US - Delphi has made no decision to terminate pension plans, despite speculation to the contrary, said Delphi chairman and CEO Robert Miller (pictured). The automotive parts giant has a pension deficit of about US$5bn and there has been heavy speculation that the company's filing for Chapter 11 bankruptcy would mean automatic termination of the plans, which Miller strongly denies.
“I have been involved in a leadership position in about ten corporate restructurings…and half of them involved Chapter 11,” he said. “Usually, the pension plans survived intact.”
“At Delphi, we have made no decision to terminate our pension plans. The big question will be whether we can formulate a plan of reorganisation over the next few months that can generate sufficient capital to support continued efforts to restore funding of the plans.”
Miller highlighted a number of key requirements for such a reorganisation plan to succeed. Firstly, Delphi’s labour agreements need to be modified such that the company has profit margins sufficient to repay the pension plan shortfall out of future years' profits.
This would put the unions in the difficult position of perhaps having to make trade-offs between maximising the pay and benefits for active workers versus maximising the chances for saving the pension plans, said Miller.
“It is a calculus made infinitely more complex by GM contingent benefit guarantees for our retiree benefits. Secondly, we need to keep key customers confident in the future viability of our business.”
Miller said Delphi would probably require some flexibility as to its required PBGC funding schedule.
Finally, it would have to convince creditors in its bankruptcy case that Delphi should reorganise in a way that holds the PBGC harmless, he said.
“[It’s a] tough assignment. The jury's out as to whether we'll succeed.”
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