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Delphi retirees say Obama administration betrayed them

In Ohio, a battleground state, thousands of former employees of General Motors' principal parts supplier, Delphi, blame the Obama administration for the deep cuts to their pension. NBC's Lisa Myers reports.

 

At first glance, David Kane, 63, appears to be solidly middle class. He has a home on a lovely suburban street in Sandusky, Ohio, and a boat docked in the nearby marina.

But looks can be deceiving. Kane doesn’t have television or even a functioning wristwatch. He and his wife Dianne live on their boat, a 1976 Trojan Tri-Cabin in need of repair, for part of the year to save on utility costs. He does outdoor maintenance at the marina to pay for the docking fees.

After a 35-year career at Delphi, the primary parts supplier for General Motors, Kane expected retirement to look much different. He left the company at age 54 as it was downsizing, and he was offered a buyout.


But in 2009, Kane received word that, as part of the bailout to save General Motors, the pensions that he and 20,000 fellow Delphi salaried employees were promised would be reduced 30 to 70 percent.

Kane lost almost half his pension and now receives only $1,600 a month. He says it has been devastating. “It’s just a beat down, day in and day out, to struggle to get through.”

What makes it more difficult is that other Delphi workers who worked alongside Kane, members of the powerful United Auto Workers union, did not suffer the same fate. They are receiving their full pensions.

When the government stepped in to bail out GM, providing a total of $50 billion from taxpayers, it also had to deal with Delphi, which already was in bankruptcy, because GM needed Delphi’s parts to build its cars. In the process, Delphi’s pensions were handed over to the Pension Benefit Guaranty Corporation (PBCG), a government-backed entity that insures private pensions. The PBCG terminated the pension plans, which were underfunded at the time.

Then General Motors did something that the Government Accountability Office, Congress’ investigative arm, later called “unusual.” GM agreed to top up the pensions of 22,000 Delphi members of the United Auto Workers union – at a cost of $1 billion. That enabled the UAW workers to still get their full pensions.

But there was no such sweetener for the company’s salaried employees or for the non-UAW hourly workers. And because the PBGC has statutory limits on how much it can pay in benefits, their payments were reduced sharply.

“We were the group that was just kicked to the curb like yesterday’s trash,” said Bruce Gump, vice-chairman of the Delphi Salaried Employees Association.

Now, two congressional committees and the Special Inspector General for the Troubled Asset Recovery Program (SIGTARP) are investigating the basis and motivation for this decision. Was this a political favor for a powerful union that backed President Barack Obama, as critics claim? Or was this a business decision by GM, based, according to the company, on an agreement originally negotiated in 1999 during Delphi’s spin off from the automaker? What role did the Obama administration play?

Inspector General Christy Romero, has said she’s looking into “whether the (administration’s) auto task force pressured GM to provide additional funding for those pensions.”

In a later agreement with the new GM, two other unions, IUE and USWA, were also topped up. Members of the Delphi Salaried Employees Association say they do not begrudge the union retirees their pensions, because they earned them. The salaried workers just want equal treatment, and they want answers from the government. 

Retirees hard hit by ‘broken promises’
Mary Miller, a divorced mother of four who worked at GM and Delphi for over 31 years, said the hit to her pension caused a true hardship.

“It's a struggle every day, and every time anything breaks, it's a near disaster,” she said, adding that she hasn’t had a working dishwasher for two years.

Miller had been counting on her full pension to help her start new career as a life coach.

“My plan was, ‘OK, I have a pension and I have health care. And I have a son in high school and sons in college -- and a daughter also.  But if we live very simply, I can make that pension stretch so that I can really have my dream.” 

Miller started the business anyway, but she says it is growing slowly because of the economy.

Miller has a friend, a former colleague at Delphi with whom she worked closely for several years in the same role, though he was paid hourly while she was drawing a salary. She can’t understand why he was treated differently.

“What made the work that that person did more valuable than the work I did? What was greater about the promise he received when he went to work for GM and Delphi than what I was told?”

Gump, who worked for General Motors and Delphi for almost 33 years and was a senior engineer when he retired, lost about 30 percent of his pension.

“Inside our organization we have lots of people that have seen their homes foreclosed,” he said. “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.”

The DSRA retirees are a politically diverse group – Republicans, Democrats and Independents – but regardless of political stripe, many of them believe the Obama administration betrayed them. Howard Collins, a Democrat, said he voted for Barack Obama in 2008 but isn’t sure he would do so again. 

“I don't know if I will decide until I actually go in the voting booth,” he said. 

Did the government pick winners and losers?
As senior advisor on auto issues at the Treasury Department, Ron Bloom led the administration’s Auto Task Force. He insists the government was not involved in GM’s individual decisions but simply approved the overall plan as being viable and based on commercial rather than political considerations.

“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,” says Bloom.  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.”

Bloom now says he feels for the Delphi workers. “There's no making it nice. There's no saying it's OK. The only thing one can say is that it was done in a responsible and fair way relative to the rules of the road in a bankruptcy.”

His position was echoed by Treasury Spokesman Anthony Coley, who told NBC News, "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, calls that justification a “smoke screen.”

“I believe that what really happened was that this administration simply wanted to take care of their political base,” he said.

The administration has turned over thousands of documents related to Treasury’s discussions between GM, Delphi and the PBGC, but not to the satisfaction of members of the House Oversight Committee, House Ways and Means Committee, or attorneys for the salaried Delphi employees  They accuse the Treasury Department of stonewalling and withholding key documents.

Ron 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 July, when they were called to testify before a house subcommittee.  Rep. Mike Turner, R-Ohio, called their refusal to answer questions “a happy train of silence.”

The three have now complied and the special investigator general’s audit is nearing completion.

Emails and testimony from lawsuits and ongoing investigations suggest the administration was deeply involved in GM’s decisions and considered a list of “politically sensitive” issues, but so far there is no proof the pension decisions were driven by political favoritism.

For its part, General Motors maintains that by topping up the union pensions, the company was fulfilling an agreement made at the time of the Delphi spin-off. And GM holds that the fate of the salaried employees was in the hands of the new Delphi.

“Delphi’s salaried pension plan was fully funded, and it was transferred to Delphi at the time the new company was created,” GM spokesperson Greg Martin said in a statement to NBC News.  “Responsibility for the future health of that plan – including funding levels and asset allocation – rested solely with Delphi.  The new GM is not in a position to fund salaried Delphi pensions twice.”

In 2010, then UAW President Ron Gettelfinger expressed support for Delphi’s salaried pensioners.

"This is a grave injustice," Gettelfinger wrote in a letter to the Delphi Salaried Retirees Association. "While the restructuring of America's auto industry requires shared sacrifice and responsibility, Delphi's salaried retirees/former employees are being forced to bear extra burdens that are not warranted."

Seeking resolution
The salaried workers have bipartisan support for their cause.

Last week Rep. Dave Camp, R-Mich., chairman of the House Ways and Means Committee, sent a letter to Department of Treasury Secretary Timothy Geithner and the White House Counsel requesting compliance with a congressional request for documents.

Sen. Sherrod Brown, a Democrat from Ohio, has introduced legislation that would restore the salaried pensions using proceeds from the sale of the government’s shares of GM stock.

But legislation takes time. The group representing the salaried workers would prefer to receive their full pension directly from the Pension Benefit Guaranty Corporation, which they say would not cost taxpayers a dime, because it receives its income from the premiums paid by the companies whose plans it insures.

Whether or not they believe the decision was made to appease an influential ally of the administration, the salaried retirees say that after a three-year struggle, it is just time to put things right.

“Really, that's in the past to be honest with you,” said David Kane. “You can't do anything about history. It's locked in. Where do we go from here? I'm more focused on what we do now to change the future. That's the only thing we can change.”

Kane’s wife, Dianne, lost her job around the same time his pension was reduced. Together, the couple has nine part-time jobs, but they are still barely making it.

“Our finances were based upon this scale, if you will, of expected income. And even with all the number jobs that we're working, it doesn't replace what we lost. It was easier sliding down the hill than to climb back up it,” Kane said.

Kane’s health has created additional challenges. Months before his pension was cut, he was diagnosed with prostate cancer. He also suffers from chronic fatigue syndrome.

Kane is still looking for full-time work but has had no luck. He suspects his age and poor health are a factor. Nevertheless, he remains hopeful.

“What I would like to see now is that portion of our pensions restored to the levels that they were before Delphi exited bankruptcy and did away with our pensions,” he said. “If I can get that portion back, I can make it. It's just too tough without it.”

Lisa Myers is NBC's senior investigative correspondent and Talesha Reynolds is an NBC investigative producer.