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Obama administration favored union worker pensions in GM bailout, House Republicans say

The administration gave union employees of auto parts supplier Delphi Corp. preferential treatment over nonunion, salaried employees when the U.S. took over Delphi's pension plan, GOP representatives say.

June 23, 2011|By Andrew Seidman, Los Angeles Times
  • A GM worker checks out a 2011 Chevrolet Volt at a factory in Hamtramck, Mich.
A GM worker checks out a 2011 Chevrolet Volt at a factory in Hamtramck, Mich. (Paul Sancya, AP )

Reporting from Washington — House Republicans lashed out at what they called preferential treatment the Obama administration gave to certain union pensions in the bailout of General Motors Corp. during the 2008 financial crisis.

During a subcommittee hearing Wednesday, Republicans accused the administration of favoring union employees of Delphi Corp., the largest U.S. supplier of auto parts, and leaving many nonunion, salaried employees empty-handed.

The government took over Delphi's pension plan during the company's reorganization in Bankruptcy Court. Roughly 21,000 salaried employees lost up to 70% of their pensions, as well as life and health insurance.

"The administration picked winners and losers where the pensions of many salaried Delphi workers were lost. This was done without any justification," said Rep. Michael R. Turner (R-Ohio).

Delphi was spun off from GM in 1999 but maintained its supply relationship and an agreement that three unions, including the United Auto Workers, would be compensated by GM in the event of a Delphi bankruptcy.

The agreement stipulated that GM would make whole, or "top up," the remainder of the pensions not covered by the federal government. GM made no such agreement with salaried employees.

At the time, the administration instructed the Treasury Department's Auto Task Force to ensure "that all stakeholders were treated fairly and received neither more nor less than they would have simply because the government was involved."

Republicans asserted that the task force did not uphold that standard.

The alternative to cutting pensions was liquidating the company, said Ron Bloom, former senior advisor to the Treasury secretary who served as one of the administration's principal architects in restructuring the auto industry.

"These two companies came to the government in a state of insolvency," Bloom said. "Unfortunately, what that means is that they simply had made more promises to people than they were able to honor."

Republicans proceeded to criticize Bloom for his role in what they called "politically motivated" actions. Rep. Connie Mack (R-Fla.) attacked Bloom's credentials, going as far as to say that Bloom, a longtime champion of unions, didn't believe in the free market.

Even union representatives have sided with the nonunion employees. Ron Gettelfinger, former president of UAW, has said that the government's actions constituted a "grave injustice."

But Michigan Democratic Party Chairman Mark Brewer released a statement denouncing the GOP for holding the Obama administration accountable for the plight of the Delphi workers.

"Shame on Republicans for wasting taxpayer money to find out what all of us in Michigan already know: It was President Obama who made the tough political decision that helped turn around the U.S. auto industry," Brewer said.

andrew.seidman@latimes.com

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