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Auto Industry Rocked by Delphi Bankruptcy (But Insiders Get Golden Parachutes)
MSNBC ^ | 10/09/2005 | John W. Schoen

Posted on 10/09/2005 5:44:11 PM PDT by drt1

Workers face prospect of wage, benefit concessions or court-ordered cuts. First came the U.S. steel industry. More recently, money-losing airlines have landed themselves in bankruptcy court to cut labor costs. Now, Saturday's filing by auto parts maker Delphi signals that the U.S. auto industry has arrived at the same crossroads with it’s work force: agree to out-of-court concessions, or face the prospect of court-ordered cuts in wages, benefits and pensions.

Delphi, a $29 billion industrial giant, has been struggling to make a profit since General Motors spun off its parts subsidiary in 1999. Last year, Delphi lost $4.8 billion; it lost nearly $750 million in the first half of this year.

A tougher new bankruptcy law effective Oct. 17 may have accelerated Delphi’s move to seek refuge in federal court in Manhattan to reorganize its money-losing operations....

(Excerpt) Read more at msnbc.msn.com ...


TOPICS: Business/Economy; Crime/Corruption; Culture/Society; Miscellaneous; News/Current Events
KEYWORDS: delphi; fatcat; gm; manufacturing; pbgc; pensions
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"Among other provisions, the new law makes it harder to pay bonuses to keep managers and imposes tighter deadlines on filers to either exit bankruptcy or liquidate faster."

Yep. Just before the filing the Board voted generous separation agreements for more than 100 key managers. Really sweet, they take as much as they can while dumping their underfunded pension plan on us (AKA the Pension Benefit Guaranty Corp). A real crock and something that should be rescinded by the Bankruptcy Court.

1 posted on 10/09/2005 5:44:14 PM PDT by drt1
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To: drt1

The beauty of outsorcing is that we still get to pay.


2 posted on 10/09/2005 5:46:57 PM PDT by ARCADIA (Abuse of power comes as no surprise)
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To: drt1
Yep. I've always thought a company shares the rewards AND risks with its employees. A company has no ethical right to withdraw agreed upon benefits and pensions to its employees and keep them for the brass. There should be one rule for high and low alike.

(Denny Crane: "Sometimes you can only look for answers from God and failing that... and Fox News".)
3 posted on 10/09/2005 5:48:22 PM PDT by goldstategop (In Memory Of A Dearly Beloved Friend Who Lives On In My Heart Forever)
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To: ARCADIA

Oh yeah, that too. The bankruptcy only involves the US operations. Offshore Ops are separate and are running business as usual and, I suspect, will take on even more of the Delphi US business while leaving us the shell to pay off.


4 posted on 10/09/2005 5:49:55 PM PDT by drt1
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To: goldstategop
"A company has no ethical right to withdraw agreed upon benefits and pensions to its employees and keep them for the brass."

I would think that the stricture is more than ethical. I mean really, this is simply fraudulent. The workers take on what is, in effect, a contractual IOU in lieu of current wages and top management takes this, bankrupts the company and defaults on the IOU. Gotta be illegal if you ask me.

5 posted on 10/09/2005 5:54:20 PM PDT by drt1
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To: drt1

That's why I never was a fan of defined-benefit pensions. I like the RSP approach instead, if it tanks I have noone to blame but myself. Also, one lesson that was reinforced by Enron: NEVER rely on the same source for both current income and retirement.


6 posted on 10/09/2005 5:58:44 PM PDT by Squawk 8888 (Proudly Christian since 2005)
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To: drt1
Delphi's retirees face similar cuts if the company follows the lead of steel companies and airlines that have successfully used the bankruptcy courts to offload their pension obligations to the federal Pension Benefit Guaranty Corporation, an agency set up in 1974 that is funded by contributions from premiums paid by companies. Once the agency takes over a pension plan, workers receive only part of their benefits.

The dumping of pension plans on the taxpayers will be the equivalent of the savings and loan debacle in the '80s.

7 posted on 10/09/2005 6:02:10 PM PDT by Joe Bfstplk (Charter Member of the VRWC.)
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To: Squawk 8888
The real problem is that the regulators let these companies underfund their pension plans and continue operating. What should be required is to keep these plans absolutely current and force bankruptcy if they are not adequately funded. I view these obligations no different than any other business related contractual obligation and if I were in the Unions I would not work another minute unless the full terms of our agreement were met. To do otherwise is to let the managers rape the company and default on the pension, which is exactly what has happened here and in every other recent high profile bankruptcy. (And BTW, I am NOT a fan of Unions but I am wedded to the old fashioned concept of freely making agreements and then satisfying them)
8 posted on 10/09/2005 6:06:34 PM PDT by drt1
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To: Joe Bfstplk

I don't think it is that bad. In the S & L debacle the Gov't took over the failed units and then sold of their assets a super bargain basement prices to the well connected in what, IMO, were patently fraudulent transactions. We picked up the difference between what they gave away and what was owed. (Incidentally, Ted Kopple bought his estate from the Resolution Trust Corp just this way and I bet you and I could never have even bid against him for it)


9 posted on 10/09/2005 6:10:48 PM PDT by drt1
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To: goldstategop
There should be one rule for high and low alike.

There is, it's called "every man for himself."

10 posted on 10/09/2005 6:13:36 PM PDT by glorgau
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To: drt1

Those horrible unions getting golden parachutes. How terrible.


11 posted on 10/09/2005 6:14:54 PM PDT by cynicom
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To: drt1

Very irksome, the very ones at the top who created the disaster walk away smiling, while the minions get stuffed.


12 posted on 10/09/2005 6:17:24 PM PDT by Ursus arctos horribilis ("It is better to die on your feet than to live on your knees!" Emiliano Zapata 1879-1919)
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To: Joe Bfstplk

When company was downsizing and I took early retirement, it was for this reason I rejected the monthly paycheck and lump summed out. Whatever happened to the money once in my hands, I would have none to blame but myself.


13 posted on 10/09/2005 6:23:02 PM PDT by Ursus arctos horribilis ("It is better to die on your feet than to live on your knees!" Emiliano Zapata 1879-1919)
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To: Ursus arctos horribilis
Very irksome, the very ones at the top who created the disaster walk away smiling, while the minions get stuffed.

Better throw open the windows and get some ventilation – there’s fumes or something where you are.

Problem stems from the fact that unions have been able to legally extort compensation WELL in excess of their value or importance. Executive pay is a drop in the bucket.

Those “minions” were pulling in 68K back in 1984 working 36 hours/wk – with a pension and health/welfare plan you’d kill for.

Chickens coming home to roost. That’s my opinion.

14 posted on 10/09/2005 6:24:28 PM PDT by Who dat?
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To: ARCADIA
The beauty of outsorcing [sic] is that we still get to pay.

Cute. Your solution?

15 posted on 10/09/2005 6:26:25 PM PDT by 1rudeboy
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To: drt1
From the PGBC Site:

PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of 44.4 million American workers and retirees in 31,200 private single-employer and multiemployer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans.

The PBGC is not backed like the FSLIC/FDIC - if they default the Congress would have to vote to bail them out, it is not an automatic action. I think the Congress would have a very hard time dealing with this - hence you see feeble efforts (like GA Sen. Johnny Isaacson's meaningless bill to allow airlines to reach fully funded pension status over a very long "catch up" period) to deal with [sic] the situation. All GM did was outsource (by spin-off) a money losing division in Delphi. Now that it has crashed and is starting to burn - the issue of general revenue bailouts of the privately negotiated pension plans will become an issue. My view - over my dead body.

16 posted on 10/09/2005 6:31:12 PM PDT by Wally_Kalbacken
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To: Who dat?

but not yet to government employees and members of congress


17 posted on 10/09/2005 7:00:19 PM PDT by ldish (God save the USA)
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To: cynicom

What are you talking about?


18 posted on 10/09/2005 7:10:07 PM PDT by drt1
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To: drt1

Every business that goes under faults the unions, management is never to blame. However management does look after itself. The taxpayers will prolly have to pick up the union pensions, management moves to Bahamas and builds a mansion.


19 posted on 10/09/2005 7:13:36 PM PDT by cynicom
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To: Who dat?
You are only partially correct. The rich contracts that the Unions negotiated were agreed to by management - The very same ones who have also garnered generous pay/benefits that are commensurate with what they agreed to with the Unions.

If these contracts were inherently uneconomical management had a duty, along with the stockholders through their representation on the Board, to refuse the agreement.

It takes two to engage in this and, though I don't like Unions in general, I do not excuse management for their turpitude and, in the final fling of paying themselves, from the accusations of fraudulent behavior.

20 posted on 10/09/2005 7:18:30 PM PDT by drt1
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