[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                   EXAMINING THE DELPHI BANKRUPTCY'S
                     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. 111-42

                               __________

      Printed for the use of the Committee on Education and Labor


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                    COMMITTEE ON EDUCATION AND LABOR

                  GEORGE MILLER, California, Chairman

Dale E. Kildee, Michigan, Vice       John Kline, Minnesota,
    Chairman                           Senior Republican Member
Donald M. Payne, New Jersey          Thomas E. Petri, Wisconsin
Robert E. Andrews, New Jersey        Howard P. ``Buck'' McKeon, 
Robert C. ``Bobby'' Scott, Virginia      California
Lynn C. Woolsey, California          Peter Hoekstra, Michigan
Ruben Hinojosa, Texas                Michael N. Castle, Delaware
Carolyn McCarthy, New York           Mark E. Souder, Indiana
John F. Tierney, Massachusetts       Vernon J. Ehlers, Michigan
Dennis J. Kucinich, Ohio             Judy Biggert, Illinois
David Wu, Oregon                     Todd Russell Platts, Pennsylvania
Rush D. Holt, New Jersey             Joe Wilson, South Carolina
Susan A. Davis, California           Cathy McMorris Rodgers, Washington
Raul M. Grijalva, Arizona            Tom Price, Georgia
Timothy H. Bishop, New York          Rob Bishop, Utah
Joe Sestak, Pennsylvania             Brett Guthrie, Kentucky
David Loebsack, Iowa                 Bill Cassidy, Louisiana
Mazie Hirono, Hawaii                 Tom McClintock, California
Jason Altmire, Pennsylvania          Duncan Hunter, California
Phil Hare, Illinois                  David P. Roe, Tennessee
Yvette D. Clarke, New York           Glenn Thompson, Pennsylvania
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

                     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                     Tom Price, Geogia,
Phil Hare, Illinois                    Ranking Minority Member
John F. Tierney, Massachusetts       John Kline, Minnesota
Dennis J. Kucinich, Ohio             Howard P. ``Buck'' McKeon, 
Marcia L. Fudge, Ohio                    California
Dale E. Kildee, Michigan             Joe Wilson, South Carolina
Carolyn McCarthy, New York           Brett Guthrie, Kentucky
Rush D. Holt, New Jersey             Tom McClintock, California
Joe Sestak, Pennsylvania             Duncan Hunter, California
David Loebsack, Iowa                 David P. Roe, Tennessee
Yvette D. Clarke, New York
Joe Courtney, Connecticut


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on December 2, 2009.................................     1

Statement of Members:
    Andrews, Hon. Robert E., Chairman, Subcommittee on Health, 
      Employment, Labor and Pensions.............................     1
        Prepared statement of....................................     3
    Kildee, Hon. Dale E., a Representative in Congress from the 
      State of Michigan, prepared statement of...................    53
        Letter, dated November 4, 2005, to the White House.......     7
        Letter, dated July 10, 2009, to the chairmen and ranking 
          members of congressional committees....................    10
        Letter, dated June 24, 2009, to the Secretary of the 
          Treasury...............................................     9
    Price, Hon. Tom, Ranking Minority Member, Subcommittee on 
      Health, Employment, Labor and Pensions.....................     4
        Prepared statement of....................................     5

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.....................    53
    Brown, Hon. Sherrod, a U.S. Senator from the State of Ohio...    11
        Prepared statement of....................................    13
    Cunningham, Charles, Delphi Salaried Retirees Association....    30
        Prepared statement of....................................    32
    Gump, Bruce, Delphi Salaried Retirees Association............    27
        Prepared statement of....................................    29
        Additional submissions:
            Letter from Joseph P. Rugola, dated November 25, 
              2009, to the Ohio General Assembly.................    46
            Resolution 2009-53, dated November 2, 2009, from the 
              Champion Township Trustees.........................    47
            Chart: ``Delphi Salaried Retiree's Benefit Cuts 
              Compared to GM & Delphi Hourly Retirees''..........    48
    Lee, Hon. Christopher, a Representative in Congress from the 
      State of New York..........................................    14
        Prepared statement of....................................    18
        Letters submitted for the record.........................    15
    Ryan, Hon. Tim, a Representative in Congress from the State 
      of Ohio....................................................    22
        Prepared statement of....................................    24
    Stein, Norman P., senior consultant, Pension Rights Center, 
      and Douglas Arant professor of law, University of Alabama 
      Law School.................................................    33
        Prepared statement of....................................    35
    Turner, Hon. Michael R., a Representative in Congress from 
      the State of Ohio..........................................    20
        Prepared statement of....................................    21


    EXAMINING THE DELPHI BANKRUPTCY'S 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 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 weren't 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 weren't.
    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 wouldn't 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 couldn't have asked for a lump sum distribution 
of your pension because the plan didn't 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 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 Bankruptcy's 
Impact on Workers and Retirees.
    We appreciate the attendance of today's 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 
Act--which was established by Congress in 1974 to protect employee 
welfare benefits--the Health, Employment, Labor and Pensions 
Subcommittee's 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 today's 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 
Delphi's 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 employees. The PBGC predicts its total obligation for 
Delphi's pension shortfall to be $6.2 billion.
    In July 2009, the federal Pension Benefit Guaranty Corporation 
announced it was taking over obligations for Delphi Corporation's 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.
    Today's hearing marks the opportunity for us to examine 
truly Delphi Corporation's 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 Delphi's 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 
company's 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 
President's hand-picked car czar were deeply involved in the 
negotiation of the restructuring of General Motors. We do know 
that Washington 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 
Delphi's 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 don't 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 Delphi's 
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.
    Today's hearing marks an opportunity to examine the impact of 
Delphi Corporation's bankruptcy on its workers and retirees. I look 
forward to hearing in detail how different classes of workers and 
retirees will fare under Delphi's bankruptcy, and what lessons we as 
policymakers might take away from this experience moving forward.
    I'd 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 connection with this company's bankruptcy. Some 
employees and retirees appear to have been given preferential treatment 
in the bankruptcy process and will enjoy full benefits. Many others--
some of whom we will hear from today--are 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 President's 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 Delphi's pension plans--the 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 workers--notably, those in 
certain politically powerful unions--while 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. Bloom's 
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 Delphi's 
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 
Corporation's 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 Department's 
Automotive Task Force, Delphi's hourly retiree pension obligations will 
be assumed by GM while Delphi's salaried pension obligations will 
default to the Pension Benefit Guaranty Corporation. This means 
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.
    Delphi's 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 Delphi's 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 Delphi's 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 America's auto 
industry will require shared sacrifice and responsibility, which makes 
the need for a congressional examination into the disparate treatment 
given to Delphi's hourly and salaried retirees all the more urgent and 
necessary.
    Since Delphi's 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 Department's Automotive Task Force 
concerning the pension obligations of Delphi Corporation.
    We are concerned about the inequitable decision to default the 
Delphi Corporation's salaried retiree pension plan to the Pension 
Benefit Guarantee Corporation (PBGC), while General Motors agreed to 
assume the auto parts supplier's 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.
    At a minimum, in the interest of transparency and accountability, 
we believe the 15,000 salaried Delphi retirees nationwide--not to 
mention the American taxpayers who now own a 60 percent stake in the 
new GM--deserve 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 York's 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 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 Ohio's 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 don't 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 is--as the 
chairman pointed out--a 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 Kucinich's 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 Federal 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-year-old 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, 
Springfield--Dayton 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 comfortably 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 can't 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.
    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 
Corporation's 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 Department's 
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, Delphi's 
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.
    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.
    Chairman Andrews. Without objection.
    [The letters, of which a sampling follows, have been 
entered into the permanent record and are archived at the 
Committee's office:]





                                ------                                

    Mr. Lee. Delphi's 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 lion's 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 Delphi's hourly and salaried retirees.
    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----
    Chairman Andrews. Without objection.
    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 administration's 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 Delphi's retirees and the American taxpayers 
who are financing GM's 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

    I'd 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 Corporation's pension obligations, and I commend you 
for doing so. As a result of the restructuring negotiations between 
Delphi Corporation, General Motors, and the Treasury Department's 
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, Delphi's 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 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.
    He's 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]
    Delphi's 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 lion's 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 Delphi's hourly and salaried retirees. At 
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 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 Administration's 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 Delphi's retirees, and the American taxpayers who are 
financing GM's 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.

 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 Delphi's bankruptcy 
through increased foreclosures and community services that have 
been affected as a result of an eroded tax base. The job loss 
associated with Delphi's bankruptcy was further increased by 
the closing of a General Motors's 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. Today's 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 Court's 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 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 court's 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 Obama's 
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 today's 
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 administration's 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 Delphi's 
bankruptcy through increased foreclosures, and community services have 
been affected because of an eroded tax base.
    The job loss associated with Delphi's 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.
    Today's 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 Court's 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 Obama's 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 today's 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 you--it 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.
    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 Ohio's 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 children's 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 GM's 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 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 Delphi's 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 people's 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 Ohio's 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 Delphi's 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 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 children's 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 GM's 
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 you're 
overleveraged and I'm 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 Delphi's 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 people's 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 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 haven't 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 don't 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.
    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. Don't 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 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, PBGC's director, Charles Millard, said in May 
of 2008 that we will act forcefully to protect Delphi's pension 
plans and we will draw down certain letters of credit and keep 
liens in place on the company's assets until Delphi has 
successfully emerged and made its pension plans whole. These 
liens were on Delphi's 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 Delphi's 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 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 Ohio's 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 Delphi's 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 Delphi's pension plans.'' 
And ``We will draw down certain letters of credit and keep liens in 
place on the company's assets until Delphi has successfully emerged and 
made its pension plans whole.'' These liens were on Delphi's 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 a Board Member 
of the PBGC) to release the liens put in place to protect Delphi's 
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 Ohio's 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. Don't 
rush. Say what you want to say.
    Mr. Cunningham. I won't rush. I will just keep it brief. 
Okay? I would like to expand a little bit on portions of Bruce 
Gump's testimony and really particularly relating to the 
Treasury's 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, GM's largest parts supplier, also emerge 
from bankruptcy as a viable entity. The last obstacle in 
settling Delphi's bankruptcy was Delphi's pension plan 
liabilities, although other options were considered, including 
GM taking back all of Delphi's 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 Delphi's 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, GM's 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, would--that 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 wasn't 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 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 don't know why we were treated in this manner or that our 
congressional leaders can't 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 Gump's testimony 
particularly relating to the Treasury's 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, GM's largest 
parts supplier, also emerge from bankruptcy as a viable entity. The 
last obstacle in settling Delphi's bankruptcy was Delphi's pension 
plans liabilities. Although other options were considered, including GM 
taking back all of Delphi's 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 Delphi's overseas assets, 
valued at between $2-4 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.
    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 Delphi's bankruptcy and Delphi's 
workers and retirees. The story of Delphi's 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 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 
ERISA's 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 let's 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, if--as of the plan's termination--an 
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 statute's 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.
    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 Delphi's 
bankruptcy on Delphi's 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 Delphi's 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 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 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 
plan's 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 
typical--historically, 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.
The PBGC Benefit Guarantees and Delphi Salaries Employees
    The PBGC guaranty program has undergone extensive modification 
since ERISA's 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--
they are in the statute that PBGC administers \1\--and PBGC does not 
have discretion to vary the guarantees even under the compelling 
circumstances presented today.
---------------------------------------------------------------------------
    \1\ In some cases, the limitations are in 30-year old regulations 
interpreting the statute.
---------------------------------------------------------------------------
    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 plan's 
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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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 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.
    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 cliff--
people 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 problem-
solving 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 assets against which the lien was released are worth--
what did you say?
    Mr. Cunningham. Between 2 and $4 billion. That can be 
found, although we can't excuse that here today.
    Chairman Andrews. Okay, I don't 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 some--you 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 don't 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. Gump's and 
Cunningham's 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 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 government's ownership stake in GM--which I hope 
is not repeated for lots of reasons--I think it would give us 
the basis to maybe take Mr. Ryan's 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 wouldn't 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 wouldn't mind.
    Mr. Price. Yeah, let me do that as well. Let me make 
certain that I didn't 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 you'll 
see them in the testimony, you'll see them all through the 
Bankruptcy Court filing in the GM bankruptcy. And we have--I 
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 still--and 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 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 reason--there 
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 wasn't 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 don't 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 can't speak to who did that. We 
know it was prompted by the Treasury, but where the influence 
came from I can't tell you.
    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 interfering--if 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 receive--at 
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 don't 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 IUE-
CWA 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 of--my father 
used to say, God put eyes in the front of our heads so we don't 
have to look 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 
that--you 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 me--which I think we all are really--you 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 people--and I know my time has run out--are 
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 don't 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 one's 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 
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 that--I 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 testified--and 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 
Secretaries--Treasury, 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 
isn't undue influence, if in fact there was, and we ought to 
determine whether or not there was such influence.
    So I don't 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 
don't 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.
    Mr. Chairman, I don't think there is anything in our 
democratic society that could shake people's 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 people's golden 
years that they worked for.
    This isn't 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 can't they be first, and ahead of the banks? Why can't 
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 aren't 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 isn't going to 
be there. What do they do?
    Let's 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 retirees 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 part--and I have to commend my colleagues who 
are talking here--it 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, let's 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 is--my 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 that--and 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 can't 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 wouldn't 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 don't 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 really--the 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 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 wouldn't 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 AFL-CIO,
                                                 November 25, 2009.
To: Members of the Ohio General Assembly.
Subject: Delphi Retirees.

                          STATEMENT OF SUPPORT

    On behalf of Ohio's working families and the Ohio AFL-CIO's 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 President's 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.
                                 ______
                                 
                                 
                                 
                                ------                                



                                ------                                

    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 
shouldn't 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 honestly--and I don't believe there was malice 
involved here, at least I don't want to believe that there was 
malice involved here--the 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 didn't 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 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 isn't--there 
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 happen--plan 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 am--the liens that PBGC can get before bankruptcy only 
attach to--only 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 doesn't 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.
    The younger employees who suffered tremendous losses--the 
losses that they suffered is the ability to take full 
retirement at earlier ages--they have a pretty good story to 
tell too; but I don't 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 
percent--it shouldn't have different meanings--but 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 couldn't 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, Bruce--and I know you know the answer to this--if 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 didn't 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 had--in 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 answer--I 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.
    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 don't 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, especially--Mr. 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. Stein--I am going to call you Dr. Stein now that you 
are promoted--mentioned 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 don't 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 can't make certain that it doesn't 
happen again unless we know how this one happened in the first 
place. I thank the Chairman.
    Chairman Andrews. I thank my friend.
    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 doesn't 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 wasn't 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 19--had 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:]

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 Delphi's 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 second-
largest based on the amount of money PBGC will pay out. More than 
70,000 workers are affected.
    Subsequently, Delphi's 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 Corporation's hourly and salaried pension obligations by GM. Mr. 
Bloom's response, dated October 14, 2009, states, in part, ``While GM 
has agreed to assume Delphi's 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 explanation 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 Inquiry--H.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 follow-up 
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.]

                                 
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