U.S. automakers and suppliers have come back from the edge of pension crisis, thanks to a resurgent General Motors Co. Adding relief to the high deficit pension insurance program.
Pension plans did not collapse at bankrupt companies as feared due to recession. Following GM, who assured investors of funding those accounts, more companies are maintaining their pension plans.
According to a spokesman for the Pension Benefit Guaranty Corp (PBGC), Jeffrey Speicher, the economic recovery allows for fewer pension terminations, including the auto sector.
Prospects for PBGC, the agency that insures corporate pensions for 44 million workers and retirees, looked bleak in 2008 and 2009, as the risks of future losses were tripled due to recession.
With GM and Chrysler on brink of bankruptcy, and many suppliers insecure because of the situation big carmakers were in, the auto industry gave a serious headache to PBGC.
The failure of pensions in auto industry would have affected the PBGC’s deficit and the retirees, many of whom would have seen a sharp cut in benefits.
The bail-out and restructuring of GM and Chrysler has bore fruit with great outlook in sales and profits.
While Delphi Corp defaulted on pensions in bankruptcy, other suppliers like Accuride, Lear Corp, and Mark IV LLC, and Cooper Standard, kept plans alive by negotiating with PBGC.
One of Ford Motor Co’s biggest suppliers, Visteon Corp, thought of ending three of its four plans, which would have had a 500 million dollars negative impact on PBGC bottom line. Before emerging for Chapter 11 in October, Visteon said it would not terminate the plans.
Both GM and Chrysler have large pension shortfalls and the ability to close these gaps depends upon future profits and investments.
Eliminating concerns of investors over pensions was the main priority of GM executives at the initial public offering.
