UK - Over 40,000 UK scheme members face "devastating" cuts to their benefits following the collapse of US auto-components manufacturer Federal Mogul.
Federal Mogul, which has filed for Chapter 11 bankruptcy protection in the US, is trying to restructure itself in order to survive. Its 2004 first quarter results revealed a combined liabilities and shareholder deficit of $8.1bn (£4.4bn) with the firm posting a loss of $20.4m (£11m).
In the UK, Federal Mogul runs the £1.2bn T&N Retirement Benefits Scheme, which has 4119 active, 15,474 deferred and 21,206 pensioner members. However, lawyers say that as T&N is one of Federal Mogul’s unsecured creditors, it is not guaranteed any additional cash.
They also say that T&N’s problems are compounded by the fact it has “enormous“ funding problems. One of the lawyers acting for the unsecured creditors in the UK said: “Depending on what happens, the results for members will be quite devastating.”
The UK administrator of Federal Mogul – Kroll Buchler Phillips – says that it is having talks with the company, T&N’s independent trustee and other creditors about the scheme’s funding levels, but declined to reveal any further details.
A Kroll spokesman said: “We can confirm that there are ongoing discussions between Federal Mogul, the other plan-proponents of the US Chapter 11 restructuring plan, the independent trustee and the administrators concerning the future funding of the scheme, which is currently funded to MFR but has a buyout deficit.
“Until these discussions are complete it would be inappropriate to draw any conclusions about the scheme. The T&N pension scheme is funded to meet regulatory requirements under the minimum funding requirement and Federal Mogul continues to meet these obligations.”
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