaluator was very conservative. So that is why it was done.
Mr. PRICE. The genesis
Mr. CUNNINGHAM. It had to get done in a hurry, as Bruce had
said.
Mr. PRICE. And the genesis for all of this notion is that all of this
had to be done in a hurry.
Mr. CUNNINGHAM. Absolutely.
Mr. PRICE. And the rush on that was due to
Mr. CUNNINGHAM. Due to the government and the Treasury, at
least from what we can ascertain, as well as many public statements, that they could not allow GM to languish in bankruptcy
more than about 60 days; that that would hurt GM and hurt the
sales, and it had to be done. In fact, some of this, I have to applaud
some of these people, they did a beautiful job on some of the things.
Unfortunately we got thrown under the bus.
Mr. PRICE. Yeah. My time is running out, but I wanted to get to
at least one other issue, and that is the whole notion of whether
there was a contract in place to top-up these pensions of some of
the workers. You mention that in your testimony. Why do you believe some folks have said there was a contract that necessitated
the topping
Mr. CUNNINGHAM. Because I think that is expeditious on their
part to say that. I believe the Treasury would much rather have
people believe that this was a contractual obligation.
But let me point out one thing in the GM bankruptcy hearing.
Tom Kennedy, the attorney for the IUE questioned Fritz Henderson and said, Why are you giving the top-off to the UAW and not
to us? And Fritz Henderson said, Because we dont have any IUE
employees anymore. Your people work for Delphi, you are of no
use, we do not have a contract with you. That was the statement
by Fritz Henderson.
It was followed through until whatever forces came out that got
the IUE topped off also. I cant speak to who did that. We know
it was prompted by the Treasury, but where the influence came
from I cant tell you.
41
Chairman ANDREWS. Thank you. The Chair recognizes the gentleman from Illinois, Mr. Hare.
Mr. HARE. Thank you. Mr. Chairman, thank you for having the
hearing today. Just three questions maybe for the panel, or Professor Stein. But it has been stated the administration chose to follow a commercial model when dealing with all bankruptcies. Just
what exactly is a commercial model and how is it applied?
Mr. GUMP. The best we can answer that would be that from all
the publications that have come out from Mr. Ratner, et cetera,
who explained this in various magazines. They chose to act as a
business. When they were interferingif I could use that term
in the business of General Motors, the government chose to act as
a business, and so be commercial, think commercially, all the
things associated with what is it going to take for the company to
succeed as a company. And so the government essentially said
when it came to the retirees there was no value to helping the retirees because they are not doing anything to produce profit for
their company. And so they chose, the government chose to not protect or benefit the retirees.
In the case of the UAW, because of the issues associated with potential job stoppages or whatever that might happen, they had to
take care of UAW, which we think is a very good thing. Those folks
earned their pensions and benefits also, and so it is a very good
thing that they were able to receiveat least a very, very large
portion of them. However, because the IUE had been cut off, and
because the salaried folks had no commercial value to the company,
the government just decided, as Mr. Cunningham said, to throw us
under the bus.
Mr. HARE. I dont mean to interrupt you, but what is considered
commercial value? What do they mean by that when they say you
have no commercial value?
Mr. GUMP. We had no ability to help the company create a profit.
So because we were retirees, no longer working for the company,
as any retiree in America is, we already earned our benefits. We
are not working for the company anymore. The compensation that
we should be getting is compensation for the work that we have already put in. But today, and because we are retirees, we are not
working for the company and helping them generate a profit. In
this situation, the government chose to say that we also deserved
no protection.
Mr. HARE. Well, let me just say this from my perspective. Maybe
you can help me out here. Several of the unions that were topped
off in terms of their pensions were made whole, if you will, or
Mr. CUNNINGHAM. The two largest unions, the UAW, the IUECWA and United Steelworkers were topped off. That represented
98, 99 percent of the unionized workers at Delphi, yes.
Mr. HARE. Well, I would just say back in my district, John Deere
is the world headquarters, and it is about 10 minutes from my district office, but I know that their management people had to file
a suit when they cut their health care benefits.
It seems to me you work for the company, you put all these years
in, and I agree with the Chairman, instead ofmy father used to
say, God put eyes in the front of our heads so we dont have to look
42
backward all the time. I do think we have to maybe take a look
at this.
I would like to be able to work with Mr. Ryan and anybody here
on the committee to make sure that the people who were left out
of the pensions get the pensions. You put the time in, you worked,
you made the company what the company is. The people on the
line, the people in the offices, the people thatyou know, every position it just seems to me.
And to take that, a 30 to 70 percent hit, when you have worked
your entire life for a company and given it everything you had
and not just the person, it seems to me, is affected, your whole
family too. I mean, ordinary people, it just seems to mewhich I
think we all are reallyyou want to put your kids through school,
you want to have a home, and you want to be able to get some decent health care. At the end of the day, after working your whole
life for a company, you would like to have a pension you can count
on.
And I think to lose that kind of funds and to lose that kind of
money is something we have to fix, and we have to fix it quickly.
And then we can look at and argue how this might have happened
and figure that out, but we have got to pick up these people.
How many total peopleand I know my time has run outare
affected by this?
Mr. GUMP. The salaried plan has about 20,000 in it, the IUE was
somewhere around 70,000.
Mr. HARE. So you have 90,000 people who have paid taxes,
American citizens; a lot of these people I am assuming served in
the military and they are getting shorted 30 to 70 percent.
We have got to fix this problem and I will be happy to work with
my friend, Congressman Ryan, or anybody here on the committee
to help solve this problem. I dont think anybody ought to be left
out on the pension program simply because you were management
or because you were a union, and maybe not small enough. So I
think we have an obligation to help you out and I would be more
than happy to do that. Thank you, Mr. Chairman.
Chairman ANDREWS. Thank you Mr. Hare. The Chair is pleased
to recognize the Ranking Member of the full committee, Mr. Kline.
Mr. KLINE. Thank you, Mr. Chairman, and I thank the panelists
for being here.
Mr. Chairman, it is always interesting to me when you speak.
You are indeed a distinguished attorney and I am sure were a fine
litigator. We know that you are a famous student, a law student,
but I always get a little bit nervous when you try to do math in
your head.
I, on the other hand, being a Marine, have none of the above. I
cannot do math in my head, I am not a famous litigator. I was a
poor student in all those things. But regardless of doing math in
ones head, we have got a huge difference here in money. We are
talking about $70 million and 2 billion or 4 billion, or perhaps more
in dollars. Regardless of where you do your math, with a pencil or
in your head, is a big difference.
And I am concerned about two things here. Some have already
been addressed. And that is, is there something that be can be
done, the VEBA or something, addressing the issue of the Delphi
43
employees, the salaried employees in some of the smaller unions
today. But part of what we ought to be doing and I think what we
are doing in this hearing, in this committee, is what is at the root
of this problem? What happened? Who made decisions?
And I am very, very concerned thatI have heard language and
looked at testimony here today. Mr. Gump or Mr. Cunningham,
you said the PBGC walked away from $2- to $4 billion. And, Mr.
Gump, in your testimony you note that you have definitive evidence that the PBGC acted and are a powerful influence for the
Department of Treasury. My colleague Mr. Price was trying to get
at that earlier.
The PBGC as Mr. Stein has testifiedand by the way, Professor,
it is good to see you back here again. The PBGC has been a very,
very important backstop for so many retirees in America as companies have gone into bankruptcy, and we want to be careful to preserve that. But it is an independent organization, or it should be
an independent organization. And the board, as I understand, is
made up of several Department SecretariesTreasury, Labor,
Commerce. And so the potential for influence might be there
through that board. But that is something we ought to know about,
Mr. Chairman. We in this committee we ought to know about that,
we ought to look at that. We need to understand that the role of
the Auto Task Force in this, who made decisions there, who cut
deals and why.
And so I am hoping, Mr. Chairman, that we will be able to get
answers, not just from this panel, but maybe we need to hear from
the PBGC itself. Maybe we need to hear from the Auto Task Force
to understand how these decisions were made, and is it something
that we ought to be able to prevent in the future, not just for the
Delphi employees, but make sure that there isnt undue influence,
if in fact there was, and we ought to determine whether or not
there was such influence.
So I dont have a question for this panel. I think you have been
very frank and forthcoming in giving us your best information and
describing the numbers to us. But I think we have work to do here.
I am eager that we get on with both of those problems: What can
we do for them now and what can we do to uncover what happened
and how we got here? I thank you and I yield back.
Chairman ANDREWS. I thank my friend from Minnesota.
The Chair is pleased to recognize the gentleman from Ohio, Mr.
Kucinich, who has brought his usual tenacity and focus to this
issue, for 5 minutes.
Mr. KUCINICH. Mr. Chairman, I want to thank you for holding
this hearing. And I think the first thing we should recognize is that
the salaried employees and those who had a union contract are
really in the same boat. They are both getting denied their economic rights. We have got to be careful that we dont let anyone
split unity between two groups that may come to the table from a
different place, for sure, but they are both appealing to this Congress for recognition of the fact that they worked a lifetime, to
come to the end of their work days only to be told that the money
they were promised at the beginning would not be there in terms
of their retirement benefits.
44
Mr. Chairman, I dont think there is anything in our democratic
society that could shake peoples confidence more in our economic
system and in our government than the inability, the unwillingness, through either ineptness or fraud, to deliver on a promise of
economic security in peoples golden years that they worked for.
This isnt something that people are asking to be given, some
kind of a government handout. People worked for this. Corporations have a moral responsibility. It should be first in line, not last
in line.
Mr. Ryan and I were in a bankruptcy court together a few years
ago when the steel industry in Ohio was struggling to survive. And
employees were basically told, you know, get at the end of the line
with the other creditors.
Why cant they be first, and ahead of the banks? Why cant we
have laws that say that we recognize the contribution of workers
to this economy as actually having precedence over those who are
making profits based on paper-shoveling? It really is a statement
of the values in our economy, it really is.
It really is a challenge to capitalism itself when you can have
workers who are told they can have a piece of the dream if they
give 20, 30, 40 years to a corporation, and then at the end of the
time, say, Guess what? The money is not there. Really. Really.
Why arent there criminal penalties attached to that? If someone
holds up a grocery store they will get 20, 30 years in jail. What if
you hold up your workforce, what if you hold them up with a pen?
The fundamental question is of economic justice here; the economic
justice due to salaried employees and hourly employees as well.
And this Congress has a lot of work to do, as you know, Mr.
Chairman, to be certain that we look at all laws that can not just
protect workers in the future, but to see if we can find a way to
help people who are struggling right now, because there will be a
lot of American families who will find it tough to be able to hold
on when they find that the money they counted on for their economic security in the future just isnt going to be there. What do
they do?
Lets not split the aspirations of salaried workers and hourly
workers. I am a strong union man, but at the same time, if people
are getting the shaft and they are not belonging to a union, that
might make our case down the road as to why the fundamental
economic justice movement in our society is to make sure people
have the right to organize.
Thank you very much.
Chairman ANDREWS. Thank you very much, Mr. Kucinich.
The Chair is pleased to recognize our guest for this hearing, the
gentleman from New York, Mr. Lee, for 5 minutes. Welcome to the
committee.
Mr. LEE. Thank you, sir, and I will try to keep it brief. I truly
appreciate what you have done on behalf of these retirees. I just
have one or two points. And I ask first and foremost to reiterate
the frustration of not having Mr. Bloom here on an issue that is
so important and trying to really understand how these decisions
were made is unfortunate. And you do have my commitment that
we will continue to try to push for him to be honest with the retir-
45
ees on truly what has happened. I think that is an important part
of this hearing we do not want to lose sight of.
But the other partand I have to commend my colleagues who
are talking hereit was mentioned, the fact that all you are looking for is fairness, not looking for anything special, you just want
to be treated equally. And if there is pain to be shared, lets do it
on a united front. And that is the part that from day one when I
got involved with this issue, I have had the utmost respect for the
individuals who are in this room. And that really ismy hat is off
to you, but it is truly what has inspired me to want to help as
much as I can.
One other question. I know the Chairman has outlined a potential remedy. I am curious if any of you had thoughts or ideas on
what else could be done to help try to assist retirees in this situation, and that is open to any of you.
Mr. CUNNINGHAM. I believe thatand I liked what the Chairman
suggested, I think that is excellent. But I believe the money is
there now. I believe the money is within GM right new to top off
top up our pensions as well as the others. Although the number
from a net present-value standpoint might be 2.6, 2.7 billion
Chairman ANDREWS. Would the gentleman yield for one second
so I can ask a question about that? And, again, if this is something
you cant answer I appreciate it. Is GM a defendant in the suit that
you brought?
Mr. CUNNINGHAM. Yes, it is.
Chairman ANDREWS. Okay.
Mr. LEE. Go ahead.
Mr. CUNNINGHAM. I believe that GM has the money. And I think
it is, again, just outrageous to think that GM is choosing to use the
money they are drawing down now, in the words of GM, to look at
acquisitions and restructuring, most of which are overseas. They
are talking about using billions of dollars of taxpayers money to
invest in, potentially, Opel or other foreign entities, while they
could be putting that money to work to pay for our pension top-up.
And it wouldnt be 2.7 billion straight up-front. In fact, it would be
very small in the opening years.
So I believe the money is available. It was given to them by the
Treasury. They said it is not required, the drawdown is not required for the day-to-day operations of the business. So if they
dont need it for that, they ought to be able to use some of it, a
very small part every month, to supplement us as they have the
other groups. So I think that remedy is very simple, it is out there,
it is available tomorrow.
Mr. LEE. Thank you. Mr. Gump, anything you wanted to add?
Mr. GUMP. Only that the issue is reallythe issue we are fighting about here is about how the United States Government interfaces with the people of the United States. In this particular case,
the United States Government chose to kind of pick and choose
who and what groups they were going to support.
This letter that was introduced by Congressman Ryan from the
President of the Ohio AFL-CIO is written on behalf of the 700,000
members of the AFL-CIO in the State. And it calls for retirees to
be fairly and equitably treated; provide for the full earned pensions
46
and other post-employment benefits in the same manner for all
groups, regardless of their representation.
I am strongly union also. I believe that unions are absolutely
necessary in our business model. And in spite of the fact that I was
salaried, the reason I am salaried is because no union was available at the time. I would have been happy to have joined one.
I would also like, if you wouldnt mind, to introduce a concurrent
resolution, currently being considered in the Ohio General Assembly, that calls for fair and equitable treatment for all workers
groups.
Chairman ANDREWS. Without objection, it will be made part of
the record.
[The information follows:]
JOSEPH P. RUGOLA,
PRESIDENT, OHIO AFLCIO,
November 25, 2009.
To: MEMBERS OF THE OHIO GENERAL ASSEMBLY.
Subject: DELPHI RETIREES.
STATEMENT OF SUPPORT
On behalf of Ohios working families and the Ohio AFL-CIOs 700,000 members
we offer our support for the introduction of a Senate Resolution that urges the
President of the United States, the Secretary of the Treasury, the head of the Presidents Auto Task Force, and the members of the United States Congress to treat
all of the General Motors-Delphi retirees fairly and equitably and provide for the
full earned pensions and other post employment benefits in the same manner for
all groups regardless of their representation.
47
48
Mr. GUMP. I would be happy to leave those here.

The point I am trying to make: Everyone that we have spoken
to, other than the administration who has tried to justify their actions based on a commercial model and determining that one person has more commercial value than another, is a question that we
settled in this country a long time ago and we shouldnt have to
discuss it today.
Trying to justify on that, every other person that I have spoken
to, be they in politics, in business, be they in any other conditions,
has said this is just a matter of right and wrong. It is a mistake.
And quite honestlyand I dont believe there was malice involved here, at least I dont want to believe that there was malice
involved herethe issue is really more one that there was a policy
that was improperly implemented and taken a little too far and it
created an error. It is just an error that needs to be corrected, that
is all this is. And it needs to be backed up. It is not difficult to do
so.
I absolutely agree with Mr. Cunningham, the money is available.
It is not this difficult to make this happen, and it just needs to be
done. So I would be happy to introduce these, and I didnt mean
to take too much time.
Mr. LEE. That is fine. I yield back.
Chairman ANDREWS. The Chair recognizes Mr. Kildee.
Mr. KILDEE. Thank you very much, Mr. Chairman. Dr. Stein
Mr. STEIN. It is Mr. Stein, actually.
Mr. KILDEE. Whatever. I will give you a doctorate.
Mr. STEIN. Thank you. My brother is doctor and I think would
object.
Mr. KILDEE. All I got was an MA.
What changes could or should Congress make in ERISA or in the
bankruptcy laws to help those already hurt, or to prevent such
49
harm from befalling others in the future? Or is there any need to
change law?
And the second part of my question here. You also mention in
your testimony that losses for Delphi workers are not typical; that
historically 85 percent of participants in plans have not suffered
any pension losses. I ask you this question. How adequate is the
reporting obligation of companies to the PBGC and how strongly
does PBGC enforce that reporting?
From what I can gather in the 33 years I have spent here in
Congress serving on this committee is that there isntthere is
fuzziness of information going back and forth. You can fall into a
situation where there is not much money being put into the PBGC.
If you could answer both those questions. Any changes in law
and how well is PBGC enforcing information coming to them?
Mr. STEIN. Let me start with the second question. I think one of
the problems that we are seeing here, and that we see often when
we have terminations of underfunded plans, is employees are completely unprepared. No one really told them that this is possible.
In fact, the message I think employees get from employers and
from, to some extent, the PBGC, is your benefits are secure. And
in fact that is true for a lot of people, but it is not true for everyone. And when there are losses, the losses are great. And people
should know exactly what would happenplan termination, if it
happens, what would be the result?
I think there are a number of changes in the law that would be
really helpful, I think Chairman Andrews is exactly right that
PBGC and participants should be given much more consideration
in bankruptcy, and even before bankruptcy.
I think one of the problems here, and this is one reason I hope
I amthe liens that PBGC can get before bankruptcy only attach
toonly relate to delinquent contributions. They have to wait until
bankruptcy when it is essentially too late to get a lien on a company for underfunding that doesnt relate just to delinquent contributions. And PBGC really should be able to go in, when a plan
is seriously underfunded, and create a lien before termination.
That would have really helped in this situation.
I made a number of suggestions, I think it would take too long
to deal with here, to itemize here, of changes that might happen.
Something else the committee might look at. I know or I have
heard that not all TARP funds have been expended. One of the
things that upset me about the use of TARP funds is that it has
not been focused on the real life pain of real people, employees.
And perhaps some TARP money could be used, not only to help the
Delphi employees, but there are other employees who also have, because of the economy turndown, suffered pension loss. And maybe
that is a possibility.
I also want to say that I think all the Delphi employees who
have lost benefits have a compelling story to tell. But if you think
about prioritizing, the employees that are in the worst shape are
those already retired or very close to retirement, who are up
against this $54,000 annual limit, which moves downward if you
take a survivor benefit for your spouse; which moves downward if
you start your pension a few years early. They have, I think, the
most compelling story to tell.
50
The younger employees who suffered tremendous lossesthe
losses that they suffered is the ability to take full retirement at
earlier agesthey have a pretty good story to tell too; but I dont
think it is as compelling as people who are very close to retirement,
or who have already retired.
So if there is limited money to go around, where I would focus
it initially are people who are retired and very close to retirement
and then look at the subsidized early retirement benefits.
Mr. KILDEE. One thing that has bothered me in my 33 years, you
ask a company how fully funded is your pension plan and they say,
oh, it is about 100 percent. One said we are over 100 percent funded. And you can never get that from PBGC. We are operating
in
Mr. STEIN. Yeah, and of course what it means to be 100 percentit shouldnt have different meaningsbut you ask somebody
what 100 percent funding means, you will get very different answers depending on who you are asking and what their interest is.
And one of the things which I think you might look at, GM transferred money when they set up Delphi to the salaried pension plan
and said it was fully funded. I spent some time trying to track this
down, and I couldnt come up with a complete story. But I wonder
whether under a realistic definition of full funding, the plan in fact
was fully funded in 1999 when the assets were transferred.
Mr. KILDEE. It is hard to pull a number out of PBGC and the
company. I think we need a change of attitude also, rather than a
change of law, or maybe a little bit of both. Thank you very much.
Chairman ANDREWS. Mr. Kildee, thank you. I am going to turn
now to Mr. Ryan and invite him and Mr. Lee to continue working
with us and the others as we work on this issue. I think we have
heard some promising ideas today. And, again, Tim, using your legislation with your colleagues as a starting point, we can work together on it. But we are glad you are with us this morning.
Mr. RYAN. Great. I just wanted to thank you again. One question, Bruceand I know you know the answer to thisif you could
share with the committee how many years you worked for General
Motors.
Mr. GUMP. That depends on how you want to calculate it. The
number of years I was paid for was 32 years and 7 months. I probably worked closer to 42 or 43 years altogether at 8 hours a day.
Working 30 percent or more overtime is not at all uncommon
amongst the salaried employees. So while we didnt pay union
dues, we certainly paid dues to the company. All that overtime was
gratis; it was free, unpaid.
So in addition to that, we probably hadin my case it was probably on the order of 3 or 4 years away from my family, weeks or
months at a time on various travel excursions for the company.
So you know, the answerI know you want a simple number,
but honestly when it comes to trying to determine whether or not
one is worthy, if you will, of protection from the United States Government to receive the same benefits that our friends in the unions
have, I think it is important to understand we paid our dues; we
have depended on the company and our government. And at this
point in time, we have been let down by both. So we would really
like to have that corrected. Thank you.
51
Mr. RYAN. I would just like to add, Mr. Chairman, it is complicated where we are from, because we have a General Motors
plan that is going to make the Chevy crews. They just added a second shift, so we are seeing some of the benefits. But we also have
thousands of employees who I dont think would be willing to buy
GM cars anymore, should this situation continue. And just to say
that working with you, I am more optimistic after this hearing
than before with trying to build coalitions in Congress to get this
done and your personal willingness to help us. But this could be
and would be a stimulus for other local communities when you talk
about 50-plus millions of dollars rippling throughout a couple of
concentrated areas in Ohio. I think this would very much stimulate
our local economy.
And the TARP money, again I voted for TARP. I was here when
things were happening, and voted for it and supported it. But we
have an opportunity, I think, to use some of this money now to
help average families, middle-class families that we are obligated.
So I want to thank Bruce and Chuck and Marianne and Nick for
you all coming down here and being so tenacious with me and with
our staffs. This is a very important issue and there is nothing more
heartbreaking, especiallyMr. Kildee represents Flint, Michigan.
So he knows exactly what we have gone through in our area. And
there is nothing more heartbreaking than promises not being kept
and watching families have to go through that.
Dr. SteinI am going to call you Dr. Stein now that you are promotedmentioned that things are a lot better now than they were
when the steel mill would close in Youngstown 30 years ago, you
would show up for work and the gate would be locked and that was
it. Things have improved, but we are not done yet. So we will keep
going.
I thank you very much for your help, the staff and the committee
on this as well. So thank you.
Chairman ANDREWS. Tim, thanks for your leadership and we
look forward to working with you, Mr. Lee, and your colleagues.
At this time I will turn to my friend the Ranking Member, Mr.
Price, for any closing remarks that he has.
Mr. PRICE. Thank you, Mr. Chairman. I think this has been a
wonderfully helpful hearing in gaining insight into the specific
challenge that many hourly and salaried workers at Delphi have,
based upon what has occurred. And really the wrong that has occurred and the information that has to be gained. This has been
remarkably helpful in providing that foundation of information.
But I think, as my colleagues have said, and we could have
agreement on, there is information out there that we need, that we
dont have. And so I would hope that the committee continues to
work, to go forward in gaining that information from the administration, from the Secretary of the Treasury, from the PBGC and
others as to what happened.
Yes, we do need to make certain that we correct what has occurred to date, but we cant make certain that it doesnt happen
again unless we know how this one happened in the first place. I
thank the Chairman.
Chairman ANDREWS. I thank my friend.
52
I want to thank the witnesses for really helping educate the
panel, helping us learn not only about your situation but how we
might address similar situations and prevent them. What I take
away from this is a renewed commitment to work with the Members and Senators who care about this, and with you. And I break
it into what we do not know and what we do know.
What we do not know are some, as Dr. Price said, some facts
that we do need the answer to about the valuation of those assets,
the decision-making dynamic around the release of those assets,
and the ways this decision was made. I agree we do need that information.
What we do know is that tens of thousands of people have taken
an awful hit as a result of this. We also know that there are two
vehicles through which we could address that hit, try to fix this
problem. The first is the legislation Mr. Ryan has proposed, along
with the other members. It gives us some framework within which
we can work. And the second is the litigation that you have
launched, which, although it is a separate branch of government,
a separate thing, it is quite useful, frankly,to have that out there
at this time as well.
What we would like to do is help you in whatever way we can
to remedy this hurt that you have suffered, this wrong that you
have suffered. But then, as Dr. Price has suggested, use the lessons
learned from this situation to construct better laws so that this
doesnt happen to other people in the future.
One of the reasons I am sitting here today is that when was 14
years old, my father who had worked for 38 years at shipyard came
home and said he wasnt going back to work the next Monday because the yard was closed. He was 61. This is before ERISA. And
so he got one severance check that was probably worth 15 percent
of what his pension was. Never got a pension. He wound up at the
age of 61 back in the workforce, was fortunate enough to find a job
with our hometown, picking up mail every morning at the post office and doing the banking for the local government in our town,
and literally worked until the day he died when he was 75 years
old because he never got a pension.
This is personal. And the fact that this could happen to somebody after the law of 19had this happened to him after 1974, his
pension would have been protected and he would have had a very
different last few years of his life. But we are thankful he had
those years and he was healthy enough to work and did it. We
were grateful that he was.
But the fact that this is post-ERISA, post-1974, and you have relied upon these promises and because of circumstances beyond your
control, for which you have no causal effect, you have to suffer
these consequences, is just wrong. And rather than just say that,
we would like to try to take it to the next step and figure out some
way to try to help you and then learn from the lessons that you
have taught us today to try to prevent for other people down the
road.
As previously ordered, members will have 14 days to submit additional materials for the hearing record.
[The statement of Mr. Kildee follows:]
53
Prepared Statement of Hon. Dale E. Kildee, a Representative in Congress
From the State of Michigan
Chairman Andrews, I would like to thank you for holding this important hearing.
Thank you to our witnesses testifying today as well.
The Delphi pension issue is an issue that greatly affects my constituents in the
5th District of Michigan and that is why I requested this hearing. Until recently
my district had two Delphi plants in Saginaw and one in Flint.
I believe it is both fiscally and morally right to ensure retirees receive the benefits
they were promised by their employers and have planned on having during their
retirement years.
Delphi retirees were promised a lifetime pension and health benefits. However,
they have now learned that those promises were not 100% guaranteed.
These Delphi retirees have seen their pensions taken over by the Pension Benefit
Guaranty Corporation (PBGC).
While the hourly workers will receive a top-off of their pension plans thanks to
the commitment GM made to those workers when Delphi spun off from GM in 1999.
GM did not make the same guarantees to salaried employees and has stated that
the salaried plan was fully funded when Delphi spun off from GM. Unfortunately
for the 20,000 Delphi salaried retirees, they will be limited to the benefits from the
PBGC as things stand now.
We will hear from the second panel about how workers have been affected by Delphis bankruptcy. The loss of retirement benefits will have a devastating impact on
thousands of workers and their families.
These individuals spent a lifetime working towards their retirement, only to find
that their retirement benefits were not there when they needed them.
I hope that today we will have a meaningful discussion on possible remedies, including possible legislation, to benefit our workers and retirees and look forward to
working with the Committee and with our witnesses to help find legislative solutions to ensure that retirees receive the pension and health benefits that they have
earned.
[The statement of Mr. Boehner follows:]

Prepared Statement of Hon. John Boehner, a Representative in Congress
From the State of Ohio; Minority Leader, U.S. House of Representatives
Chairman Andrews and Ranking Member Price, thank you for holding a hearing
on the Impact of Bankruptcy on Delphi Workers.
The bankruptcy of Delphi has far-reaching impact in the 8th District. Delphi had
multiple facilities in the Dayton area and many retirees live in my district. Many
of these individuals spent most of their careers as General Motors (GM) employees
before Delphi was spun-off as an independent company.
After over three years in bankruptcy, bankruptcy court approved a reorganization
plan for Delphi at the end of July. As part of its reorganization, Delphi terminated
its pension plans in June, defaulting responsibility for the pension plans of its workers and retirees to the Pension Benefit Guaranty Corporation (PBGC). Reportedly,
this is the fourth-largest takeover of plans in terms of people covered and secondlargest based on the amount of money PBGC will pay out. More than 70,000 workers are affected.
Subsequently, Delphis former parent company, GM, topped off the pensions of
thousands of hourly workers and retirees under UAW and other union contracts.
However, 15,000 salaried retirees still face significant cuts to their pensions based
on PBGC rules and maximum benefits. Affected retirees may lose up to 70 percent
of their expected pension benefits. Hourly and salaried employees and retirees
worked side-by-side during their careers yet now are receiving disparate, inequitable
treatment.
In June, I joined Congressman Mike Turner (R-OH) in writing Ron Bloom, Senior
Advisor on the Auto Industry at the U.S. Department of Treasury, asking the Automotive Task Force to support the assumption of Delphi Corporations hourly and
salaried pension obligations by GM. Mr. Blooms response, dated October 14, 2009,
states, in part, While GM has agreed to assume Delphis hourly pension plans, unfortunately there simply is no realistic alternative to the termination of the existing
Delphi salaried pension plans and the transition of their stewardship to the PBGC.
However, the taxpayer-funded rescue of GM, combined with the government-directed bankruptcy and reorganization of GM, has resulted in unprecedented government involvement and intervention in the workings of a private company and the
economy. Neither GM nor the Automotive Task Force has provided a full expla-
54
nation as to why some Delphi pension obligations will be met by GM while the salaried retirees are not made whole. I commend you for highlighting these issues during this hearing, but I am disappointed that an Administration official was unavailable to testify to bring some much needed transparency to this process.
On June 26, 2009, joined by 7 of my Republican colleagues, I introduced a Resolution of InquiryH.Res. 591. This resolution requests that President Obama transmit all information in his possession relating to certain specific communications
with and financial assistance provided to General Motors Corporation and Chrysler
LLC to the United States House of Representatives. This resolution focuses on the
role of the Presidential Task Force on the Auto Industry in any negotiation or approval of the companies plans for reorganization.
In regard to salaried retirees benefits, the resolution seeks information regarding
the role of the Task Force in negotiating, reviewing, approving, determining, or in
any other aspect relating to, levels of and reductions in the employee and retiree
benefits of General Motors salaried employees and non-union hourly retirees.
On July 10, the House Committee on Financial Services considered the resolution
for amendment. While I am not a member of this committee, I am pleased that Congressman Chris Lee (R-NY) offered an amendment, which was adopted, to include
determination of pension benefits of Delphi retirees as part of the inquiry.
The resolution passed the committee by voice vote. I am hopeful that this resolution will be scheduled for a vote on the House Floor. The American people, especially those affected by the bankruptcy proceedings, deserve to be a part of an open
and transparent process.
Chairman ANDREWS. Any member who wishes to submit followup questions in writing to the witnesses should coordinate with the
Majority staff within 14 days.
Without objection, the hearing is adjourned.
[Whereupon, at 12:23 p.m., the subcommittee was adjourned.]

Examining The Delphi Bankruptcy'S Impact On Workers and Retirees

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Examining The Delphi Bankruptcy'S Impact On Workers and Retirees

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EXAMINING THE DELPHI BANKRUPTCYS

IMPACT ON WORKERS AND RETIREES

ONE HUNDRED ELEVENTH CONGRESS

HEARING HELD IN WASHINGTON, DC, DECEMBER 2, 2009

Serial No. 11142

For sale by the Superintendent of Documents, U.S. Government Printing Office

COMMITTEE ON EDUCATION AND LABOR

John Kline, Minnesota,

Mark Zuckerman, Staff Director

SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS

Tom Price, Geogia,

Hearing held on December 2, 2009 ........................................................................

EXAMINING THE DELPHI BANKRUPTCYS

The subcommittee met, pursuant to call, at 10:35 a.m., in room

Chairman ANDREWS. Without objection, opening statements from

Chairman ANDREWS. At this time, I am going to introduce our

Chairman ANDREWS. Thank you, Senator. It is great to have you

Mr. LEE. Delphis hourly and salaried retirees worked side by

Chairman ANDREWS. Congressman Michael Turner, welcome to

Mr. TURNER. Thank you, Mr. Chairman, Ranking Member Price.

Chairman ANDREWS. Mr. Rose said he had driven to be here

Chairman ANDREWS. Thank you. And Mr. Dragovich, is he here

Mr. GUMP. Good morning, Chairman Andrews and Ranking

Chairman ANDREWS. Mr. Cunningham, welcome. We are happy

Mr. CUNNINGHAM. Thank you, Chairman Andrews and Ranking

Mr. GUMP. I would be happy to leave those here.

[The statement of Mr. Boehner follows:]

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