More Auto Sector Pensions

The New York Times has further news this morning on the fate of auto sector pensions as first Chrysler and then possibly GM head into bankruptcy protection. Key quote . . .

For hundreds of thousands of retired auto workers, a federal pension takeover would mean sharply reduced benefits. For the federal agency that insures pensions, it would mean a logistical nightmare in the short term — and most likely a slow demise eventually as fewer and fewer small plans remain in the system and pay premiums.

So far, the prospect of a grueling grind through bankruptcy court has been a major deterrent to companies that might want to rid themselves of pension obligations. But retirement and labor specialists are watching closely to see whether the administration’s auto task force will give either of the auto companies an easier way to shed their huge pension funds, blazing a simplified trail for others to follow.

With or without a bankruptcy filing, the government is quietly making the preparations that would be needed to take over Chrysler’s pension plan, with its 255,000 participants, according to government officials.

Even if Chrysler manages to strike a deal to sell many of its assets to Fiat, perhaps in conjunction with a bankruptcy filing, experts doubt Fiat will agree to take on its pension plan without extraordinary assistance.

It is difficult to imagine the Canadian operation of Chrysler facing a different fate. And if the backing of Chrysler pensions falls to government, how will the responsibilities be apportioned between feds and the province. The McGuinty government's easy assurances are starting to ring ever more hollow.