Barack Obama convinced many people he acted heroically when he bailed out General Motors with $50 billion from U.S. taxpayers in 2009. Tell that to the 20,000 Delphi employees who saw their pensions sliced from 30% to 70%.
Delphi was the primary parts supplier for General Motors, and was already in bankruptcy in 2009. When Obama bailed out GM, Delphi’s pensions were transferred to the Pension Benefit Guaranty Corporation (PBCG), which was a government-backed organization that insured private pensions. The PBCG decided to terminate the underfunded pension plans.
So far, everything was even-handed; everyone suffered. But then GM somehow decided to top up the pensions of 22,000 Delphi members, not all the members, but the ones who were members of the United Auto Workers union. GM invested $1 billion to give the UAW workers their full pensions.
But what of the company’s salaried employees or the non-UAW hourly workers? They wound up getting screwed, because PBGC has statutory limits on how much it can dole out. Bruce Gump, vice-chairman of the Delphi Salaried Employees Association, said bitterly, “We were the group that was just kicked to the curb like yesterday’s trash.”
If you think Obama was out to pay off his union buddies, you’re not alone.
Two congressional committees and the Special Inspector General for the Troubled Asset Recovery Program (SIGTARP) are investigating the smelly deal to see if the Obama Administration was paying off political favors. GM claims that the deal was based on an agreement negotiated in 1999 when Delphi separated from GM.
In a strange coincidence, two other unions, IUE and USWA, were also topped up.
Ron Bloom, a senior advisor on auto issues at the Treasury Department, led the administration’s Auto Task Force. He explained the situation this way:
“What I think is a fair surmise is that General Motors made a judgment that there was a commercial necessity for treating the UAW the way they did. There was concern that the unions might interfere with the flow of parts from Delphi to the auto company, which could harm new GM. Topping up the union pensions ensured the work would continue. The UAW had commercial leverage in this case, which they utilized.
Commercial leverage? Sounds like blackmail.
Treasury Spokesman Anthony Coley agreed with Bloom:
As has been exhaustively documented, Treasury's consistent approach to the auto restructuring was to defer to GM's business judgment and not approve or disapprove individual business decisions. While the GM restructuring involved painful concessions from all stakeholders, President Obama's decision to stand behind GM and the American auto industry saved more than a million jobs.
But Bruce Gump, the Delphi salaried workers representative, said those explanations were a “smoke screen”, adding:
“I believe that what really happened was that this administration simply wanted to take care of their political base … Inside our organization we have lots of people that have seen their homes foreclosed. They’ve had to declare personal bankruptcy. There’s been some families that have broken up over the stress associated with this. There’s even been a couple suicides.”
Meanwhile, the House Oversight Committee, House Ways and Means Committee, and attorneys for the salaried Delphi employees accuse the Treasury Department of stonewalling and withholding evidence. Bloom and key Task Force members Harry Wilson and Matthew Feldman refused to be interviewed by the special investigator general of TARP about the Delphi pension decisions for almost a year, until this past July.
And the most cynical tack was taken by Sen. Sherrod Brown, who is now claiming the bailout was a problem for Delphi workers three years after he championed it. Brown’s duplicitous plans for fixing the problem can be seen here.
The Rust Belt should know – Obama’s bailout was not the angelic act it appeared to be. Thousands of good people have suffered – just not union members.