One of the questions that continues to haunt the big three auto makers, particularly GM, is what would happen to unfunded pension liabilities if the automaker were to enter into bankruptcy proceedings.
Under a regulatory provision introduced by the Rae government, GM was allowed to underfund its pension plan, or "fund it as a going concern" (not!) in return for contributions to Ontario's Pension Benefits Guarantee Fund. It currently contributes a laughable $5 million per year to a fund that already has a deficit of $102 million. This fund would guarantee $1000 per month to retirees if GM were to fail, also a laughable amount. It would, however, cost the fund billions, not a laughable amount, which the Ontario government would have to backstop.
Even with the historic concessions on pensions made yesterday by the CAW (without the consent or retirees), this continues to be a sword hanging over the head of GM and in fact all Ontarians.
Is this perhaps the chief motive behind the provincial government's willingness to provide massive assistance to the auto makers?
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