PBGC to assume Delphi pension plans; agency eyes trustee status

By Caroline Salls

Pittsburgh, July 22 - Delphi Corp.'s pension plans will be assumed by the Pension Benefit Guaranty Corp., which will also take action to become trustee of the plans, according to a PBGC news release.

The PBGC said the process for becoming trustee of the plans, which cover 70,000 Delphi workers and retirees, could last up to several months.

The agency said it is stepping in to protect the Delphi pensions because the company cannot afford to maintain its pension plans, and General Motors Corp. has said it will not assume them.

Since Delphi filed for bankruptcy in 2005, the PBGC said it has worked intensively with the company, GM and other stakeholders to keep the pension plans going.

The PBGC said GM took on $2.5 billion in liabilities of the Delphi Hourly Plan in September 2008, and until its recent bankruptcy, GM had been expected to assume the entire obligation for the hourly plan.

According to the release, Delphi sponsors six defined benefit plans for its workers. The Delphi Hourly Pension Plan covers 47,000 participants and has about $3.7 billion in assets and more than $8 billion in liabilities, according to PBGC estimates. The PBGC expects to be responsible for about $4 billion of the plan's shortfall of nearly $4.4 billion.

The Delphi Salaried Pension Plan covers about 20,000 workers and retirees, and has $2.4 billion in assets and liabilities of $5 billion. The PBGC expects to be responsible for about $2.2 billion of its estimated $2.6 billion in underfunding.

In addition, the agency said it will be responsible for $50 million in underfunding of four smaller Delphi plans with 2,000 participants, including the ASEC Manufacturing Retirement Program, Delphi Mechatronic Systems Retirement Program, Packard-Hughes Interconnect Bargaining Retirement Plan and Packard-Hughes Interconnect Non-Bargaining Retirement Plan.

The PBGC will pay pension benefits up to the limits set by law. In 2009, the maximum benefit for a 65-year-old is $54,000 per year.

Until the PBGC becomes trustee, the pension plans will remain ongoing under company sponsorship.

Claim settlement

According to an 8-K filed with the Securities and Exchange Commission, Delphi has agreed to grant the PBGC a $3 billion general unsecured claim in settlement of the agency's various claims against the company.

The company said the PBGC will receive additional consideration from GM.

The settlement is subject to bankruptcy court approval.

Delphi, a Troy, Mich.-based automotive electronics manufacturer, filed for bankruptcy on Oct. 8, 2005 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 05-44481.

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