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DELPHI PENSION FALLOUT: FEDERAL GOVERNMENT PICKED WINNERS AND LOSERS, SO WHO

WON AND WHO LOST?

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

FIRST SESSION

NOVEMBER 14, 2011

Serial No. 112–106

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.house.gov/reform
(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA, California, Chairman

DAN BURTON, Indiana

JOHN L. MICA, Florida

TODD RUSSELL PLATTS, Pennsylvania

MICHAEL R. TURNER, Ohio

PATRICK T. MCHENRY, North Carolina

JIM JORDAN, Ohio

JASON CHAFFETZ, Utah

CONNIE MACK, Florida

TIM WALBERG, Michigan

JAMES LANKFORD, Oklahoma

JUSTIN AMASH, Michigan

ANN MARIE BUERKLE, New York

PAUL A. GOSAR, Arizona

RAU ́ L R. LABRADOR, Idaho

PATRICK MEEHAN, Pennsylvania

SCOTT DESJARLAIS, Tennessee

JOE WALSH, Illinois

TREY GOWDY, South Carolina

DENNIS A. ROSS, Florida

FRANK C. GUINTA, New Hampshire

BLAKE FARENTHOLD, Texas

MIKE KELLY, Pennsylvania

ELIJAH E. CUMMINGS, Maryland, Ranking

Minority Member

EDOLPHUS TOWNS, New York

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, District of

Columbia

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

DANNY K. DAVIS, Illinois

BRUCE L. BRALEY, Iowa

PETER WELCH, Vermont

JOHN A. YARMUTH, Kentucky

CHRISTOPHER S. MURPHY, Connecticut

JACKIE SPEIER, California

LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director

ROBERT BORDEN, General Counsel

LINDA A. GOOD, Chief Clerk

DAVID RAPALLO, Minority Staff Director
(III)

C O N T E N T S

Page

Hearing held on November 14, 2011 ...................................................................... 1

Statement of:

Black, Den, member of the Delphi Salaried Retirees Association; Bruce

Gump, member of the Delphi Salaried Retirees Association; Mary Miller, member of the Delphi Salaried Retirees Association; and Tom

Rose, member of the Delphi Salaried Retirees Association ....................... 25

Black, Den .................................................................................................. 25

Gump, Bruce .............................................................................................. 31

Miller, Mary ............................................................................................... 38

Rose, Tom ................................................................................................... 43

Bovbjerg, Barbara, Managing Director, Education, Workforce, and Income

Security Issues, Government Accountability Office; and Vincent K.

Snowbarger, Deputy Director for Operations, Pension Benefit Guaranty

Corp. ............................................................................................................... 58

Bovbjerg, Barbara ..................................................................................... 58

Snowbarger, Vincent K. ............................................................................ 78

Cunningham, Chuck, former executive at Delphi Corp.; and Steve Gebbia,

former executive at Delphi Corp. ................................................................. 8

Cunningham, Chuck ................................................................................. 8

Gebbia, Steve ............................................................................................. 14

Letters, statements, etc., submitted for the record by:

Black, Den, member of the Delphi Salaried Retirees Association, prepared

statement of ................................................................................................... 28

Bovbjerg, Barbara, Managing Director, Education, Workforce, and Income

Security Issues, Government Accountability Office, prepared statement

of ..................................................................................................................... 60

Burton, Hon. Dan, a Representative in Congress from the State of Indiana, prepared statement of .......................................................................... 107

Cunningham, Chuck, former executive at Delphi Corp., prepared statement of ........................................................................................................... 10

Gebbia, Steve, former executive at Delphi Corp., prepared statement

of ..................................................................................................................... 16

Gump, Bruce, member of the Delphi Salaried Retirees Association, prepared statement of ........................................................................................ 34

Issa, Hon. Darrell E., a Representative in Congress from the State of

California:

Prepared statement of Senator Rob Portman ......................................... 3

Various prepared statements ................................................................... 55

Miller, Mary, member of the Delphi Salaried Retirees Association, prepared statement of ........................................................................................ 40

Rose, Tom, member of the Delphi Salaried Retirees Association, prepared

statement of ................................................................................................... 45

Snowbarger, Vincent K., Deputy Director for Operations, Pension Benefit

Guaranty Corp., prepared statement of ...................................................... 80

(1)

DELPHI PENSION FALLOUT: FEDERAL GOVERNMENT PICKED WINNERS AND LOSERS,

SO WHO WON AND WHO LOST?

MONDAY, NOVEMBER 14, 2011

HOUSE OF REPRESENTATIVES,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Dayton, OH.

The committee met, pursuant to notice, at 9 a.m., at Sinclair

Community College, Smith Auditorium, 444 W. 3rd Street, Dayton,

OH, Hon. Darrell E. Issa (chairman of the committee) presiding.

Present: Representatives Issa, Burton, Turner, and Jordan.

Also present: Representative Austria.

Staff present: Michael R. Bebeau, assistant clerk; Adam P.

Fromm, director of Member services and committee operations;

Linda Good, chief clerk; Tyler Grimm, professional staff member;

Christopher Hixon, deputy chief counsel, oversight; Rebecca Watkins, press secretary; and Jason Powell, minority counsel.

Chairman ISSA. First of all, this hearing is being streamed for

anyone who logs in with the assumption that anything you say will

end up on the record. [Laughter.]

This congressional investigation and hearing was called by Congressman Turner—here and one of the most effective—last, do not

try to do amateur video or too many pictures. It will be 100 percent

available to you and to everyone. We post and maintain, going back

more than 5 years, all of our video of all committee hearings.

So, with that, the full committee hearing on ‘‘Delphi’s Pension

Fallout: Federal Government Picked Winners and Losers, So Who

Won and Who Lost?’’ will come to order.

The Committee on Oversight exists for two fundamental principles. First, Americans have a right to know that the money

Washington takes from them is well spent. And, second, Americans

deserve an efficient, effective government that works for them. Our

duty on the Oversight and Government Reform Committee is to

protect these rights. Our solemn responsibility is to hold government accountable to taxpayers, because taxpayers have the right to

know what they get from their government.

It is our committee’s responsibility to work tirelessly in partnership with citizen watch dogs to deliver the facts to the American

people and bring genuine reform to the Federal bureaucracy.

Today, I ask unanimous consent that our colleague, Mr. Steve

Austria, who is present and represents Ohio’s 7th District, be allowed to participate as a non-member of the committee in this

hearing.
2

Without objection, so ordered.

Additionally, at this time I would ask unanimous consent that

the statement of Senator Portman be placed in the record.

Without objection, so ordered.

[The information referred to follows:]
3
4

Chairman ISSA. Today I want to begin by thanking the Sinclair

Community College for allowing us to use this facility. We would

have expected this facility to be far larger than an ordinary hearing, but we do have standing room only, and we appreciate a facility this size being made available, far beyond what would ordinarily be used in a field hearing.

Additionally, I want to thank Mr. Turner again for tirelessly

making sure that both in Washington and here these activities are

happening. I might note that Jim Jordan and other Members of the

Ohio delegation have held additional hearings and may hold more

in Washington in days to come.

All Members, both present and those who want to submit for the

record, will have 5 days in which to put in statements and extraneous materials for the record.

I will allow each Member who wants to make a short opening

statement to make one if they choose to. And I think I will start

with our hometown favorite, Mr. Turner, first.

Mr. TURNER. Mr. Chairman, thank you so much. Thank you for

bringing this Washington committee hearing here to Dayton, OH.

I appreciate you granting my request to hold it here. I think

that——

Chairman ISSA. You did not give me a choice. [Laughter.]

Mr. TURNER. You are a very good friend, and I greatly appreciate

your focus on this issue.

This is not the first hearing that has been held by your full committee or by the subcommittees on this issue. It is the first that

is focused solely on this issue. You have had witnesses testify, and

I greatly appreciate the manner in which you have allowed the retirees and their issues to be addressed as we have looked to the

auto bailout, the use of retired funds, the discrimination that has

occurred in the funding of the payout of pensions.

Representative Jordan as the chairman of the subcommittee has

held hearings on this issue and has been very active I know not

only just as a strong member of this committee, but also as an Ohioan. His father, like mine, retired from General Motors. My father

retired from General Motors after 42 years as a result of the GM

bankruptcy. His health insurance was impacted. We have stories

like this throughout our community of people who have been impacted by General Motors and the Delphi bankruptcy.

I think, Mr. Chairman, you and I had the conversation that Delphi began as Dayton Engineering Laboratories Co., so it is important being here is that we have the historical nexus of the beginning of the company and also the thousands of numbers of retirees

that are here that have been impacted.

In the wake of the General Motors’ bailout, the administration

clearly picked winners and losers without transparency, without

justification, and, in my opinion, without respect for the men and

women who dedicated years of service in earning their retirement

benefits. Part of the hearing today is our ability to try to get some

of that transparency. The administration has not been forthcoming.

The negotiations, the decisions, have been largely in secret, and as

the committee and the retirees have tried and attempted to get answers they have largely been thwarted, which is why it is so important to have the assistance of this hearing.
5

The treatment of salaried retirees is particularly troubling in

comparison to the benefits received by some in organized labor organizations. In fact, the UAW and the Ohio AFL–CIO have written

letters in support of restoring benefits for the Delphi salaried retirees.

I will work along with all the members of this panel to advocate

on behalf of both the union and the non-union labor to ensure that

all retirees receive whatever benefits that they were promised. All

of these retirees, regardless of labor affiliation or not, worked

alongside each other during their careers and were part of the success of Delphi. They earned these pensions, and they deserve them.

They should not be differently in retirement.

I think as we have all said as we looked at this issue, we want

to know where did the money go and how do we get the money put

back? This is part of our quest today as we look to accountability

in the administration and the decisionmaking process.

I also want to thank Congressman Dan Burton for being here

from Indiana. He has been also a strong advocate on this as he has

had a number of retirees in his area that were impacted. And certainly I want to recognize Representative Austria for being here

today.

Mr. Chairman, thank you for this opportunity, and thank you for

being here in Dayton, OH.

Chairman ISSA. Thank you. We now go to the former chairman

of the full committee who represents, among other places, Kokomo,

and as much as Mr. Turner, clearly has a huge population of people who have earned retirement who are not getting it today?

Mr. BURTON. Thank you, Mr. Chairman. I appreciate you having

this hearing. I appreciate the comments of from Representative

Turner, who shares my concern about the inequities that have

taken place.

Mr. Chairman, Delphi Corp. was created in 1999 by General Motors through the spinoff of the company’s automotive component

group into a separate entity. In fact, many of the current Delphi

retirees, hourly and salary, spent the majority of their working career, on average about 25 years, with GM until they were involuntarily moved to Delphi.

Regrettably, in 2005, Delphi Corp. filed chapter 11 bankruptcy

protection. On October 6, 2009, 4 years after entering into chapter

11, Delphi Corp. exited bankruptcy as Delphi Holdings under a restructuring plan, facilitated by the Obama administration, and approved by the U.S. District Bankruptcy Court for the Southern District of New York. Under the terms of the agreement, the Federal

Pension Benefits Guaranty Corp. assumed responsibility for all of

the Delphi pension plans, roughly $6.2 billion in liability, for six

Delphi pension plans covering approximately 70,000 employees and

retirees.

However, in a very unusual agreement as part of the restructuring plan, GM consented to use money from its own pension

funds to supplement the 46,000 Delphi hourly union employees’

pension payments to make up for the 30 to 70 percent cuts in benefits resulting from a PBGC takeover of the Delphi pension plan.

This unprecedented agreement was not extended to the 21,000 salaried workers and retirees, which is really terrible. By some esti-
6

mates, this resulted in a 70 percent reduction in pensions and loss

of health care for salaried Delphi retirees.

When questioned about the disparate treatment of Delphi employees and retirees, to this day executives for GM only say that

the company agreed to supplement Delphi union employees and retirees because it had promised to do so in 1999, and that the company did not supplement Delphi non-union employees or retirees

because it, ‘‘is not something that GM has any control over.’’ And

GM does not have a legal obligation, nor does it have the money

to refund those pensions. The explanations offered by GM are woefully insufficient.

Once GM entered into bankruptcy, the contractual promises

made in 1999 were null and void, and it makes no business sense

for a company trying to shed excessive debt to assume more debt.

In reality, though, the blame does not lie with GM. I believe that

evidence uncovered by this committee and others clearly shows

that the Obama administration’s auto task force made this decision

for purely political reasons. In fact, Mr. Ron Bloom, former senior

advisor to the Secretary of the Treasury, on the auto bailout admitted as much when he said in a celebratory dinner for the auto bailout, ‘‘He did this for all of the unions.’’

On June 22, 2011 during the last committee hearing on this

issue, when I questioned Mr. Bloom about his statement, he flatly

and unequivocally denied that he ever said that. Unfortunately for

Mr. Bloom, this statement was corroborated by a reporter for the

Detroit Free Press, and in a book by Mr. Bloom’s former boss, auto

czar Steve Radner.

Two weeks later, after coming under fire from this committee

and the media about his blatant lie under oath, and he should have

been held in contempt—I still think we ought to do that, Mr.

Chairman. [Laughter.]

Mr. Bloom retracted his denial and instead claimed he did not

‘‘recall’’ ever saying that. But he did.

Mr. Bloom’s actions are sadly typical of this administration’s blatant disregard for Congress’ pursuit of the truth in this case. To

the best of my knowledge, all congressional requests to the administration about this case have either been ignored or obfuscated.

This is unacceptable and should not be tolerated, and I applaud the

tenacity you have shown, Mr. Chairman—I do not tell you very

often, but I mean that—to keep investigating this matter further

so we can uncover the real truth behind the Delphi pension scam,

and it is a scam.

I said back in October 2009 when I, along with others, first requested a congressional hearing on this issue, that I understood

the restructuring of America’s auto industry required a shared sacrifice and responsibility. But Delphi’s salaried retirees are being

forced to bear extra burdens that are not warranted and have not

been explained. It seemed to me at the time, and it still does, to

be fundamentally unfair to salaried and union employees in the

same company who face the same unfortunate situation, were

treated so unequally by the administration and the Federal Government.

The American people, especially from my perspective, the thousands of Hoosier families and people from Ohio who have been im-
7

pacted by this policy, and whose tax dollars were used to facilitate

this travesty, deserve a full and transparent explanation from all

parties involved, especially the administration. Hopefully today we

can move one more step closer to an explanation.

And once again, Mr. Chairman, I really want to thank you for

having this hearing. I yield back.

Chairman ISSA. And with that, we will recognize the chairman

of the subcommittee who has done more to further this, if he chooses?

Mr. JORDAN. Well, I would just say, Mr. Chairman, I want to

thank you for having this hearing and for our colleagues for being

here at Sinclair for this important event. And I will just yield back

with that with all the testimony.

Chairman ISSA. Thank you.

Mr. AUSTRIA. Thank you, Mr. Chairman, for holding this field

hearing, and my colleagues for attending. It is very important, and

I appreciate all the work that the Committee on Oversight and

Government Reform has done thus far on this issue, and particularly Chairman Issa for scheduling this hearing. It is very important to our community. I know many of the folks here today I represent, and it is important that we have this hearing here in our

area. And I thank you for that.

And I especially want to thank the Delphi salaried retirees for

testifying today, and all their efforts over the past several years to

hold the administration accountable so that retirees can receive a

fair pension.

You know, I am very concerned about the unfair treatment received by Delphi salaried retirees during the Delphi and GM bankruptcy proceedings. The administration, as Mr. Burton pointed out,

picking winners and losers with Delphi retirees is something that

should trouble I think all Americans.

While Delphi workers stood side by side every day doing similar

jobs at the same plants, the administration proactively made a decision that retirees from three unions would be basically unaffected

by the bankruptcy. But that is not the reason that we are here

today. The reason we are here is because of the unfair treatment

of the Delphi salaried retirees.

While in some cases, and I had an opportunity to recently meet

with several Delphi salaried retirees last week in my office from

our area, and I listened to the challenges that they have been facing with this unfair treatment. Some salaried Delphi employees

had a 30 to 70 percent reduction in their pensions, and others have

lost all their health care and life insurance, and that is unacceptable and troubling. And it is unacceptable, and it must be fixed.

And that is why we are here today to hear your testimony. And I

thank you all for being here today.

Thank you, Mr. Chairman. I yield back.

Chairman ISSA. Thank you. Does the gentleman wish unanimous

consent?

Mr. TURNER. Mr. Chairman, before we proceed, I would like to

ask unanimous consent that the written statements of Delphi salaried retirees that are unable to be here today to testify be included

in the record.

Chairman ISSA. Without objection, so ordered.
8

We now recognize our first panel of witnesses, Mr. Steven

Gebbia.

Mr. GEBBIA. Gebbia.

Chairman ISSA. Gebbia. He is a former executive director for employee benefits and salary policies at Delphi Corp. And Mr. Chuck

Cunningham is the former senior executive at Delphi Corp.

Gentleman, pursuant to the rules of the committee, would you

please rise and take the oath?

[Witnesses sworn.]

Chairman ISSA. Let the record reflect that both witnesses answered in the affirmative. Please take a seat.

Now the rules of the committee are pretty straightforward. Your

entire statement will be placed in the record, plus any additional

remarks that you would like in the next 5 days. We would ask you

to stick to the 5-minute rule, which means that when the green

light comes on, you may begin, when the yellow light comes on,

please summarize, and when it gets red, I am going to gavel you

fairly quickly, and I will do that for each of the panels. This really

allows us to quickly get to the portions not in the record, which is

the questions and answer that I think you want to give you to us

as much as we want to receive it.

Mr. Cunningham.

STATEMENTS OF CHUCK CUNNINGHAM, FORMER EXECUTIVE

AT DELPHI CORP.; AND STEVE GEBBIA, FORMER EXECUTIVE

AT DELPHI CORP.

STATEMENT OF CHUCK CUNNINGHAM

Ms. CUNNINGHAM. Mr. Chairman, members of the committee,

thank you so much for the opportunity for the Delphi retirees to

tell our story today.

My name is Chuck Cunningham, and I am a retiree who worked

27 years for GM and three for Delphi. I now serve as the DSRA

legal liaison to our Washington law firm, coordinating the activities

between the retirees and our attorneys.

In 2009, the Obama administration decided to bail out General

Motors through an expedited bankruptcy. We are not here today to

discuss the merits or the wisdom of that bailout. That is not for us

to discuss. But we are to talk about the consequences of those actions that were devastating for one group, the Delphi salaried retirees.

In order to ensure a successful emergence from bankruptcy for

GM, the issue of Delphi had to be dealt with. And that was a task

the auto task force and the Treasury took up, because Delphi was

previously spun off from GM. It was their major parts supplier, and

in order for GM to be successful in the future, it had to be a viable

Delphi. It just had not happened. We understand that. I think everybody understands that.

One of the issues of importance to the purchase of Delphi was

the Delphi pension liabilities. The auto task force looked at various

options, and we know they looked at them, including returning

those pensions to GM, but they chose not to do this. They decided

that this would not look good on GM’s balance sheet. Therefore, the

decision was made to turn over all Delphi pensions to the PBGC
9

with one caveat. The new GM would top off only Delphi UAW pensions and make them up. The auto task force called this a commercial decision to ensure the UAW’s cooperation and restructuring.

More than a month later, the announcement was made that the

pensions of the Delphi CWEA/IUE and steelworkers would also be

topped up, leaving only the salaried employees and a few small

unions without the top ups.

Now, we hear many, many times from people that advocate on

the part of the administration and the task force that it was contractual. It was done in 1999. The truth of the matter is, as Representative Burton so well put, these things would have been

thrown out in bankruptcy court. They always were. A less than astute student in bankruptcy knows that. But they were not.

As Fritz Henderson, the CEO of GM, testified at the time of the

bankruptcy, there was absolutely no reason for them to have this

arrangement with the CWEA/IUE steelworkers. They had no employees. They had divested themselves of all those employees from

those unions. There was no contract, and he said so. In an A-K filing that was done by GM, it called these gratuitous. The tops offs

were gratuitous.

Now, why were they done? We believe they were done because

the IUE/CWEA steelworkers put pressure on the administration,

put pressure on the Treasury, to provide those top offs also. It is

interesting to note that a large portion of membership in those

unions was present from the State of Ohio, which is a very important swing State. And we believe that these were basically politically motivated. Unfortunately, we do not have the pensions.

We thought it was a pure of discrimination against the salaried

employees who had chosen not to join the union. I would ask anyone to think about this in terms of our country’s social security.

Now, suppose an administration decided that everybody but Asians

would receive social security. I think we would be outraged. How

could that be? How could we decide one group would not receive

the same pension treatment as another? I think this is about the

same thing we are talking about today.

The worst part about this is that PBGC, who I understand is on

a later panel, was complicit in all this. They did not object to the

impermissible followup plans that were disguised as top offs. They

have always objected to those plans in the past, and in fact took

LTV to the Supreme Court to fight the top up plan. But for some

reason, they choose not to now. I would mention that the Secretary

of Treasury is head of the board of directors, but that is a fact.

Instead——

Chairman ISSA. If you could summarize.

Mr. CUNNINGHAM. Okay. We are in a legal conflict right now,

and we are moving forward with it, but we are in the discovery

stage and moving very slowly. The PBGC has failed to give us the

information that the Federal judge has demanded of them. We

have had a motion to compel on many other issues. Three times

they have been told to comply, but they will not comply.

Chairman ISSA. Thank you.

Mr. CUNNINGHAM. Thank you.

[The prepared statement of Mr. Cunningham follows:]
10
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13
14

Chairman ISSA. Mr. Gebbia.

STATEMENT OF STEVEN GEBBIA

Mr. GEBBIA. I am Steven Gebbia, former executive director of

employee benefits for Delphi Corp. I held that position since Delphi’s inception in 1999 until I retired in June earlier this year in

2011. During this entire time, I held administrative responsibilities

for Delphi’s local employee benefit plans, including the U.S. salaried and hourly defined benefit pension plans that were involuntarily terminated by the PBGC in July 2009.

My administrative responsibilities included designing and developing the various pension plans and negotiating their provisions

with the unions, ongoing communications with employees, retirees,

unions, and oversight of the day-to-day administration of these

pension plans. This oversight involved frequent interaction with

Towers Watson, a consulting firm hired by Delphi to conduct actuarial work on these pension plans, including annual evaluations of

these plans as required by law.

During the almost 4-year period during Delphi’s bankruptcy

cases up until the PBGC involuntarily terminated Delphi’s pension

plans, Delphi’s management team repeatedly communicated to employees its desire to retain these plans as part of the bankruptcy

restructuring. Like others, I was very surprised when I learned

that the pension plans were going to be terminated and taken over

by the PBGC, and I was extremely disappointed when I learned

that it was decided that only the hourly employee pension benefits,

but not the salaried employee pension benefits, would be topped up

by General Motors, and, therefore, would be made whole.

Several employees came to me and asked me to quantify for

them the impact on this seemingly unexplainable action on their

drastically reduced pension benefits. Because I did not personally

have the access to the information they were requesting, I contacted Towers Watson and asked for their help in responding to the

questions and concerns being raised by Delphi salaried employees.

During our discussion, Towers Watson offered to me and the

members of my staff that while the salaried pension plan was not

fully funded at the time of the involuntarily termination, it was,

however, funded well above a level that would have required mandatory termination of this plan. In fact, Towers Watson stated that

this plan had enough assets to pay benefits for decades to come,

and that they also opined that this plan was very salvageable

should there be any sincere desire to save it.

They stated the reasons for their opinions were based on these

four items: one, the data derived from their most recent actuarial

evaluation of the plan; two, the fact that the plan was frozen in October 2008, meaning no new benefits would accrue going forward

from that point in time; three, the equity market, the stock market,

at that time were at a historic low, keeping asset values lower than

they normally would have been; and, four, the discount rates were

also extremely low by historical standards, thereby overstating the

plan’s liability valuations over the near term.

Towers Watson further offered that they believed that other

bankruptcy cases existed where pension plans were funded at lev-
15

els lower than the Delphi salary pension plans but had not been

taken over by the PBGC.

Now, to the best of my personal recollection, the Delphi salary pension plan had total liabilities of about $4 billion at this time,

and was under funded by roughly $1 billion at the time, the plan

was last valued by Towers Watson prior to the plan’s termination.

This concludes my statement.

[The prepared statement of Mr. Gebbia follows:]
16
17
18

Chairman ISSA. Thank you. I am going to ask just a couple of

questions, and I will start by saying my family was a General Motors family, but my father passed away many years ago. So, I am

not personally affected by it, but I do look at the broader problem

of what I call the would have, could have, and should have—what

would have happened had this been handled any of the two ways

that you are mentioning. I will follow up with that.

What could have happened if the government had, if you will,

what is the best course to take rather than making a decision that

undoubtedly had a lot to do with their relationship with the unions.

And they are, in fact, getting made 100 percent whole.

And then, for our committee, I think the most important thing

that we are here is in addition to trying to bring justice for the retirees that you represent, quite frankly we have to figure out how

to make sure this does not happen again either by government fiat

or, in fact, in the defined benefit packages that continue to sustain

the main companies.

So, if we could just go through a couple of numbers to make sure

I get this right. If I look at the two figures that are most significant, if General Motors had said this is all the money we can do

to try to make as whole as we can everybody, even with the termination, basically leaving the salaried employees with about a 70

percent discount, and making whole the roughly twice as many

union employees, it comes out to about to 66 percent if you simply

divide the money equally. Is that roughly what you are seeing, is

that the haircut that you took would have been less than half as

much had the same amount of money been broadly put into all the

pensions?

Mr. GEBBIA. I am not sure I can speak to that.

Chairman ISSA. That is roughly the arithmetic——

Mr. CUNNINGHAM. I guess would go to——

Chairman ISSA. I am not suggesting that it is a should have,

would have, could have. But the fact is if everyone had a shared

sacrifice as has been said by so many, the shared sacrifice would

have been less than half as much for people represented by the

DSRA, if it had been shared across all employees.

Mr. CUNNINGHAM. To give you a reference to that, I would agree

with you, and I think that work on both sides of the——

Chairman ISSA. Well, the other part of it, if you simply left it

continuing to go and assuming kind of a lackadaisical performance

of the market, you still would have gotten about 75 cents on the

dollars if it simply had been terminated. So, whether it is terminated at low and spread plus up, or do not terminate, either way

it would have been half the haircut you had taken.

Mr. CUNNINGHAM. In fact, the irony is, if they would have just

done what they were discussing with the PBGC and GM originally

and folded it into the GM salary plan, those two plans together, the

Delphi and the GM plan, would have been about 94 percent financed. But it was decided that they did not want to do that.

Chairman ISSA. You know, one of the things that our committee

has to look at is, can we unring the bell? I think for many people

here today, that is one of the biggest challenges. When we get to

the third panel, the third panel is going to basically say due process was executed pursuant to our rules. We had no choice. You
19

back up and say maybe they are right. Assuming that a bankruptcy did not give a clean bill of health to a very unusual deal,

assuming that they did not do a Claude Act the way they did with

Bernie Madoff and say, no, no, this was a preferential payment,

and that preferential payment has to be divided throughout the entire plan, all of those would haves, could haves, and should haves

we are going to look at.

Are there other areas that you think this committee should delve

into going forward that would be helpful, not to specific litigation—

that is not within our jurisdiction—but for us to see if we cannot

bring justice separately in congressional action and, more importantly, to the American people beyond all of you who are so affected, making sure that this does not happen again?

Mr. GEBBIA. Well, I think interesting enough, some people say,

well, you know, you are asking Congress to appropriate money. We

are not. In fact, the PBGC has stated in an affidavit in the legal

text that they are putting $2.1 billion into our plan. If you add that

together with the $2.4 that they admit was the amount that plan

was funded, that comes out to $4.5. Watson Wyatt came in somewhere between $3.4 and $4. All we would like to do is sit down

with PBGC and work through those numbers. We believe that

under normal actuarial data, that we could have a fully funded

pension administered by the PBGC, which is totally legal, but we

cannot even get them to give us the option. And it is a shame.

Chairman ISSA. Thank you. I am going to be respectful of the 5-

minute rule also, and I will recognize Mr. Burton?

Mr. BURTON. Why can you not get the records if the court has

said that those records must be given to you?

[Applause.]

Mr. BURTON. Has the judge moved a contempt citation against

them for not complying?

Mr. GEBBIA. We have not set forth a motion for contempt yet. We

have another meeting with the PBGC coming up. But this is the

third time that the judge has ordered discovery, and it is the third

time we are now seeing resistance on the part of the PBGC.

Mr. BURTON. Are you concerned that the judge will not move a

contempt citation if you ask him to do so?

Mr. GEBBIA. I would rather not speak to that, but I do not think

that is the case at all.

Mr. BURTON. Well, if that is not the case, and, of course, you are

the lawyer and I am——

Mr. GEBBIA. I am not a lawyer. I am the liaison.

Mr. BURTON. Well, whatever you are. [Laughter.]

Chairman ISSA. Folks, please do not applaud to find out that he

is not a lawyer. Please. [Laughter.]

The gentleman may continue.

Mr. BURTON. Well, whatever is your law firm, I would urge them,

if the judge has said not once, not twice, but three times there

should be discovery and that information should be given to you,

that your law firm say, okay, enough is enough to the court and

urge them to go ahead and move a contempt citation, because if the

administration or if those in charge will not give it to you or to

your legal counsel, then, by golly, they should be held in contempt,

and there should be a severe fine involved.
20

So, anyhow, can you elaborate a little bit further? What is your

lawyer’s explanation for why they have not done it?

Mr. GEBBIA. Well, I think our lawyers cannot give an explanation

for what they say.

Mr. BURTON. No, no, but, I mean, why have they not moved a

contempt citation?

Mr. GEBBIA. I believe there are civil procedures that have to be

followed before we can ask for that. There are civil rules of Federal

court, and we are following those. And, believe me, we will do everything we can under the law to get that information.

We have gotten some information. We have what they call the

administrative record, but we have not gotten all the information

that the judge has given us in a broad discovery sense.

But a lot of the information we have received, like from the

PBGC and the Treasury, is really interesting. It says—an e-mail,

and it says, Dear John. The rest is redacted, and it says, yours

truly, Fred. I mean, that is the type of information we are getting

from them, huge redactions or nothing at all.

Mr. BURTON. Well, redactions, they are usually only utilized

when there is some kind of national security issue involved. I cannot understand why the court is allowing redactions, which means

crossing out things so you cannot read them.

But anyhow, thank you very much, Mr. Chairman. I yield back.

Chairman ISSA. I thank the gentleman.

Mr. TURNER [continuing]. Mr. Jordan has held because we are

getting the picture of really the crux of the problem in that we do

not have the information from the administration as to how these

decisions were made for a full and complete understanding of what

was the process that was undertaken, what was the decisionmaking that was undertaken, and how can we review it through

congressional oversight, how can the courts review it, to determine

if you have been treated fairly and properly.

Now, both of you were just testifying concerning the pension

plans, and we all know that pensions are contractual obligations.

They are highly and heavily regulated. And it was my understanding that as Delphi went into bankruptcy, General Motors

went into bankruptcy, of course they had a number of different

pension plans.

But the pension plans, if I am understanding you, is that you

were unaware of any reason why your pension plan on an entitlement basis, a legal basis, would have less standing than other pension plans with Delphi and General Motors, because you went into

the bankruptcy process that your pension would have been as great

of a contractual obligation and heavily federally regulated so that

when you went into the process, you did not expect it would be

handled differently than the other pension. Is that correct?

Mr. GEBBIA. That is absolutely correct.

Mr. TURNER. They know your and everybody else’s understanding also, and I want to congratulate you and the other Delphi

salaried retirees because you have—in the manner in which you

approach the success of Delphi, you have approached this issue.

You have professionally managed it to give us the issues and the

information so that we can do this oversight.
21

Now, you frequently referred to decisions that were made along

the way that your pension plan was equal to everyone else’s, went

into bankruptcy, came out the other end not the same as everyone

else’s. There were decisions made you identified it was decided.

And my understanding is because you have not gotten discovery

because they have not been forthcoming to you, you do not know

who made these decisions. You do not know the basis of those decisions. You do not know why and you do not know how. Is that correct?

Mr. GEBBIA. It is correct, from my standpoint, yes.

Mr. TURNER. And the thing that is most disturbing to me about

that, which is why I am, again, so appreciative of Chairman Issa

and Chairman Jordan for holding these hearings, is that this was

done with taxpayers’ dollars ultimately. The bankruptcy did not receive it as a normal bankruptcy. Our taxpayers’ dollars were utilized, were injected into this process so that what came out at the

other end with General Motors and Delphi was a different animal

that went in, more than what would normally occur in a bankruptcy.

So, there is a higher level of scrutiny. It is not just that we want

to ensure we are treated the same, which of course we do, but also

you were not treated the same, and your own taxpayers’ dollars,

the taxpayers’ dollars of every Delphi salaried retiree were used in

that process. It is discriminating.

[Applause.]

Chairman ISSA. If you could hold the applause, it will help us

make the record more complete.

Mr. TURNER. And the troubling aspect of the fact that the taxpayers’ dollars were there is not in dispute, but I am going to ask

you to provide some asset valuation, because it seems to me that

the PGBC is giving us answers as to what the financial status of

the pension was before it went into bankruptcy. It has used its financial status and bankruptcy and even its status as it came out.

My understanding is that the basis of your complaint is that you

do not agree with their assessment as to the valuation of the assets

before the handling of the assets during bankruptcy or even the

manner in which they were valuating or allocating assets as they

came out. Is that correct?

Mr. GEBBIA. Well, I think the message that I wanted to convey

here, coming from Towers Watson, who are the experts here, is the

population of that salaried pension plan was not the reason that

it was terminated. It did not have to be terminated because of the

lack of funding. So, there must have been other reasons; I do not

what they were, but it was not this.

Mr. CUNNINGHAM. Representative Turner, if I may make a point.

After getting knowledge of that Towers Watson report, we contracted with PDS&M, which is a wholly owned subsidiary of Wells

Fargo, to do a followup analysis for the court. They found the same

thing, that our pension plan was funded at the time of termination.

In fact, higher than that, over 80 percent, and that it stood above

the midpoint of the hundred largest pension plans in the country

at that time, none of which were terminated.

So, no, it was expeditious to do that. It was not the right thing

to do. Besides, in cases like this, ERISA is clear. These kinds of
22

things have to be adjudicated. They should not have done it like

passing the gravy between the people who wanted to be rid of the

plan and PBGC.

Mr. TURNER. Thank you. Mr. Chairman, I have looked at this as

a who, what, when, where investigation on the Federal side, and

also the issue of, you know, where was the money, where did it go,

and then ultimately how do we get it back?

Chairman ISSA. Will the gentleman yield?

Mr. TURNER. Yes.

Chairman ISSA. I just want to interject into this portion of the

testimony that although the committee has been receiving documents from the PBGC—relatively unredacted, we have gotten almost no documents from Treasury. I know that will not be as much

mentioned in their dialog, but it is one of the early frustrations,

that even the committee is having trouble getting from Treasury,

the behind the scenes decision separate from the actual decision

about witnesses we have here today.

I would be happy to recognize the chairman of the subcommittee?

Mr. JORDAN. I thank the Chair. And Mr. Turner is exactly right.

This is all about transparency. What we have had, as Mr. Burton

talked about, Mr. Bloom in our subcommittee and committees in

Washington talking about the lack of transparency. And it is not

just yours. It is a whole host of issues which closed facilities. We

have had GM in Mansfield, OH, which I have the privilege of representing, close. We have had dealerships close.

So, the idea that we need to bind up all these decisions, particularly, as Mr. Turner pointed out, when taxpayer dollars are stake,

and when the auto task force made up of Federal employees is

making the decision, that is the key issue here. And when you start

down this road, which is why I have been troubled by this whole

process where government gets this involved in the private sector,

where you have the President of the United States firing the CEO

of General Motors, where you have the auto task force taking over,

that is the problem. And we just want to continue to look at this,

delve into this, and get the answers needed for transparency that

is needed for taxpayers to understand what is going on.

With that, I would yield back my time. I would be happy to yield

time to——

Chairman ISSA. Mr. Austria.

Mr. AUSTRIA. Well, thank you, Mr. Chairman. Mr. Gebbia and

Mr. Cunningham, thank you both for being here today and sharing

your story with us, because as I heard your testimony, like many

members up here, my uncle and brother-in-law both retired from

GM. It is very troubling as to what is happening here.

And I would like to just continue on, if you could, as much as

you are able to, with the ongoing lawsuit between Delphi Salaried

Retiree Association and the Pension Benefit Guaranty Corp.

Let me first of all say that I applaud your determination to ensure that Delphi retirees receive a fair pension. However, it is concerning to me that while the trial court has ordered this discovery,

and you mentioned that there a lot of documents or some of the

documents have been redacted as far as much of the information,

which is very troubling. PBGC continues to delay and refuse to

comply with these orders.
23

Are you able to describe to the committee the effects that these

actions have on the retirees, and your lawsuit, and the longer this

goes, because I think one of you mentioned, or someone mentioned

to me before this hearing, that this has now been going on and this

issue has been going on for over 1,000 days now.

Mr. CUNNINGHAM. I think that the second panel will probably do

a better job of describing that. That is their mission here today.

But I will say that, I mean, the financial burden of the lawsuit is

tremendous. I mean, you know, the irony of this, again, is this

whole thing. We are spending money that we do not have to fight

the government that has our money. [Laughter.]

It is a little odd, but that is what we are doing. I mean——

Mr. AUSTRIA. It sounds like an unfair fight to me.

Mr. CUNNINGHAM. Well, you know, they can spend all the money

they want on attorneys, and, believe me, we have wonderful attorneys, the best we could have. But, you know, it gets a little long,

and it gets very expensive. But we are not going to quit.

Mr. AUSTRIA. Let me just, if I could, just one last comment because you brought up the Treasury, Mr. Chairman, which is very

important. I know our delegation and many other Members of Congress signed that letter that we sent to Secretary Geithner and

never get a response back. And I wanted to discuss that with you

as well as to what input Delphi retirees and non-union employees

had during this time to protect their interests in a fully funded

pension and receiving benefits? I am talking about when Delphi

went through bankruptcy in terms of the pension plan, so there

were several parties that were involved, including the Treasury Department, the auto task force, PBGC, and each of these parties

were concerned with resolving the bankruptcy in a manner that

would be most beneficial for their particular interests.

What was your position on that?

Mr. CUNNINGHAM. We were never invited to the table in any

way, shape, or form. Delphi salaried retirees were not invited to

the table. Meetings were held, in fact, a meeting which we would

love to get information on was held in Poughkeepsie, New York, at

the direction of the bankruptcy court. The PBGC and its attorney,

one which is here today, I think, were there. UAW was there. The

Treasury Department was there. GM was there. Delphi salaried retirees were not there. So, all the constituents were there, except us.

Mr. AUSTRIA. Was there a reason that they gave you that you

were not included in those meetings?

Mr. CUNNINGHAM. Well, they would not answer those kind of

questions. You know, we went to bankruptcy court, this is not just

the 6th Circuit we were fighting in. We fought in the bankruptcy

courts. We watched the pirate case get thrown out just like that

from the judge. We also watched three small unions that had the

same problem. They were often important. I watched their attorneys argue cases where their contracts in 1999 were identical to

the UAW’s, and then they could not go back because they were too

small. We reached out to those people and talked with them.

So, you know, we were not going to be part of the process. The

decisions were made. If you go back, we have a lot of information,

not enough, not all of it. But if you go back to even the written testimonies of Matthew Sullivan from the automotive task force, you
24

will see that, you know, they basically orchestrated this whole

thing, and the PGBC was complicit.

One of the other things, and I would just bring this up, and I

have someone with me here today who is from the minority side

from Ohio, that is Senator Sherrod Brown, who held up the nomination of Mr. Gotbaum, the director of the PBGC, until the President decided to do a recess appointment. And guess what Mr.

Gotbaum did before that? He represented the DIP financers for

Delphi, who were part of a deal with PBGC, with the Treasury.

And ironically, a month ago, Harry Wilson, who was on the automotive task force, especially responsible for GM, and one of the architects, became a member of the advisory board of the PGBC.

Something is wrong.

Chairman ISSA. Gentleman, I am going to ask you, before I dismiss you, one quick round of questions that I saved until the end,

figuring someone else might ask you.

But the union represents UAW, correct, that they might strike

if they did not get topped up. Everybody knows that. Do you believe as people who did not get the benefit, that the real difference

was that salaried workers could not reasonably, you know, current

workers threatened to walk off the job in order to ensure that you

got the same benefit. Is that really what separated, in your mind,

the difference between large organized labor using current willingness to strike or it pulls out of the deal, if you will, by saying it

would versus the inability of you as retirees not represented by a

union that would take current workers and strike? Do you believe

that that was, more than anything else——

Mr. GEBBIA. I believe that is half, that half being the UAW had

leverage, okay? But I believe the other top ups had nothing to do

with leverage as far as GM’s exit in bankruptcy. I believe they

were totally influenced by using membership and the ability of

those unions to lobby and get a paper trail.

Chairman ISSA. So, you would say one group had power and used

it, the other group had the power of helping the President be elected or his party. Is that more or less——

Mr. GEBBIA. It is the only way I can see it. I mean, that is the

way a logical person would.

Chairman ISSA. Well, thank you. As I said, I am going to ask all

the panels the same question. I think that would be appropriate in

this case.

We are going to take a very short recess and set up the second

panel. Thank you.

[Recess.]

Chairman ISSA. Would everyone please take their seats? The

hearing will now resume. We will now recognize our second panel.

Mr. Den Black is the former chief engineer at Delphi Corp. Mr.

Bruce Gump is a former senior engineer at Delphi Corp. Ms. Mary

Miller formerly provided human resource leadership at Delphi

Corp.’s brake assembly operations. And Mr. Tom Rose is a former

plant manager at Delphi.

Again, you saw in the first panel, pursuant to our rules of our

committee, all witnesses are to be sworn. Would you please rise

and take the oath? Raise your right hands.

[Witnesses sworn.]
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Chairman ISSA. Let the record indicate all witnesses answered in

the affirmative. Please be seated.

As you saw in the first panel, I thank and reward those who stay

within 5 minutes. [Laughter.]

I am a little less thankful if you go over, and if you go far over,

I will have to ask you to come to a stop. And I would like you to

end on a high note, which is best done when the yellow light is on.

And so, with that, I believe we are starting with Mr. Black. The

gentleman is recognized?

STATEMENTS OF DEN BLACK, MEMBER OF THE DELPHI SALARIED RETIREES ASSOCIATION; BRUCE GUMP, MEMBER OF

THE DELPHI SALARIED RETIREES ASSOCIATION; MARY MILLER, MEMBER OF THE DELPHI SALARIED RETIREES ASSOCIATION; AND TOM ROSE, MEMBER OF THE DELPHI SALARIED RETIREES ASSOCIATION

STATEMENT OF DEN BLACK

Mr. BLACK. Thank you for the opportunity for this panel to share

the story of the Delphi Salaried Retirees Association, and to ask

that this committee leave here today with a renewed determination

to ensure an immediate end to our 32-month long search for justice

is forthcoming.

My name is Dennis Black. I am trained as a mechanical engineer, and my career spanned 36 years with GM and Delphi

Corp.s—34 years with GM and only 2 years with Delphi. During

my career, I served GM in a large variety of capacities, including

project engineer, engineering supervisor, chief engineer of two business units, chief engineer for global future products, global quality

management, and divisional strategic planning.

Along the way I was fortunate enough to be the inventor of what

has turned out to be a game changing innovation in the field of

providing automotive air conditioning comfort for millions of vehicle owners around the globe. This was the infinitely variable displacement AC compressor that has literally created tens of thousands of living wage jobs around the globe, subsequently jobs that

have allowed workers to support their families since the mid1980’s. This innovation has been emulated by every major competitor, and as a result, everyone in the globe has followed our lead.

I was honored to receive GM’s highest engineering honor, the

Boss Kettering Award, for inventions considered to be of particular

significance to General Motors.

Now, please understand that I only tell you this to emphasize

that it is the salaried workers of General Motors and Delphi whose

historical role has been to first imagine, then design and develop

the automotive products and production facilities. Without question, the salaried workers have made tremendous contributions to

the American auto industry, and our contributions were in no way

less valuable than those of our union counterparts.

I had served as the chairperson for the Delphi Salaried Retirees

Association since its inception in early February 2009. One thousand twelve very long and stressful days ago, the DSRA seeks to

represent the interests of as many as 20,000 Delphi salaried retirees, supervisors, accountants, administrators, administrative as-
26

sistants, technicians, and engineers whose economic futures have

been intentionally and needlessly torn asunder since our ordeal

began.

As I mentioned, we organized DSRA in February 2009, and subsequently we have left absolutely no stone unturned in our efforts

to seek justice. We have taken our story to the Federal courts, to

our congressional officials, to the GAO, to SIGTARP, to our union

counterparts, to the national and local media everywhere. We have

expended several million dollars in our unrelenting quest, dollars

that many simply cannot afford to contribute due to their depleted

financial resources. Nevertheless, they find a way to contribute

anyhow. We will never, never cease our unrelenting quest for justice until we obtain the pension benefits that we earned after a lifetime of playing by the rules.

We have collected hundreds of human impact testimonials, and

a large sampling of these have been submitted for the hearing

record. However, they tell the story of damage already done as a

result of the loss of benefits earned over a lifetime by folks who

simply played by the rules. However, they do not tell of the damage

to come, in the next 10 to 30 years. They do not tell of victims who

have not yet drowned, those who continue to slowly sink, like sinking in quicksand, due to negative cash-flows, which insidiously deplete their monitory reserves. Fortunately, my wife and I have not

yet drowned. Not yet. But it is entirely possible that we could succumb, due to the huge pension losses imposed upon us in the years

to come.

Here is just one letter from an Ohio resident to share with you.

He wrote this on November 3rd following a November 1st Detroit

News article by David Shepardson, entitled ‘‘Ratner Applauds Auto

Bailout’s Happy Ending.’’ ‘‘I am a Delphi salaried retiree. The Delphi’s story may have been a happy ending for Mr. Ratner, who is

all warm and fuzzy to the point of almost crying tears of joy, but

for many of us, myself being one, we have been crying tears of pain

and anguish over what Delphi did to us.’’ The remainder of his letter, which is anguishing indeed and only an indication of hundreds

more, is in the record. And he is sitting right here in the audience,

by the way, Mr. David Kane.

Since those first chaotic days of DSRA, we have come a long way

with regard to our factual understanding of how we have become

hapless victims of discriminatory actions of our Federal Government’s executive branch. These actions have resulted in egregious

harm to thousands while using taxpayer dollars. We have learned

that the earned pension benefits of non-union Delphi retirees have

been slashed by as much as 70 percent as a result of needless and

inappropriate termination of our Delphi salaried pension funds by

the Pension Benefits Guaranty Corp. We, of course, have learned

that we were singled out as losers by the executive branch, while

the earned pension benefits of our union counterparts were kept

whole by a top ups.

Let me be extremely clear, though. We do not for a moment begrudge the fact that our union counterparts have remained whole

and they are receiving the pension benefits that they earned over

decades. But we cannot abide by the loss of our earned pension

benefits.
27

In addition, our ordeal has caught the attention of a growing

number of media sources that include Fox News, New York Times,

Wall Street Journal, The Daily Caller, or the Detroit News? and

many more. Also, our story has been reported in a recent 2011 book

by David Freddoso of the Washington Examiner. Chapter 2 (Stop

Us If You Can: Saving the UAW) is recommended reading for all.

Finally, we have learned that our congressional requests for full

disclosure have been consistently ignored and obstructed by the executive branch. And in closing, our situation is not complicated.

Very simply, our major union counterparts receive taxpayer provided top ups to keep their earned pension benefits, whole. In contrast, our nonunion Delphi people did not receive equal treatment.

This is wrong. This was needless. This is illegal. All that we require of our Federal Government is fair and equitable treatment.

And we——

Chairman ISSA. Thank you. Your entire statement will be placed

in the record.

[The prepared statement of Mr. Black follows:]
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29
30
31

Chairman ISSA. Mr. Gump.

STATEMENT OF BRUCE GUMP

Mr. GUMP. Chairman Issa——

Chairman ISSA. By the way, only Senators get to filibuster.

[Laughter.]

Mr. Gump.

Mr. GUMP. Chairman Issa, Congressman Turner, and members

of the committee, thank you for another opportunity to explain our

issues and the effect the treatment that we have received at the

hands of the Obama administration and the PBGC has had on our

members and the Nation, and to request your help in resolving

those issues.

I am here to represent the more than 20,000 Delphi salaried retirees. Please understand that these salaried retirees worked as

secretaries, technicians, and engineers, as well as supervisors and

managers. We worked hard. We did what we were told. We did everything right, and we expected to be paid for our efforts, both with

our wages and the deferred compensation, known as a modest pension. But when our government stepped in, they chose to protect

but only their favorite groups and throw us out like yesterday’s

trash.

The effects of this treatment have been devastating. My own

story includes the fact that my wife and I have four children, all

currently in college. Paying for health and life insurance, plus tuition, housing, and loans takes 90 percent of my monthly pension.

Our other expenses, like utilities, mortgage, fuel, food, medicine,

require us to spend my wife’s small income, plus some of our savings each month. We calculate that so far over the last 30 months.

We have spent more than $60,000 we had not planned to spend

this early in my retirement.

The future outlook is getting worse for us. Just because I was a

salaried worker instead of a member of a group our government

chose to protect. I warned our children that they must be prepared

to prove their commercial necessity to our government, as in the

end that is all that matters. Citizenship, contribution to society,

planning or effort, do not matter at all. That is the lesson in all

of this. Government, the PBGC, and industry are not to be trusted.

The story of Mary Ann Hudzik is no better. She lost 40 percent

of her earned pension. That, along with a 500 percent increase in

the cost of healthcare insurance for herself and her self-employed

husband, has resulted in them having to spend down their savings

much faster than planned. Her husband has a degenerative disease, and so cannot always work, but no work means no pay when

one is self-employed. Mary Ann is a fighter, though, and as the

chairman of the group that she works on, I will guess that she has

spent more than 7,000 hour over the last 30 months working to

have this situation corrected. Mary Ann could not be here today because she has depleted her own physical resources and has contracted mononucleosis. I guarantee you she will continue to fight,

though.

Jim Kane is here today. While working for Delphi in Mexico, he

contracted a virus that destroyed the hearing in his right ear. Even

though his superintendent told him to get whatever healthcare was
32

needed, he ended up spending more than $12,000 out of his own

retirement savings to pay for it. When he was involuntarily terminated he had lost his life and health care insurance, and then the

PBGC reduced his pension by 30 percent. He has since had a heart

attack and has developed diabetes. His retirement savings are now

gone. He could no longer provide for his wife or himself. Living on

a reduced pension alone is extremely difficult and may not be possible over time. He says, ‘‘I want what was promised, to survive

with some dignity in my final years. I want justice.’’

That is what we all want, what was promised, to survive with

dignity and justice.

The stories you hear today are just examples, and just the beginning. They will get worse as time goes forward as the economy

takes its toll, and savings are depleted. Many of our members have

already had to declare personal bankruptcy, some seeing their

homes foreclosed. We have had to endure additional health issues

from the stress and conditions and because we cannot always afford to get preventative care. I know a co-worker who delayed going

to the doctor while he worked at a part-time job to earn enough to

cover the expense. He knew something did not feel right, and by

the time he did see his doctor and was diagnosed, it was too late.

He died in just a few weeks.

On our larger scope, there are indications the effects on retirees

are causing economic problems and our communities, too. In the

area where I live in Northeast Ohio, a recent Brookings Institute

study determined that Youngstown, OH has the highest concentration of poverty in the Nation. The poverty rate there got to be 49.7

percent. I saw an article in the local newspaper that 30 percent of

the dwellings in Warren, OH, are unoccupied. There is a nine story

bank building in good condition directly across the street from the

courthouse was recently sold at auction for $75,000.

A study by Youngstown State University requested by Congress,

and Tim Ryan, predicted that the pension issue alone, the cost to

local economy, $58 million per year, or $145 million so far. When

the cost of health care issues for all Delphi retirees is added, that

that jumps to $400 million lost to the local economy so far. Adding

in retirees from Dayton and Columbus and Sandusky, the losses in

economic activity in Ohio are now over $1.2 billion. Nationally, it

is about $4 billion, all because our government incorrectly chose to

treat us as having no commercial necessity. The PBGC was willing

to play along. These losses will continue to grow for decades if they

are not corrected.

The PBGC has chosen to defy the Federal court. They are denying us access to documents and people we have requested. And one

must ask why, and the only answer I can think of is that they feel

that the consequences of defying the Federal court are not as bad

as complying with it.

Here is one area where you can help. We need transparency on

the actions of the PBGC and the administration regarding the

treatment of the Delphi salaried retirees. I will summarize. We

have lots of support, including the UAW, the Ohio AFL–CIO. The

Senate in Ohio unanimously passed a resolution saying that all the

retirees should be treated fairly. The State Democratic parties in
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both Ohio and Michigan, the Democratic Party, said that everybody

should be treated fairly.

We need your help, and we ask your help to end this nightmare

and reverse the precedents set by this administration and the

PBGC, so that we and those behind us will have to deal with the

same horrible issues. Help us stop the slide down the financial cliff.

Thank you very much.

[The prepared statement of Mr. Gump follows:]
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Chairman ISSA. Thank you, Mr. Gump.

Ms. Miller.

STATEMENT OF MARY MILLER

Ms. MILLER. Thank you, Congressman Issa, for inviting me to

testify today. I am Mary Miller. It is an honor and privilege to be

here. I am here to tell you how the GM bailout has shattered my

plans for retirement, and to ask you to fix this shameful injustice.

I worked for 22 years for General Motors and nine for Delphi.

While I held many different positions over my 31 year career, one

of the jobs I held for quite some time was to partner with an appointed hourly employee to manage the UAW and GM and Delphi

training funds. I am still good friends with this coworker. While he

continues to receive the full pension and health-care benefits he

earned, I do not.

How can it be legal for the government to pick winners and losers amongst its own citizens? Why did the administration deem my

friend and his family as more valuable to America that my family

and me?

For me, and many of my fellow retirees, the burden of trying to

figure out how to make ends meet gets heavier every day. Let me

tell you a little more about me, what my plan was for retirement,

and what will happen to my plan unless you can fix this disaster.

I am a mother of four young adults ages 20 to 26. I am a home

owner, a taxpayer, a person of deep faith, and a law abiding citizen. I am divorced. As a single mom, I have long been the main

provider for my four children. Prior to losing my job at Delphi, I

was a human resources manager. I am a professional certified

Coach. I started my own business, MTM Transformation Coaching,

after I lost my job at Delphi. Being only 57, I knew I needed to

start a new career to earn additional income. Due to the recessionary economy, it has been very challenging to build my coaching

practice.

In 2009, Delphi stripped its retirees of all promised healthcare

coverage. That means retirees under the age of 65 have to purchase

it. In my case, that means the cost for health care for my family

has increased from $179 in 2008 to $787 a month now, even with

HCTC benefits. This means I cannot afford to provide health care

coverage for my three sons who are in college. I feel that I have

failed my children when I cannot help to provide the basics while

they are full-time students.

And, sadly, that was just the beginning of the retirees’ horror

story. Just a few months later, the bottom fell out when the PBGC

took over the Delphi pensions. The PBGC slashed my pension

check by 30 percent. This is not a situation that can be remedied

by just cutting out all discretionary spending. I am struggling to

pay for the basics, to keep my 10-year-old car running, to pay my

property taxes, and to make critical home repairs.

Even though I have bought health insurance for myself, I was

not able to afford a CAT scan my doctor ordered last June. When

I learned my portion of the bill would be $278, I had to take cancel

the test.

I have been put in this crushing position because the government

intentionally chose to treat me and all Delphi salaried retirees with
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absolute disdain and disregard. What does the future hold? Without your help to resolve this travesty, I will not be able to maintain

my own home or pay for my own medical needs. How can it be that

a person who put herself through graduate school, worked hard in

two Fortune 500 companies for over 31 years, earned a comfortable

pension and health care benefits to have in retirement, will live her

golden years in such poverty? How can it be legal for the government to pick winners and losers amongst its own citizens? I have

learned that when you are in the right, you do not back down. We

will never give up our fight to regain powerful pensions.

Please take up our cause and help us to regain the full pensions

we earned and so desperately need. Thank you.

[The prepared statement of Ms. Miller follows:]
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Chairman ISSA. Thank you.

Mr. Rose.

STATEMENT OF TOM ROSE

Mr. ROSE. Thank you, and good morning. My name is Tom Rose.

I am a salaried retiree from Delphi, having worked 30 years for

General Motors, and another 9 years for Delphi. My entire career

has been spent working at five of the former eight Delphi plants

in Dayton.

I grew up in Nashville, graduated from college, served our country in the military, including a year in Vietnam, met a wonderful

girl in Dayton, married, three children, all of whom graduated from

college and are themselves married, with two grandchildren.

My working career began as a young engineer at the local GM

plant on Wisconsin Boulevard, and included many different management jobs, including, plant manager at the Kettering Boulevard

plant. I was fortunate to lead many talented salaried and union

people as we delivered quality parts to our customers on time. Our

plans and people contributed greatly to the local economy.

I am now using retirement savings at a much faster rate than

originally planned to compensate for my missing pension dollars.

The careful financial plan for retirement, that my wife and I were

taught to achieve was wiped out and became meaningless. My wife

and I are paying three times more for our healthcare than with

Delphi, even with HCTC, and we are paying for it with 40 percent

fewer pension dollars. We use what little is left to help fund the

DSRA lawsuit to correct what never should have happened in the

first place.

A successful retirement for my wife and I is now in jeopardy. Salaried and union employees worked for the same company, were in

the identical situation, in many instances worked side by side, but

were treated in distinctly different manners. The current administration created solutions in which our suspensions were sacrificed

to help enable GM’s emergence from a choreographed bankruptcy

in a record 44 days.

You have heard some of how my wife and I have been impacted.

I would like to share input from other salaried retirees: Saginaw,

Michigan—‘‘My unemployment ran out, so I am really under water

right now. I am using my savings account to pay my bills, but that

is quickly dwindling, and I may have to sell my house by spring

time and find a cheap place to live.’’ Dayton, OH—‘‘This past year

has been hard for me. I am making it through, but just by a

thread. I had to borrow money from my family this month to make

it to payday.’’ Cicero, Indiana—‘‘I have great difficulty providing

even the basics for my family. I am appalled and enraged at the

treatment I am receiving in retirement. As a result of this discrimination, my annual income is more than $6,500 below poverty level

guidelines.’’ Boyne City, Michigan—‘‘The 30 percent reduction in

my pension has put my wife and me in a situation where in order

to make ends meet, we have to live apart Monday through Friday,

working in two separate towns. I have been blessed with a wonderful wife. We have been married for 35 years, and this is the first

time in my career that we have been separated on a regular basis.

It is very hard on both of us.’’ Sandusky—‘‘What makes what has
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been done to us so damndable is this. We are at an age and state

of health where we cannot bounce back. There is too little time remaining and too little opportunity available. I do not want a hand

out, but I do want a hand back of what was taken from me.’’

Earlier in my testimony, I mentioned we were forced into a legal

effort to gain back that which we had earned and was denied us

by the administration. In closing, please let me give you to brief examples of exceptional sacrifice and the tenacity of our membership.

Bonita Springs, Florida—‘‘I have been pretty well consumed with

caring for my wife, who has had a recurrence of breast cancer this

spring. I have just sent $40 through PayPal, and next month I will

send $35. Sorry I cannot do more, but we have some large medical

bills this year.’’ West Carrollton, OH—‘‘In April, I took a part time

job, along with my full time day job. I would get up at 5 AM and

return home at 11 p.m. I soon had to quit my part time job for concerns about my health and lack of rest. After 391⁄2 years at GM/

Delphi, I never imagined that I would be working two jobs to try

and support my family. I am doubling what I would normally give

to our cause. I hope someday that we will prevail. I feel that time

is on the PBGC’s side by dragging this out and not cooperating.

This may someday deplete our funds in a way we cannot support

our lawyers.’’

Members of the committee, these are real people, real lives, real

impact. More than 20,000 current and future Delphi salaried retirees and our families are appealing to the oversight committee

today to hold the administration responsible to correct this injustice. We are not asking for a handout or an entitlement, only the

deferred compensation that was earned by us and taken away by

the executive branch of our own government.

Thank you for this opportunity.

[The prepared statement of Mr. Rose follows:]
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Chairman ISSA. Thank you, Mr. Rose.

As I said to the earlier panel, I am going to ask each panel substantially the same question, and I know some of you may have

slightly different takes on it. And I will preface it by saying, you

know, when I worked for General Motors, I was a machinist, Aerospace Workers Union in Cleveland. Enjoyed the job, enjoyed the

benefits, did not stay for a career. But I knew at that time I was

represented by a powerful union that had a lot of clout. None of

you were represented by a powerful union who had a lot of clout.

What part do you believe not being represented by a union played

in the decision to have people, like Mr. Black and all of you who

had special skills—some might say harder to duplicate skills—than

a line worker, in many cases, choose to have retirees of that category receive only what was in the bank, so to speak, versus union

workers who were topped up?

Anyone can answer. I want to make sure we go away with the

record clear about why you might make a decision that one group

was important versus another. Is there any reason you can find

other than, in fact, the clout of the union and its influence on the

administration?

Mr. GUMP. The reason is the involvement of the U.S. Government. The issue here is that the government stepped into this with

our dollars, with our money, right, and allowed General Motors to

make totally different decisions than they would have had that not

happened. In the end, the Treasury knew that the folks represented by the unions tend to support them very strongly. And so,

there is even some testimony that has already been offered in deposition that indicates that the political sensitivity of certain groups

was a criteria that was considered during the bailout. So, we know

that that was one of the things that was an issue.

I do not believe that the UAW would have struck General Motors, which was already in bankruptcy and in danger of liquidation,

because that would have ruined all of the jobs for all of their members at General Motors. They would have found some other way to

have worked and tried to make their point with General Motors.

I do not think there would have been a general strike.

Chairman ISSA. So, your belief is that it was more the political

importance to the current administration rather than the likelihood

of a strike leading to the crippling of the company.

Mr. BLACK. Let me comment also and reiterate what was mentioned in the prior testimony, and that was immediately when the

plan of reorganization for General Motors was announced, it immediately was said that our UAW counterparts would be topped up.

But the other major unions were left out of that. Some weeks

passed before it eventually came that the decision was changed to

also top up our IUE counterparts and steelworkers, okay? That

alone is indicative of why if they all had contractual agreements,

why did it happen?

And, of course, clearly why it happened, especially in this State

of Ohio, which I am a Buckeye and started my job with IUE representation here, is that IUE is very, very, very powerful in Ohio.

And the decision to change and include the IUE clearly had to do

with political considerations, not contractual considerations.

Chairman ISSA. Mr. Rose.
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Mr. ROSE. I concur. As you heard Mr. Gebbia’s testimony, there

was no financial justification given the, you know, actuarial funding level of the pension plan. So, what else happened? It is my personal belief that when the Federal Government interjected itself

into the GM bankruptcy process, and you can only wonder why

they did, but to me, clearly the Delphi pension plan was an obstacle to quickly getting GM out of bankruptcy. So, they dealt with it

in a way that I believe favored the current administration politically.

Chairman ISSA. Well, I also serve on the Judiciary Committee,

and I was there for bankruptcy reform. Mr. Jordan also serves on

the committee. The amazing thing to me is that we in government

do not need a Constitution for the powerful. We do not need laws

for the powerful. We need the Constitution and laws for the weak.

Ultimately the success of our democracy is about the minority having rights, not the majority. If you want to see the majority have

rights, just go to any Third World country and see who is in

charge. They do not need any more government than in fact a one

party.

So, I can only say to you and to all of the salaried employees that

have suffered now and will continue to suffer until there is a resolution, that this committee will look into both the bankruptcy inequities and, in fact, the misconduct that we believe may in part

have come out of Treasury and come out of the administration, to

see if we cannot get a full disclosure and then rectification once

that has seen the light of day.

I know that is not enough while you are continuing to suffer, but

it is what we will do, and this committee will additionally make

public such documents as we can from our discovery. Now, that

will not necessary be the documents you want, but it is our intention to be as transparent as we can be, and particularly when we

get into the details of Treasury’s, what they did, why they did it,

and what they did not tell all of you.

And with that, I would recognize former chairman of the committee, Mr. Burton?

Mr. BURTON. I think these stories that we have heard are heart

rendering. It makes you kind of ashamed that our government even

considers doing these sorts of things. We have another investigation going on right now with the National Labor Relations Board

where they are trying to use political muscle to force unionism on

a company down in South Carolina. It is a different issue, but, once

again, you have the Federal Government, this administration, trying to control the people of this country instead of working for the

people of this country. And I think it is very sad.

I do not have any questions, Mr. Chairman.

Chairman ISSA. I thank the gentleman. Mr. Turner.

Mr. TURNER. Thank you for your compelling testimony, and also

thank you for your diligence in working on this issue. I know in

addition to sharing your personal stories that each of you have

taken responsibility in working on behalf of yourselves and all the

Delphi retirees on this issue.

I want to commend you because one of the things that you have

said that I think is very striking is the wide range of support that

you have. The unions who have received their full pensions support
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that the outcome should have been you had received your full pensions. So, this is not an issue of division between you. It is winners

and losers chosen by the government, not chosen by your fellow coworkers. And I think their solidarity with you is incredibly compelling.

And I also note your statement that in Ohio your strong support

that you have, and the State Senate had passed a resolution calling

on full funding of the pensions. I know Secretary Peggy Laner was

here earlier, and she was one of the champions that you have

worked with on this issue.

Over the last several years that I had the opportunity to work

with you on this, and we have tried to advance this in a number

of areas, one asking for GAO studies of the GAO today. Another

study is ongoing. And working with the chairman, Chairman Jordan, on trying on the congressional side to get documents produced,

to get people to answer appropriate questions, working also in putting additional pressure on the administration and then looking to,

as your litigation proceeds, ways in which we might be able to assist in making certain that the story that you do not know yet, how

did this happen, gets told.

So, I want to tell you that, I think you have heard from the

chairman, and I know that you know from the things that are in

front of us that we are not going to stop on this. You are not going

to stop, and we are not going to stop. The administration is not

going to be able to say, I am not going to tell the Federal courts,

I am not going to tell Congress how or why I did this. The administration is going to have to ’fess up that there were decisions that

they made. We want to know why and the basis of the decisions.

We know the outcome. The outcome is discriminatory. We need

to determine and learn the manner in which this was done so that

we can correct it. So, thank you for your diligence. Thank you for

being here, and also thank you for the fact that you have continued

to reach out so that this is not just an issue of you standing here

alone. It is an issue of you also working with the other Delphi retirees in unison. So, thank you again.

Chairman ISSA. Thank the gentleman. Mr. Jordan.

Mr. JORDAN. If I could just real quickly, Mr. Black, come back

to something you had just said. GM initially only wanted to top up

the UAW plan. And yet, to your understanding, Treasury forced

them to also add in the IUE and the UAW.

Mr. BLACK. Yeah. For about 40 days in continuing discussions by

the IUE and the steelworkers, a miraculous thing happened, and

it was decided that we will also top them up.

Mr. JORDAN. Yes. Mr. Chairman, I would just point out that this

pattern, you remember in prior hearings we have had, the overall

restructuring plan that GM first submitted to the auto task force

was turned down, was rejected. And, you know, this idea that GM

would make the decisions and not people in Treasury, not the auto

task, not the government I think is just absolutely not true. Because the initial restructuring plan was turned down, the subsequent restructuring plan was accepted where facilities were closed,

dealerships were closed, etc.

So, again, this I think points to a pattern where political influence was, in fact, at play. And I yield back.
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Chairman ISSA. Go ahead.

Mr. GUMP. I am sorry. You asked at the last hearing to get a

copy of the first restructuring plan.

Mr. JORDAN. We are looking over it now.

Mr. GUMP. You got it?

Mr. JORDAN. Yes.

Chairman ISSA. Yes. In consultation with the chairman, our anticipation is we would post an appropriately and limited redacted

portion of that as soon as it has been reviewed by counsel. As you

know, our committee has a unilateral right to determine what we

will or will not release. We try to be considerate, but certainly this

is something that has a huge public interest.

Mr. Austria.

Mr. AUSTRIA. Thank you, Mr. Chairman. Let me, first of all, take

a moment to thank all of you for being here today. I think it is important that you share the stories that you have with this committee so we understand the direct impact it is having on you all

and other families, which is very important. I know the last few

years have been extremely difficult for you and your families, but

we appreciate your determination to ensure that every Delphi retiree receives a fair pension.

And what I would like to ask you is about, and you have touched

on this, is the reduced pensions. I know, Ms. Miller, you mentioned

that your pension has been reduced another 30 percent. Mr. Gump,

I think you talked about somebody who had a 49 percent loss.

And, as you know, the Federal law limits the maximum benefit

a person can receive through the PBGC under a partially funded

pension plan. The limit is based on the year the plan was terminated or went bankrupt and does not include an adjustment for inflation. As a result, not only have Delphi salaried employees had

pensions cut, as I mentioned earlier, and you have mentioned also,

as much as 70 percent with our discussions, Mr. Rose, last week,

but each year, and this is the point I am trying to make, each year

your pension has less and less purchasing power.

Can you describe for the committee how this has impacted your

lives. And also, Mr. Black, you talked about the future, I mean, in

planning for the future when you have less and less purchasing

power.

Mr. ROSE. Yeah, inevitably, of course, now there are signs that

even with inflation and everything it might be picking up steam,

especially if you are trying to buy gasoline or food, so indeed. You

know, those who have not suffered complete economic wreckage yet

will most certainly suffer it in the next decade or two should they

be unfortunate enough to live that long. [Laughter.]

Mr. AUSTRIA. That is the bottom line.

Mr. GUMP. I would like to point out, you talked about the 49.7

percent. That is actually the levels of concentrated poverty in

Youngstown, OH is what I was trying to make. That same study,

by the way, pointed up that for every million dollars lost, about 30

people downstream of us will also lose their jobs. So, you go do the

math, at $161 million in the Mahoney Valley alone up in Northeast

Ohio, that is nearly 5,000 people that were still waitresses, and

service workers, and electricians, and plumbers that might do

work. They lose their jobs, too, because we are not out participating
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in the economy any more, all right? That is the effect that commercial necessity, if you will, of including us. But the government

chose to not do that because it was not just commercial necessity;

it was also political necessity, all right? We are absolutely convinced of.

Mr. AUSTRIA. One follow-up real quick, Mr. Chairman, if I can

in the short time allotted. Today, I think all four of you expressed

your frustration with government, and the numerous hardships

that have been put on you as a result of what has happened. And

I know many of the retirees feel betrayed by the government because the administration’s quest to quickly resolve the Delphi

bankruptcy without adequate consideration for the effects on retirees.

And I know this panel, and I know this committee, and many of

my colleagues have worked very hard to help your cause through

the hearings and requesting this information from the administration. But I also know there have been obstacles and roadblocks

have been put forward with government, and also Members of Congress. I know we want to continue to work hard. I have co-sponsored bills. There have been letters that we have sent that we have

taken the lead on, and working coordinating with you. But what

are some of those roadblocks that you have been faced with in trying to work with government and trying to work with Congress in

particular?

Mr. GUMP. I think, first of all, the reluctance of both the Treasury and the PBGC to allow any transparency. They essentially tell

us that we should be glad to be able to get anything at all, while

our next door neighbors are out buying boats and taking vacations

because they were members of the union. I think that is probably

the most difficult.

There are some obvious political issues, one party versus another. Those kinds of issues have played a role.

What we found was that if we do get an opportunity to speak to

the right people and explain the realities of the decisions that they

are making, they tend to carve out niches in their ideologies to try

to work against that. I would point out that we do have support

on both sides of the aisle, very strong support. In fact, two of our

very best supporters up to now have been Senator Brown and Congressman Ryan, both Democrats. That is not to leave out, you

know, your committee and others on that side of the aisle.

The point I am trying to make is that this really is not an issue

of one party versus another. The parties themselves have spoken

and said this was wrong. This is an issue of right and wrong, and

that is why they are protecting it. That is why they do not want

to let anything out. They know they did wrong. They do not want

to admit it. They do not want to allow anything out. So, they are

going to go to the mat and prevent anybody from learning what

happened. That is where we need your help.

Mr. ROSE. So, in a nutshell, of course, the roadblock has been the

utter unwillingness to have transparency, utter unwillingness. And

even Federal judges are slapped upside the head when they say

you are going to be transparent. That is the problem.

Mr. AUSTRIA. Thank you.
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Chairman ISSA. We are going to have a very limited second

round. What I would add for all of you, I think you have done a

good job of explaining for the record that this is not about bringing

down the successes of a union or several unions looking out for the

benefit of the people they represent. They did their job. We expect

they would. And union members come in all party persuasions,

from the far left to the far right. So, hopefully you are helping us

make that record, additionally making the record that this is not

a partisan issue of Republicans versus Democrats. You have support on both sides of the aisle in the House and the Senate. And,

last, that in fact we cannot make you whole by taking away anything from the men and women who are receiving a greater benefit.

To make you whole, we have to use other means available, either

with Congress or with the Benefit Corp.

With that, I would recognize Mr. Burton for a second round of

questions?

Mr. BURTON. Yes, real quickly, one of the things that Mr. Bloom,

who lied to our committee and then said he could not remember

once he was caught, staff just reminded me, he was the senior advisor to the President of the steelworkers union before he got his

present position. So, when you think that there was not politics involved, it is clear as the day is long that it was definitely involved.

I just had one question I wanted to ask, Mr. Chairman, and that

is, do you have any idea how much it has cost in legal fees, the

people who are involved in this lawsuit?

Mr. ROSE. Yeah. We are over several million dollars so far, and

we got plenty more if we need it.

Mr. GUMP. I would like to make the point, if I may, Mr. Burton,

that the attorneys have worked very strongly and carefully with us

on that. And our members send in $10, $20, $30 a month, $50 a

month to support that, and every bill has been paid, and we are

ahead. We are in this. We are going to finish this, and our attorneys are, too.

Mr. BURTON. Well, I appreciate your dedication. But it is unfortunate that the people who are suffering have to pony up the

money for legal fees as well when their opponent, the Federal Government, has unlimited resources.

Chairman ISSA. I thank all of you for your testimony. Mr. Rose,

you included a number of references to other letters that you had

received. As I said in the beginning of the hearing, we will leave

the record open for five additional days. That would include any

and all letters or information from your various members that you

want to make sure were added to make the record complete.

And with that, as we take a brief recess to set up the next panel,

I want to ask the audience to be just as kind and considerate to

people who were obligated to come here to tell what is to a great

extent the other side of the story. They are career professionals.

Their job is not to make political decisions, and they are here at

our request to explain what they can and to take candid questions.

So, I want you to be just as genteel and kind as you have been to

the first two panels. [Laughter.]

With that, we will take a short recess.

[Recess.]
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Chairman ISSA. Thank you. This hearing will come back to order.

I am going to place in the record by unanimous consent the additional statements of Senator Sherrod Brown and Congressman Tim

Ryan. They were unable to be here today, but wanted to make sure

their thoughts were known on this hearing.

[The information referred to follows:]
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Chairman ISSA. With that, we now recognize our third panel, as

I said, career professionals. Ms. Barbara Bovbjerg is director for

education, work force, and income security issues at the U.S. Government Accountability Office, which is a branch of Congress. Mr.

Vincent Snowbarger is the deputy director for operations at the

Pension Benefit Guaranty Corp., again, a career professional.

Pursuant to the committee rules, I would ask you to rise and

take the oath.

[Witnesses sworn.]

Chairman ISSA. Let the record indicate that both witnesses answered in the affirmative. And you have sat patiently through two

previous panels, so you know it better than I can describe how this

is going to work.

And, Ms. Bovbjerg, you first?

STATEMENTS OF BARBARA BOVBJERG, MANAGING DIRECTOR,

EDUCATION, WORKFORCE, AND INCOME SECURITY ISSUES,

GOVERNMENT ACCOUNTABILITY OFFICE; AND VINCENT K.

SNOWBARGER, DEPUTY DIRECTOR FOR OPERATIONS, PENSION BENEFIT GUARANTY CORP.

STATEMENT OF BARBARA BOVBJERG

Ms. BOVBJERG. Thank YOU, Mr. Chairman, members of the committee. I appreciate your inviting me here today to speak about

events leading to termination of the Delphi pension plans, and the

differential benefit payments that resulted. My beat at GAO includes income security issues, and we have heard truly heart

wrenching stories this morning.

My testimony today presents a timeline of key events leading to

the plan’s termination, focusing in particular on decisions allowing

General Motors to provide retirement benefit supplements to some

Delphi employees, but not to others. This information is drawn

from our March 2011 report prepared for Mr. Turner and others,

and relies on publicly available documents.

The story begins in 1999 when the Delphi Corp., once part of GM

was spun off as an independent company. As part of that arrangement, GM was required to bargain with the unions affected by the

spin off. In those negotiations, GM agreed to provide top ups to collectively bargained employees, meaning that if something went

wrong with the pension plans for these employees under Delphi,

GM would make good on their promised benefits.

At the time of these agreements, Delphi’s hourly plan was not

fully funded, meaning that absent a top up agreement, some benefits could have been at risk. In contract at that time, the Delphi

salaried employees’ plan was fully funded.

So, fast forward to October 2005 when Delphi filed for bankruptcy. The pension plans were under funded, and Delphi was not

planning to make contributions to these plans during the bankruptcy process; hence, prospects for the plans and a prospect for

participants’ future benefits got substantially worse.

Two years later in 2007, Delphi was still in bankruptcy. In its

initial reorganization plan, Delphi proposed to emerge from bankruptcy with its pension plans intact, which could have removed the

need for top up agreements, but this proposal fell through. Shortly
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thereafter in 2008, GM agreed to take responsibility for about $3.4

billion of net liabilities in Delphi’s hourly plan in two phases.

Phase one took place in September 2008 when GM assumed about

$2 billion in plan liabilities. Economic conditions deteriorated

throughout the auto industry in fall 2008, as we all know. GM’s

losses led the company to seek assistance from the Federal Government.

By April 2009, the Department of the Treasury was working with

GM to develop a restructuring plan, and by June, GM, too, had

filed for bankruptcy.

In May 2009, Treasury believed that the hourly plan would be

assumed by GM, at least for the UAW workers. However, phase

two of the Delphi/GM transfer agreement required Delphi to pay

GM about $2 billion, and because Delphi, in its bankrupt state,

could not make such a payment, the phase two transfer never took

place. Meanwhile, GM and Treasury both understood that the salary plan would be terminated.

In June 2009, as part of an arrangement for GM to emerge from

bankruptcy, GM and the UAW agreed to modify wages, benefits,

and work rules to be more cost competitive, and agreed that new

GM would assume all employment-related obligations and liabilities for their hourly benefit plan. This agreement did not include

other unions or salaried employees.

Meanwhile, Delphi and PBGC began the process of what we call

a distress termination of Delphi pension plans. PBGC estimated

that Delphi plans were $7 billion under funded, with PBGC expected to bear $6 billion of that shortfall, and Delphi plan participants the remaining $1 billion through the application of benefit

limitations as required by law.

After objections from the other unions and the salaried employees, objections that threatened to thwart Delphi’s and GM’s future

viability, GM entered into a settlement agreement that, among

other things, resulted in top up payments to the unionized workers

of the main unions. No such agreement pertained to salaried workers, and this is where the situation lies today.

GAO will be reporting more substantively to Mr. Turner and

other requestors on these issues next month, and in that work, we

will be talking about what precipitated plan termination, what actions were taken to preserve assets for PBGC in the plans, why

some employees were topped up and others not, and what was communicated to employees about the termination, and we expect that

in mid-December. And, unfortunately, I will not be able to talk

about that work in progress today.

Thank you, Mr. Chairman. That completed my statement.

[The prepared statement of Ms. Bovbjerg follows:]
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Chairman ISSA. Thank you.

Mr. Snowbarger.

STATEMENT OF VINCENT SNOWBARGER

Mr. SNOWBARGER. Good morning, Chairman Issa, and other

members of the committee. I am Vince Snowbarger, deputy director

of operations at the Pension Benefit Guaranty Corp., and I also

ought to mention at the times relevant to our proceedings here, I

was the acting director of PBGC.

I will testify today about the termination of the pension plans of

Delphi Corp., the Nation’s largest producer of auto parts, and specifically about PBGC’s role.

As you know, in July 2009, PBGC stepped in to protect the pension of Delphi’s 70,000 workers and retirees. PBGC will cover about

$6 billion of the plan’s shortfall, but there is also a shortfall of $1.2

billion in benefits that are not guaranteed by the insurance program.

Delphi, which was originally an in house parts manufacturer for

GM, was spun off as an independent company in 1999. At that

time, GM transferred assets and liabilities from the salaried and

hourly pension plans to the newly established Delphi salaried and

hourly defined benefit pension plans. GM negotiated with certain

unions to provide benefit guarantees if the hourly plan terminated

or was frozen at a later date. Delphi began suffering significant

losses in January 2001, and the funding of pension plans deteriorated.

On October 8, 2005, Delphi entered chapter 11 bankruptcy, and

ultimately liquidated in 2009. The old Delphi ceased to exist. The

new Delphi, as United Kingdom Co. purchased most of the old Delphi’s assets, including its name.

After Delphi entered into bankruptcy protection in October 2005,

PBGC worked intensely with Delphi, GM, and other stakeholders

to keep the pension plans ongoing. As mentioned earlier, during

the bankruptcy Delphi consistently told PBGC and its employees

that it intended to reorganize with the pension plans intact. However, Delphi failed to make required minimum funding contributions to the plans, and as a result liens were triggered on behalf

of the plans against the assets of Delphi’s non-bankruptcy foreign

subsidiaries.

Beginning in March 2006, PBGC perfected those liens as the law

provided so that the plans had a secured interest against the foreign Delphi entities. In September 2007, Delphi filed a reorganization plan with the Delphi bankruptcy court, and as a part of that

reorganization, GM and Delphi entered into a settlement agreement to transfer part of Delphi’s hourly plan to GM’s hourly plan.

Delphi was to continue to sponsor all of its other plans, including

the salaried plan.

That fell through in April 2008, but in the latter half of 2008,

as Ms. Bovbjerg has mentioned, Delphi still anticipated reorganization through bankruptcy, maintain its salaried plans and merge

the hourly plan with the GM hourly plan. And they indeed transferred part of the hourly plan to GM for compensation.

Unfortunately, Delphi experienced severely declining revenues in

the fall of 2008 and the spring of 2009 as GM and other manufac-
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turers sharply reduced production. When Delphi’s financing agreement with its debtor in possession [DIP], lenders was scheduled to

expire on April 24, 2009, Delphi was faced with the prospects of

imminent liquidation.

On April 21, 2009, I signed a notice of determination seeking to

terminate the six Delphi salaried and hourly pension plans to avoid

losses to participants in the insurance fund, if the DIP lenders

were to foreclose on their collateral. PBGC agreed with the Delphi

DIP lenders to postpone the effective date of the termination decision to allow the parties to negotiate a resolution of Delphi’s bankruptcy. However, in July 2009 as Delphi was being liquidated, the

DIP lenders initiated foreclosure, leaving PBGC with no choice but

to step in and take over Delphi’s underfunded pension plans.

I want to emphasize that PBGC treated the salaried plan no differently than the hourly plan. The only difference in treatment of

the participants resulted from decisions made by GM. PBGC’s involvement in the Delphi and GM bankruptcies was limited to the

disposition of the pension plans. PBGC did not have any influence

in GM’s restructuring decisions, including the decision to assume

the collectively bargained top up agreements entered into by the

old GM in 1999.

In conclusion, Mr. Chairman, companies that sponsor pension

plans have the responsibility to live up to the promises they made

to their workers and retirees. Plans come to PBGC because their

sponsors have failed to properly fund them. In unfortunate cases

like Delphi where sponsors fail and liquidate, PBGC is forced to,

and will, step in to protect workers and retirees.

I would be happy to answer questions.

[The prepared statement of Mr. Snowbarger follows:]
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Chairman ISSA. Thank you.

I recognize myself for a round of questioning.

In June 2009, General Motors, as you know, received $50 billion in taxpayer money, and it used $2.5 billion of that $50 billion to

buy a stake in Delphi, essentially an indirect bailout. In early 2011,

Delphi bought back its assets from General Motors. However, GM

still owes about $26 billion to the taxpayers, and unless the stock

more than doubles, the taxpayers will not be made whole at General Motors.

So, ultimately that $2.5 billion was, in fact, simply a pass

through of taxpayers’ dollars. It was not within General Motors’

means or anticipated means in the foreseeable time. Literally, they

need 10 years’ worth of profits they have never had in modern

times in order to come close to paying back the government.

So, in that scenario, the question I would ask you, first of all, is,

at the time the PBGC terminated Delphi’s pension, did you know

General Motors was going to own a large stake in Delphi? Did you

know about the purchase?

Mr. SNOWBARGER. Obviously we knew about the interconnection

between GM and Delphi, but at the time we made the decision in

April 2009 that the plans were going to need to be terminated, I

do not think any decision had been made at that point. Well, I

guess there had been a couple of——

Chairman ISSA. April to June was pretty close. That is why I

asked.

Mr. SNOWBARGER. No, I understand that. But I think it is a significant difference in timing. Again, our decision was based on factors that were beyond what was happening with GM. We were

looking solely at——

Chairman ISSA. Sure, and I am not questioning your termination.

It is simply, at that time—I mean, April to June was very, very

close. At the time of the termination, were you aware of obviously

the top ups and this investment that was literally a conduit of taxpayer money?

Mr. SNOWBARGER. My understanding is those decisions had not

been made by GM at that point in time.

Chairman ISSA. Did you know——

Mr. SNOWBARGER. To my knowledge.

Chairman ISSA. Did you have any knowledge that it might happen?

Mr. SNOWBARGER. We understood that that agreement was in

place in 1999, yes.

Chairman ISSA. Well, that agreement expired with the bankruptcy, did it not?

Mr. SNOWBARGER. I do not think it automatically expires. I think

they have to reject the agreement. I am not a bankruptcy lawyer,

but I believe GM would have had to reject those parts of the agreement.

Chairman ISSA. But GM had the power to reject all agreements,

void all leases, all purchase agreements. That is a standard part

of bankruptcy is you can literally pick and choose what you want

to get rid, and all you have to show is a business reason to do it.

Mr. SNOWBARGER. Again, PBGC was not a part of that decision,

but I do not disagree with the chairman.
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Chairman ISSA. Okay. Well, but it is safe to say that GM’s purchase of Delphi is the equivalent of an indirect bailout from the

Treasury to Delphi. You would agree with that, that that $2.5 billion of the $50 billion is essentially a conduit of a loan to GM that

passed through to Delphi. And you knew that that was anticipated.

Mr. SNOWBARGER. I do not know that we did anticipate that in

terms of our decision about terminating the plans, no.

Mr. BURTON. What was the timeframe?

Chairman ISSA. The timeframe was April to June. But am I right

to assume that terminating these pension plans made Delphi a

more viable company? That these were somewhat anchors to them,

the fact that they were, at that point, underfunded. And unless the

market rose, would remain underfunded, and would cause dollars

to have to be put into them?

Mr. SNOWBARGER. PBGC made its decision to terminate the Delphi pension plans because Delphi was going away. It would no

longer exist.

Chairman ISSA. But if General Motors getting $50 billion had given $10 billion to Delphi instead of $2.5, would there not have

been enough money to view it differently?

Mr. SNOWBARGER. I suppose. I do not have any basis on which

to make a decision like that.

Chairman ISSA. So, if the administration had handed $10 billion

in TARP money to Delphi, and I use this point because, remember,

with Chrysler, we sold Chrysler to Fiat, but we also put the money

in out of TARP never to get it back. Is that correct, to your understanding?

Mr. SNOWBARGER. That is my understanding. And, again, wheth- er $10 billion was the right number or something more than that,

sure, TARP funds could have been used for a different purpose.

Chairman ISSA. Do you have any knowledge as of today if you

had not terminated the fund as the earlier panel said, would that

amount of funds be still able to pay out substantially more than

you are currently paying out? That is their allegation is that the

funds were there. They were at a low point. The funds were essentially transferred to you as part of the termination. If those funds

were put back into ordinary investments today, would they yield as

much as the recipients are getting today, or would it be likely

more?

Mr. SNOWBARGER. The problem, Mr. Chairman, is that there is

no sponsor to turn this plan back over to. Delphi no longer exists.

Chairman ISSA. And retirees are no longer working.

Mr. SNOWBARGER. I understand.

Chairman ISSA. Okay. I just want to understand that General

Motors, for example, and I said earlier would have, could have, and

should have. General Motors could have taken back the retirees at

least and said, you retirees, we are going to fold you back into our

plan, and then you would not have terminated had they agreed to

be the sponsor.

Mr. SNOWBARGER. If there had been another sponsor willing to

take over the plan, that is correct.

Chairman ISSA. So, it was General Motor’s decision to cut and

run from its former employees, longstanding former employees,

that in no small part played a part in this. They could have made
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that decision. They considered that decision. It was even in earlier

proposals. And they chose not to.

Mr. SNOWBARGER. I am not aware that it was in earlier proposals

to take over the salaried plan. My understanding was they had a

number of times talked with Delphi about taking over the hourly

pension plans, but I do not believe the salaried plans were ever

treated that way, or considered that way.

So, the more powerful of the group was considered, and ultimately taken care of, while the less powerful, less represented

group, in your opinion, was always going to get screwed.

Mr. SNOWBARGER. Well, again, I think—[laughter.]

Chairman ISSA. It is a technical term. You remember we use that

in Washington. [Laughter.]

Mr. SNOWBARGER. I have heard the term before, yes. And, again,

I do not think it is my position to respond to that because we were

not a part of those decisions by them or Treasury.

Chairman ISSA. But you know there could have been a better

outcome than there was by several means that you have described

here today.

Mr. SNOWBARGER. Well, obviously the people that lost an awful

lot of those salaries—excuse me, those pensions that were not

topped up obviously could have been treated better.

Chairman ISSA. Thank you.

Mr. Burton.

Mr. BURTON. This is a little confusing to me. Did the administration have any hand in any of the decisions that were made?

Mr. SNOWBARGER. I want to try to understand the definition here

of the word ‘‘administration.’’

Mr. BURTON. The President, the people that work in his administration.

Mr. SNOWBARGER. If you are talking the task force or the political side of the administration, the answer is no, not in terms of

our decision to terminate the pension plans.

Mr. BURTON. I am trying to figure out how the topping up decision was made. The Federal Government, the taxpayer, put all that

money into it. General Motors gets the money, and then they decide that the unions are going to be made whole or almost completely whole, but the salaried employees, the hourly employees,

are not. And I am just wondering how that decision was made.

Mr. SNOWBARGER. We were not a part of that decision. And that

was not a part of our decision to terminate.

Mr. BURTON. So, it was left up to General Motors.

Mr. SNOWBARGER. Again, we were not a part of that process, part

of the auto task force’s decisions.

Mr. BURTON. Do you know anything about the auto task force’s

decisionmaking process?

Mr. SNOWBARGER. What I read in the papers, you know, and we

had some conversations about both GM’s plans and Chrysler’s

plans early that spring.

Mr. BURTON. But you did not have anything to do with any of

that.

Mr. SNOWBARGER. No, we had no part in the decision about how

they were spending their funds.

Mr. BURTON. You just turned it over to GM and that was it.
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Mr. SNOWBARGER. We did not turn anything over to GM, I am

sorry.

Mr. BURTON. Explain to me real quickly the process that you

went through, because I am not sure I got it right.

Mr. SNOWBARGER. Sure. Our focus in this particular case was

solely on the pension plans sponsored by Delphi. Let us say old

Delphi is what came out. In looking at those plans, we were looking

at are they funded? The answer was no. For all the hourly plans

and for the salaried plans, none of them were funded as well as

they should have been funded, as well as they needed to be funded.

The second thing we looked at is there——

Mr. BURTON. When you were asking the question, you said between April and June they got another $2.5 billion?

Chairman ISSA. Terminated in April. The money came in from

GM in June. Obviously it was anticipated at that point.

Mr. BURTON. Did you know that that money was—you did not

know that that money was coming?

Mr. SNOWBARGER. Well, let me——

Mr. BURTON. When you made the decision to terminate these

plans.

Mr. SNOWBARGER. When I made the decision to terminate, when

I signed off on the notice of determination in April, no. It was not

a part of our consideration.

Mr. BURTON. And had you known, would that have changed your

decision?

Mr. SNOWBARGER. Well, again, it depends on whether—the third

factor that we look at is, is there going to be an ongoing sponsor.

If, as the chairman posited, Delphi somehow is going to continue

and come out bankruptcy because they were able to get lending

from other source, that would be one scenario. That was not a scenario that existed as of April 21st. The fact of the matter was, as

of April 21st, the lenders in the Delphi bankruptcy were ready to

foreclose on their liens.

Now, they agreed to postpone that a little while longer, and we

agreed to postpone taking action on our decision until——

Mr. BURTON. And 2 months later, $2.5 billion came in.

Mr. SNOWBARGER. Yes. And it did not go——

Mr. BURTON. But that would not have changed your decision at

all.

Mr. SNOWBARGER. If it would have made Delphi a viable ongoing

sponsor for the pension plan, yes, it would. But it did not.

Mr. BURTON. Ms. Bovbjerg, you said that Mr. Turner asked for

information from you, and you said that you could not talk about

it today, but that you would get it to him in December. Can you

tell me why you cannot talk about it today?

Ms. BOVBJERG. Because it is ongoing work.

Mr. BURTON. But what do you mean ongoing work? Do you have

any kind of answers at all today?

Ms. BOVBJERG. We have answers, but they could be wrong since

it is ongoing work. We want to make sure that we are right when

we are reporting to the Congress. We did this interim report in

March that was really just a sort of a sequence of events, a

timeline, not particularly analytic, from publicly available documents. And you will note in here that——
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Mr. BURTON. How long have you been working on this? I am just

curious.

Ms. BOVBJERG. I want to say about a year. About a year.

Mr. BURTON. About a year, and you could not have the information for us today. It has to be after the hearing in December.

Ms. BOVBJERG. Well, that was the schedule. I was notified of the

hearing last week.

Chairman ISSA. I would ask unanimous consent that the gentleman have an additional minute.

Mr. BURTON. Sure. I yield back, Mr. Chairman.

Chairman ISSA. And I would ask you to yield.

I might note for the record that GAO is very conscious that in

the for-profit education preliminary report that was issued that

was essentially reversed in the final report, the early report, we

have chastised GAO for issuing anything that they could not stand

behind 100 percent. So, although it is the original schedule and we

would love to have it faster, I think on behalf of the former chairman and myself, we do want you to get it absolutely right the first

time when it comes out.

Ms. BOVBJERG. Thank you, Mr. Chairman. I wonder if I might

make——

Chairman ISSA. Of course.

Ms. BOVBJERG [continuing]. A remark about the question of who

did what, and where the money went. We have done a fair amount

of work in another part of GAO on the auto task force and the auto

bailout, and we have done some work jointly on GM and Chrysler

and how that all worked, and how it worked with pensions particularly. We did that about a year and a half ago. And we have made

recommendations in that report and prior to Treasury that they

really need to be more transparent about how they do this business, that the auto task force and with Treasury as a whole.

The Secretary of Treasury is not only over the auto task force

and everything else in Treasury, he also sits on a three-person

PBGC board of directors. It is critically important, even if there is

indeed this steel curtain that we have heard a lot about, and everyone is doing everything completely without conflict. It is very important that the appearance of conflict not exist as well. And we

felt that if they had been more transparent about how all these

things were working and when, that would have been very helpful,

and it would help you all in this hearing today.

Chairman ISSA. Thank you.

Mr. Turner.

Mr. TURNER. Thank you. And I also want to note for the record

that there is a GAO response of November 14th that is in our materials that includes an overview of some of the things that you

have looked at. So, we do have that information from you.

Mr. Snowbarger, I want to thank you for the responses that I

just received November 9th to the questions that I had given you

at our hearing of June 22nd. I want to ask you, are you familiar

with these——

Mr. SNOWBARGER. Yes.

Mr. TURNER [continuing]. With these answers——

Mr. SNOWBARGER [continuing]. Yes.
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Mr. TURNER [continuing]. And these questions. You are under

oath. I would like you to affirm the content of these as being truthful and correct.

Mr. SNOWBARGER. They were true when I signed it. They are

true now.

Mr. TURNER. Excellent. Thank you.

There is a lot of talk about the issue of the termination. I want

to get to the issue of the settlement. The PBGC approved the settlement. They were a party to the settlement. We have heard today

about these Delphi retirees, and really the perception that we all

have is that this was wrong, that the pension plans were dealt with

differently, that some were topped up and some were not. Does this

happen a lot with the PBGC, or is this unusual that pension plans

would come out of a bankruptcy, a legal proceeding that you are

a part of, that there would be a settlement that results in just one

group that had a pension from the company versus others, being

so significantly impacted and others being made whole. Is that unusual?

Mr. SNOWBARGER. I am not aware of any other situation where

there was an agreement like this between a former plan sponsor

and a union that carried through. I do believe we have had situations where you have multiple plans sponsored by a company, and

some of the plans are terminated and others remain ongoing.

Mr. TURNER. I have three topics I want to deal with, ask you

about. And one is the issue of conflicts, and another is asset and

liens, and the other is openness and transparency. And I appreciate

that the statement on the issue of the conflict. I am going to walk

you through that a little bit, because in the question that I have

to you, part of what you gave me on September 9th, I asked, please

describe the actual conflicts and potential conflicts between the

Secretary’s duties as a PBGC board member and the Treasury Department’s duties as the majority owner of the new GM. And you

wrote, we are not aware of any conflict. And I think our GAO representative gave us a great outline of those conflicts.

In your testimony, you say, ‘‘I want to emphasize that PBGC

treated the salaried plan no differently from the hourly plan. The

only difference in treatment are the participants resulted from

GM’s decisions.’’ Well, you know, part of the reason I voted against

TARP and why I think people are so upset about all these bailouts

is because that is not really an accurate statement, participants resulted from GM’s decisions, because there was no independent GM

when the President publicly called for the firing of the CEO. The

Treasury Department is bailing them out. The auto task force reports to the Secretary of Treasury, and the Treasury Secretary is

on your board.

And when I get to the question that I ask you about the settlement negotiations, you indicate that PBGC notes that attorneys for

the auto task force participated, along with the PBGC, GM, Delphi,

and Delphi debtor in possession lenders in telephone conversations

during which the terms of the PBGC settlements were negotiated.

I mean, you really have the government there three times, General Motors and Delphi being bailed out through the TARP program as in the stock being owned ultimately by the Treasury Department, you have the auto task force that reports to the Treasury
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Secretary, and you have PBGC which has the representation of the

Treasury Secretary.

Do you not think that since—well, actually I cannot find one of

them that was on the telephone that did not have some direct connection with the Treasury Secretary. Do you not believe that that

can result in conflicts?

Mr. SNOWBARGER. I can only speak to PBGC’s side of things.

When decisions are made to terminate plans, we keep our board informed about the actions that we are taking. But——

Mr. TURNER. In this instance, the board member that you are

keeping informed also is in control of the other entities.

Mr. SNOWBARGER. Mr. Chairman, I cannot speak to all the other

rules that the Treasury Secretary has. I can speak to his role as

a board member for PBGC, and I can tell you how PBGC interacts

with that board. But I do not know anything more about that. I do

not know he——

Mr. TURNER. I perceive it as a conflict. I think GAO will perceive

it as a conflict, as was stated. I think certainly the people here

today in this committee will.

Mr. Chairman, are you going to do a second round of questions?

Chairman ISSA. We will.

Mr. JORDAN. Would the gentleman yield?

Chairman ISSA. Following up on Mr. Turner, though, it is impossible to have the Secretary, Secretary Geithner, not know what you

intended to do prior to your doing it. Well, it is impossible for Secretary Geithner not to have the ability to order moneys made available to General Motors. Well, it is impossible for him not to have

influence on the auto task force as to what they might recommend

or recommend to General Motors that they should do.

That is an impossibility. There is no Chinese firewall between

Secretary Geithner, Secretary Geithner, and Secretary Geithner, is

that correct? [Laughter.]

Mr. SNOWBARGER. To my knowledge, no.

Chairman ISSA. Thank you. Mr. Jordan.

Mr. JORDAN. Thank you, Mr. Chairman. And I do have to leave

here after my questioning. I apologize. I got to run to another

meeting here in the Dayton area.

Mr. Snowbarger, you mentioned that you were totally impartial

when you initiated the termination of the Delphi plan in the spring

of 2009, this April to June timeframe. But the first restructuring

plan, to my knowledge, came out in February 2009. Is that not correct?

Mr. SNOWBARGER. The restructuring plan of which?

Mr. JORDAN. General Motors. The overall restructuring plan.

Mr. SNOWBARGER. Again, we were not concerned with General

Motors.

Mr. JORDAN. But that is not my question. My question is——

Mr. SNOWBARGER. I do not know. I do not know.

Mr. JORDAN. The restructuring plan came out in February 2009.

Mr. SNOWBARGER. Okay.

Mr. JORDAN. Right? Did you have a chance to look at that plan?

Mr. SNOWBARGER. I did not, but I do not know if our attorneys

did or not. Again, we were not focused on General Motors.

Chairman ISSA. Your attorney is shaking his head yes.
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Mr. SNOWBARGER. Maybe they did.

Mr. JORDAN. So, PBGC looked at the plan, and in the plan was

the top up agreement was contained in the restructuring plan in

February 2009. So, before you made the initial termination decision

in the spring of 2009, you knew about the top up plan being part

of the overall new restructuring plan. Is that correct?

Mr. SNOWBARGER. PBGC, I guess, was. When I made my decision

and when I signed off, it was not part of——

Mr. JORDAN. Well, but you are PBGC, right?

Mr. SNOWBARGER. Well, I was the ultimate signer and the ultimate decider about whether or not these pension plans should be

terminated.

Mr. JORDAN. All I am trying to get at is you——

Mr. SNOWBARGER. And I am suggesting to you that that was not

a part of my rationale for signing off on that, on those terminations.

Mr. JORDAN. But it was common knowledge that that was part

of the deal, part of the restructuring plan, correct?

Mr. SNOWBARGER. I do not how to respond. I mean, common

knowledge? You know, it was a restructuring plan that fell through

as well.

Mr. JORDAN. Okay.

Mr. SNOWBARGER. My decision was not made on the basis that

there were going to be top ups.

Mr. JORDAN. Okay then, let me move on to this. When you were

dealing with the Delphi plan, who did you primarily deal with?

Was it General Motors, or was it the Treasury Department auto

task force?

Mr. SNOWBARGER. Delphi.

Mr. JORDAN. You never dealt with General Motors at all?

Mr. SNOWBARGER. I am not going to say we did not talk to General Motors because, again, they were a potential rescuer for Delphi. If we could have found a sponsor that would have carried on

the pension plans after Delphi, then that is fine. We do not care

to take over pension plans when there is a sponsor out there.

Mr. JORDAN. I am just asking about this. When you dealt with

General Motors, was it General Motors or was it the auto task

force, or could you make a distinction?

Mr. SNOWBARGER. I think they were all in the room at the same

time when discussions were had.

Mr. JORDAN. So, it is fair to say you were dealing with the Treasury and auto task force.

Mr. SNOWBARGER. And Delphi.

Mr. JORDAN. And Delphi, okay. And did it ever come up in those

discussions that General Motors or Treasury auto task force when

you were dealing with it, did it ever come up, did they explain why

they wanted the top up agreement to take place, why they wanted

that to be in place?

Mr. SNOWBARGER. I am not aware of that.

Mr. JORDAN. And in those discussions when you were dealing

with GM, did it ever come up with why they were not going to

treat the salaried the same as they were going to treat the hourly

employees? Did that ever come up?
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Mr. SNOWBARGER. To my knowledge, the only discussion about

top ups were related to the agreements that they entered into in

1999.

Mr. JORDAN. Okay. Mr. Chairman, I yield back. Thank you.

Chairman ISSA. Thank you.

Mr. Austria.

Mr. AUSTRIA. Thank you, Mr. Chairman. Deputy Director

Snowbarger, I want to ask you about the Pension Benefits Guaranty Corporation v. LTV Corporation case that PBGC won in 1990

in the U.S. Supreme Court. That case had very similar, I think,

facts to the Delphi pension termination. And when LTV went

through bankruptcy, it created an agreement with the steel workers, which provided additional payments based on reduced benefits

that retirees receive through PBGC, and what the retirees would

have received if the plans had not been terminated.

In that case, PBGC objected to the agreements as improper follow-up on plans, and, in fact, one of the main reasons PBGC has

a policy against followup plans is because such plans remove employee resistance as a significant check against termination. Therefore, PBGC has sought to restore those pension plans back to LTV,

and the Supreme Court agreed.

So, I ask you why hasn’t PBGC filed a similar lawsuit against

GM to restore the union pension plans based on top up agreements? And, I mean, it seems that if this were to occur, then all

the windfall payments could be used to fund the salary plan as a

fully funded pension with full benefits.

Mr. SNOWBARGER. I think there are two significant differences

between LTV and Delphi. The agreements that we opposed in LTV

were in the context of the LTV bankruptcy case. The agreements

between GM and the unions were a matter of contract between private parties.

The second major difference——

Chairman ISSA. Private parties both in bankruptcy, right?

Mr. SNOWBARGER. No.

Chairman ISSA. In 2005, both were in bankruptcy.

Mr. SNOWBARGER. What I am referring to are the agreements

that were made back in 1999.

Chairman ISSA. Subsequently, both entities were in bankruptcy.

Mr. SNOWBARGER. Yes, but they were not in a court setting that

PBGC had standing to be a part of complaining about those particular agreements. In 1999, it was the spin off in a private business setting where those agreements arose. In this situation where

the top ups, or, excuse me, where the supplements were promised

in LTV, that was still in a bankruptcy setting where PBGC was

still an active party to the bankruptcy.

The second major difference between the two cases that you gave

me is that LTV came out of bankruptcy as LTV, and then prospered and was able to take on those pension plans. That was what

we were arguing.

In this case, you have Delphi who is the sponsor of the pension

plans. They go into bankruptcy, and they did not come out.

You are asking us to turn these pension plans over to General

Motors. General Motors does not have a legal obligation to take
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over those pension plans. That was Delphi’s responsibility as of the

spinoff of the pension plans to Delphi.

Mr. AUSTRIA. Mr. Chairman, I would be glad to yield to you, because I think a good point to make here is that were both parties

not in bankruptcy? Would you respond to that question because I

think that is a very important question.

Mr. SNOWBARGER. They were not in 1999 when the agreements

were made.

Mr. AUSTRIA. All right. Well, I know I have one other question,

we are short on time.

Chairman ISSA. Please, go ahead.

Mr. AUSTRIA. We will get this on the second round because it is

important. But let me ask you this, Deputy Director Snowbarger.

You know, Delphi employees believe that prior to termination,

PBGC overestimated the pension liabilities and under estimated

the level of funding. Can you explain to the committee, and I am

interested in knowing what determinations were made for the Delphi pension plans?

Mr. SNOWBARGER. Well, first of all, I want to caveat all this by

saying that that is part of the litigation that is ongoing, so I would

rather talk about it in general terms. From what I have seen, and

I have seen the Watson Wyatt report that has been referred to. It

is referred to as an adjusted funding target attainment percentage.

That is a formula specified in the Pension Protection Act, or at

least the parameters are set out in the Pension Protection Act.

When PBGC tries to decide whether or not a pension plan is

funded sufficiently, we look at it as a termination liability because

we presume that if PBGC is interested and PBGC is going to take

it over, that plan is terminating and it is not going on any further.

There are three major differences in the way we would calculate

things. One is the discount rate that is used. And, again, one of the

earlier people testified if you use a higher discount rate, the liability is lower. We normally use a lower discount rate than our use

for ongoing pension funds.

A second is what do you consider the normal retirement age. And

our experience is when a company goes out of business, people tend

to retire earlier than if a company is staying in business. And so,

the assumed retirement age that we use is probably lower than the

one that was used by Watts Wyatt.

And the third thing is the value of the assets and the date when

you value those assets. My understanding is the Watts and Wyatt

report valued assets in the salaried pension plan as of October 1,

2008, we valued them at January 1st or January 31, 2009. I do not

think I need to tell the members of the committee what happened

between October 8th and January 2009. There was a significant decline in the market and a significant decline in the assets, and also

a significant decline in the interest rate. So, you have liabilities are

going up at the time assets are coming down, and a lower retirement age. And it leads to the conclusion that we have that at termination, the Delphi salaried pension plan was about 46 percent

funded.

Mr. AUSTRIA. My time has expired. Thank you, Mr. Chairman.

Chairman ISSA. We are going to do a second round.
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You were there in 2008 and 2009. Is it not true that everybody’s

pension plans enjoyed that same precipitous fall? So, if I was at

General Electric, or I was at General Motors, or I was at dozens

of Warren Buffet’s various holdings, working for the railroad, wherever I was, I probably had my pension dropped by 25 or 30 percent,

meaning it was at least 30 percent underfunded. If it had been

fully funded or the usual 90-some percent in 2008 at that exact low

point that you fund it. I mean, virtually a lot of them, you could

have gone to every pension plan there was and said, boy, you guys

are grossly underfunded, could you not?

Mr. SNOWBARGER. Correct.

Chairman ISSA. Okay. And nobody was forced to top up based on

a moment in time. I mean, and I am not trying to push you beyond

making sure we get the current law. Current law, you mark to

market on a date.

Mr. SNOWBARGER. Correct.

Chairman ISSA. The reality, though, is had you been allowed to

anticipate those revenues over the life of an ongoing use of those

revenues, you would never have marked them to the current value,

would you? In other words, functionally those assets, assuming

that America did not go down rat hole and never come back, those

assets were worth a lot more in a relatively short period of time

because everybody knew this was a short term disaster for which

the American people were bailing out all kinds of entities, knowing

that good times comparatively were coming back.

So, part of the problem for Delphi retirees, salaried retirees, is

you marked—statutorily I understand why you did it. But you

marked at literally the worst possible time for valuation.

Mr. SNOWBARGER. We revalued by the time we had come to June,

and we continued to revalue as we find out what the assets were

actually worth at the day of termination.

The biggest problem for Delphi employees is that Delphi no

longer exists. There is no plan sponsor. So, you cannot really assume an ongoing plan when there is no sponsor.

Chairman ISSA. Now, I want to get back to that. First of all, Mr.

Austria makes the point better than I was making. Very clearly,

you had two entities in bankruptcy, and bankruptcy is the wild

west. Companies ask for relief any which they want to, so there is

no question, I think, in anyone on this panel’s mind or anyone here

today. They could have absolutely reneged on that 1999 agreement,

and I assume your counsels have told you that General Motors

could have reneged on it, that they could have sought complete relief. Is that correct?

Mr. SNOWBARGER. I think it is accurate legally, yes.

Chairman ISSA. Okay. So, the idea that it was an obligation just

is not so. It was an obligation for which they could have gotten relief.

Now, let me go through one line of thinking or two lines of thinking.

First of all, could General Motors have been a sponsor at amount

less than 100 percent? Could they have taken both of these plans,

but had them taken at an adjusted amount and having them transferred from Delphi back?
97

Mr. SNOWBARGER. I do not about the adjustment part. I think we

have concluded that they have could have taken both over both of

these plans.

Chairman ISSA. And they could have taken—right. They could

have taken over at 100 percent, but to your knowledge, under existing law, could they have taken them over at 90 percent?

Mr. SNOWBARGER. I do not believe they could. I believe ERISA

does not allow cutbacks by the sponsor of benefits that have already been promised.

Chairman ISSA. The sponsor was gone.

Mr. SNOWBARGER. Well——

Chairman ISSA. Let me put it another way, because I want to get

to the forward looking. We will assume for a moment——

Mr. SNOWBARGER. I thought you were positive that GM was now

the sponsor, so I misunderstood this.

Chairman ISSA. Okay. Right. What I want to do is I want to go

to two things. First of all, let us assume for a moment that the

company has gone. These two pensions have not been terminated.

General Motors walks in under current law and says, we will take

these, but we cannot have the anchor as great as it is. We will take

all the assets and we will agree to 80 percent or 90 percent, and

Delphi says to the bankruptcy judge, will you grant us that relief?

Is that not available under the law today, either bankruptcy law

or ERISA, do you believe it should be available to salvage a greater

amount than these salaried Delphi workers had salvaged when you

took it over in termination?

Mr. SNOWBARGER. I appreciate the comment of the chairman earlier on that I am a career Federal employee. I do not have a position on that issue. [Laughter.]

Chairman ISSA. You are not getting away with that. [Laughter.]

But nice try. I ask unanimous consent I have an additional

minute. So ordered.

You are a person who has the tools that you have. Would that

tool be, and this is where you may not be able to lobby for it, but

you do have an opinion on it. Would that tool be a good tool for

people in your position now or in the future to have if it were made

available by Congress?

Mr. SNOWBARGER. I think PBGC has taken the position before

that we wish we had more tools to keep plans out there for participants. Currently, the major tool that we have is threatening to terminate a plan. If you think that through, that does not make a lot

of sense for an agency that is supposed to be promoting defined

benefit pension plans.

Chairman ISSA. Okay. So, we will take that as it is.

The goal here today obviously is to try to find out what happened, and you have been helpful on that, and I want to thank you

for it. And I know some of the other Members have a second round.

But prior to adjournment, I will not be speaking to either of you

again.

I want to thank you for being here. As you said, you are career

professionals. You are limited to answering our questions and not

lobbying for, and I appreciate that. And I want to thank you for

being here and giving us your testimony.
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And with that, I recognize Mr. Turner for a second round? I am

sorry——

Mr. BURTON. It is okay. I am just sitting here. [Laughter.]

Chairman ISSA. You know, Dan, I am going to call you Mica if

you are not careful. [Laughter.]

Mr. BURTON. That is an inside joke, folks.

Chairman ISSA. Former chairman?

Mr. BURTON. Let me follow up. You said that nobody in the administration had any influence on the decision that was made.

There was a meeting——

Mr. SNOWBARGER. Well, again, I have never quite understood in

the parlance here whether you are including us as a part of the administration, or the executive branch.

Mr. BURTON. Okay. Well, the executive branch includes Treasury, does it not?

Mr. SNOWBARGER. Yes.

Mr. BURTON. Okay. And Geithner and Mr. Bloom were part of

Treasury.

Mr. SNOWBARGER. Correct.

Mr. BURTON. And they are also part of PBGC.

Mr. SNOWBARGER. Mr. Bloom is not.

Mr. BURTON. Well, Mr. Bloom is not, but Geithner is. They work

together, do they not? They know each other.

Mr. SNOWBARGER. Not anymore, but, yes, they did.

Mr. BURTON. What I am trying to find out is during your telephone conversations and during the meetings that you had, what

went on? What was said by Treasury who also had a tremendous

amount of influence on PBGC. What did they say to you? Did they

say, hey, this is what we ought to do? I mean, they went ahead and

upped the pension for the union people, but they did not for the

salaried or hourly people. What went on? What was said that made

that decision?

And you told me earlier, you said, well, the administration had

no influence on the decisionmaking process. Well, Treasury is part

of the administration. Geithner is part of the administration.

Bloom is part of the administration.

I want to know what went on in the meetings that you had, and

what did they say? I mean, somebody said something about helping

the unions. Somebody said something about not doing it for the

hourly employees. And you were on the phone with them. You were

talking to them. So, what happened?

Mr. SNOWBARGER. Number one, let me explain that when I said

that they were not a part of the decision, the decision I was referring was the decision about whether or not to terminate the pension plans, which pension plans, the timing of that, etc. That decision was solely done in PBGC by career employees, as it turns out.

Mr. BURTON. But Treasury is on the board, and Bloom is——

Mr. SNOWBARGER. They were not part of the decision. The board

is not a part of the decision.

Mr. BURTON. Well, wait, wait, wait. What do you mean they were

not part of the decision? There are three people on the board,

right?

Mr. SNOWBARGER. The day-to-day operations of PBGC are vested

with the director of the corporation.
99

Mr. BURTON. And so, they do not have any input on these kinds

of things.

Mr. SNOWBARGER. As a practical matter for the history of PBGC,

no, they have not. We have done that to avoid political influence

on those kinds of decisions.

Mr. BURTON. That just mystifies me. I do not know how you can

have Bloom, who lied to our committee, and who also was an executive for the steel workers union. He was one of the people that

was involved in this decisionmaking process.

Mr. SNOWBARGER. I met Mr. Bloom when we terminated a number of steel plans, yes.

Mr. BURTON. And Geithner, and I just do not understand how

they were not involved in the decisionmaking process. But you said

they were not, so I guess I will take your word for that.

Mr. SNOWBARGER. They were not.

Mr. BURTON. Okay. You know, I am a stickler for people being

under oath. When Mr. Bloom testified, he said he did not say

things, and we proved that he did and he recanted. So, it is very

important that you remember because we are going to pursue this.

Mr. SNOWBARGER. Like I said, I was the ultimate decisionmaker

on whether or not to terminate these plans, and Mr. Bloom did not

talk to me about them, and Secretary Geithner did not either.

Mr. BURTON. None of these meetings on the phone or anything

else. There was no influence exerted by Treasury or by the administration.

Mr. SNOWBARGER. No. I think we communicated with them that

we thought we were going to have to terminate those plans, if, in

particular because there was no sponsor.

Mr. BURTON. What did they say when you communicated that to

them?

Mr. SNOWBARGER. They normally did not respond back to me.

Mr. BURTON. They did not say anything. They just listened.

Mr. SNOWBARGER. For most of the conversations, I think that is

correct.

Mr. BURTON. Thank you, Mr. Chairman.

Chairman ISSA. If the gentleman would yield.

Mr. BURTON. I will yield to you, sure.

Chairman ISSA. I just want to review for the record, Secretary

Geithner knew you were going to terminate the plans. Secretary

Geithner, through the TARP, his control of General Motors and the

task force, made sure that the union workers were made whole in

the termination, while Secretary Geithner, informed of the termination, allowed the salaried workers to be terminated with 30 to

70 percent loss by not topping it up or taking steps to have them

made whole.

Clearly, Secretary Geithner was aware of this at all times, and

had the power and influence to change that.

Mr. SNOWBARGER. I can talk to you about what influence he may

have had in the decision on PBGC side of things. I cannot tell you

what decisions were made on the auto task force side.

Chairman ISSA. Following up, Secretary Geithner left you no

choice but to terminate as a result of Delphi not being viable, General Motors not taking it. And the losses experienced by the salaried employees and retirees of Delphi is the result of his not taking
100

steps to make them whole, while clearly steps were taken to make

the union employees whole. That is your observation, even though

your decision, you had no choice.

Mr. SNOWBARGER. Mr. Chairman, that is not my observation.

That is your observation. All I can talk to you about is the decision

that PBGC made, what went into those decisions. And the only

part of that that goes into that decision was there was no plan

sponsor going forward.

Chairman ISSA. Thank you.

Mr. SNOWBARGER. The plans were basically abandoned.

Chairman ISSA. Mr. Turner.

Mr. TURNER. Thank you, Mr. Chairman. I just want to know one

thing for the record with respect to your answer on the LTV case.

I understand that you are saying that the agreements for General

Motors from 1999 predated the bankruptcy. They were not top up

agreements that were made in bankruptcy. But to buy your argument that there were parties that made an agreement in 1999 is

to assume that the parties that were in the bankruptcy were the

same. I mean, we do not buy, and no one in this room buys, that

there was independent General Motors in that bankruptcy. That

bankruptcy had new parties. The new party was the Treasury Secretary, and that is how it becomes like the case that Mr. Austria

is citing of the LTV because it is not this independent decisionmaking of affirming this. There is not only this new party, but it

is the government, and that is why everyone is so particularly disappointed and upset.

And I want to turn to the issue on the liens because part of the

concern that everyone has is, you know, the valuation of assets, but

also the termination of the plan, but also what happened with respect to liens.

Now, in your written testimony, you indicate that Delphi entered

bankruptcy in October 2005, and that they failed to make the required minimum funding contributions to the plans, so as a result

liens were triggered, and that PBGC perfected those liens in March

2006.

In your November 9th answers to me from the June 22nd questions, you indicate when the plan was terminated, PBGC had perfected $195.9 million in liens for the benefit of the salaried plan

due to Delphi’s failure to make statutory required minimum funding contributions. You did say, which is what confuses me, this was

the largest lien amount that PBGC could assert under the law because a secured interest exists only to the extent there is a debt.

It is underfunded; they clearly were not during that period making

payments.

Is it really your testimony that from the period of October 2005,

where PBGC went into bankruptcy, up to the point of plan termination, that there was no additional opportunities for the PBGC to

assert liens? And we know, by the way, that those liens were largely against foreign assets that had their value. I mean, did you

have——

Mr. SNOWBARGER. That is correct.

Mr. TURNER. You had no additional time period from October

2005 until plan termination to assert any additional liens.
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Mr. SNOWBARGER. Yeah. There are only certain events that give

rise to liens, and we file the lien every time one of those events occurred. And it normally is missed contributions.

I think I am not sure they were actually liens. We also received,

I guess that was letters of credit on the waivers that were given

by Treasury for funding contributions. But we did receive those

back. PBGC does not receive any of these, by the way. It goes into

the plan.

But, no, there are only a limited amount of circumstances that

allow us to file a lien. And the lien is not for all of the underfunding. It is for the amount of the contribution that was missed.

Mr. TURNER. And you are saying that during that time period,

all the way up until termination, you were dealing only with the

liens that you had placed, and that was on the foreign assets going

into the settlement.

Mr. SNOWBARGER. Yeah. Let me expand that just a little bit. And

I think this is correct, and we will correct if it I am wrong. But

I believe there were other liens that were filed on behalf of the

hourly plan, and when GM took over half of the hourly plan, as Ms.

Bovbjerg indicated, I believe those liens expired at that point. So,

the only liens we are talking about here is, what, it is about $195,

$196 million for the salaried plan, and I think there was another

smaller amount of liens for some of the other smaller plans. But

in terms of the large salary plan, there had been liens, but those

were satisfied when GM took over the first half of the hourly plan,

as they had agreed to.

Mr. TURNER. As you went into the settlement negotiations, you

had the liens that had been in place. You relinquished the liens in

part for unsecured debt and payments.

As part of the FOIA request, as part of the whole process that

the Delphi salaried retirees have requested is that these settlement

negotiations, what had been said, the documents that had passed

between parties, be made public. The settlement is over. This certainly is an issue that has taxpayers’ dollars. How the settlement

proceeded should be both a discoverable item in Federal court, but

also should be released with respect to FOIA.

As we heard from those that had testified, when they have made

their requests under Freedom of Information, they get pages that

look like this. Governmental pre-decisional, attachment deleted, 34

pages. I mean, the government is not telling the taxpayers, part of

which were the Delphi salaried retirees who had their retirements

reduced, what were those settlement negotiations, and what was on

the table, and who was saying what, and who told who to do what.

I do not understand, and I would like you give us, as you said,

you know, you are the decider. Why isn’t this information being released? This is public information about public taxpayers.

Mr. SNOWBARGER. I think all the documentation that was requested pursuant to FOIA has been produced, with the exceptions

that are allowed by FOIA, with the exceptions that are allowed by

FOIA.

Mr. TURNER. Okay. Now, let us emphasize that word, ‘‘allowed

by,’’ which means that you are exercising discretion to hold the documents back. It is not required by FOIA. You have the ability

under FOIA to fully comply and release the documents. Will you?
102

Mr. SNOWBARGER. That is a matter under litigation, and

when——

Mr. TURNER. No, no, no, it is not under litigation. The FOIA request is not, the subject matter is. You have the FOIA request. You

know you have the discretion to release the documents. I personally believe, like this panel believes, that this is taxpayers’ dollars

that were handled here. These retirees deserve an answer. Will you

release the documents?

Mr. SNOWBARGER. Well, let me make clear, PBGC does not operate on taxpayer dollars. I understand you are not drawing a distinction between the amount of money that came from TARP and

what PBGC does, but PBGC does not receive taxpayer funding.

Second part is, as long as this is a matter of litigation, I will stay

with the decisions that we have made thus far.

Mr. TURNER. Well, I think that is wrong. I mean, I think is it

wrong that you not be held accountable in the decisionmaking that

you had. This was a heavily taxpayer subsidized transaction in the

General Motors and Delphi bankruptcy. These individuals have

been significantly impacted. I thank the chairman for his push to

make you give him the documents so he can make the decision as

to whether or not they be released. But you should be releasing

those documents.

Chairman ISSA. Mr. Austria.

Mr. AUSTRIA. Thank you, Mr. Chairman. And I would just follow

up to what Mr. Turner was saying as far as the transparency here.

I mean, if we want a level playing field, so to speak, and we want

to make sure that things are done right, then there should not be

any reason there should not be full transparency.

But let me go back to this valuation of the level of funding. And

I agree with the chairman, the timing—and I think you might acknowledge, is the timing in which that valuation was done was

when the markets were down. And what was the funding level that

you valuated the pension at that time?

Mr. SNOWBARGER. A specific dollar amount?

Mr. AUSTRIA. Or percentage, whatever.

Mr. SNOWBARGER. Again, when we did our initial review of this,

it was about 46 percent funded.

Mr. AUSTRIA. About 46 percent funded. Okay. Let me ask you

this. When you did the revaluation, what was the difference?

Mr. SNOWBARGER. There wasn’t a lot of difference.

Mr. AUSTRIA. There was not a lot of difference? There was not

a lot of difference?

Mr. SNOWBARGER. It was still below 50 percent.

Mr. AUSTRIA. Now, let me ask you, because I am looking at some

information here. It shows that the average funding level for the

top 100 pension plans in 2009 was 81 percent, and that, again, and

you made reference to it, there were two independent actual firms

that analyzed DSRs pensions and determined that it was actually

86 percent funded.

Those are big differences. I mean, can you further elaborate and

give us your thoughts as to why we have such big differences other

than the timing of when you valuated it?

Mr. SNOWBARGER. If one is calculating the funded percentage for

an ongoing plan, that means there is going to be a sponsor at the
103

end of the day. There was not going to be a sponsor here. Therefore, PBGC evaluates the funding of the plans on a termination

basis, and, again, on a termination basis, we use an interest factor

that is derived from the annuity markets. We use a retirement age

that reflects our experience that people retire when their employers

go out of business. They retire earlier. And we use mark to market

on the value of the assets.

Mr. AUSTRIA. Well, it seems to me that, again, we are going back

to transparency here as far as—and I appreciate you disclosing this

now because it is important that we understand how you evaluate

these pension plans. But when we look at the average level of the

other, you know, top 100 pension plans in 2009 and how they were

valuated, it does not seem like we are comparing apples to apples.

Mr. SNOWBARGER. Well, Congressman, we are not. We are not.

Those are ongoing pension plans. Those sponsors are still out there.

They are still viable entities. To the extent they are not a viable

entity and they underfunded in the same way that these plans

were, then we look to terminate those. You are talking about the

funding of all pension plans, and, again, not all plan sponsors are

in financial difficulty. Delphi was not only in financial difficulty, it

went away. It is no longer there. It does not exist.

Mr. AUSTRIA. What was the revaluation as far as with this plan?

Mr. SNOWBARGER. I would have to check. I do not know what the

latest valuation is on that. But it would go toward the benefits that

are paid to participants.

Let me put it this way. We have certain limitations, and I believe

one of the earlier witnesses testified to the limitations by law that

are placed on us. There are times when we can pay above those

limitations for a certain limited group of people. That is for people

that have retired or could have retired 3 years prior to the termination date. So, that goes back to could have retired in 2006. They

fall under the category called priority category 3, and I very frankly could not go through the exact calculations of how you get there.

But it is possible that if assets are sufficient, we can pay benefits

above guarantees for those folks. But we will just have to wait and

see what the ultimate valuation is of the assets. And that is ongoing.

Mr. AUSTRIA. Thank you, Mr. Chairman.

Chairman ISSA. I am going to take two chairmen prerogatives.

First, Mr. Turner is going to close the hearing. And, second, I am

going to renege on I have asked my last question. [Laughter.]

Because I think there are two things I want to make clear. I

serve on the company that I founded when it became public, and

our stock traded below certain minimums, and

PriceWaterhouseCooper came to us and said, oh, by the way, because your stock is trading low, because people do not appreciate

its going concern value, its actual earnings, we are going to make

you take $100 million write down on your good will. And I never

understood it. I never agreed with it. But the SEC and GAP and

so on, they could do that.

I will never agree that you have to diminish somehow an 80 percent to a 60 percent or a 50 percent for the difference between the

two without at least stating that as a going concern, there was 80

percent.
104

And the reason simply is that if we continue to allow you to do

that, then pensions need to be funded at 120 percent. They need

to be funded as though the entity is not going to be a going concern. And, by the way, it is not just General Motors; it is the State

of California. It is an awful lot of other groups, because sovereigns

can default, and if they default, then you are stuck with the assets

you have.

So, I think that is an area that this committee and Congress

needs to look at is to beg the real question of, if you are correct,

not as to the early retirement because I think there is a little bit

of wiggle room there, but as to these other diminishments of the

amount, then to be honest, 85, 90 percent just is not enough. And

it is not enough because ultimately we need to be protected, or we

need to protect those people who rely on these pensions at a level

that if the company defaults, or if anyone defaults, the pension is

going to be able to pay substantially close to what was promised

and not end up where these people did, or, for that matter, the

United Airlines pilots and flight attendants who today, and I will

use the word ‘‘enjoy’’ in a terrible way, enjoy the same kind of same

kind of diminishment that the salaried workers for Delphi do.

Let me ask you one last question, and you can respond for the

record if it requires more counsel than you have here today. Most

of these workers contributed most of their money as General Motors employees. And none of these workers got a real say in being

spun off. If they cannot claw back to the parent entity, if they cannot demand that 70, 80 percent of their retirement, which was really GM retirement, be able to go back to GM, which is still around,

then do we not open everyone to a situation, not one in which there

was a legitimate spin off that was intended to work, but to a spin

off that would be just absolutely designed to do in their existing retirees? Because ultimately anybody could say, well, I am going to

spin off a subsidiary, and I am going to spin off this, and I am

going to make it all sound good, but I am basically after 2 years

going to quit buying from that subsidiary that I set up, and it is

going to go bust, and they are just going to be screwed, to use that

technical word again. [Laughter.]

Doesn’t Congress have an obligation to ask, should they not be

able to claw back to the parent, which they were taken away from

involuntarily, or some other remedy that would prevent this from

happening in the future, which I believe you are going to say does

not exist in the law today.

Mr. SNOWBARGER. Well, it does not exist in the law today, but

PBGC watches those transactions all the time. And if we are concerned that the pension plans are either being transferred to a spin

off that will not be able to sufficiently fund that, or if they see that

the assets of a company are being spun off leaving the pension behind, we try to intervene in those transactions and stop them or

make sure there is some kind of protection for the pension plans.

Chairman ISSA. But is it not true, both in the case of Delphi and

Visteon, the Ford spinoff, that their entire viability was dependent

upon continuing the tier 1 suppliers at substantially the same revenue as they had been when they had been part of General Motors

or Ford. I mean, basically that was always the case is their viabil-
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ity. The Delphi, and I bought from Packard Electric and some of

the other divisions for my company.

But the fact is, 90-some percent of their revenues was father to

child kind of thing. So, when you did that evaluation, weren’t they

completely dependent upon the success of General Motors continuing to buy, and isn’t that really why the unions had the 1999

agreement that required General Motors to protect them for an indeterminate period of time while the salaried workers did not get

the same?

Mr. SNOWBARGER. Well, it was also the fact that their plan was

underfunded when the spin off occurred.

Chairman ISSA. But under your calculations, they were both underfunded.

Mr. SNOWBARGER. No, I have not made any comment about what

the funding status was of the salaried plan in 1999.

Chairman ISSA. Well, but——

Mr. SNOWBARGER. And that is the time period I am referring to

when the spinoff actually occurred.

Chairman ISSA. Yeah, but today you gave testimony that shows

if you are fully funded and if the fit hits the shan, you are going

to, in fact, be underfunded by 30 percent or more. I mean, the fact

is they were underfunded if Delphi did not remain a going concern,

and Delphi’s going concern was completely linked both to General

Motors’ continuing to be viable and General Motors choosing to

continue buying. So, they were in a precarious position in 1999,

and that is why the unions, on behalf of their portion of the work

force, demanded something. Shouldn’t that have been a red flag to

your role or your entity’s role that if the union needed it, why did

the salaried workers, the people who had less power to negotiate,

why did they not need the same guarantee?

Mr. SNOWBARGER. I have no response.

Chairman ISSA. I now turn the gavel over to Mr. Turner.

Mr. TURNER [presiding]. I did not want our chairman to leave because obviously one of the things that I want to do is to thank him.

Chairman ISSA. You are the chairman.

Mr. TURNER. Well, I appreciate that.

Mr. Chairman, if you had not held the prior hearings that we

have had, or, Chairman Jordan, the subcommittee under your committee having had inquiries in this and hearings, we would not

know as much as we even know today.

But thank you for coming here, for having this hearing. Thank

you for granting my request for these retirees to have an ability to

speak with you, and for this issue to gain additional light. I think

we have learned a couple of things, one of which is the fact that

the administration was in on all sides of this deal. But the second

thing, which I want to thank you for, is that we have learned that,

you know, PBGC has the ability to release these documents, is exercising discretion under FOIA. Some of those documents have

been or will be released to this committee, and I know you are

going to be reviewing the issue as to what of those the committee

might under its own guise make public that PBGC chooses on their

own accord not to.

So, thank you for your consideration of that, and thank you for

being here today. And thank you for being in Dayton, OH.
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Chairman ISSA. Well, thanks for inviting me.

[Applause.]

Mr. TURNER. With that, the committee stands adjourned.

[Whereupon, at 12:27 p.m., the committee was adjourned.]

[The prepared statement of Hon. Dan Burton and additional information submitted for the hearing record follow:]
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