[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
DELPHI PENSION FALLOUT: FEDERAL GOVERNMENT PICKED WINNERS AND LOSERS,
SO WHO WON AND WHO LOST?
=======================================================================
HEARING
before the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
NOVEMBER 14, 2011
__________
Serial No. 112-106
__________
Printed for the use of the Committee on Oversight and Government Reform
Available via the World Wide Web: http://www.fdsys.gov
http://www.house.gov/reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana ELIJAH E. CUMMINGS, Maryland,
JOHN L. MICA, Florida Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina ELEANOR HOLMES NORTON, District of
JIM JORDAN, Ohio Columbia
JASON CHAFFETZ, Utah DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee PETER WELCH, Vermont
JOE WALSH, Illinois JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania
Lawrence J. Brady, Staff Director
John D. Cuaderes, Deputy Staff Director
Robert Borden, General Counsel
Linda A. Good, Chief Clerk
David Rapallo, Minority Staff Director
C O N T E N T S
----------
Page
Hearing held on November 14, 2011................................ 1
Statement of:
Black, Den, member of the Delphi Salaried Retirees
Association; Bruce Gump, member of the Delphi Salaried
Retirees Association; Mary Miller, member of the Delphi
Salaried Retirees Association; and Tom Rose, member of the
Delphi Salaried Retirees Association....................... 25
Black, Den............................................... 25
Gump, Bruce.............................................. 31
Miller, Mary............................................. 38
Rose, Tom................................................ 43
Bovbjerg, Barbara, Managing Director, Education, Workforce,
and Income Security Issues, Government Accountability
Office; and Vincent K. Snowbarger, Deputy Director for
Operations, Pension Benefit Guaranty Corp.................. 58
Bovbjerg, Barbara........................................ 58
Snowbarger, Vincent K.................................... 78
Cunningham, Chuck, former executive at Delphi Corp.; and
Steve Gebbia, former executive at Delphi Corp.............. 8
Cunningham, Chuck........................................ 8
Gebbia, Steve............................................ 14
Letters, statements, etc., submitted for the record by:
Black, Den, member of the Delphi Salaried Retirees
Association, prepared statement of......................... 28
Bovbjerg, Barbara, Managing Director, Education, Workforce,
and Income Security Issues, Government Accountability
Office, prepared statement of.............................. 60
Burton, Hon. Dan, a Representative in Congress from the State
of Indiana, prepared statement of.......................... 107
Cunningham, Chuck, former executive at Delphi Corp., prepared
statement of............................................... 10
Gebbia, Steve, former executive at Delphi Corp., prepared
statement of............................................... 16
Gump, Bruce, member of the Delphi Salaried Retirees
Association, prepared statement of......................... 34
Issa, Hon. Darrell E., a Representative in Congress from the
State of California:
Prepared statement of Senator Rob Portman................ 3
Various prepared statements.............................. 55
Miller, Mary, member of the Delphi Salaried Retirees
Association, prepared statement of......................... 40
Rose, Tom, member of the Delphi Salaried Retirees
Association, prepared statement of......................... 45
Snowbarger, Vincent K., Deputy Director for Operations,
Pension Benefit Guaranty Corp., prepared statement of...... 80
DELPHI PENSION FALLOUT: FEDERAL GOVERNMENT PICKED WINNERS AND LOSERS,
SO WHO WON AND WHO LOST?
----------
MONDAY, NOVEMBER 14, 2011
House of Representatives,
Committee on Oversight and Government Reform,
Dayton, OH.
The committee met, pursuant to notice, at 9 a.m., at
Sinclair Community College, Smith Auditorium, 444 W. 3rd
Street, Dayton, OH, Hon. Darrell E. Issa (chairman of the
committee) presiding.
Present: Representatives Issa, Burton, Turner, and Jordan.
Also present: Representative Austria.
Staff present: Michael R. Bebeau, assistant clerk; Adam P.
Fromm, director of Member services and committee operations;
Linda Good, chief clerk; Tyler Grimm, professional staff
member; Christopher Hixon, deputy chief counsel, oversight;
Rebecca Watkins, press secretary; and Jason Powell, minority
counsel.
Chairman Issa. First of all, this hearing is being streamed
for anyone who logs in with the assumption that anything you
say will end up on the record. [Laughter.]
This congressional investigation and hearing was called by
Congressman Turner--here and one of the most effective--last,
do not try to do amateur video or too many pictures. It will be
100 percent available to you and to everyone. We post and
maintain, going back more than 5 years, all of our video of all
committee hearings.
So, with that, the full committee hearing on ``Delphi's
Pension Fallout: Federal Government Picked Winners and Losers,
So Who Won and Who Lost?'' will come to order.
The Committee on Oversight exists for two fundamental
principles. First, Americans have a right to know that the
money Washington takes from them is well spent. And, second,
Americans deserve an efficient, effective government that works
for them. Our duty on the Oversight and Government Reform
Committee is to protect these rights. Our solemn responsibility
is to hold government accountable to taxpayers, because
taxpayers have the right to know what they get from their
government.
It is our committee's responsibility to work tirelessly in
partnership with citizen watch dogs to deliver the facts to the
American people and bring genuine reform to the Federal
bureaucracy.
Today, I ask unanimous consent that our colleague, Mr.
Steve Austria, who is present and represents Ohio's 7th
District, be allowed to participate as a non-member of the
committee in this hearing.
Without objection, so ordered.
Additionally, at this time I would ask unanimous consent
that the statement of Senator Portman be placed in the record.
Without objection, so ordered.
[The information referred to follows:]
[GRAPHIC] [TIFF OMITTED] 73164.001
Chairman Issa. Today I want to begin by thanking the
Sinclair Community College for allowing us to use this
facility. We would have expected this facility to be far larger
than an ordinary hearing, but we do have standing room only,
and we appreciate a facility this size being made available,
far beyond what would ordinarily be used in a field hearing.
Additionally, I want to thank Mr. Turner again for
tirelessly making sure that both in Washington and here these
activities are happening. I might note that Jim Jordan and
other Members of the Ohio delegation have held additional
hearings and may hold more in Washington in days to come.
All Members, both present and those who want to submit for
the record, will have 5 days in which to put in statements and
extraneous materials for the record.
I will allow each Member who wants to make a short opening
statement to make one if they choose to. And I think I will
start with our hometown favorite, Mr. Turner, first.
Mr. Turner. Mr. Chairman, thank you so much. Thank you for
bringing this Washington committee hearing here to Dayton, OH.
I appreciate you granting my request to hold it here. I think
that----
Chairman Issa. You did not give me a choice. [Laughter.]
Mr. Turner. You are a very good friend, and I greatly
appreciate your focus on this issue.
This is not the first hearing that has been held by your
full committee or by the subcommittees on this issue. It is the
first that is focused solely on this issue. You have had
witnesses testify, and I greatly appreciate the manner in which
you have allowed the retirees and their issues to be addressed
as we have looked to the auto bailout, the use of retired
funds, the discrimination that has occurred in the funding of
the payout of pensions.
Representative Jordan as the chairman of the subcommittee
has held hearings on this issue and has been very active I know
not only just as a strong member of this committee, but also as
an Ohioan. His father, like mine, retired from General Motors.
My father retired from General Motors after 42 years as a
result of the GM bankruptcy. His health insurance was impacted.
We have stories like this throughout our community of people
who have been impacted by General Motors and the Delphi
bankruptcy.
I think, Mr. Chairman, you and I had the conversation that
Delphi began as Dayton Engineering Laboratories Co., so it is
important being here is that we have the historical nexus of
the beginning of the company and also the thousands of numbers
of retirees that are here that have been impacted.
In the wake of the General Motors' bailout, the
administration clearly picked winners and losers without
transparency, without justification, and, in my opinion,
without respect for the men and women who dedicated years of
service in earning their retirement benefits. Part of the
hearing today is our ability to try to get some of that
transparency. The administration has not been forthcoming. The
negotiations, the decisions, have been largely in secret, and
as the committee and the retirees have tried and attempted to
get answers they have largely been thwarted, which is why it is
so important to have the assistance of this hearing.
The treatment of salaried retirees is particularly
troubling in comparison to the benefits received by some in
organized labor organizations. In fact, the UAW and the Ohio
AFL-CIO have written letters in support of restoring benefits
for the Delphi salaried retirees.
I will work along with all the members of this panel to
advocate on behalf of both the union and the non-union labor to
ensure that all retirees receive whatever benefits that they
were promised. All of these retirees, regardless of labor
affiliation or not, worked alongside each other during their
careers and were part of the success of Delphi. They earned
these pensions, and they deserve them. They should not be
differently in retirement.
I think as we have all said as we looked at this issue, we
want to know where did the money go and how do we get the money
put back? This is part of our quest today as we look to
accountability in the administration and the decisionmaking
process.
I also want to thank Congressman Dan Burton for being here
from Indiana. He has been also a strong advocate on this as he
has had a number of retirees in his area that were impacted.
And certainly I want to recognize Representative Austria for
being here today.
Mr. Chairman, thank you for this opportunity, and thank you
for being here in Dayton, OH.
Chairman Issa. Thank you. We now go to the former chairman
of the full committee who represents, among other places,
Kokomo, and as much as Mr. Turner, clearly has a huge
population of people who have earned retirement who are not
getting it today?
Mr. Burton. Thank you, Mr. Chairman. I appreciate you
having this hearing. I appreciate the comments of from
Representative Turner, who shares my concern about the
inequities that have taken place.
Mr. Chairman, Delphi Corp. was created in 1999 by General
Motors through the spinoff of the company's automotive
component group into a separate entity. In fact, many of the
current Delphi retirees, hourly and salary, spent the majority
of their working career, on average about 25 years, with GM
until they were involuntarily moved to Delphi.
Regrettably, in 2005, Delphi Corp. filed chapter 11
bankruptcy protection. On October 6, 2009, 4 years after
entering into chapter 11, Delphi Corp. exited bankruptcy as
Delphi Holdings under a restructuring plan, facilitated by the
Obama administration, and approved by the U.S. District
Bankruptcy Court for the Southern District of New York. Under
the terms of the agreement, the Federal Pension Benefits
Guaranty Corp. assumed responsibility for all of the Delphi
pension plans, roughly $6.2 billion in liability, for six
Delphi pension plans covering approximately 70,000 employees
and retirees.
However, in a very unusual agreement as part of the
restructuring plan, GM consented to use money from its own
pension funds to supplement the 46,000 Delphi hourly union
employees' pension payments to make up for the 30 to 70 percent
cuts in benefits resulting from a PBGC takeover of the Delphi
pension plan. This unprecedented agreement was not extended to
the 21,000 salaried workers and retirees, which is really
terrible. By some estimates, this resulted in a 70 percent
reduction in pensions and loss of health care for salaried
Delphi retirees.
When questioned about the disparate treatment of Delphi
employees and retirees, to this day executives for GM only say
that the company agreed to supplement Delphi union employees
and retirees because it had promised to do so in 1999, and that
the company did not supplement Delphi non-union employees or
retirees because it, ``is not something that GM has any control
over.'' And GM does not have a legal obligation, nor does it
have the money to refund those pensions. The explanations
offered by GM are woefully insufficient.
Once GM entered into bankruptcy, the contractual promises
made in 1999 were null and void, and it makes no business sense
for a company trying to shed excessive debt to assume more
debt. In reality, though, the blame does not lie with GM. I
believe that evidence uncovered by this committee and others
clearly shows that the Obama administration's auto task force
made this decision for purely political reasons. In fact, Mr.
Ron Bloom, former senior advisor to the Secretary of the
Treasury, on the auto bailout admitted as much when he said in
a celebratory dinner for the auto bailout, ``He did this for
all of the unions.''
On June 22, 2011 during the last committee hearing on this
issue, when I questioned Mr. Bloom about his statement, he
flatly and unequivocally denied that he ever said that.
Unfortunately for Mr. Bloom, this statement was corroborated by
a reporter for the Detroit Free Press, and in a book by Mr.
Bloom's former boss, auto czar Steve Radner.
Two weeks later, after coming under fire from this
committee and the media about his blatant lie under oath, and
he should have been held in contempt--I still think we ought to
do that, Mr. Chairman. [Laughter.]
Mr. Bloom retracted his denial and instead claimed he did
not ``recall'' ever saying that. But he did.
Mr. Bloom's actions are sadly typical of this
administration's blatant disregard for Congress' pursuit of the
truth in this case. To the best of my knowledge, all
congressional requests to the administration about this case
have either been ignored or obfuscated. This is unacceptable
and should not be tolerated, and I applaud the tenacity you
have shown, Mr. Chairman--I do not tell you very often, but I
mean that--to keep investigating this matter further so we can
uncover the real truth behind the Delphi pension scam, and it
is a scam.
I said back in October 2009 when I, along with others,
first requested a congressional hearing on this issue, that I
understood the restructuring of America's auto industry
required a shared sacrifice and responsibility. But Delphi's
salaried retirees are being forced to bear extra burdens that
are not warranted and have not been explained. It seemed to me
at the time, and it still does, to be fundamentally unfair to
salaried and union employees in the same company who face the
same unfortunate situation, were treated so unequally by the
administration and the Federal Government.
The American people, especially from my perspective, the
thousands of Hoosier families and people from Ohio who have
been impacted by this policy, and whose tax dollars were used
to facilitate this travesty, deserve a full and transparent
explanation from all parties involved, especially the
administration. Hopefully today we can move one more step
closer to an explanation.
And once again, Mr. Chairman, I really want to thank you
for having this hearing. I yield back.
Chairman Issa. And with that, we will recognize the
chairman of the subcommittee who has done more to further this,
if he chooses?
Mr. Jordan. Well, I would just say, Mr. Chairman, I want to
thank you for having this hearing and for our colleagues for
being here at Sinclair for this important event. And I will
just yield back with that with all the testimony.
Chairman Issa. Thank you.
Mr. Austria. Thank you, Mr. Chairman, for holding this
field hearing, and my colleagues for attending. It is very
important, and I appreciate all the work that the Committee on
Oversight and Government Reform has done thus far on this
issue, and particularly Chairman Issa for scheduling this
hearing. It is very important to our community. I know many of
the folks here today I represent, and it is important that we
have this hearing here in our area. And I thank you for that.
And I especially want to thank the Delphi salaried retirees
for testifying today, and all their efforts over the past
several years to hold the administration accountable so that
retirees can receive a fair pension.
You know, I am very concerned about the unfair treatment
received by Delphi salaried retirees during the Delphi and GM
bankruptcy proceedings. The administration, as Mr. Burton
pointed out, picking winners and losers with Delphi retirees is
something that should trouble I think all Americans.
While Delphi workers stood side by side every day doing
similar jobs at the same plants, the administration proactively
made a decision that retirees from three unions would be
basically unaffected by the bankruptcy. But that is not the
reason that we are here today. The reason we are here is
because of the unfair treatment of the Delphi salaried
retirees.
While in some cases, and I had an opportunity to recently
meet with several Delphi salaried retirees last week in my
office from our area, and I listened to the challenges that
they have been facing with this unfair treatment. Some salaried
Delphi employees had a 30 to 70 percent reduction in their
pensions, and others have lost all their health care and life
insurance, and that is unacceptable and troubling. And it is
unacceptable, and it must be fixed. And that is why we are here
today to hear your testimony. And I thank you all for being
here today.
Thank you, Mr. Chairman. I yield back.
Chairman Issa. Thank you. Does the gentleman wish unanimous
consent?
Mr. Turner. Mr. Chairman, before we proceed, I would like
to ask unanimous consent that the written statements of Delphi
salaried retirees that are unable to be here today to testify
be included in the record.
Chairman Issa. Without objection, so ordered.
We now recognize our first panel of witnesses, Mr. Steven
Gebbia.
Mr. Gebbia. Gebbia.
Chairman Issa. Gebbia. He is a former executive director
for employee benefits and salary policies at Delphi Corp. And
Mr. Chuck Cunningham is the former senior executive at Delphi
Corp.
Gentleman, pursuant to the rules of the committee, would
you please rise and take the oath?
[Witnesses sworn.]
Chairman Issa. Let the record reflect that both witnesses
answered in the affirmative. Please take a seat.
Now the rules of the committee are pretty straightforward.
Your entire statement will be placed in the record, plus any
additional remarks that you would like in the next 5 days. We
would ask you to stick to the 5-minute rule, which means that
when the green light comes on, you may begin, when the yellow
light comes on, please summarize, and when it gets red, I am
going to gavel you fairly quickly, and I will do that for each
of the panels. This really allows us to quickly get to the
portions not in the record, which is the questions and answer
that I think you want to give you to us as much as we want to
receive it.
Mr. Cunningham.
STATEMENTS OF CHUCK CUNNINGHAM, FORMER EXECUTIVE AT DELPHI
CORP.; AND STEVE GEBBIA, FORMER EXECUTIVE AT DELPHI CORP.
STATEMENT OF CHUCK CUNNINGHAM
Ms. Cunningham. Mr. Chairman, members of the committee,
thank you so much for the opportunity for the Delphi retirees
to tell our story today.
My name is Chuck Cunningham, and I am a retiree who worked
27 years for GM and three for Delphi. I now serve as the DSRA
legal liaison to our Washington law firm, coordinating the
activities between the retirees and our attorneys.
In 2009, the Obama administration decided to bail out
General Motors through an expedited bankruptcy. We are not here
today to discuss the merits or the wisdom of that bailout. That
is not for us to discuss. But we are to talk about the
consequences of those actions that were devastating for one
group, the Delphi salaried retirees.
In order to ensure a successful emergence from bankruptcy
for GM, the issue of Delphi had to be dealt with. And that was
a task the auto task force and the Treasury took up, because
Delphi was previously spun off from GM. It was their major
parts supplier, and in order for GM to be successful in the
future, it had to be a viable Delphi. It just had not happened.
We understand that. I think everybody understands that.
One of the issues of importance to the purchase of Delphi
was the Delphi pension liabilities. The auto task force looked
at various options, and we know they looked at them, including
returning those pensions to GM, but they chose not to do this.
They decided that this would not look good on GM's balance
sheet. Therefore, the decision was made to turn over all Delphi
pensions to the PBGC with one caveat. The new GM would top off
only Delphi UAW pensions and make them up. The auto task force
called this a commercial decision to ensure the UAW's
cooperation and restructuring.
More than a month later, the announcement was made that the
pensions of the Delphi CWEA/IUE and steelworkers would also be
topped up, leaving only the salaried employees and a few small
unions without the top ups.
Now, we hear many, many times from people that advocate on
the part of the administration and the task force that it was
contractual. It was done in 1999. The truth of the matter is,
as Representative Burton so well put, these things would have
been thrown out in bankruptcy court. They always were. A less
than astute student in bankruptcy knows that. But they were
not.
As Fritz Henderson, the CEO of GM, testified at the time of
the bankruptcy, there was absolutely no reason for them to have
this arrangement with the CWEA/IUE steelworkers. They had no
employees. They had divested themselves of all those employees
from those unions. There was no contract, and he said so. In an
A-K filing that was done by GM, it called these gratuitous. The
tops offs were gratuitous.
Now, why were they done? We believe they were done because
the IUE/CWEA steelworkers put pressure on the administration,
put pressure on the Treasury, to provide those top offs also.
It is interesting to note that a large portion of membership in
those unions was present from the State of Ohio, which is a
very important swing State. And we believe that these were
basically politically motivated. Unfortunately, we do not have
the pensions.
We thought it was a pure of discrimination against the
salaried employees who had chosen not to join the union. I
would ask anyone to think about this in terms of our country's
social security. Now, suppose an administration decided that
everybody but Asians would receive social security. I think we
would be outraged. How could that be? How could we decide one
group would not receive the same pension treatment as another?
I think this is about the same thing we are talking about
today.
The worst part about this is that PBGC, who I understand is
on a later panel, was complicit in all this. They did not
object to the impermissible followup plans that were disguised
as top offs. They have always objected to those plans in the
past, and in fact took LTV to the Supreme Court to fight the
top up plan. But for some reason, they choose not to now. I
would mention that the Secretary of Treasury is head of the
board of directors, but that is a fact.
Instead----
Chairman Issa. If you could summarize.
Mr. Cunningham. Okay. We are in a legal conflict right now,
and we are moving forward with it, but we are in the discovery
stage and moving very slowly. The PBGC has failed to give us
the information that the Federal judge has demanded of them. We
have had a motion to compel on many other issues. Three times
they have been told to comply, but they will not comply.
Chairman Issa. Thank you.
Mr. Cunningham. Thank you.
[The prepared statement of Mr. Cunningham follows:]
[GRAPHIC] [TIFF OMITTED] 73164.002
[GRAPHIC] [TIFF OMITTED] 73164.003
[GRAPHIC] [TIFF OMITTED] 73164.004
[GRAPHIC] [TIFF OMITTED] 73164.005
Chairman Issa. Mr. Gebbia.
STATEMENT OF STEVEN GEBBIA
Mr. Gebbia. I am Steven Gebbia, former executive director
of employee benefits for Delphi Corp. I held that position
since Delphi's inception in 1999 until I retired in June
earlier this year in 2011. During this entire time, I held
administrative responsibilities for Delphi's local employee
benefit plans, including the U.S. salaried and hourly defined
benefit pension plans that were involuntarily terminated by the
PBGC in July 2009.
My administrative responsibilities included designing and
developing the various pension plans and negotiating their
provisions with the unions, ongoing communications with
employees, retirees, unions, and oversight of the day-to-day
administration of these pension plans. This oversight involved
frequent interaction with Towers Watson, a consulting firm
hired by Delphi to conduct actuarial work on these pension
plans, including annual evaluations of these plans as required
by law.
During the almost 4-year period during Delphi's bankruptcy
cases up until the PBGC involuntarily terminated Delphi's
pension plans, Delphi's management team repeatedly communicated
to employees its desire to retain these plans as part of the
bankruptcy restructuring. Like others, I was very surprised
when I learned that the pension plans were going to be
terminated and taken over by the PBGC, and I was extremely
disappointed when I learned that it was decided that only the
hourly employee pension benefits, but not the salaried employee
pension benefits, would be topped up by General Motors, and,
therefore, would be made whole.
Several employees came to me and asked me to quantify for
them the impact on this seemingly unexplainable action on their
drastically reduced pension benefits. Because I did not
personally have the access to the information they were
requesting, I contacted Towers Watson and asked for their help
in responding to the questions and concerns being raised by
Delphi salaried employees.
During our discussion, Towers Watson offered to me and the
members of my staff that while the salaried pension plan was
not fully funded at the time of the involuntarily termination,
it was, however, funded well above a level that would have
required mandatory termination of this plan. In fact, Towers
Watson stated that this plan had enough assets to pay benefits
for decades to come, and that they also opined that this plan
was very salvageable should there be any sincere desire to save
it.
They stated the reasons for their opinions were based on
these four items: one, the data derived from their most recent
actuarial evaluation of the plan; two, the fact that the plan
was frozen in October 2008, meaning no new benefits would
accrue going forward from that point in time; three, the equity
market, the stock market, at that time were at a historic low,
keeping asset values lower than they normally would have been;
and, four, the discount rates were also extremely low by
historical standards, thereby overstating the plan's liability
valuations over the near term.
Towers Watson further offered that they believed that other
bankruptcy cases existed where pension plans were funded at
levels lower than the Delphi salary pension plans but had not
been taken over by the PBGC.
Now, to the best of my personal recollection, the Delphi
salary pension plan had total liabilities of about $4 billion
at this time, and was under funded by roughly $1 billion at the
time, the plan was last valued by Towers Watson prior to the
plan's termination.
This concludes my statement.
[The prepared statement of Mr. Gebbia follows:]
[GRAPHIC] [TIFF OMITTED] 73164.006
[GRAPHIC] [TIFF OMITTED] 73164.007
Chairman Issa. Thank you. I am going to ask just a couple
of questions, and I will start by saying my family was a
General Motors family, but my father passed away many years
ago. So, I am not personally affected by it, but I do look at
the broader problem of what I call the would have, could have,
and should have--what would have happened had this been handled
any of the two ways that you are mentioning. I will follow up
with that.
What could have happened if the government had, if you
will, what is the best course to take rather than making a
decision that undoubtedly had a lot to do with their
relationship with the unions. And they are, in fact, getting
made 100 percent whole.
And then, for our committee, I think the most important
thing that we are here is in addition to trying to bring
justice for the retirees that you represent, quite frankly we
have to figure out how to make sure this does not happen again
either by government fiat or, in fact, in the defined benefit
packages that continue to sustain the main companies.
So, if we could just go through a couple of numbers to make
sure I get this right. If I look at the two figures that are
most significant, if General Motors had said this is all the
money we can do to try to make as whole as we can everybody,
even with the termination, basically leaving the salaried
employees with about a 70 percent discount, and making whole
the roughly twice as many union employees, it comes out to
about to 66 percent if you simply divide the money equally. Is
that roughly what you are seeing, is that the haircut that you
took would have been less than half as much had the same amount
of money been broadly put into all the pensions?
Mr. Gebbia. I am not sure I can speak to that.
Chairman Issa. That is roughly the arithmetic----
Mr. Cunningham. I guess would go to----
Chairman Issa. I am not suggesting that it is a should
have, would have, could have. But the fact is if everyone had a
shared sacrifice as has been said by so many, the shared
sacrifice would have been less than half as much for people
represented by the DSRA, if it had been shared across all
employees.
Mr. Cunningham. To give you a reference to that, I would
agree with you, and I think that work on both sides of the----
Chairman Issa. Well, the other part of it, if you simply
left it continuing to go and assuming kind of a lackadaisical
performance of the market, you still would have gotten about 75
cents on the dollars if it simply had been terminated. So,
whether it is terminated at low and spread plus up, or do not
terminate, either way it would have been half the haircut you
had taken.
Mr. Cunningham. In fact, the irony is, if they would have
just done what they were discussing with the PBGC and GM
originally and folded it into the GM salary plan, those two
plans together, the Delphi and the GM plan, would have been
about 94 percent financed. But it was decided that they did not
want to do that.
Chairman Issa. You know, one of the things that our
committee has to look at is, can we unring the bell? I think
for many people here today, that is one of the biggest
challenges. When we get to the third panel, the third panel is
going to basically say due process was executed pursuant to our
rules. We had no choice. You back up and say maybe they are
right. Assuming that a bankruptcy did not give a clean bill of
health to a very unusual deal, assuming that they did not do a
Claude Act the way they did with Bernie Madoff and say, no, no,
this was a preferential payment, and that preferential payment
has to be divided throughout the entire plan, all of those
would haves, could haves, and should haves we are going to look
at.
Are there other areas that you think this committee should
delve into going forward that would be helpful, not to specific
litigation--that is not within our jurisdiction--but for us to
see if we cannot bring justice separately in congressional
action and, more importantly, to the American people beyond all
of you who are so affected, making sure that this does not
happen again?
Mr. Gebbia. Well, I think interesting enough, some people
say, well, you know, you are asking Congress to appropriate
money. We are not. In fact, the PBGC has stated in an affidavit
in the legal text that they are putting $2.1 billion into our
plan. If you add that together with the $2.4 that they admit
was the amount that plan was funded, that comes out to $4.5.
Watson Wyatt came in somewhere between $3.4 and $4. All we
would like to do is sit down with PBGC and work through those
numbers. We believe that under normal actuarial data, that we
could have a fully funded pension administered by the PBGC,
which is totally legal, but we cannot even get them to give us
the option. And it is a shame.
Chairman Issa. Thank you. I am going to be respectful of
the 5-minute rule also, and I will recognize Mr. Burton?
Mr. Burton. Why can you not get the records if the court
has said that those records must be given to you?
[Applause.]
Mr. Burton. Has the judge moved a contempt citation against
them for not complying?
Mr. Gebbia. We have not set forth a motion for contempt
yet. We have another meeting with the PBGC coming up. But this
is the third time that the judge has ordered discovery, and it
is the third time we are now seeing resistance on the part of
the PBGC.
Mr. Burton. Are you concerned that the judge will not move
a contempt citation if you ask him to do so?
Mr. Gebbia. I would rather not speak to that, but I do not
think that is the case at all.
Mr. Burton. Well, if that is not the case, and, of course,
you are the lawyer and I am----
Mr. Gebbia. I am not a lawyer. I am the liaison.
Mr. Burton. Well, whatever you are. [Laughter.]
Chairman Issa. Folks, please do not applaud to find out
that he is not a lawyer. Please. [Laughter.]
The gentleman may continue.
Mr. Burton. Well, whatever is your law firm, I would urge
them, if the judge has said not once, not twice, but three
times there should be discovery and that information should be
given to you, that your law firm say, okay, enough is enough to
the court and urge them to go ahead and move a contempt
citation, because if the administration or if those in charge
will not give it to you or to your legal counsel, then, by
golly, they should be held in contempt, and there should be a
severe fine involved.
So, anyhow, can you elaborate a little bit further? What is
your lawyer's explanation for why they have not done it?
Mr. Gebbia. Well, I think our lawyers cannot give an
explanation for what they say.
Mr. Burton. No, no, but, I mean, why have they not moved a
contempt citation?
Mr. Gebbia. I believe there are civil procedures that have
to be followed before we can ask for that. There are civil
rules of Federal court, and we are following those. And,
believe me, we will do everything we can under the law to get
that information.
We have gotten some information. We have what they call the
administrative record, but we have not gotten all the
information that the judge has given us in a broad discovery
sense.
But a lot of the information we have received, like from
the PBGC and the Treasury, is really interesting. It says--an
e-mail, and it says, Dear John. The rest is redacted, and it
says, yours truly, Fred. I mean, that is the type of
information we are getting from them, huge redactions or
nothing at all.
Mr. Burton. Well, redactions, they are usually only
utilized when there is some kind of national security issue
involved. I cannot understand why the court is allowing
redactions, which means crossing out things so you cannot read
them.
But anyhow, thank you very much, Mr. Chairman. I yield
back.
Chairman Issa. I thank the gentleman.
Mr. Turner [continuing]. Mr. Jordan has held because we are
getting the picture of really the crux of the problem in that
we do not have the information from the administration as to
how these decisions were made for a full and complete
understanding of what was the process that was undertaken, what
was the decisionmaking that was undertaken, and how can we
review it through congressional oversight, how can the courts
review it, to determine if you have been treated fairly and
properly.
Now, both of you were just testifying concerning the
pension plans, and we all know that pensions are contractual
obligations. They are highly and heavily regulated. And it was
my understanding that as Delphi went into bankruptcy, General
Motors went into bankruptcy, of course they had a number of
different pension plans.
But the pension plans, if I am understanding you, is that
you were unaware of any reason why your pension plan on an
entitlement basis, a legal basis, would have less standing than
other pension plans with Delphi and General Motors, because you
went into the bankruptcy process that your pension would have
been as great of a contractual obligation and heavily federally
regulated so that when you went into the process, you did not
expect it would be handled differently than the other pension.
Is that correct?
Mr. Gebbia. That is absolutely correct.
Mr. Turner. They know your and everybody else's
understanding also, and I want to congratulate you and the
other Delphi salaried retirees because you have--in the manner
in which you approach the success of Delphi, you have
approached this issue. You have professionally managed it to
give us the issues and the information so that we can do this
oversight.
Now, you frequently referred to decisions that were made
along the way that your pension plan was equal to everyone
else's, went into bankruptcy, came out the other end not the
same as everyone else's. There were decisions made you
identified it was decided. And my understanding is because you
have not gotten discovery because they have not been
forthcoming to you, you do not know who made these decisions.
You do not know the basis of those decisions. You do not know
why and you do not know how. Is that correct?
Mr. Gebbia. It is correct, from my standpoint, yes.
Mr. Turner. And the thing that is most disturbing to me
about that, which is why I am, again, so appreciative of
Chairman Issa and Chairman Jordan for holding these hearings,
is that this was done with taxpayers' dollars ultimately. The
bankruptcy did not receive it as a normal bankruptcy. Our
taxpayers' dollars were utilized, were injected into this
process so that what came out at the other end with General
Motors and Delphi was a different animal that went in, more
than what would normally occur in a bankruptcy.
So, there is a higher level of scrutiny. It is not just
that we want to ensure we are treated the same, which of course
we do, but also you were not treated the same, and your own
taxpayers' dollars, the taxpayers' dollars of every Delphi
salaried retiree were used in that process. It is
discriminating.
[Applause.]
Chairman Issa. If you could hold the applause, it will help
us make the record more complete.
Mr. Turner. And the troubling aspect of the fact that the
taxpayers' dollars were there is not in dispute, but I am going
to ask you to provide some asset valuation, because it seems to
me that the PGBC is giving us answers as to what the financial
status of the pension was before it went into bankruptcy. It
has used its financial status and bankruptcy and even its
status as it came out. My understanding is that the basis of
your complaint is that you do not agree with their assessment
as to the valuation of the assets before the handling of the
assets during bankruptcy or even the manner in which they were
valuating or allocating assets as they came out. Is that
correct?
Mr. Gebbia. Well, I think the message that I wanted to
convey here, coming from Towers Watson, who are the experts
here, is the population of that salaried pension plan was not
the reason that it was terminated. It did not have to be
terminated because of the lack of funding. So, there must have
been other reasons; I do not what they were, but it was not
this.
Mr. Cunningham. Representative Turner, if I may make a
point. After getting knowledge of that Towers Watson report, we
contracted with PDS&M, which is a wholly owned subsidiary of
Wells Fargo, to do a followup analysis for the court. They
found the same thing, that our pension plan was funded at the
time of termination. In fact, higher than that, over 80
percent, and that it stood above the midpoint of the hundred
largest pension plans in the country at that time, none of
which were terminated.
So, no, it was expeditious to do that. It was not the right
thing to do. Besides, in cases like this, ERISA is clear. These
kinds of things have to be adjudicated. They should not have
done it like passing the gravy between the people who wanted to
be rid of the plan and PBGC.
Mr. Turner. Thank you. Mr. Chairman, I have looked at this
as a who, what, when, where investigation on the Federal side,
and also the issue of, you know, where was the money, where did
it go, and then ultimately how do we get it back?
Chairman Issa. Will the gentleman yield?
Mr. Turner. Yes.
Chairman Issa. I just want to interject into this portion
of the testimony that although the committee has been receiving
documents from the PBGC--relatively unredacted, we have gotten
almost no documents from Treasury. I know that will not be as
much mentioned in their dialog, but it is one of the early
frustrations, that even the committee is having trouble getting
from Treasury, the behind the scenes decision separate from the
actual decision about witnesses we have here today.
I would be happy to recognize the chairman of the
subcommittee?
Mr. Jordan. I thank the Chair. And Mr. Turner is exactly
right. This is all about transparency. What we have had, as Mr.
Burton talked about, Mr. Bloom in our subcommittee and
committees in Washington talking about the lack of
transparency. And it is not just yours. It is a whole host of
issues which closed facilities. We have had GM in Mansfield,
OH, which I have the privilege of representing, close. We have
had dealerships close.
So, the idea that we need to bind up all these decisions,
particularly, as Mr. Turner pointed out, when taxpayer dollars
are stake, and when the auto task force made up of Federal
employees is making the decision, that is the key issue here.
And when you start down this road, which is why I have been
troubled by this whole process where government gets this
involved in the private sector, where you have the President of
the United States firing the CEO of General Motors, where you
have the auto task force taking over, that is the problem. And
we just want to continue to look at this, delve into this, and
get the answers needed for transparency that is needed for
taxpayers to understand what is going on.
With that, I would yield back my time. I would be happy to
yield time to----
Chairman Issa. Mr. Austria.
Mr. Austria. Well, thank you, Mr. Chairman. Mr. Gebbia and
Mr. Cunningham, thank you both for being here today and sharing
your story with us, because as I heard your testimony, like
many members up here, my uncle and brother-in-law both retired
from GM. It is very troubling as to what is happening here.
And I would like to just continue on, if you could, as much
as you are able to, with the ongoing lawsuit between Delphi
Salaried Retiree Association and the Pension Benefit Guaranty
Corp.
Let me first of all say that I applaud your determination
to ensure that Delphi retirees receive a fair pension. However,
it is concerning to me that while the trial court has ordered
this discovery, and you mentioned that there a lot of documents
or some of the documents have been redacted as far as much of
the information, which is very troubling. PBGC continues to
delay and refuse to comply with these orders.
Are you able to describe to the committee the effects that
these actions have on the retirees, and your lawsuit, and the
longer this goes, because I think one of you mentioned, or
someone mentioned to me before this hearing, that this has now
been going on and this issue has been going on for over 1,000
days now.
Mr. Cunningham. I think that the second panel will probably
do a better job of describing that. That is their mission here
today. But I will say that, I mean, the financial burden of the
lawsuit is tremendous. I mean, you know, the irony of this,
again, is this whole thing. We are spending money that we do
not have to fight the government that has our money.
[Laughter.]
It is a little odd, but that is what we are doing. I mean--
--
Mr. Austria. It sounds like an unfair fight to me.
Mr. Cunningham. Well, you know, they can spend all the
money they want on attorneys, and, believe me, we have
wonderful attorneys, the best we could have. But, you know, it
gets a little long, and it gets very expensive. But we are not
going to quit.
Mr. Austria. Let me just, if I could, just one last comment
because you brought up the Treasury, Mr. Chairman, which is
very important. I know our delegation and many other Members of
Congress signed that letter that we sent to Secretary Geithner
and never get a response back. And I wanted to discuss that
with you as well as to what input Delphi retirees and non-union
employees had during this time to protect their interests in a
fully funded pension and receiving benefits? I am talking about
when Delphi went through bankruptcy in terms of the pension
plan, so there were several parties that were involved,
including the Treasury Department, the auto task force, PBGC,
and each of these parties were concerned with resolving the
bankruptcy in a manner that would be most beneficial for their
particular interests.
What was your position on that?
Mr. Cunningham. We were never invited to the table in any
way, shape, or form. Delphi salaried retirees were not invited
to the table. Meetings were held, in fact, a meeting which we
would love to get information on was held in Poughkeepsie, New
York, at the direction of the bankruptcy court. The PBGC and
its attorney, one which is here today, I think, were there. UAW
was there. The Treasury Department was there. GM was there.
Delphi salaried retirees were not there. So, all the
constituents were there, except us.
Mr. Austria. Was there a reason that they gave you that you
were not included in those meetings?
Mr. Cunningham. Well, they would not answer those kind of
questions. You know, we went to bankruptcy court, this is not
just the 6th Circuit we were fighting in. We fought in the
bankruptcy courts. We watched the pirate case get thrown out
just like that from the judge. We also watched three small
unions that had the same problem. They were often important. I
watched their attorneys argue cases where their contracts in
1999 were identical to the UAW's, and then they could not go
back because they were too small. We reached out to those
people and talked with them.
So, you know, we were not going to be part of the process.
The decisions were made. If you go back, we have a lot of
information, not enough, not all of it. But if you go back to
even the written testimonies of Matthew Sullivan from the
automotive task force, you will see that, you know, they
basically orchestrated this whole thing, and the PGBC was
complicit.
One of the other things, and I would just bring this up,
and I have someone with me here today who is from the minority
side from Ohio, that is Senator Sherrod Brown, who held up the
nomination of Mr. Gotbaum, the director of the PBGC, until the
President decided to do a recess appointment. And guess what
Mr. Gotbaum did before that? He represented the DIP financers
for Delphi, who were part of a deal with PBGC, with the
Treasury. And ironically, a month ago, Harry Wilson, who was on
the automotive task force, especially responsible for GM, and
one of the architects, became a member of the advisory board of
the PGBC. Something is wrong.
Chairman Issa. Gentleman, I am going to ask you, before I
dismiss you, one quick round of questions that I saved until
the end, figuring someone else might ask you.
But the union represents UAW, correct, that they might
strike if they did not get topped up. Everybody knows that. Do
you believe as people who did not get the benefit, that the
real difference was that salaried workers could not reasonably,
you know, current workers threatened to walk off the job in
order to ensure that you got the same benefit. Is that really
what separated, in your mind, the difference between large
organized labor using current willingness to strike or it pulls
out of the deal, if you will, by saying it would versus the
inability of you as retirees not represented by a union that
would take current workers and strike? Do you believe that that
was, more than anything else----
Mr. Gebbia. I believe that is half, that half being the UAW
had leverage, okay? But I believe the other top ups had nothing
to do with leverage as far as GM's exit in bankruptcy. I
believe they were totally influenced by using membership and
the ability of those unions to lobby and get a paper trail.
Chairman Issa. So, you would say one group had power and
used it, the other group had the power of helping the President
be elected or his party. Is that more or less----
Mr. Gebbia. It is the only way I can see it. I mean, that
is the way a logical person would.
Chairman Issa. Well, thank you. As I said, I am going to
ask all the panels the same question. I think that would be
appropriate in this case.
We are going to take a very short recess and set up the
second panel. Thank you.
[Recess.]
Chairman Issa. Would everyone please take their seats? The
hearing will now resume. We will now recognize our second
panel.
Mr. Den Black is the former chief engineer at Delphi Corp.
Mr. Bruce Gump is a former senior engineer at Delphi Corp. Ms.
Mary Miller formerly provided human resource leadership at
Delphi Corp.'s brake assembly operations. And Mr. Tom Rose is a
former plant manager at Delphi.
Again, you saw in the first panel, pursuant to our rules of
our committee, all witnesses are to be sworn. Would you please
rise and take the oath? Raise your right hands.
[Witnesses sworn.]
Chairman Issa. Let the record indicate all witnesses
answered in the affirmative. Please be seated.
As you saw in the first panel, I thank and reward those who
stay within 5 minutes. [Laughter.]
I am a little less thankful if you go over, and if you go
far over, I will have to ask you to come to a stop. And I would
like you to end on a high note, which is best done when the
yellow light is on.
And so, with that, I believe we are starting with Mr.
Black. The gentleman is recognized?
STATEMENTS OF DEN BLACK, MEMBER OF THE DELPHI SALARIED RETIREES
ASSOCIATION; BRUCE GUMP, MEMBER OF THE DELPHI SALARIED RETIREES
ASSOCIATION; MARY MILLER, MEMBER OF THE DELPHI SALARIED
RETIREES ASSOCIATION; AND TOM ROSE, MEMBER OF THE DELPHI
SALARIED RETIREES ASSOCIATION
STATEMENT OF DEN BLACK
Mr. Black. Thank you for the opportunity for this panel to
share the story of the Delphi Salaried Retirees Association,
and to ask that this committee leave here today with a renewed
determination to ensure an immediate end to our 32-month long
search for justice is forthcoming.
My name is Dennis Black. I am trained as a mechanical
engineer, and my career spanned 36 years with GM and Delphi
Corp.s--34 years with GM and only 2 years with Delphi. During
my career, I served GM in a large variety of capacities,
including project engineer, engineering supervisor, chief
engineer of two business units, chief engineer for global
future products, global quality management, and divisional
strategic planning.
Along the way I was fortunate enough to be the inventor of
what has turned out to be a game changing innovation in the
field of providing automotive air conditioning comfort for
millions of vehicle owners around the globe. This was the
infinitely variable displacement AC compressor that has
literally created tens of thousands of living wage jobs around
the globe, subsequently jobs that have allowed workers to
support their families since the mid-1980's. This innovation
has been emulated by every major competitor, and as a result,
everyone in the globe has followed our lead.
I was honored to receive GM's highest engineering honor,
the Boss Kettering Award, for inventions considered to be of
particular significance to General Motors.
Now, please understand that I only tell you this to
emphasize that it is the salaried workers of General Motors and
Delphi whose historical role has been to first imagine, then
design and develop the automotive products and production
facilities. Without question, the salaried workers have made
tremendous contributions to the American auto industry, and our
contributions were in no way less valuable than those of our
union counterparts.
I had served as the chairperson for the Delphi Salaried
Retirees Association since its inception in early February
2009. One thousand twelve very long and stressful days ago, the
DSRA seeks to represent the interests of as many as 20,000
Delphi salaried retirees, supervisors, accountants,
administrators, administrative assistants, technicians, and
engineers whose economic futures have been intentionally and
needlessly torn asunder since our ordeal began.
As I mentioned, we organized DSRA in February 2009, and
subsequently we have left absolutely no stone unturned in our
efforts to seek justice. We have taken our story to the Federal
courts, to our congressional officials, to the GAO, to SIGTARP,
to our union counterparts, to the national and local media
everywhere. We have expended several million dollars in our
unrelenting quest, dollars that many simply cannot afford to
contribute due to their depleted financial resources.
Nevertheless, they find a way to contribute anyhow. We will
never, never cease our unrelenting quest for justice until we
obtain the pension benefits that we earned after a lifetime of
playing by the rules.
We have collected hundreds of human impact testimonials,
and a large sampling of these have been submitted for the
hearing record. However, they tell the story of damage already
done as a result of the loss of benefits earned over a lifetime
by folks who simply played by the rules. However, they do not
tell of the damage to come, in the next 10 to 30 years. They do
not tell of victims who have not yet drowned, those who
continue to slowly sink, like sinking in quicksand, due to
negative cash-flows, which insidiously deplete their monitory
reserves. Fortunately, my wife and I have not yet drowned. Not
yet. But it is entirely possible that we could succumb, due to
the huge pension losses imposed upon us in the years to come.
Here is just one letter from an Ohio resident to share with
you. He wrote this on November 3rd following a November 1st
Detroit News article by David Shepardson, entitled ``Ratner
Applauds Auto Bailout's Happy Ending.'' ``I am a Delphi
salaried retiree. The Delphi's story may have been a happy
ending for Mr. Ratner, who is all warm and fuzzy to the point
of almost crying tears of joy, but for many of us, myself being
one, we have been crying tears of pain and anguish over what
Delphi did to us.'' The remainder of his letter, which is
anguishing indeed and only an indication of hundreds more, is
in the record. And he is sitting right here in the audience, by
the way, Mr. David Kane.
Since those first chaotic days of DSRA, we have come a long
way with regard to our factual understanding of how we have
become hapless victims of discriminatory actions of our Federal
Government's executive branch. These actions have resulted in
egregious harm to thousands while using taxpayer dollars. We
have learned that the earned pension benefits of non-union
Delphi retirees have been slashed by as much as 70 percent as a
result of needless and inappropriate termination of our Delphi
salaried pension funds by the Pension Benefits Guaranty Corp.
We, of course, have learned that we were singled out as losers
by the executive branch, while the earned pension benefits of
our union counterparts were kept whole by a top ups.
Let me be extremely clear, though. We do not for a moment
begrudge the fact that our union counterparts have remained
whole and they are receiving the pension benefits that they
earned over decades. But we cannot abide by the loss of our
earned pension benefits.
In addition, our ordeal has caught the attention of a
growing number of media sources that include Fox News, New York
Times, Wall Street Journal, The Daily Caller, or the Detroit
News? and many more. Also, our story has been reported in a
recent 2011 book by David Freddoso of the Washington Examiner.
Chapter 2 (Stop Us If You Can: Saving the UAW) is recommended
reading for all.
Finally, we have learned that our congressional requests
for full disclosure have been consistently ignored and
obstructed by the executive branch. And in closing, our
situation is not complicated. Very simply, our major union
counterparts receive taxpayer provided top ups to keep their
earned pension benefits, whole. In contrast, our nonunion
Delphi people did not receive equal treatment. This is wrong.
This was needless. This is illegal. All that we require of our
Federal Government is fair and equitable treatment. And we----
Chairman Issa. Thank you. Your entire statement will be
placed in the record.
[The prepared statement of Mr. Black follows:]
[GRAPHIC] [TIFF OMITTED] 73164.008
[GRAPHIC] [TIFF OMITTED] 73164.009
[GRAPHIC] [TIFF OMITTED] 73164.010
Chairman Issa. Mr. Gump.
STATEMENT OF BRUCE GUMP
Mr. Gump. Chairman Issa----
Chairman Issa. By the way, only Senators get to filibuster.
[Laughter.]
Mr. Gump.
Mr. Gump. Chairman Issa, Congressman Turner, and members of
the committee, thank you for another opportunity to explain our
issues and the effect the treatment that we have received at
the hands of the Obama administration and the PBGC has had on
our members and the Nation, and to request your help in
resolving those issues.
I am here to represent the more than 20,000 Delphi salaried
retirees. Please understand that these salaried retirees worked
as secretaries, technicians, and engineers, as well as
supervisors and managers. We worked hard. We did what we were
told. We did everything right, and we expected to be paid for
our efforts, both with our wages and the deferred compensation,
known as a modest pension. But when our government stepped in,
they chose to protect but only their favorite groups and throw
us out like yesterday's trash.
The effects of this treatment have been devastating. My own
story includes the fact that my wife and I have four children,
all currently in college. Paying for health and life insurance,
plus tuition, housing, and loans takes 90 percent of my monthly
pension. Our other expenses, like utilities, mortgage, fuel,
food, medicine, require us to spend my wife's small income,
plus some of our savings each month. We calculate that so far
over the last 30 months. We have spent more than $60,000 we had
not planned to spend this early in my retirement.
The future outlook is getting worse for us. Just because I
was a salaried worker instead of a member of a group our
government chose to protect. I warned our children that they
must be prepared to prove their commercial necessity to our
government, as in the end that is all that matters.
Citizenship, contribution to society, planning or effort, do
not matter at all. That is the lesson in all of this.
Government, the PBGC, and industry are not to be trusted.
The story of Mary Ann Hudzik is no better. She lost 40
percent of her earned pension. That, along with a 500 percent
increase in the cost of healthcare insurance for herself and
her self-employed husband, has resulted in them having to spend
down their savings much faster than planned. Her husband has a
degenerative disease, and so cannot always work, but no work
means no pay when one is self-employed. Mary Ann is a fighter,
though, and as the chairman of the group that she works on, I
will guess that she has spent more than 7,000 hour over the
last 30 months working to have this situation corrected. Mary
Ann could not be here today because she has depleted her own
physical resources and has contracted mononucleosis. I
guarantee you she will continue to fight, though.
Jim Kane is here today. While working for Delphi in Mexico,
he contracted a virus that destroyed the hearing in his right
ear. Even though his superintendent told him to get whatever
healthcare was needed, he ended up spending more than $12,000
out of his own retirement savings to pay for it. When he was
involuntarily terminated he had lost his life and health care
insurance, and then the PBGC reduced his pension by 30 percent.
He has since had a heart attack and has developed diabetes. His
retirement savings are now gone. He could no longer provide for
his wife or himself. Living on a reduced pension alone is
extremely difficult and may not be possible over time. He says,
``I want what was promised, to survive with some dignity in my
final years. I want justice.''
That is what we all want, what was promised, to survive
with dignity and justice.
The stories you hear today are just examples, and just the
beginning. They will get worse as time goes forward as the
economy takes its toll, and savings are depleted. Many of our
members have already had to declare personal bankruptcy, some
seeing their homes foreclosed. We have had to endure additional
health issues from the stress and conditions and because we
cannot always afford to get preventative care. I know a co-
worker who delayed going to the doctor while he worked at a
part-time job to earn enough to cover the expense. He knew
something did not feel right, and by the time he did see his
doctor and was diagnosed, it was too late. He died in just a
few weeks.
On our larger scope, there are indications the effects on
retirees are causing economic problems and our communities,
too. In the area where I live in Northeast Ohio, a recent
Brookings Institute study determined that Youngstown, OH has
the highest concentration of poverty in the Nation. The poverty
rate there got to be 49.7 percent. I saw an article in the
local newspaper that 30 percent of the dwellings in Warren, OH,
are unoccupied. There is a nine story bank building in good
condition directly across the street from the courthouse was
recently sold at auction for $75,000.
A study by Youngstown State University requested by
Congress, and Tim Ryan, predicted that the pension issue alone,
the cost to local economy, $58 million per year, or $145
million so far. When the cost of health care issues for all
Delphi retirees is added, that that jumps to $400 million lost
to the local economy so far. Adding in retirees from Dayton and
Columbus and Sandusky, the losses in economic activity in Ohio
are now over $1.2 billion. Nationally, it is about $4 billion,
all because our government incorrectly chose to treat us as
having no commercial necessity. The PBGC was willing to play
along. These losses will continue to grow for decades if they
are not corrected.
The PBGC has chosen to defy the Federal court. They are
denying us access to documents and people we have requested.
And one must ask why, and the only answer I can think of is
that they feel that the consequences of defying the Federal
court are not as bad as complying with it.
Here is one area where you can help. We need transparency
on the actions of the PBGC and the administration regarding the
treatment of the Delphi salaried retirees. I will summarize. We
have lots of support, including the UAW, the Ohio AFL-CIO. The
Senate in Ohio unanimously passed a resolution saying that all
the retirees should be treated fairly. The State Democratic
parties in both Ohio and Michigan, the Democratic Party, said
that everybody should be treated fairly.
We need your help, and we ask your help to end this
nightmare and reverse the precedents set by this administration
and the PBGC, so that we and those behind us will have to deal
with the same horrible issues. Help us stop the slide down the
financial cliff. Thank you very much.
[The prepared statement of Mr. Gump follows:]
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Chairman Issa. Thank you, Mr. Gump.
Ms. Miller.
STATEMENT OF MARY MILLER
Ms. Miller. Thank you, Congressman Issa, for inviting me to
testify today. I am Mary Miller. It is an honor and privilege
to be here. I am here to tell you how the GM bailout has
shattered my plans for retirement, and to ask you to fix this
shameful injustice.
I worked for 22 years for General Motors and nine for
Delphi. While I held many different positions over my 31 year
career, one of the jobs I held for quite some time was to
partner with an appointed hourly employee to manage the UAW and
GM and Delphi training funds. I am still good friends with this
coworker. While he continues to receive the full pension and
health-care benefits he earned, I do not.
How can it be legal for the government to pick winners and
losers amongst its own citizens? Why did the administration
deem my friend and his family as more valuable to America that
my family and me?
For me, and many of my fellow retirees, the burden of
trying to figure out how to make ends meet gets heavier every
day. Let me tell you a little more about me, what my plan was
for retirement, and what will happen to my plan unless you can
fix this disaster.
I am a mother of four young adults ages 20 to 26. I am a
home owner, a taxpayer, a person of deep faith, and a law
abiding citizen. I am divorced. As a single mom, I have long
been the main provider for my four children. Prior to losing my
job at Delphi, I was a human resources manager. I am a
professional certified Coach. I started my own business, MTM
Transformation Coaching, after I lost my job at Delphi. Being
only 57, I knew I needed to start a new career to earn
additional income. Due to the recessionary economy, it has been
very challenging to build my coaching practice.
In 2009, Delphi stripped its retirees of all promised
healthcare coverage. That means retirees under the age of 65
have to purchase it. In my case, that means the cost for health
care for my family has increased from $179 in 2008 to $787 a
month now, even with HCTC benefits. This means I cannot afford
to provide health care coverage for my three sons who are in
college. I feel that I have failed my children when I cannot
help to provide the basics while they are full-time students.
And, sadly, that was just the beginning of the retirees'
horror story. Just a few months later, the bottom fell out when
the PBGC took over the Delphi pensions. The PBGC slashed my
pension check by 30 percent. This is not a situation that can
be remedied by just cutting out all discretionary spending. I
am struggling to pay for the basics, to keep my 10-year-old car
running, to pay my property taxes, and to make critical home
repairs.
Even though I have bought health insurance for myself, I
was not able to afford a CAT scan my doctor ordered last June.
When I learned my portion of the bill would be $278, I had to
take cancel the test.
I have been put in this crushing position because the
government intentionally chose to treat me and all Delphi
salaried retirees with absolute disdain and disregard. What
does the future hold? Without your help to resolve this
travesty, I will not be able to maintain my own home or pay for
my own medical needs. How can it be that a person who put
herself through graduate school, worked hard in two Fortune 500
companies for over 31 years, earned a comfortable pension and
health care benefits to have in retirement, will live her
golden years in such poverty? How can it be legal for the
government to pick winners and losers amongst its own citizens?
I have learned that when you are in the right, you do not back
down. We will never give up our fight to regain powerful
pensions.
Please take up our cause and help us to regain the full
pensions we earned and so desperately need. Thank you.
[The prepared statement of Ms. Miller follows:]
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Chairman Issa. Thank you.
Mr. Rose.
STATEMENT OF TOM ROSE
Mr. Rose. Thank you, and good morning. My name is Tom Rose.
I am a salaried retiree from Delphi, having worked 30 years for
General Motors, and another 9 years for Delphi. My entire
career has been spent working at five of the former eight
Delphi plants in Dayton.
I grew up in Nashville, graduated from college, served our
country in the military, including a year in Vietnam, met a
wonderful girl in Dayton, married, three children, all of whom
graduated from college and are themselves married, with two
grandchildren.
My working career began as a young engineer at the local GM
plant on Wisconsin Boulevard, and included many different
management jobs, including, plant manager at the Kettering
Boulevard plant. I was fortunate to lead many talented salaried
and union people as we delivered quality parts to our customers
on time. Our plans and people contributed greatly to the local
economy.
I am now using retirement savings at a much faster rate
than originally planned to compensate for my missing pension
dollars. The careful financial plan for retirement, that my
wife and I were taught to achieve was wiped out and became
meaningless. My wife and I are paying three times more for our
healthcare than with Delphi, even with HCTC, and we are paying
for it with 40 percent fewer pension dollars. We use what
little is left to help fund the DSRA lawsuit to correct what
never should have happened in the first place.
A successful retirement for my wife and I is now in
jeopardy. Salaried and union employees worked for the same
company, were in the identical situation, in many instances
worked side by side, but were treated in distinctly different
manners. The current administration created solutions in which
our suspensions were sacrificed to help enable GM's emergence
from a choreographed bankruptcy in a record 44 days.
You have heard some of how my wife and I have been
impacted. I would like to share input from other salaried
retirees: Saginaw, Michigan--``My unemployment ran out, so I am
really under water right now. I am using my savings account to
pay my bills, but that is quickly dwindling, and I may have to
sell my house by spring time and find a cheap place to live.''
Dayton, OH--``This past year has been hard for me. I am making
it through, but just by a thread. I had to borrow money from my
family this month to make it to payday.'' Cicero, Indiana--``I
have great difficulty providing even the basics for my family.
I am appalled and enraged at the treatment I am receiving in
retirement. As a result of this discrimination, my annual
income is more than $6,500 below poverty level guidelines.''
Boyne City, Michigan--``The 30 percent reduction in my pension
has put my wife and me in a situation where in order to make
ends meet, we have to live apart Monday through Friday, working
in two separate towns. I have been blessed with a wonderful
wife. We have been married for 35 years, and this is the first
time in my career that we have been separated on a regular
basis. It is very hard on both of us.'' Sandusky--``What makes
what has been done to us so damndable is this. We are at an age
and state of health where we cannot bounce back. There is too
little time remaining and too little opportunity available. I
do not want a hand out, but I do want a hand back of what was
taken from me.''
Earlier in my testimony, I mentioned we were forced into a
legal effort to gain back that which we had earned and was
denied us by the administration. In closing, please let me give
you to brief examples of exceptional sacrifice and the tenacity
of our membership. Bonita Springs, Florida--``I have been
pretty well consumed with caring for my wife, who has had a
recurrence of breast cancer this spring. I have just sent $40
through PayPal, and next month I will send $35. Sorry I cannot
do more, but we have some large medical bills this year.'' West
Carrollton, OH--``In April, I took a part time job, along with
my full time day job. I would get up at 5 AM and return home at
11 p.m. I soon had to quit my part time job for concerns about
my health and lack of rest. After 39\1/2\ years at GM/Delphi, I
never imagined that I would be working two jobs to try and
support my family. I am doubling what I would normally give to
our cause. I hope someday that we will prevail. I feel that
time is on the PBGC's side by dragging this out and not
cooperating. This may someday deplete our funds in a way we
cannot support our lawyers.''
Members of the committee, these are real people, real
lives, real impact. More than 20,000 current and future Delphi
salaried retirees and our families are appealing to the
oversight committee today to hold the administration
responsible to correct this injustice. We are not asking for a
handout or an entitlement, only the deferred compensation that
was earned by us and taken away by the executive branch of our
own government.
Thank you for this opportunity.
[The prepared statement of Mr. Rose follows:]
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Chairman Issa. Thank you, Mr. Rose.
As I said to the earlier panel, I am going to ask each
panel substantially the same question, and I know some of you
may have slightly different takes on it. And I will preface it
by saying, you know, when I worked for General Motors, I was a
machinist, Aerospace Workers Union in Cleveland. Enjoyed the
job, enjoyed the benefits, did not stay for a career. But I
knew at that time I was represented by a powerful union that
had a lot of clout. None of you were represented by a powerful
union who had a lot of clout. What part do you believe not
being represented by a union played in the decision to have
people, like Mr. Black and all of you who had special skills--
some might say harder to duplicate skills--than a line worker,
in many cases, choose to have retirees of that category receive
only what was in the bank, so to speak, versus union workers
who were topped up?
Anyone can answer. I want to make sure we go away with the
record clear about why you might make a decision that one group
was important versus another. Is there any reason you can find
other than, in fact, the clout of the union and its influence
on the administration?
Mr. Gump. The reason is the involvement of the U.S.
Government. The issue here is that the government stepped into
this with our dollars, with our money, right, and allowed
General Motors to make totally different decisions than they
would have had that not happened. In the end, the Treasury knew
that the folks represented by the unions tend to support them
very strongly. And so, there is even some testimony that has
already been offered in deposition that indicates that the
political sensitivity of certain groups was a criteria that was
considered during the bailout. So, we know that that was one of
the things that was an issue.
I do not believe that the UAW would have struck General
Motors, which was already in bankruptcy and in danger of
liquidation, because that would have ruined all of the jobs for
all of their members at General Motors. They would have found
some other way to have worked and tried to make their point
with General Motors. I do not think there would have been a
general strike.
Chairman Issa. So, your belief is that it was more the
political importance to the current administration rather than
the likelihood of a strike leading to the crippling of the
company.
Mr. Black. Let me comment also and reiterate what was
mentioned in the prior testimony, and that was immediately when
the plan of reorganization for General Motors was announced, it
immediately was said that our UAW counterparts would be topped
up. But the other major unions were left out of that. Some
weeks passed before it eventually came that the decision was
changed to also top up our IUE counterparts and steelworkers,
okay? That alone is indicative of why if they all had
contractual agreements, why did it happen?
And, of course, clearly why it happened, especially in this
State of Ohio, which I am a Buckeye and started my job with IUE
representation here, is that IUE is very, very, very powerful
in Ohio. And the decision to change and include the IUE clearly
had to do with political considerations, not contractual
considerations.
Chairman Issa. Mr. Rose.
Mr. Rose. I concur. As you heard Mr. Gebbia's testimony,
there was no financial justification given the, you know,
actuarial funding level of the pension plan. So, what else
happened? It is my personal belief that when the Federal
Government interjected itself into the GM bankruptcy process,
and you can only wonder why they did, but to me, clearly the
Delphi pension plan was an obstacle to quickly getting GM out
of bankruptcy. So, they dealt with it in a way that I believe
favored the current administration politically.
Chairman Issa. Well, I also serve on the Judiciary
Committee, and I was there for bankruptcy reform. Mr. Jordan
also serves on the committee. The amazing thing to me is that
we in government do not need a Constitution for the powerful.
We do not need laws for the powerful. We need the Constitution
and laws for the weak. Ultimately the success of our democracy
is about the minority having rights, not the majority. If you
want to see the majority have rights, just go to any Third
World country and see who is in charge. They do not need any
more government than in fact a one party.
So, I can only say to you and to all of the salaried
employees that have suffered now and will continue to suffer
until there is a resolution, that this committee will look into
both the bankruptcy inequities and, in fact, the misconduct
that we believe may in part have come out of Treasury and come
out of the administration, to see if we cannot get a full
disclosure and then rectification once that has seen the light
of day.
I know that is not enough while you are continuing to
suffer, but it is what we will do, and this committee will
additionally make public such documents as we can from our
discovery. Now, that will not necessary be the documents you
want, but it is our intention to be as transparent as we can
be, and particularly when we get into the details of
Treasury's, what they did, why they did it, and what they did
not tell all of you.
And with that, I would recognize former chairman of the
committee, Mr. Burton?
Mr. Burton. I think these stories that we have heard are
heart rendering. It makes you kind of ashamed that our
government even considers doing these sorts of things. We have
another investigation going on right now with the National
Labor Relations Board where they are trying to use political
muscle to force unionism on a company down in South Carolina.
It is a different issue, but, once again, you have the Federal
Government, this administration, trying to control the people
of this country instead of working for the people of this
country. And I think it is very sad.
I do not have any questions, Mr. Chairman.
Chairman Issa. I thank the gentleman. Mr. Turner.
Mr. Turner. Thank you for your compelling testimony, and
also thank you for your diligence in working on this issue. I
know in addition to sharing your personal stories that each of
you have taken responsibility in working on behalf of
yourselves and all the Delphi retirees on this issue.
I want to commend you because one of the things that you
have said that I think is very striking is the wide range of
support that you have. The unions who have received their full
pensions support that the outcome should have been you had
received your full pensions. So, this is not an issue of
division between you. It is winners and losers chosen by the
government, not chosen by your fellow co-workers. And I think
their solidarity with you is incredibly compelling.
And I also note your statement that in Ohio your strong
support that you have, and the State Senate had passed a
resolution calling on full funding of the pensions. I know
Secretary Peggy Laner was here earlier, and she was one of the
champions that you have worked with on this issue.
Over the last several years that I had the opportunity to
work with you on this, and we have tried to advance this in a
number of areas, one asking for GAO studies of the GAO today.
Another study is ongoing. And working with the chairman,
Chairman Jordan, on trying on the congressional side to get
documents produced, to get people to answer appropriate
questions, working also in putting additional pressure on the
administration and then looking to, as your litigation
proceeds, ways in which we might be able to assist in making
certain that the story that you do not know yet, how did this
happen, gets told.
So, I want to tell you that, I think you have heard from
the chairman, and I know that you know from the things that are
in front of us that we are not going to stop on this. You are
not going to stop, and we are not going to stop. The
administration is not going to be able to say, I am not going
to tell the Federal courts, I am not going to tell Congress how
or why I did this. The administration is going to have to 'fess
up that there were decisions that they made. We want to know
why and the basis of the decisions.
We know the outcome. The outcome is discriminatory. We need
to determine and learn the manner in which this was done so
that we can correct it. So, thank you for your diligence. Thank
you for being here, and also thank you for the fact that you
have continued to reach out so that this is not just an issue
of you standing here alone. It is an issue of you also working
with the other Delphi retirees in unison. So, thank you again.
Chairman Issa. Thank the gentleman. Mr. Jordan.
Mr. Jordan. If I could just real quickly, Mr. Black, come
back to something you had just said. GM initially only wanted
to top up the UAW plan. And yet, to your understanding,
Treasury forced them to also add in the IUE and the UAW.
Mr. Black. Yeah. For about 40 days in continuing
discussions by the IUE and the steelworkers, a miraculous thing
happened, and it was decided that we will also top them up.
Mr. Jordan. Yes. Mr. Chairman, I would just point out that
this pattern, you remember in prior hearings we have had, the
overall restructuring plan that GM first submitted to the auto
task force was turned down, was rejected. And, you know, this
idea that GM would make the decisions and not people in
Treasury, not the auto task, not the government I think is just
absolutely not true. Because the initial restructuring plan was
turned down, the subsequent restructuring plan was accepted
where facilities were closed, dealerships were closed, etc.
So, again, this I think points to a pattern where political
influence was, in fact, at play. And I yield back.
Chairman Issa. Go ahead.
Mr. Gump. I am sorry. You asked at the last hearing to get
a copy of the first restructuring plan.
Mr. Jordan. We are looking over it now.
Mr. Gump. You got it?
Mr. Jordan. Yes.
Chairman Issa. Yes. In consultation with the chairman, our
anticipation is we would post an appropriately and limited
redacted portion of that as soon as it has been reviewed by
counsel. As you know, our committee has a unilateral right to
determine what we will or will not release. We try to be
considerate, but certainly this is something that has a huge
public interest.
Mr. Austria.
Mr. Austria. Thank you, Mr. Chairman. Let me, first of all,
take a moment to thank all of you for being here today. I think
it is important that you share the stories that you have with
this committee so we understand the direct impact it is having
on you all and other families, which is very important. I know
the last few years have been extremely difficult for you and
your families, but we appreciate your determination to ensure
that every Delphi retiree receives a fair pension.
And what I would like to ask you is about, and you have
touched on this, is the reduced pensions. I know, Ms. Miller,
you mentioned that your pension has been reduced another 30
percent. Mr. Gump, I think you talked about somebody who had a
49 percent loss.
And, as you know, the Federal law limits the maximum
benefit a person can receive through the PBGC under a partially
funded pension plan. The limit is based on the year the plan
was terminated or went bankrupt and does not include an
adjustment for inflation. As a result, not only have Delphi
salaried employees had pensions cut, as I mentioned earlier,
and you have mentioned also, as much as 70 percent with our
discussions, Mr. Rose, last week, but each year, and this is
the point I am trying to make, each year your pension has less
and less purchasing power.
Can you describe for the committee how this has impacted
your lives. And also, Mr. Black, you talked about the future, I
mean, in planning for the future when you have less and less
purchasing power.
Mr. Rose. Yeah, inevitably, of course, now there are signs
that even with inflation and everything it might be picking up
steam, especially if you are trying to buy gasoline or food, so
indeed. You know, those who have not suffered complete economic
wreckage yet will most certainly suffer it in the next decade
or two should they be unfortunate enough to live that long.
[Laughter.]
Mr. Austria. That is the bottom line.
Mr. Gump. I would like to point out, you talked about the
49.7 percent. That is actually the levels of concentrated
poverty in Youngstown, OH is what I was trying to make. That
same study, by the way, pointed up that for every million
dollars lost, about 30 people downstream of us will also lose
their jobs. So, you go do the math, at $161 million in the
Mahoney Valley alone up in Northeast Ohio, that is nearly 5,000
people that were still waitresses, and service workers, and
electricians, and plumbers that might do work. They lose their
jobs, too, because we are not out participating in the economy
any more, all right? That is the effect that commercial
necessity, if you will, of including us. But the government
chose to not do that because it was not just commercial
necessity; it was also political necessity, all right? We are
absolutely convinced of.
Mr. Austria. One follow-up real quick, Mr. Chairman, if I
can in the short time allotted. Today, I think all four of you
expressed your frustration with government, and the numerous
hardships that have been put on you as a result of what has
happened. And I know many of the retirees feel betrayed by the
government because the administration's quest to quickly
resolve the Delphi bankruptcy without adequate consideration
for the effects on retirees.
And I know this panel, and I know this committee, and many
of my colleagues have worked very hard to help your cause
through the hearings and requesting this information from the
administration. But I also know there have been obstacles and
roadblocks have been put forward with government, and also
Members of Congress. I know we want to continue to work hard. I
have co-sponsored bills. There have been letters that we have
sent that we have taken the lead on, and working coordinating
with you. But what are some of those roadblocks that you have
been faced with in trying to work with government and trying to
work with Congress in particular?
Mr. Gump. I think, first of all, the reluctance of both the
Treasury and the PBGC to allow any transparency. They
essentially tell us that we should be glad to be able to get
anything at all, while our next door neighbors are out buying
boats and taking vacations because they were members of the
union. I think that is probably the most difficult.
There are some obvious political issues, one party versus
another. Those kinds of issues have played a role.
What we found was that if we do get an opportunity to speak
to the right people and explain the realities of the decisions
that they are making, they tend to carve out niches in their
ideologies to try to work against that. I would point out that
we do have support on both sides of the aisle, very strong
support. In fact, two of our very best supporters up to now
have been Senator Brown and Congressman Ryan, both Democrats.
That is not to leave out, you know, your committee and others
on that side of the aisle.
The point I am trying to make is that this really is not an
issue of one party versus another. The parties themselves have
spoken and said this was wrong. This is an issue of right and
wrong, and that is why they are protecting it. That is why they
do not want to let anything out. They know they did wrong. They
do not want to admit it. They do not want to allow anything
out. So, they are going to go to the mat and prevent anybody
from learning what happened. That is where we need your help.
Mr. Rose. So, in a nutshell, of course, the roadblock has
been the utter unwillingness to have transparency, utter
unwillingness. And even Federal judges are slapped upside the
head when they say you are going to be transparent. That is the
problem.
Mr. Austria. Thank you.
Chairman Issa. We are going to have a very limited second
round. What I would add for all of you, I think you have done a
good job of explaining for the record that this is not about
bringing down the successes of a union or several unions
looking out for the benefit of the people they represent. They
did their job. We expect they would. And union members come in
all party persuasions, from the far left to the far right. So,
hopefully you are helping us make that record, additionally
making the record that this is not a partisan issue of
Republicans versus Democrats. You have support on both sides of
the aisle in the House and the Senate. And, last, that in fact
we cannot make you whole by taking away anything from the men
and women who are receiving a greater benefit. To make you
whole, we have to use other means available, either with
Congress or with the Benefit Corp.
With that, I would recognize Mr. Burton for a second round
of questions?
Mr. Burton. Yes, real quickly, one of the things that Mr.
Bloom, who lied to our committee and then said he could not
remember once he was caught, staff just reminded me, he was the
senior advisor to the President of the steelworkers union
before he got his present position. So, when you think that
there was not politics involved, it is clear as the day is long
that it was definitely involved.
I just had one question I wanted to ask, Mr. Chairman, and
that is, do you have any idea how much it has cost in legal
fees, the people who are involved in this lawsuit?
Mr. Rose. Yeah. We are over several million dollars so far,
and we got plenty more if we need it.
Mr. Gump. I would like to make the point, if I may, Mr.
Burton, that the attorneys have worked very strongly and
carefully with us on that. And our members send in $10, $20,
$30 a month, $50 a month to support that, and every bill has
been paid, and we are ahead. We are in this. We are going to
finish this, and our attorneys are, too.
Mr. Burton. Well, I appreciate your dedication. But it is
unfortunate that the people who are suffering have to pony up
the money for legal fees as well when their opponent, the
Federal Government, has unlimited resources.
Chairman Issa. I thank all of you for your testimony. Mr.
Rose, you included a number of references to other letters that
you had received. As I said in the beginning of the hearing, we
will leave the record open for five additional days. That would
include any and all letters or information from your various
members that you want to make sure were added to make the
record complete.
And with that, as we take a brief recess to set up the next
panel, I want to ask the audience to be just as kind and
considerate to people who were obligated to come here to tell
what is to a great extent the other side of the story. They are
career professionals. Their job is not to make political
decisions, and they are here at our request to explain what
they can and to take candid questions. So, I want you to be
just as genteel and kind as you have been to the first two
panels. [Laughter.]
With that, we will take a short recess.
[Recess.]
Chairman Issa. Thank you. This hearing will come back to
order. I am going to place in the record by unanimous consent
the additional statements of Senator Sherrod Brown and
Congressman Tim Ryan. They were unable to be here today, but
wanted to make sure their thoughts were known on this hearing.
[The information referred to follows:]
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Chairman Issa. With that, we now recognize our third panel,
as I said, career professionals. Ms. Barbara Bovbjerg is
director for education, work force, and income security issues
at the U.S. Government Accountability Office, which is a branch
of Congress. Mr. Vincent Snowbarger is the deputy director for
operations at the Pension Benefit Guaranty Corp., again, a
career professional.
Pursuant to the committee rules, I would ask you to rise
and take the oath.
[Witnesses sworn.]
Chairman Issa. Let the record indicate that both witnesses
answered in the affirmative. And you have sat patiently through
two previous panels, so you know it better than I can describe
how this is going to work.
And, Ms. Bovbjerg, you first?
STATEMENTS OF BARBARA BOVBJERG, MANAGING DIRECTOR, EDUCATION,
WORKFORCE, AND INCOME SECURITY ISSUES, GOVERNMENT
ACCOUNTABILITY OFFICE; AND VINCENT K. SNOWBARGER, DEPUTY
DIRECTOR FOR OPERATIONS, PENSION BENEFIT GUARANTY CORP.
STATEMENT OF BARBARA BOVBJERG
Ms. Bovbjerg. Thank YOU, Mr. Chairman, members of the
committee. I appreciate your inviting me here today to speak
about events leading to termination of the Delphi pension
plans, and the differential benefit payments that resulted. My
beat at GAO includes income security issues, and we have heard
truly heart wrenching stories this morning.
My testimony today presents a timeline of key events
leading to the plan's termination, focusing in particular on
decisions allowing General Motors to provide retirement benefit
supplements to some Delphi employees, but not to others. This
information is drawn from our March 2011 report prepared for
Mr. Turner and others, and relies on publicly available
documents.
The story begins in 1999 when the Delphi Corp., once part
of GM was spun off as an independent company. As part of that
arrangement, GM was required to bargain with the unions
affected by the spin off. In those negotiations, GM agreed to
provide top ups to collectively bargained employees, meaning
that if something went wrong with the pension plans for these
employees under Delphi, GM would make good on their promised
benefits.
At the time of these agreements, Delphi's hourly plan was
not fully funded, meaning that absent a top up agreement, some
benefits could have been at risk. In contract at that time, the
Delphi salaried employees' plan was fully funded.
So, fast forward to October 2005 when Delphi filed for
bankruptcy. The pension plans were under funded, and Delphi was
not planning to make contributions to these plans during the
bankruptcy process; hence, prospects for the plans and a
prospect for participants' future benefits got substantially
worse.
Two years later in 2007, Delphi was still in bankruptcy. In
its initial reorganization plan, Delphi proposed to emerge from
bankruptcy with its pension plans intact, which could have
removed the need for top up agreements, but this proposal fell
through. Shortly thereafter in 2008, GM agreed to take
responsibility for about $3.4 billion of net liabilities in
Delphi's hourly plan in two phases. Phase one took place in
September 2008 when GM assumed about $2 billion in plan
liabilities. Economic conditions deteriorated throughout the
auto industry in fall 2008, as we all know. GM's losses led the
company to seek assistance from the Federal Government.
By April 2009, the Department of the Treasury was working
with GM to develop a restructuring plan, and by June, GM, too,
had filed for bankruptcy.
In May 2009, Treasury believed that the hourly plan would
be assumed by GM, at least for the UAW workers. However, phase
two of the Delphi/GM transfer agreement required Delphi to pay
GM about $2 billion, and because Delphi, in its bankrupt state,
could not make such a payment, the phase two transfer never
took place. Meanwhile, GM and Treasury both understood that the
salary plan would be terminated.
In June 2009, as part of an arrangement for GM to emerge
from bankruptcy, GM and the UAW agreed to modify wages,
benefits, and work rules to be more cost competitive, and
agreed that new GM would assume all employment-related
obligations and liabilities for their hourly benefit plan. This
agreement did not include other unions or salaried employees.
Meanwhile, Delphi and PBGC began the process of what we
call a distress termination of Delphi pension plans. PBGC
estimated that Delphi plans were $7 billion under funded, with
PBGC expected to bear $6 billion of that shortfall, and Delphi
plan participants the remaining $1 billion through the
application of benefit limitations as required by law.
After objections from the other unions and the salaried
employees, objections that threatened to thwart Delphi's and
GM's future viability, GM entered into a settlement agreement
that, among other things, resulted in top up payments to the
unionized workers of the main unions. No such agreement
pertained to salaried workers, and this is where the situation
lies today.
GAO will be reporting more substantively to Mr. Turner and
other requestors on these issues next month, and in that work,
we will be talking about what precipitated plan termination,
what actions were taken to preserve assets for PBGC in the
plans, why some employees were topped up and others not, and
what was communicated to employees about the termination, and
we expect that in mid-December. And, unfortunately, I will not
be able to talk about that work in progress today.
Thank you, Mr. Chairman. That completed my statement.
[The prepared statement of Ms. Bovbjerg follows:]
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Chairman Issa. Thank you.
Mr. Snowbarger.
STATEMENT OF VINCENT SNOWBARGER
Mr. Snowbarger. Good morning, Chairman Issa, and other
members of the committee. I am Vince Snowbarger, deputy
director of operations at the Pension Benefit Guaranty Corp.,
and I also ought to mention at the times relevant to our
proceedings here, I was the acting director of PBGC.
I will testify today about the termination of the pension
plans of Delphi Corp., the Nation's largest producer of auto
parts, and specifically about PBGC's role.
As you know, in July 2009, PBGC stepped in to protect the
pension of Delphi's 70,000 workers and retirees. PBGC will
cover about $6 billion of the plan's shortfall, but there is
also a shortfall of $1.2 billion in benefits that are not
guaranteed by the insurance program.
Delphi, which was originally an in house parts manufacturer
for GM, was spun off as an independent company in 1999. At that
time, GM transferred assets and liabilities from the salaried
and hourly pension plans to the newly established Delphi
salaried and hourly defined benefit pension plans. GM
negotiated with certain unions to provide benefit guarantees if
the hourly plan terminated or was frozen at a later date.
Delphi began suffering significant losses in January 2001, and
the funding of pension plans deteriorated.
On October 8, 2005, Delphi entered chapter 11 bankruptcy,
and ultimately liquidated in 2009. The old Delphi ceased to
exist. The new Delphi, as United Kingdom Co. purchased most of
the old Delphi's assets, including its name.
After Delphi entered into bankruptcy protection in October
2005, PBGC worked intensely with Delphi, GM, and other
stakeholders to keep the pension plans ongoing. As mentioned
earlier, during the bankruptcy Delphi consistently told PBGC
and its employees that it intended to reorganize with the
pension plans intact. However, Delphi failed to make required
minimum funding contributions to the plans, and as a result
liens were triggered on behalf of the plans against the assets
of Delphi's non-bankruptcy foreign subsidiaries.
Beginning in March 2006, PBGC perfected those liens as the
law provided so that the plans had a secured interest against
the foreign Delphi entities. In September 2007, Delphi filed a
reorganization plan with the Delphi bankruptcy court, and as a
part of that reorganization, GM and Delphi entered into a
settlement agreement to transfer part of Delphi's hourly plan
to GM's hourly plan. Delphi was to continue to sponsor all of
its other plans, including the salaried plan.
That fell through in April 2008, but in the latter half of
2008, as Ms. Bovbjerg has mentioned, Delphi still anticipated
reorganization through bankruptcy, maintain its salaried plans
and merge the hourly plan with the GM hourly plan. And they
indeed transferred part of the hourly plan to GM for
compensation.
Unfortunately, Delphi experienced severely declining
revenues in the fall of 2008 and the spring of 2009 as GM and
other manufacturers sharply reduced production. When Delphi's
financing agreement with its debtor in possession [DIP],
lenders was scheduled to expire on April 24, 2009, Delphi was
faced with the prospects of imminent liquidation.
On April 21, 2009, I signed a notice of determination
seeking to terminate the six Delphi salaried and hourly pension
plans to avoid losses to participants in the insurance fund, if
the DIP lenders were to foreclose on their collateral. PBGC
agreed with the Delphi DIP lenders to postpone the effective
date of the termination decision to allow the parties to
negotiate a resolution of Delphi's bankruptcy. However, in July
2009 as Delphi was being liquidated, the DIP lenders initiated
foreclosure, leaving PBGC with no choice but to step in and
take over Delphi's underfunded pension plans.
I want to emphasize that PBGC treated the salaried plan no
differently than the hourly plan. The only difference in
treatment of the participants resulted from decisions made by
GM. PBGC's involvement in the Delphi and GM bankruptcies was
limited to the disposition of the pension plans. PBGC did not
have any influence in GM's restructuring decisions, including
the decision to assume the collectively bargained top up
agreements entered into by the old GM in 1999.
In conclusion, Mr. Chairman, companies that sponsor pension
plans have the responsibility to live up to the promises they
made to their workers and retirees. Plans come to PBGC because
their sponsors have failed to properly fund them. In
unfortunate cases like Delphi where sponsors fail and
liquidate, PBGC is forced to, and will, step in to protect
workers and retirees.
I would be happy to answer questions.
[The prepared statement of Mr. Snowbarger follows:]
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Chairman Issa. Thank you.
I recognize myself for a round of questioning.
In June 2009, General Motors, as you know, received $50
billion in taxpayer money, and it used $2.5 billion of that $50
billion to buy a stake in Delphi, essentially an indirect
bailout. In early 2011, Delphi bought back its assets from
General Motors. However, GM still owes about $26 billion to the
taxpayers, and unless the stock more than doubles, the
taxpayers will not be made whole at General Motors.
So, ultimately that $2.5 billion was, in fact, simply a
pass through of taxpayers' dollars. It was not within General
Motors' means or anticipated means in the foreseeable time.
Literally, they need 10 years' worth of profits they have never
had in modern times in order to come close to paying back the
government.
So, in that scenario, the question I would ask you, first
of all, is, at the time the PBGC terminated Delphi's pension,
did you know General Motors was going to own a large stake in
Delphi? Did you know about the purchase?
Mr. Snowbarger. Obviously we knew about the interconnection
between GM and Delphi, but at the time we made the decision in
April 2009 that the plans were going to need to be terminated,
I do not think any decision had been made at that point. Well,
I guess there had been a couple of----
Chairman Issa. April to June was pretty close. That is why
I asked.
Mr. Snowbarger. No, I understand that. But I think it is a
significant difference in timing. Again, our decision was based
on factors that were beyond what was happening with GM. We were
looking solely at----
Chairman Issa. Sure, and I am not questioning your
termination. It is simply, at that time--I mean, April to June
was very, very close. At the time of the termination, were you
aware of obviously the top ups and this investment that was
literally a conduit of taxpayer money?
Mr. Snowbarger. My understanding is those decisions had not
been made by GM at that point in time.
Chairman Issa. Did you know----
Mr. Snowbarger. To my knowledge.
Chairman Issa. Did you have any knowledge that it might
happen?
Mr. Snowbarger. We understood that that agreement was in
place in 1999, yes.
Chairman Issa. Well, that agreement expired with the
bankruptcy, did it not?
Mr. Snowbarger. I do not think it automatically expires. I
think they have to reject the agreement. I am not a bankruptcy
lawyer, but I believe GM would have had to reject those parts
of the agreement.
Chairman Issa. But GM had the power to reject all
agreements, void all leases, all purchase agreements. That is a
standard part of bankruptcy is you can literally pick and
choose what you want to get rid, and all you have to show is a
business reason to do it.
Mr. Snowbarger. Again, PBGC was not a part of that
decision, but I do not disagree with the chairman.
Chairman Issa. Okay. Well, but it is safe to say that GM's
purchase of Delphi is the equivalent of an indirect bailout
from the Treasury to Delphi. You would agree with that, that
that $2.5 billion of the $50 billion is essentially a conduit
of a loan to GM that passed through to Delphi. And you knew
that that was anticipated.
Mr. Snowbarger. I do not know that we did anticipate that
in terms of our decision about terminating the plans, no.
Mr. Burton. What was the timeframe?
Chairman Issa. The timeframe was April to June. But am I
right to assume that terminating these pension plans made
Delphi a more viable company? That these were somewhat anchors
to them, the fact that they were, at that point, underfunded.
And unless the market rose, would remain underfunded, and would
cause dollars to have to be put into them?
Mr. Snowbarger. PBGC made its decision to terminate the
Delphi pension plans because Delphi was going away. It would no
longer exist.
Chairman Issa. But if General Motors getting $50 billion
had given $10 billion to Delphi instead of $2.5, would there
not have been enough money to view it differently?
Mr. Snowbarger. I suppose. I do not have any basis on which
to make a decision like that.
Chairman Issa. So, if the administration had handed $10
billion in TARP money to Delphi, and I use this point because,
remember, with Chrysler, we sold Chrysler to Fiat, but we also
put the money in out of TARP never to get it back. Is that
correct, to your understanding?
Mr. Snowbarger. That is my understanding. And, again,
whether $10 billion was the right number or something more than
that, sure, TARP funds could have been used for a different
purpose.
Chairman Issa. Do you have any knowledge as of today if you
had not terminated the fund as the earlier panel said, would
that amount of funds be still able to pay out substantially
more than you are currently paying out? That is their
allegation is that the funds were there. They were at a low
point. The funds were essentially transferred to you as part of
the termination. If those funds were put back into ordinary
investments today, would they yield as much as the recipients
are getting today, or would it be likely more?
Mr. Snowbarger. The problem, Mr. Chairman, is that there is
no sponsor to turn this plan back over to. Delphi no longer
exists.
Chairman Issa. And retirees are no longer working.
Mr. Snowbarger. I understand.
Chairman Issa. Okay. I just want to understand that General
Motors, for example, and I said earlier would have, could have,
and should have. General Motors could have taken back the
retirees at least and said, you retirees, we are going to fold
you back into our plan, and then you would not have terminated
had they agreed to be the sponsor.
Mr. Snowbarger. If there had been another sponsor willing
to take over the plan, that is correct.
Chairman Issa. So, it was General Motor's decision to cut
and run from its former employees, longstanding former
employees, that in no small part played a part in this. They
could have made that decision. They considered that decision.
It was even in earlier proposals. And they chose not to.
Mr. Snowbarger. I am not aware that it was in earlier
proposals to take over the salaried plan. My understanding was
they had a number of times talked with Delphi about taking over
the hourly pension plans, but I do not believe the salaried
plans were ever treated that way, or considered that way.
So, the more powerful of the group was considered, and
ultimately taken care of, while the less powerful, less
represented group, in your opinion, was always going to get
screwed.
Mr. Snowbarger. Well, again, I think--[laughter.]
Chairman Issa. It is a technical term. You remember we use
that in Washington. [Laughter.]
Mr. Snowbarger. I have heard the term before, yes. And,
again, I do not think it is my position to respond to that
because we were not a part of those decisions by them or
Treasury.
Chairman Issa. But you know there could have been a better
outcome than there was by several means that you have described
here today.
Mr. Snowbarger. Well, obviously the people that lost an
awful lot of those salaries--excuse me, those pensions that
were not topped up obviously could have been treated better.
Chairman Issa. Thank you.
Mr. Burton.
Mr. Burton. This is a little confusing to me. Did the
administration have any hand in any of the decisions that were
made?
Mr. Snowbarger. I want to try to understand the definition
here of the word ``administration.''
Mr. Burton. The President, the people that work in his
administration.
Mr. Snowbarger. If you are talking the task force or the
political side of the administration, the answer is no, not in
terms of our decision to terminate the pension plans.
Mr. Burton. I am trying to figure out how the topping up
decision was made. The Federal Government, the taxpayer, put
all that money into it. General Motors gets the money, and then
they decide that the unions are going to be made whole or
almost completely whole, but the salaried employees, the hourly
employees, are not. And I am just wondering how that decision
was made.
Mr. Snowbarger. We were not a part of that decision. And
that was not a part of our decision to terminate.
Mr. Burton. So, it was left up to General Motors.
Mr. Snowbarger. Again, we were not a part of that process,
part of the auto task force's decisions.
Mr. Burton. Do you know anything about the auto task
force's decisionmaking process?
Mr. Snowbarger. What I read in the papers, you know, and we
had some conversations about both GM's plans and Chrysler's
plans early that spring.
Mr. Burton. But you did not have anything to do with any of
that.
Mr. Snowbarger. No, we had no part in the decision about
how they were spending their funds.
Mr. Burton. You just turned it over to GM and that was it.
Mr. Snowbarger. We did not turn anything over to GM, I am
sorry.
Mr. Burton. Explain to me real quickly the process that you
went through, because I am not sure I got it right.
Mr. Snowbarger. Sure. Our focus in this particular case was
solely on the pension plans sponsored by Delphi. Let us say old
Delphi is what came out. In looking at those plans, we were
looking at are they funded? The answer was no. For all the
hourly plans and for the salaried plans, none of them were
funded as well as they should have been funded, as well as they
needed to be funded. The second thing we looked at is there----
Mr. Burton. When you were asking the question, you said
between April and June they got another $2.5 billion?
Chairman Issa. Terminated in April. The money came in from
GM in June. Obviously it was anticipated at that point.
Mr. Burton. Did you know that that money was--you did not
know that that money was coming?
Mr. Snowbarger. Well, let me----
Mr. Burton. When you made the decision to terminate these
plans.
Mr. Snowbarger. When I made the decision to terminate, when
I signed off on the notice of determination in April, no. It
was not a part of our consideration.
Mr. Burton. And had you known, would that have changed your
decision?
Mr. Snowbarger. Well, again, it depends on whether--the
third factor that we look at is, is there going to be an
ongoing sponsor. If, as the chairman posited, Delphi somehow is
going to continue and come out bankruptcy because they were
able to get lending from other source, that would be one
scenario. That was not a scenario that existed as of April
21st. The fact of the matter was, as of April 21st, the lenders
in the Delphi bankruptcy were ready to foreclose on their
liens.
Now, they agreed to postpone that a little while longer,
and we agreed to postpone taking action on our decision until--
--
Mr. Burton. And 2 months later, $2.5 billion came in.
Mr. Snowbarger. Yes. And it did not go----
Mr. Burton. But that would not have changed your decision
at all.
Mr. Snowbarger. If it would have made Delphi a viable
ongoing sponsor for the pension plan, yes, it would. But it did
not.
Mr. Burton. Ms. Bovbjerg, you said that Mr. Turner asked
for information from you, and you said that you could not talk
about it today, but that you would get it to him in December.
Can you tell me why you cannot talk about it today?
Ms. Bovbjerg. Because it is ongoing work.
Mr. Burton. But what do you mean ongoing work? Do you have
any kind of answers at all today?
Ms. Bovbjerg. We have answers, but they could be wrong
since it is ongoing work. We want to make sure that we are
right when we are reporting to the Congress. We did this
interim report in March that was really just a sort of a
sequence of events, a timeline, not particularly analytic, from
publicly available documents. And you will note in here that--
--
Mr. Burton. How long have you been working on this? I am
just curious.
Ms. Bovbjerg. I want to say about a year. About a year.
Mr. Burton. About a year, and you could not have the
information for us today. It has to be after the hearing in
December.
Ms. Bovbjerg. Well, that was the schedule. I was notified
of the hearing last week.
Chairman Issa. I would ask unanimous consent that the
gentleman have an additional minute.
Mr. Burton. Sure. I yield back, Mr. Chairman.
Chairman Issa. And I would ask you to yield.
I might note for the record that GAO is very conscious that
in the for-profit education preliminary report that was issued
that was essentially reversed in the final report, the early
report, we have chastised GAO for issuing anything that they
could not stand behind 100 percent. So, although it is the
original schedule and we would love to have it faster, I think
on behalf of the former chairman and myself, we do want you to
get it absolutely right the first time when it comes out.
Ms. Bovbjerg. Thank you, Mr. Chairman. I wonder if I might
make----
Chairman Issa. Of course.
Ms. Bovbjerg [continuing]. A remark about the question of
who did what, and where the money went. We have done a fair
amount of work in another part of GAO on the auto task force
and the auto bailout, and we have done some work jointly on GM
and Chrysler and how that all worked, and how it worked with
pensions particularly. We did that about a year and a half ago.
And we have made recommendations in that report and prior to
Treasury that they really need to be more transparent about how
they do this business, that the auto task force and with
Treasury as a whole.
The Secretary of Treasury is not only over the auto task
force and everything else in Treasury, he also sits on a three-
person PBGC board of directors. It is critically important,
even if there is indeed this steel curtain that we have heard a
lot about, and everyone is doing everything completely without
conflict. It is very important that the appearance of conflict
not exist as well. And we felt that if they had been more
transparent about how all these things were working and when,
that would have been very helpful, and it would help you all in
this hearing today.
Chairman Issa. Thank you.
Mr. Turner.
Mr. Turner. Thank you. And I also want to note for the
record that there is a GAO response of November 14th that is in
our materials that includes an overview of some of the things
that you have looked at. So, we do have that information from
you.
Mr. Snowbarger, I want to thank you for the responses that
I just received November 9th to the questions that I had given
you at our hearing of June 22nd. I want to ask you, are you
familiar with these----
Mr. Snowbarger. Yes.
Mr. Turner [continuing]. With these answers----
Mr. Snowbarger [continuing]. Yes.
Mr. Turner [continuing]. And these questions. You are under
oath. I would like you to affirm the content of these as being
truthful and correct.
Mr. Snowbarger. They were true when I signed it. They are
true now.
Mr. Turner. Excellent. Thank you.
There is a lot of talk about the issue of the termination.
I want to get to the issue of the settlement. The PBGC approved
the settlement. They were a party to the settlement. We have
heard today about these Delphi retirees, and really the
perception that we all have is that this was wrong, that the
pension plans were dealt with differently, that some were
topped up and some were not. Does this happen a lot with the
PBGC, or is this unusual that pension plans would come out of a
bankruptcy, a legal proceeding that you are a part of, that
there would be a settlement that results in just one group that
had a pension from the company versus others, being so
significantly impacted and others being made whole. Is that
unusual?
Mr. Snowbarger. I am not aware of any other situation where
there was an agreement like this between a former plan sponsor
and a union that carried through. I do believe we have had
situations where you have multiple plans sponsored by a
company, and some of the plans are terminated and others remain
ongoing.
Mr. Turner. I have three topics I want to deal with, ask
you about. And one is the issue of conflicts, and another is
asset and liens, and the other is openness and transparency.
And I appreciate that the statement on the issue of the
conflict. I am going to walk you through that a little bit,
because in the question that I have to you, part of what you
gave me on September 9th, I asked, please describe the actual
conflicts and potential conflicts between the Secretary's
duties as a PBGC board member and the Treasury Department's
duties as the majority owner of the new GM. And you wrote, we
are not aware of any conflict. And I think our GAO
representative gave us a great outline of those conflicts.
In your testimony, you say, ``I want to emphasize that PBGC
treated the salaried plan no differently from the hourly plan.
The only difference in treatment are the participants resulted
from GM's decisions.'' Well, you know, part of the reason I
voted against TARP and why I think people are so upset about
all these bailouts is because that is not really an accurate
statement, participants resulted from GM's decisions, because
there was no independent GM when the President publicly called
for the firing of the CEO. The Treasury Department is bailing
them out. The auto task force reports to the Secretary of
Treasury, and the Treasury Secretary is on your board.
And when I get to the question that I ask you about the
settlement negotiations, you indicate that PBGC notes that
attorneys for the auto task force participated, along with the
PBGC, GM, Delphi, and Delphi debtor in possession lenders in
telephone conversations during which the terms of the PBGC
settlements were negotiated.
I mean, you really have the government there three times,
General Motors and Delphi being bailed out through the TARP
program as in the stock being owned ultimately by the Treasury
Department, you have the auto task force that reports to the
Treasury Secretary, and you have PBGC which has the
representation of the Treasury Secretary.
Do you not think that since--well, actually I cannot find
one of them that was on the telephone that did not have some
direct connection with the Treasury Secretary. Do you not
believe that that can result in conflicts?
Mr. Snowbarger. I can only speak to PBGC's side of things.
When decisions are made to terminate plans, we keep our board
informed about the actions that we are taking. But----
Mr. Turner. In this instance, the board member that you are
keeping informed also is in control of the other entities.
Mr. Snowbarger. Mr. Chairman, I cannot speak to all the
other rules that the Treasury Secretary has. I can speak to his
role as a board member for PBGC, and I can tell you how PBGC
interacts with that board. But I do not know anything more
about that. I do not know he----
Mr. Turner. I perceive it as a conflict. I think GAO will
perceive it as a conflict, as was stated. I think certainly the
people here today in this committee will.
Mr. Chairman, are you going to do a second round of
questions?
Chairman Issa. We will.
Mr. Jordan. Would the gentleman yield?
Chairman Issa. Following up on Mr. Turner, though, it is
impossible to have the Secretary, Secretary Geithner, not know
what you intended to do prior to your doing it. Well, it is
impossible for Secretary Geithner not to have the ability to
order moneys made available to General Motors. Well, it is
impossible for him not to have influence on the auto task force
as to what they might recommend or recommend to General Motors
that they should do.
That is an impossibility. There is no Chinese firewall
between Secretary Geithner, Secretary Geithner, and Secretary
Geithner, is that correct? [Laughter.]
Mr. Snowbarger. To my knowledge, no.
Chairman Issa. Thank you. Mr. Jordan.
Mr. Jordan. Thank you, Mr. Chairman. And I do have to leave
here after my questioning. I apologize. I got to run to another
meeting here in the Dayton area.
Mr. Snowbarger, you mentioned that you were totally
impartial when you initiated the termination of the Delphi plan
in the spring of 2009, this April to June timeframe. But the
first restructuring plan, to my knowledge, came out in February
2009. Is that not correct?
Mr. Snowbarger. The restructuring plan of which?
Mr. Jordan. General Motors. The overall restructuring plan.
Mr. Snowbarger. Again, we were not concerned with General
Motors.
Mr. Jordan. But that is not my question. My question is----
Mr. Snowbarger. I do not know. I do not know.
Mr. Jordan. The restructuring plan came out in February
2009.
Mr. Snowbarger. Okay.
Mr. Jordan. Right? Did you have a chance to look at that
plan?
Mr. Snowbarger. I did not, but I do not know if our
attorneys did or not. Again, we were not focused on General
Motors.
Chairman Issa. Your attorney is shaking his head yes.
Mr. Snowbarger. Maybe they did.
Mr. Jordan. So, PBGC looked at the plan, and in the plan
was the top up agreement was contained in the restructuring
plan in February 2009. So, before you made the initial
termination decision in the spring of 2009, you knew about the
top up plan being part of the overall new restructuring plan.
Is that correct?
Mr. Snowbarger. PBGC, I guess, was. When I made my decision
and when I signed off, it was not part of----
Mr. Jordan. Well, but you are PBGC, right?
Mr. Snowbarger. Well, I was the ultimate signer and the
ultimate decider about whether or not these pension plans
should be terminated.
Mr. Jordan. All I am trying to get at is you----
Mr. Snowbarger. And I am suggesting to you that that was
not a part of my rationale for signing off on that, on those
terminations.
Mr. Jordan. But it was common knowledge that that was part
of the deal, part of the restructuring plan, correct?
Mr. Snowbarger. I do not how to respond. I mean, common
knowledge? You know, it was a restructuring plan that fell
through as well.
Mr. Jordan. Okay.
Mr. Snowbarger. My decision was not made on the basis that
there were going to be top ups.
Mr. Jordan. Okay then, let me move on to this. When you
were dealing with the Delphi plan, who did you primarily deal
with? Was it General Motors, or was it the Treasury Department
auto task force?
Mr. Snowbarger. Delphi.
Mr. Jordan. You never dealt with General Motors at all?
Mr. Snowbarger. I am not going to say we did not talk to
General Motors because, again, they were a potential rescuer
for Delphi. If we could have found a sponsor that would have
carried on the pension plans after Delphi, then that is fine.
We do not care to take over pension plans when there is a
sponsor out there.
Mr. Jordan. I am just asking about this. When you dealt
with General Motors, was it General Motors or was it the auto
task force, or could you make a distinction?
Mr. Snowbarger. I think they were all in the room at the
same time when discussions were had.
Mr. Jordan. So, it is fair to say you were dealing with the
Treasury and auto task force.
Mr. Snowbarger. And Delphi.
Mr. Jordan. And Delphi, okay. And did it ever come up in
those discussions that General Motors or Treasury auto task
force when you were dealing with it, did it ever come up, did
they explain why they wanted the top up agreement to take
place, why they wanted that to be in place?
Mr. Snowbarger. I am not aware of that.
Mr. Jordan. And in those discussions when you were dealing
with GM, did it ever come up with why they were not going to
treat the salaried the same as they were going to treat the
hourly employees? Did that ever come up?
Mr. Snowbarger. To my knowledge, the only discussion about
top ups were related to the agreements that they entered into
in 1999.
Mr. Jordan. Okay. Mr. Chairman, I yield back. Thank you.
Chairman Issa. Thank you.
Mr. Austria.
Mr. Austria. Thank you, Mr. Chairman. Deputy Director
Snowbarger, I want to ask you about the Pension Benefits
Guaranty Corporation v. LTV Corporation case that PBGC won in
1990 in the U.S. Supreme Court. That case had very similar, I
think, facts to the Delphi pension termination. And when LTV
went through bankruptcy, it created an agreement with the steel
workers, which provided additional payments based on reduced
benefits that retirees receive through PBGC, and what the
retirees would have received if the plans had not been
terminated.
In that case, PBGC objected to the agreements as improper
follow-up on plans, and, in fact, one of the main reasons PBGC
has a policy against followup plans is because such plans
remove employee resistance as a significant check against
termination. Therefore, PBGC has sought to restore those
pension plans back to LTV, and the Supreme Court agreed.
So, I ask you why hasn't PBGC filed a similar lawsuit
against GM to restore the union pension plans based on top up
agreements? And, I mean, it seems that if this were to occur,
then all the windfall payments could be used to fund the salary
plan as a fully funded pension with full benefits.
Mr. Snowbarger. I think there are two significant
differences between LTV and Delphi. The agreements that we
opposed in LTV were in the context of the LTV bankruptcy case.
The agreements between GM and the unions were a matter of
contract between private parties.
The second major difference----
Chairman Issa. Private parties both in bankruptcy, right?
Mr. Snowbarger. No.
Chairman Issa. In 2005, both were in bankruptcy.
Mr. Snowbarger. What I am referring to are the agreements
that were made back in 1999.
Chairman Issa. Subsequently, both entities were in
bankruptcy.
Mr. Snowbarger. Yes, but they were not in a court setting
that PBGC had standing to be a part of complaining about those
particular agreements. In 1999, it was the spin off in a
private business setting where those agreements arose. In this
situation where the top ups, or, excuse me, where the
supplements were promised in LTV, that was still in a
bankruptcy setting where PBGC was still an active party to the
bankruptcy.
The second major difference between the two cases that you
gave me is that LTV came out of bankruptcy as LTV, and then
prospered and was able to take on those pension plans. That was
what we were arguing.
In this case, you have Delphi who is the sponsor of the
pension plans. They go into bankruptcy, and they did not come
out.
You are asking us to turn these pension plans over to
General Motors. General Motors does not have a legal obligation
to take over those pension plans. That was Delphi's
responsibility as of the spinoff of the pension plans to
Delphi.
Mr. Austria. Mr. Chairman, I would be glad to yield to you,
because I think a good point to make here is that were both
parties not in bankruptcy? Would you respond to that question
because I think that is a very important question.
Mr. Snowbarger. They were not in 1999 when the agreements
were made.
Mr. Austria. All right. Well, I know I have one other
question, we are short on time.
Chairman Issa. Please, go ahead.
Mr. Austria. We will get this on the second round because
it is important. But let me ask you this, Deputy Director
Snowbarger. You know, Delphi employees believe that prior to
termination, PBGC overestimated the pension liabilities and
under estimated the level of funding. Can you explain to the
committee, and I am interested in knowing what determinations
were made for the Delphi pension plans?
Mr. Snowbarger. Well, first of all, I want to caveat all
this by saying that that is part of the litigation that is
ongoing, so I would rather talk about it in general terms. From
what I have seen, and I have seen the Watson Wyatt report that
has been referred to. It is referred to as an adjusted funding
target attainment percentage. That is a formula specified in
the Pension Protection Act, or at least the parameters are set
out in the Pension Protection Act.
When PBGC tries to decide whether or not a pension plan is
funded sufficiently, we look at it as a termination liability
because we presume that if PBGC is interested and PBGC is going
to take it over, that plan is terminating and it is not going
on any further.
There are three major differences in the way we would
calculate things. One is the discount rate that is used. And,
again, one of the earlier people testified if you use a higher
discount rate, the liability is lower. We normally use a lower
discount rate than our use for ongoing pension funds.
A second is what do you consider the normal retirement age.
And our experience is when a company goes out of business,
people tend to retire earlier than if a company is staying in
business. And so, the assumed retirement age that we use is
probably lower than the one that was used by Watts Wyatt.
And the third thing is the value of the assets and the date
when you value those assets. My understanding is the Watts and
Wyatt report valued assets in the salaried pension plan as of
October 1, 2008, we valued them at January 1st or January 31,
2009. I do not think I need to tell the members of the
committee what happened between October 8th and January 2009.
There was a significant decline in the market and a significant
decline in the assets, and also a significant decline in the
interest rate. So, you have liabilities are going up at the
time assets are coming down, and a lower retirement age. And it
leads to the conclusion that we have that at termination, the
Delphi salaried pension plan was about 46 percent funded.
Mr. Austria. My time has expired. Thank you, Mr. Chairman.
Chairman Issa. We are going to do a second round.
You were there in 2008 and 2009. Is it not true that
everybody's pension plans enjoyed that same precipitous fall?
So, if I was at General Electric, or I was at General Motors,
or I was at dozens of Warren Buffet's various holdings, working
for the railroad, wherever I was, I probably had my pension
dropped by 25 or 30 percent, meaning it was at least 30 percent
underfunded. If it had been fully funded or the usual 90-some
percent in 2008 at that exact low point that you fund it. I
mean, virtually a lot of them, you could have gone to every
pension plan there was and said, boy, you guys are grossly
underfunded, could you not?
Mr. Snowbarger. Correct.
Chairman Issa. Okay. And nobody was forced to top up based
on a moment in time. I mean, and I am not trying to push you
beyond making sure we get the current law. Current law, you
mark to market on a date.
Mr. Snowbarger. Correct.
Chairman Issa. The reality, though, is had you been allowed
to anticipate those revenues over the life of an ongoing use of
those revenues, you would never have marked them to the current
value, would you? In other words, functionally those assets,
assuming that America did not go down rat hole and never come
back, those assets were worth a lot more in a relatively short
period of time because everybody knew this was a short term
disaster for which the American people were bailing out all
kinds of entities, knowing that good times comparatively were
coming back.
So, part of the problem for Delphi retirees, salaried
retirees, is you marked--statutorily I understand why you did
it. But you marked at literally the worst possible time for
valuation.
Mr. Snowbarger. We revalued by the time we had come to
June, and we continued to revalue as we find out what the
assets were actually worth at the day of termination.
The biggest problem for Delphi employees is that Delphi no
longer exists. There is no plan sponsor. So, you cannot really
assume an ongoing plan when there is no sponsor.
Chairman Issa. Now, I want to get back to that. First of
all, Mr. Austria makes the point better than I was making. Very
clearly, you had two entities in bankruptcy, and bankruptcy is
the wild west. Companies ask for relief any which they want to,
so there is no question, I think, in anyone on this panel's
mind or anyone here today. They could have absolutely reneged
on that 1999 agreement, and I assume your counsels have told
you that General Motors could have reneged on it, that they
could have sought complete relief. Is that correct?
Mr. Snowbarger. I think it is accurate legally, yes.
Chairman Issa. Okay. So, the idea that it was an obligation
just is not so. It was an obligation for which they could have
gotten relief.
Now, let me go through one line of thinking or two lines of
thinking.
First of all, could General Motors have been a sponsor at
amount less than 100 percent? Could they have taken both of
these plans, but had them taken at an adjusted amount and
having them transferred from Delphi back?
Mr. Snowbarger. I do not about the adjustment part. I think
we have concluded that they have could have taken both over
both of these plans.
Chairman Issa. And they could have taken--right. They could
have taken over at 100 percent, but to your knowledge, under
existing law, could they have taken them over at 90 percent?
Mr. Snowbarger. I do not believe they could. I believe
ERISA does not allow cutbacks by the sponsor of benefits that
have already been promised.
Chairman Issa. The sponsor was gone.
Mr. Snowbarger. Well----
Chairman Issa. Let me put it another way, because I want to
get to the forward looking. We will assume for a moment----
Mr. Snowbarger. I thought you were positive that GM was now
the sponsor, so I misunderstood this.
Chairman Issa. Okay. Right. What I want to do is I want to
go to two things. First of all, let us assume for a moment that
the company has gone. These two pensions have not been
terminated. General Motors walks in under current law and says,
we will take these, but we cannot have the anchor as great as
it is. We will take all the assets and we will agree to 80
percent or 90 percent, and Delphi says to the bankruptcy judge,
will you grant us that relief? Is that not available under the
law today, either bankruptcy law or ERISA, do you believe it
should be available to salvage a greater amount than these
salaried Delphi workers had salvaged when you took it over in
termination?
Mr. Snowbarger. I appreciate the comment of the chairman
earlier on that I am a career Federal employee. I do not have a
position on that issue. [Laughter.]
Chairman Issa. You are not getting away with that.
[Laughter.]
But nice try. I ask unanimous consent I have an additional
minute. So ordered.
You are a person who has the tools that you have. Would
that tool be, and this is where you may not be able to lobby
for it, but you do have an opinion on it. Would that tool be a
good tool for people in your position now or in the future to
have if it were made available by Congress?
Mr. Snowbarger. I think PBGC has taken the position before
that we wish we had more tools to keep plans out there for
participants. Currently, the major tool that we have is
threatening to terminate a plan. If you think that through,
that does not make a lot of sense for an agency that is
supposed to be promoting defined benefit pension plans.
Chairman Issa. Okay. So, we will take that as it is.
The goal here today obviously is to try to find out what
happened, and you have been helpful on that, and I want to
thank you for it. And I know some of the other Members have a
second round. But prior to adjournment, I will not be speaking
to either of you again.
I want to thank you for being here. As you said, you are
career professionals. You are limited to answering our
questions and not lobbying for, and I appreciate that. And I
want to thank you for being here and giving us your testimony.
And with that, I recognize Mr. Turner for a second round? I
am sorry----
Mr. Burton. It is okay. I am just sitting here. [Laughter.]
Chairman Issa. You know, Dan, I am going to call you Mica
if you are not careful. [Laughter.]
Mr. Burton. That is an inside joke, folks.
Chairman Issa. Former chairman?
Mr. Burton. Let me follow up. You said that nobody in the
administration had any influence on the decision that was made.
There was a meeting----
Mr. Snowbarger. Well, again, I have never quite understood
in the parlance here whether you are including us as a part of
the administration, or the executive branch.
Mr. Burton. Okay. Well, the executive branch includes
Treasury, does it not?
Mr. Snowbarger. Yes.
Mr. Burton. Okay. And Geithner and Mr. Bloom were part of
Treasury.
Mr. Snowbarger. Correct.
Mr. Burton. And they are also part of PBGC.
Mr. Snowbarger. Mr. Bloom is not.
Mr. Burton. Well, Mr. Bloom is not, but Geithner is. They
work together, do they not? They know each other.
Mr. Snowbarger. Not anymore, but, yes, they did.
Mr. Burton. What I am trying to find out is during your
telephone conversations and during the meetings that you had,
what went on? What was said by Treasury who also had a
tremendous amount of influence on PBGC. What did they say to
you? Did they say, hey, this is what we ought to do? I mean,
they went ahead and upped the pension for the union people, but
they did not for the salaried or hourly people. What went on?
What was said that made that decision?
And you told me earlier, you said, well, the administration
had no influence on the decisionmaking process. Well, Treasury
is part of the administration. Geithner is part of the
administration. Bloom is part of the administration.
I want to know what went on in the meetings that you had,
and what did they say? I mean, somebody said something about
helping the unions. Somebody said something about not doing it
for the hourly employees. And you were on the phone with them.
You were talking to them. So, what happened?
Mr. Snowbarger. Number one, let me explain that when I said
that they were not a part of the decision, the decision I was
referring was the decision about whether or not to terminate
the pension plans, which pension plans, the timing of that,
etc. That decision was solely done in PBGC by career employees,
as it turns out.
Mr. Burton. But Treasury is on the board, and Bloom is----
Mr. Snowbarger. They were not part of the decision. The
board is not a part of the decision.
Mr. Burton. Well, wait, wait, wait. What do you mean they
were not part of the decision? There are three people on the
board, right?
Mr. Snowbarger. The day-to-day operations of PBGC are
vested with the director of the corporation.
Mr. Burton. And so, they do not have any input on these
kinds of things.
Mr. Snowbarger. As a practical matter for the history of
PBGC, no, they have not. We have done that to avoid political
influence on those kinds of decisions.
Mr. Burton. That just mystifies me. I do not know how you
can have Bloom, who lied to our committee, and who also was an
executive for the steel workers union. He was one of the people
that was involved in this decisionmaking process.
Mr. Snowbarger. I met Mr. Bloom when we terminated a number
of steel plans, yes.
Mr. Burton. And Geithner, and I just do not understand how
they were not involved in the decisionmaking process. But you
said they were not, so I guess I will take your word for that.
Mr. Snowbarger. They were not.
Mr. Burton. Okay. You know, I am a stickler for people
being under oath. When Mr. Bloom testified, he said he did not
say things, and we proved that he did and he recanted. So, it
is very important that you remember because we are going to
pursue this.
Mr. Snowbarger. Like I said, I was the ultimate
decisionmaker on whether or not to terminate these plans, and
Mr. Bloom did not talk to me about them, and Secretary Geithner
did not either.
Mr. Burton. None of these meetings on the phone or anything
else. There was no influence exerted by Treasury or by the
administration.
Mr. Snowbarger. No. I think we communicated with them that
we thought we were going to have to terminate those plans, if,
in particular because there was no sponsor.
Mr. Burton. What did they say when you communicated that to
them?
Mr. Snowbarger. They normally did not respond back to me.
Mr. Burton. They did not say anything. They just listened.
Mr. Snowbarger. For most of the conversations, I think that
is correct.
Mr. Burton. Thank you, Mr. Chairman.
Chairman Issa. If the gentleman would yield.
Mr. Burton. I will yield to you, sure.
Chairman Issa. I just want to review for the record,
Secretary Geithner knew you were going to terminate the plans.
Secretary Geithner, through the TARP, his control of General
Motors and the task force, made sure that the union workers
were made whole in the termination, while Secretary Geithner,
informed of the termination, allowed the salaried workers to be
terminated with 30 to 70 percent loss by not topping it up or
taking steps to have them made whole.
Clearly, Secretary Geithner was aware of this at all times,
and had the power and influence to change that.
Mr. Snowbarger. I can talk to you about what influence he
may have had in the decision on PBGC side of things. I cannot
tell you what decisions were made on the auto task force side.
Chairman Issa. Following up, Secretary Geithner left you no
choice but to terminate as a result of Delphi not being viable,
General Motors not taking it. And the losses experienced by the
salaried employees and retirees of Delphi is the result of his
not taking steps to make them whole, while clearly steps were
taken to make the union employees whole. That is your
observation, even though your decision, you had no choice.
Mr. Snowbarger. Mr. Chairman, that is not my observation.
That is your observation. All I can talk to you about is the
decision that PBGC made, what went into those decisions. And
the only part of that that goes into that decision was there
was no plan sponsor going forward.
Chairman Issa. Thank you.
Mr. Snowbarger. The plans were basically abandoned.
Chairman Issa. Mr. Turner.
Mr. Turner. Thank you, Mr. Chairman. I just want to know
one thing for the record with respect to your answer on the LTV
case. I understand that you are saying that the agreements for
General Motors from 1999 predated the bankruptcy. They were not
top up agreements that were made in bankruptcy. But to buy your
argument that there were parties that made an agreement in 1999
is to assume that the parties that were in the bankruptcy were
the same. I mean, we do not buy, and no one in this room buys,
that there was independent General Motors in that bankruptcy.
That bankruptcy had new parties. The new party was the Treasury
Secretary, and that is how it becomes like the case that Mr.
Austria is citing of the LTV because it is not this independent
decisionmaking of affirming this. There is not only this new
party, but it is the government, and that is why everyone is so
particularly disappointed and upset.
And I want to turn to the issue on the liens because part
of the concern that everyone has is, you know, the valuation of
assets, but also the termination of the plan, but also what
happened with respect to liens.
Now, in your written testimony, you indicate that Delphi
entered bankruptcy in October 2005, and that they failed to
make the required minimum funding contributions to the plans,
so as a result liens were triggered, and that PBGC perfected
those liens in March 2006.
In your November 9th answers to me from the June 22nd
questions, you indicate when the plan was terminated, PBGC had
perfected $195.9 million in liens for the benefit of the
salaried plan due to Delphi's failure to make statutory
required minimum funding contributions. You did say, which is
what confuses me, this was the largest lien amount that PBGC
could assert under the law because a secured interest exists
only to the extent there is a debt. It is underfunded; they
clearly were not during that period making payments.
Is it really your testimony that from the period of October
2005, where PBGC went into bankruptcy, up to the point of plan
termination, that there was no additional opportunities for the
PBGC to assert liens? And we know, by the way, that those liens
were largely against foreign assets that had their value. I
mean, did you have----
Mr. Snowbarger. That is correct.
Mr. Turner. You had no additional time period from October
2005 until plan termination to assert any additional liens.
Mr. Snowbarger. Yeah. There are only certain events that
give rise to liens, and we file the lien every time one of
those events occurred. And it normally is missed contributions.
I think I am not sure they were actually liens. We also
received, I guess that was letters of credit on the waivers
that were given by Treasury for funding contributions. But we
did receive those back. PBGC does not receive any of these, by
the way. It goes into the plan.
But, no, there are only a limited amount of circumstances
that allow us to file a lien. And the lien is not for all of
the underfunding. It is for the amount of the contribution that
was missed.
Mr. Turner. And you are saying that during that time
period, all the way up until termination, you were dealing only
with the liens that you had placed, and that was on the foreign
assets going into the settlement.
Mr. Snowbarger. Yeah. Let me expand that just a little bit.
And I think this is correct, and we will correct if it I am
wrong. But I believe there were other liens that were filed on
behalf of the hourly plan, and when GM took over half of the
hourly plan, as Ms. Bovbjerg indicated, I believe those liens
expired at that point. So, the only liens we are talking about
here is, what, it is about $195, $196 million for the salaried
plan, and I think there was another smaller amount of liens for
some of the other smaller plans. But in terms of the large
salary plan, there had been liens, but those were satisfied
when GM took over the first half of the hourly plan, as they
had agreed to.
Mr. Turner. As you went into the settlement negotiations,
you had the liens that had been in place. You relinquished the
liens in part for unsecured debt and payments.
As part of the FOIA request, as part of the whole process
that the Delphi salaried retirees have requested is that these
settlement negotiations, what had been said, the documents that
had passed between parties, be made public. The settlement is
over. This certainly is an issue that has taxpayers' dollars.
How the settlement proceeded should be both a discoverable item
in Federal court, but also should be released with respect to
FOIA.
As we heard from those that had testified, when they have
made their requests under Freedom of Information, they get
pages that look like this. Governmental pre-decisional,
attachment deleted, 34 pages. I mean, the government is not
telling the taxpayers, part of which were the Delphi salaried
retirees who had their retirements reduced, what were those
settlement negotiations, and what was on the table, and who was
saying what, and who told who to do what.
I do not understand, and I would like you give us, as you
said, you know, you are the decider. Why isn't this information
being released? This is public information about public
taxpayers.
Mr. Snowbarger. I think all the documentation that was
requested pursuant to FOIA has been produced, with the
exceptions that are allowed by FOIA, with the exceptions that
are allowed by FOIA.
Mr. Turner. Okay. Now, let us emphasize that word,
``allowed by,'' which means that you are exercising discretion
to hold the documents back. It is not required by FOIA. You
have the ability under FOIA to fully comply and release the
documents. Will you?
Mr. Snowbarger. That is a matter under litigation, and
when----
Mr. Turner. No, no, no, it is not under litigation. The
FOIA request is not, the subject matter is. You have the FOIA
request. You know you have the discretion to release the
documents. I personally believe, like this panel believes, that
this is taxpayers' dollars that were handled here. These
retirees deserve an answer. Will you release the documents?
Mr. Snowbarger. Well, let me make clear, PBGC does not
operate on taxpayer dollars. I understand you are not drawing a
distinction between the amount of money that came from TARP and
what PBGC does, but PBGC does not receive taxpayer funding.
Second part is, as long as this is a matter of litigation,
I will stay with the decisions that we have made thus far.
Mr. Turner. Well, I think that is wrong. I mean, I think is
it wrong that you not be held accountable in the decisionmaking
that you had. This was a heavily taxpayer subsidized
transaction in the General Motors and Delphi bankruptcy. These
individuals have been significantly impacted. I thank the
chairman for his push to make you give him the documents so he
can make the decision as to whether or not they be released.
But you should be releasing those documents.
Chairman Issa. Mr. Austria.
Mr. Austria. Thank you, Mr. Chairman. And I would just
follow up to what Mr. Turner was saying as far as the
transparency here. I mean, if we want a level playing field, so
to speak, and we want to make sure that things are done right,
then there should not be any reason there should not be full
transparency.
But let me go back to this valuation of the level of
funding. And I agree with the chairman, the timing--and I think
you might acknowledge, is the timing in which that valuation
was done was when the markets were down. And what was the
funding level that you valuated the pension at that time?
Mr. Snowbarger. A specific dollar amount?
Mr. Austria. Or percentage, whatever.
Mr. Snowbarger. Again, when we did our initial review of
this, it was about 46 percent funded.
Mr. Austria. About 46 percent funded. Okay. Let me ask you
this. When you did the revaluation, what was the difference?
Mr. Snowbarger. There wasn't a lot of difference.
Mr. Austria. There was not a lot of difference? There was
not a lot of difference?
Mr. Snowbarger. It was still below 50 percent.
Mr. Austria. Now, let me ask you, because I am looking at
some information here. It shows that the average funding level
for the top 100 pension plans in 2009 was 81 percent, and that,
again, and you made reference to it, there were two independent
actual firms that analyzed DSRs pensions and determined that it
was actually 86 percent funded.
Those are big differences. I mean, can you further
elaborate and give us your thoughts as to why we have such big
differences other than the timing of when you valuated it?
Mr. Snowbarger. If one is calculating the funded percentage
for an ongoing plan, that means there is going to be a sponsor
at the end of the day. There was not going to be a sponsor
here. Therefore, PBGC evaluates the funding of the plans on a
termination basis, and, again, on a termination basis, we use
an interest factor that is derived from the annuity markets. We
use a retirement age that reflects our experience that people
retire when their employers go out of business. They retire
earlier. And we use mark to market on the value of the assets.
Mr. Austria. Well, it seems to me that, again, we are going
back to transparency here as far as--and I appreciate you
disclosing this now because it is important that we understand
how you evaluate these pension plans. But when we look at the
average level of the other, you know, top 100 pension plans in
2009 and how they were valuated, it does not seem like we are
comparing apples to apples.
Mr. Snowbarger. Well, Congressman, we are not. We are not.
Those are ongoing pension plans. Those sponsors are still out
there. They are still viable entities. To the extent they are
not a viable entity and they underfunded in the same way that
these plans were, then we look to terminate those. You are
talking about the funding of all pension plans, and, again, not
all plan sponsors are in financial difficulty. Delphi was not
only in financial difficulty, it went away. It is no longer
there. It does not exist.
Mr. Austria. What was the revaluation as far as with this
plan?
Mr. Snowbarger. I would have to check. I do not know what
the latest valuation is on that. But it would go toward the
benefits that are paid to participants.
Let me put it this way. We have certain limitations, and I
believe one of the earlier witnesses testified to the
limitations by law that are placed on us. There are times when
we can pay above those limitations for a certain limited group
of people. That is for people that have retired or could have
retired 3 years prior to the termination date. So, that goes
back to could have retired in 2006. They fall under the
category called priority category 3, and I very frankly could
not go through the exact calculations of how you get there. But
it is possible that if assets are sufficient, we can pay
benefits above guarantees for those folks. But we will just
have to wait and see what the ultimate valuation is of the
assets. And that is ongoing.
Mr. Austria. Thank you, Mr. Chairman.
Chairman Issa. I am going to take two chairmen
prerogatives. First, Mr. Turner is going to close the hearing.
And, second, I am going to renege on I have asked my last
question. [Laughter.]
Because I think there are two things I want to make clear.
I serve on the company that I founded when it became public,
and our stock traded below certain minimums, and
PriceWaterhouseCooper came to us and said, oh, by the way,
because your stock is trading low, because people do not
appreciate its going concern value, its actual earnings, we are
going to make you take $100 million write down on your good
will. And I never understood it. I never agreed with it. But
the SEC and GAP and so on, they could do that.
I will never agree that you have to diminish somehow an 80
percent to a 60 percent or a 50 percent for the difference
between the two without at least stating that as a going
concern, there was 80 percent.
And the reason simply is that if we continue to allow you
to do that, then pensions need to be funded at 120 percent.
They need to be funded as though the entity is not going to be
a going concern. And, by the way, it is not just General
Motors; it is the State of California. It is an awful lot of
other groups, because sovereigns can default, and if they
default, then you are stuck with the assets you have.
So, I think that is an area that this committee and
Congress needs to look at is to beg the real question of, if
you are correct, not as to the early retirement because I think
there is a little bit of wiggle room there, but as to these
other diminishments of the amount, then to be honest, 85, 90
percent just is not enough. And it is not enough because
ultimately we need to be protected, or we need to protect those
people who rely on these pensions at a level that if the
company defaults, or if anyone defaults, the pension is going
to be able to pay substantially close to what was promised and
not end up where these people did, or, for that matter, the
United Airlines pilots and flight attendants who today, and I
will use the word ``enjoy'' in a terrible way, enjoy the same
kind of same kind of diminishment that the salaried workers for
Delphi do.
Let me ask you one last question, and you can respond for
the record if it requires more counsel than you have here
today. Most of these workers contributed most of their money as
General Motors employees. And none of these workers got a real
say in being spun off. If they cannot claw back to the parent
entity, if they cannot demand that 70, 80 percent of their
retirement, which was really GM retirement, be able to go back
to GM, which is still around, then do we not open everyone to a
situation, not one in which there was a legitimate spin off
that was intended to work, but to a spin off that would be just
absolutely designed to do in their existing retirees? Because
ultimately anybody could say, well, I am going to spin off a
subsidiary, and I am going to spin off this, and I am going to
make it all sound good, but I am basically after 2 years going
to quit buying from that subsidiary that I set up, and it is
going to go bust, and they are just going to be screwed, to use
that technical word again. [Laughter.]
Doesn't Congress have an obligation to ask, should they not
be able to claw back to the parent, which they were taken away
from involuntarily, or some other remedy that would prevent
this from happening in the future, which I believe you are
going to say does not exist in the law today.
Mr. Snowbarger. Well, it does not exist in the law today,
but PBGC watches those transactions all the time. And if we are
concerned that the pension plans are either being transferred
to a spin off that will not be able to sufficiently fund that,
or if they see that the assets of a company are being spun off
leaving the pension behind, we try to intervene in those
transactions and stop them or make sure there is some kind of
protection for the pension plans.
Chairman Issa. But is it not true, both in the case of
Delphi and Visteon, the Ford spinoff, that their entire
viability was dependent upon continuing the tier 1 suppliers at
substantially the same revenue as they had been when they had
been part of General Motors or Ford. I mean, basically that was
always the case is their viability. The Delphi, and I bought
from Packard Electric and some of the other divisions for my
company.
But the fact is, 90-some percent of their revenues was
father to child kind of thing. So, when you did that
evaluation, weren't they completely dependent upon the success
of General Motors continuing to buy, and isn't that really why
the unions had the 1999 agreement that required General Motors
to protect them for an indeterminate period of time while the
salaried workers did not get the same?
Mr. Snowbarger. Well, it was also the fact that their plan
was underfunded when the spin off occurred.
Chairman Issa. But under your calculations, they were both
underfunded.
Mr. Snowbarger. No, I have not made any comment about what
the funding status was of the salaried plan in 1999.
Chairman Issa. Well, but----
Mr. Snowbarger. And that is the time period I am referring
to when the spinoff actually occurred.
Chairman Issa. Yeah, but today you gave testimony that
shows if you are fully funded and if the fit hits the shan, you
are going to, in fact, be underfunded by 30 percent or more. I
mean, the fact is they were underfunded if Delphi did not
remain a going concern, and Delphi's going concern was
completely linked both to General Motors' continuing to be
viable and General Motors choosing to continue buying. So, they
were in a precarious position in 1999, and that is why the
unions, on behalf of their portion of the work force, demanded
something. Shouldn't that have been a red flag to your role or
your entity's role that if the union needed it, why did the
salaried workers, the people who had less power to negotiate,
why did they not need the same guarantee?
Mr. Snowbarger. I have no response.
Chairman Issa. I now turn the gavel over to Mr. Turner.
Mr. Turner [presiding]. I did not want our chairman to
leave because obviously one of the things that I want to do is
to thank him.
Chairman Issa. You are the chairman.
Mr. Turner. Well, I appreciate that.
Mr. Chairman, if you had not held the prior hearings that
we have had, or, Chairman Jordan, the subcommittee under your
committee having had inquiries in this and hearings, we would
not know as much as we even know today.
But thank you for coming here, for having this hearing.
Thank you for granting my request for these retirees to have an
ability to speak with you, and for this issue to gain
additional light. I think we have learned a couple of things,
one of which is the fact that the administration was in on all
sides of this deal. But the second thing, which I want to thank
you for, is that we have learned that, you know, PBGC has the
ability to release these documents, is exercising discretion
under FOIA. Some of those documents have been or will be
released to this committee, and I know you are going to be
reviewing the issue as to what of those the committee might
under its own guise make public that PBGC chooses on their own
accord not to.
So, thank you for your consideration of that, and thank you
for being here today. And thank you for being in Dayton, OH.
Chairman Issa. Well, thanks for inviting me.
[Applause.]
Mr. Turner. With that, the committee stands adjourned.
[Whereupon, at 12:27 p.m., the committee was adjourned.]
[The prepared statement of Hon. Dan Burton and additional
information submitted for the hearing record follow:]
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