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Ertman, 61, of Birch Run, was a foreman at General Motors Corp. until 1994 when her plant in Three Rivers was sold to American Axle. At that time, Ertman recalls, both companies said they would share the cost of her pension. But when Ertman retired in 2003, she noticed something unusual.
The monthly checks she had expected to come from GM instead came from Delphi.
"I never worked for Delphi," Ertman said.
When GM spun off Delphi in 1999, it moved the pensions of Ertman and scores of other American Axle salaried workers to Delphi. Now, Delphi has been in bankruptcy for nearly three years and is struggling to emerge.
Throughout the case, Delphi Executive Chairman Steve Miller has vowed to protect the company's pensions. But the government recently has raised questions about whether Delphi will be able to move forward on its strategy to keep its pension plans.
Delphi expects to move some of its hourly pension obligations -- not salaried retirees' pensions -- to the over-funded pension plan at GM, which is fighting for its own financial health in North America, having lost almost $70 billion in the last 3 1/2 years.
Pension experts say GM's decision years ago to move part of its pension plans to its Delphi spinoff is legal.
In Delphi's case, if the company terminates its plan and hands its obligations to the government, some retirees would see no change, though others could miss out on part or all of their step-ups in payments and early-retirement supplements.
Ertman and others in her situation say it's unfair that their pensions are wrapped up in the bankruptcy case of a company for which they never worked.
"A lot of good people who have retired have a lot of stress over this," she said.
Delphi takes over
At first, many retirees wondered why their checks were coming from Delphi, but didn't worry too much about it. Then in October 2005, they received letters about Delphi's bankruptcy filing.
The letter said there was a risk that Delphi could fail to make its pension payments and would have to hand those obligations to the Pension Benefit Guaranty Corp., a quasi-governmental agency that monitors pension plans and steps in when companies can't pay,
Alarmed by this risk, Ertman and other retirees talked to lawyers and made several trips to Washington, D.C., to talk to federal officials and politicians only to learn that there was nothing they could do to move their pensions back onto GM's books.
That's because GM's move was legal, pension experts say. Pension laws keep companies from creating shell companies and spinning them off to unload pension debt, said Andrew Stumpff, a pension expert and lecturer at the University of Michigan Law School.
That was not the case at Delphi.
In 1991, while Ertman was working at GM's driveshaft plant in Three Rivers, the automaker established a parts subsidiary called Automotive Components Group Worldwide. That subsidiary included Ertman's plant as well as four others that were sold in 1994 to the investor group that formed American Axle.
Fast forward to 1999, when GM spun off Delphi.
The supplier took on pension obligations not only for salaried workers at its operations, but also for salaried workers at some of the parts plants that GM sold or closed before the spinoff -- including those at American Axle. In May 1999, the companies also notified workers about the pension transfer.
"These things are regulated, but they're regulated by only a few blunt tools under the pension laws," Stumpff said. "It's difficult to imagine that any of those were violated at this point."
Pension shuffle
Delphi says it currently pays part or all of the pensions for 160 salaried employees who had worked for GM's parts subsidiary, but not for Delphi because their plants had been sold or closed.
Ertman said she has contacted nearly 300 American Axle retirees and current employees who moved from GM to American Axle and received letters warning that their pensions were at risk in Delphi's bankruptcy.
In April, with much of its restructuring complete and several billion dollars in financing lined up, Delphi had planned to leave bankruptcy protection. But that exit was put on hold when hedge fund Appaloosa Management LP, which planned to buy $2.5 billion in Delphi stock, dropped out of the deal.
Meanwhile, the company faces a deadline at the end of next month to have GM take on $1.5 billion of Delphi's pension debt, nearly slashing in half its $3.3-billion shortfall.
Earlier this month, the Pension Benefit Guaranty Corp. expressed concern that there are no signs that the transfer is under way.
Negotiations continue among Delphi, GM and stakeholders in the supplier's bankruptcy, Delphi spokesman Lindsey Williams said.
"Our plan all along has been to maintain and fund our pension obligation," he said.
If that transfer doesn't take place by Sept. 30, when new funding rules kick in, Delphi could face high pension obligations, making it tougher to pay down its pension debt when it emerges from bankruptcy and raising the risk of default.
The PBGC, which has taken on the defaulted pensions of United Airlines, automotive plastics supplier Collins & Aikman and retailer Jacobson Stores among others, caps payments to retirees depending on their ages when a company terminated its plan. The agency also may not pay increases that a company has promised retirees or pay supplements aimed at tiding retirees to the age of 62 when they become eligible to receive Social Security.
Those rules likely mean that Steve Gillihan, 55, who worked for GM and American Axle for 32 years, would see a cut in his retirement check if Delphi defaulted on its pension.
"I don't want a handout," said Gillihan, from his home in Bradenton, Fla. "I want General Motors to pay my pensions like they told me they were going to do."
Contact JEWEL GOPWANI at 313-223-4550 or jgopwani@freepress.com.
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