GM Bankruptcy and Pensions

As General Motors moves inexorably toward bankruptcy in both Canada and the U.S., the pension plan picture is becoming clearer. As the Globe and Mail reports, it seems that labor concessions and loans from the federal and provincial governments will contribute about $2 billion each to the shortfall. GM will then have six years to make up whatever shortfall remains. And workers' pensions will be preserved.

The larger question for me is how we ever got here. A defined benefit pension is a contract which, in order to be honored, must be adequately funded. Ontario's very own social democratic Rae government cut a sweetheart deal with the auto sector in the early 1990s that allowed deficits in return for modest contributions to the provincial fund that guarantees pensions. But surely they never envisioned deficits of this magnitude.

In the wake of this debacle, surely there is a need for careful regulation of private sector pension plans, particularly those of large corporations.