[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
AFTER THE FINANCIAL CRISIS:
ONGOING CHALLENGES FACING
DELPHI RETIREES
=======================================================================
FIELD HEARING
BEFORE THE
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
JULY 13, 2010
__________
Printed for the use of the Committee on Financial Services
Serial No. 111-143
U.S. GOVERNMENT PRINTING OFFICE
61-847 WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected].
HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina RON PAUL, Texas
GARY L. ACKERMAN, New York DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts GARY G. MILLER, California
RUBEN HINOJOSA, Texas SHELLEY MOORE CAPITO, West
WM. LACY CLAY, Missouri Virginia
CAROLYN McCARTHY, New York JEB HENSARLING, Texas
JOE BACA, California SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia RANDY NEUGEBAUER, Texas
AL GREEN, Texas TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois JOHN CAMPBELL, California
GWEN MOORE, Wisconsin ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota KENNY MARCHANT, Texas
RON KLEIN, Florida THADDEUS G. McCOTTER, Michigan
CHARLES WILSON, Ohio KEVIN McCARTHY, California
ED PERLMUTTER, Colorado BILL POSEY, Florida
JOE DONNELLY, Indiana LYNN JENKINS, Kansas
BILL FOSTER, Illinois CHRISTOPHER LEE, New York
ANDRE CARSON, Indiana ERIK PAULSEN, Minnesota
JACKIE SPEIER, California LEONARD LANCE, New Jersey
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York
Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Oversight and Investigations
DENNIS MOORE, Kansas, Chairman
STEPHEN F. LYNCH, Massachusetts JUDY BIGGERT, Illinois
RON KLEIN, Florida PATRICK T. McHENRY, North Carolina
JACKIE SPEIER, California RON PAUL, Texas
GWEN MOORE, Wisconsin MICHELE BACHMANN, Minnesota
JOHN ADLER, New Jersey CHRISTOPHER LEE, New York
MARY JO KILROY, Ohio ERIK PAULSEN, Minnesota
STEVE DRIEHAUS, Ohio
ALAN GRAYSON, Florida
C O N T E N T S
----------
Page
Hearing held on:
July 13, 2010................................................ 1
Appendix:
July 13, 2010................................................ 33
WITNESSES
Thursday, July 13, 2010
Akpadock, Frank, Ph.D, Senior Research Associate and Regional
Scientist, Youngstown State University's Center for Urban and
Regional Studies............................................... 24
Dragojevic, Milan (Nick) Jr., Delphi hourly retiree.............. 20
Fisher, Hon. Lee, Lieutenant Governor of Ohio.................... 8
Frost, James, Vice Chair, Delphi Salaried Retiree Association
(DSRA)......................................................... 16
Gump, Bruce, Director, Warren Legislative Council, and Board
Member, Delphi Salaried Retiree Association (DSRA)............. 14
Hudzik, Mary Ann, Delphi salaried retiree........................ 18
Wernet, Norman, State Director, Ohio Alliance for Retired
Americans...................................................... 22
APPENDIX
Prepared statements:
Brown, Senator Sherrod....................................... 34
Donnelly, Hon. Joe........................................... 40
Turner, Hon. Michael R....................................... 41
Wilson, Hon. Charlie......................................... 44
Akpadock, Frank.............................................. 46
Dragojevic, Milan (Nick) Jr.................................. 64
Fisher, Hon. Lee............................................. 68
Frost, James................................................. 72
Gump, Bruce.................................................. 74
Hudzik, Mary Ann............................................. 77
Wernet, Norman............................................... 79
Additional Material Submitted for the Record
Moore, Hon. Dennis:
Issue brief of the Alliance for Retired Americans, entitled,
``Retiring Into Work,'' dated July 2005.................... 85
Issue brief of the Alliance for Retired Americans, entitled,
``Vanishing: Pensions and Savings,'' dated September 2005.. 93
Institute for Women's Policy Research Fact Sheet entitled,
``The Economic Security of Older Women and Men in Ohio,''
dated January 2007......................................... 101
Michigan Democratic Party, ``Resolution in Support of Delphi
Salaried Retirees,'' adopted May 5, 2010................... 105
Ohio AFL-CIO, ``Senate Concurrent Resolution 23''............ 107
Letter from Armond Budish, Speaker, Ohio House of
Representatives, to President Barack Obama, dated January
27, 2010................................................... 111
``Resolution 2010-9''........................................ 113
Letter from Ted Strickland, Governor, State of Ohio, to
President Barack Obama, dated September 14, 2009........... 114
Letter from Ted Strickland, Governor, State of Ohio, to
Chairman Moore, Ranking Member Biggert, and members of the
subcommittee, dated July 12, 2010.......................... 116
Lee, Hon. Christopher:
Series of letters to various parties regarding the Delphi
situation.................................................. 117
Wilson, Hon. Charlie:
Written responses to questions submitted to Bruce Gump....... 153
List of Delphi retirees who submitted testimonials
(testimonials are contained in committee files)............ 158
AFTER THE FINANCIAL CRISIS:
ONGOING CHALLENGES FACING
DELPHI RETIREES
----------
Thursday, July 13, 2010
U.S. House of Representatives,
Subcommittee on Oversight
and Investigations,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, in the Canfield
High School Auditorium, 100 Cardinal Drive, Canfield, Ohio,
Hon. Dennis Moore [chairman of the subcommittee] presiding.
Members present: Representatives Moore and Lee.
Also present: Representatives Wilson and Ryan.
Chairman Moore of Kansas. This field hearing of the
Subcommittee on Oversight and Investigations of the House
Financial Services Committee will come to order. Our hearing
today is entitled, ``After the Financial Crisis: Ongoing
Challenges Facing Delphi Retires.'' This is our 15th Oversight
and Investigations hearing this Congress, and our 4th field
hearing.
Before we begin with today's hearing, I want to take a
moment of personal privilege to first thank Representative
Charles Wilson for asking that we come to Ohio and focus on
this important issue of Delphi workers and retirees and how
they are doing following the recent financial crisis. Congress
can learn much more about particular issues or challenges when
we get out of Washington and hear directly from the people we
represent, as we will today.
I also want to thank the other Members who have traveled to
be with us today: Representative Chris Lee of New York; and
Representative Tim Ryan of Ohio. Finally, I want to thank the
City of Canfield for welcoming us to Ohio, as well as
Representative Wilson's staff and others who made today's field
hearing possible.
We'll begin this hearing with Members' opening statements
up to 10 minutes per side, and then we will hear testimony from
our witnesses. For each witness panel, Members will each have
up to 5 minutes to question our witnesses. The Chair advises
our witnesses to please keep your opening statements to 5
minutes to keep things moving so we can get to Members'
questions. Also, any unanswered questions can be followed up in
writing for the record.
Without objection, all Members' opening statements will be
made a part of the record. I now recognize myself for 2 minutes
for an opening statement.
I don't need to remind anyone that our country has been
through the worst economic recession and financial crisis since
the Great Depression and everyone knows, whether you're a
Democrat or Republican, that lax oversight and poor regulation
of our financial system for too many years sowed the seeds of a
near collapse of our entire economy.
Who paid the price for these mistakes? Unfortunately, it
was not Wall Street but our constituents on Main Street and the
people from places like right here in Canfield, Ohio, who paid
the price. American households lost about $14 trillion in net
worth over the course of 2 years. Retirement accounts saw an
over 20 percent decline in value, forcing many Americans to
delay their retirement.
Millions of Americans lost their homes through foreclosure.
Bernie Madoff's Ponzi scheme defrauded $65 million from
investors. In response to all of this, the House responded by
approving the Dodd-Frank Wall Street Reform Act which will end
``too-big-to-fail,'' end taxpayer bailouts, and put tough cops
on the beat watching out for consumers and investors. I hope
the Senate will act soon so these needed reforms become law.
But this is not the end of the story. As if the financial
crisis was not bad enough, the auto industry in our country has
struggled in a major way this past decade, and as a result we
have seen far too many bankruptcies, layoffs, and plants being
closed. Representative Charlie Wilson invited our subcommittee
to visit Ohio as he told me about the Delphi retirees we will
hear from today and the challenges they have faced before,
during, and after the financial crisis.
I look forward to hearing from them, how the financial
crisis has impacted them and their communities, and what
particular issues with respect to pension plans and other
challenges they continue to face.
I now recognize my colleague, Representative Chris Lee, for
as much time as he may consume, up to 10 minutes. Mr. Lee is a
valued member of our Oversight Subcommittee who, like other
Members present, has been very active on this Delphi issue we
are discussing today. Mr. Lee?
Mr. Lee. Thank you, Mr. Chairman, for convening this
hearing today, and thank you, Congressman Wilson and
Congressman Ryan, for requesting this field hearing and for
your hard work on this issue which truly is near and dear to
all of our hearts. This is something that early on in this
Congress when this--we heard the plight of the Delphi workers.
I think all of us around this table have gravitated towards,
because it's truly--it's an issue of fairness, and the part
that I have respected the most out of all of the retirees I
have met since coming to this Congress is the fact that
nobody's looking for anything special. They're looking for
fairness, to be treated like all others have during the
difficult economic time, and that's really what has separated
you and that's really gravitated me to try to be a champion for
this issue.
The treatment of retirees is one of the less discussed
aspects of the restructuring of the auto industry but one that
needs our attention. We're talking about close to 20,000
families who ultimately will be affected by this issue. Through
no fault of their own, those who assumed that after working
side-by-side with their fellow workers for 20, 25, 30 years and
working hard, that they would have something left at the end of
the day, to have their life insurance, their health care, and
now potentially their pensions cut drastically surely is not
right.
And the fact is after they have seen their pensions
defaulted to the Pension Benefit Guaranty Corp, this is a
direct result of the negotiation discussions between Delphi,
GM, and the Treasury Department's Task Force. Unfortunately,
these discussions raised far more questions than answers about
how and why these pensions were terminated, which is now having
a lasting impact on, I assume, almost everybody in this room's
financial security.
I welcome the committee's willingness to conduct its
congressional oversight and investigate this issue. I agree
with the thousands of people around this country and those in
this auditorium, retirees and their families who demand real
action, not just talk, but real action. Delphi retirees and
their families need help. They deserve action and an
investigation into why this unfair and unjust decision was
made.
However, there's little this committee can investigate
without a witness here from the Treasury Department. That, to
me, is the most unnerving situation to have people come here,
we want to have an open discussion, and for the Treasury not to
show up, to me, is incredibly frustrating and the fact that
Delphi retirees deserve answers, all taxpayers deserve an
answer. Dozens of Members of Congress have tried over the year
to seek answers from the Treasury Department on behalf of
Delphi workers, retirees, as well as the American taxpayers
since they now own 60 percent of General Motors. However, we
have received very little. On April 21, 2010, I received a
response from Ron Bloom, who was one of the acting chairs of
the Auto Task Force. He sent the letter to me on April 21; it
was a response to the letter I had sent to him on June 5, 2009,
nearly 10 months after the letter had been sent out.
Unfortunately, this is not an isolated issue and, Mr. Chairman,
I ask unanimous consent to have these letters submitted into
the record.
Chairman Moore of Kansas. Without objection, they will be
made a part of the record.
Mr. Lee. Literally, here, I have over a dozen letters that
were sent in the last year to the Administration, to the
Treasury Department, to the Auto Task Force, to General Motors.
How many responses did I get back? Very few, and I think that
is wrong when we are here representing the American people and
not to have sufficient answers on what truly is going on.
Outside of that frustration, since a December 2009
Education and Labor Subcommittee hearing, new information has
emerged that should focus the attention of this committee and
indeed the entire Congress. One critical piece of evidence,
according to a report prepared by the consulting firm of Watson
Wyatt at the request of Delphi on September 30, 2009, the
salaried pension plan was 85.62 percent funded, yet the average
funded status of the 100 largest pension plans in America was
only 81.7 percent in 2009. This truly calls into question
exactly why the Delphi salaried plan was considered severely
underfunded and necessitating termination.
Were there other motivations involved in the termination?
It's the answers to these questions that Democrats and
Republicans alike in Congress have been seeking for more than a
year. On behalf of Delphi's workers and retirees, and the
American taxpayers who are financing General Motors recovery,
I'm here today to seek the support of this committee to demand
action and to urge the Treasury to correct this injustice and
treat all Delphi workers and retirees fairly.
This is not a Republican issue; it's not a Democrat issue.
This is not a union versus non-union; this is a fairness issue.
Delphi workers deserve to be treated fairly. I would like to
leave the committee with one thought expressed by the UAW
president, Ron Gettlefinger. In January, he wrote, ``We are
advocating for the salaried retirees whose pensions have been
eroded, though their dedication to the company and their years
of service remain steady. No one should sit silently by and say
nothing about the unfair and inequitable treatment these people
are receiving. Such silence goes against the founding
principles of our Union.''
Mr. Gettlefinger is absolutely right, and for those reasons
I, again, commend this committee for holding this hearing to
try to reach the goals of fairness, transparency, and equity.
Simply put, we want, and we deserve, answers. With that, I
yield back.
Chairman Moore of Kansas. My thanks to Congressman Lee for
his statement. I now ask unanimous consent that our colleagues,
Representatives Charlie Wilson and Tim Ryan, participate in
this subcommittee field hearing. Without objection, it is so
ordered. I recognize Representative Charlie Wilson for 3
minutes for your opening statement.
Mr. Wilson. Thank you, Mr. Chairman, and let me thank you
formally for coming here to host this meeting for us today and
welcome and thank you, Lieutenant Governor Fisher, for being
here with us today and have testimony for all of us. I thank
the Delphi retirees for being here and please know that we're
trying to help in any way we can. I would like to thank Dr.
Akpadock for coming before our panel today to talk about how
the situation has affected our community financially and I am
pleased to have other Members of Congress, Congressman Tim Ryan
and Congressman Chris Lee, both here with us today. Thank you
for all your efforts on behalf of Delphi retirees.
While I am pleased to have great panelists before us today,
I am also submitting testimony for over 100 Delphi retirees who
wanted to make sure that their official statements are placed
in the record. And though they can't be here with us today, I
would like to thank Governor Strickland and Senator Brown for
their continuous efforts and support on behalf of Delphi
retirees. I'll also be submitting statements from both of them
for the record.
First and foremost, we are here today to listen. My office
has worked for many months to ensure that the Delphi retirees
are listened to and that your plight is understood. I'm so
pleased that we're able to hold the Financial Services
Committee field hearing right here in our own backyard and you
can hear firsthand from the people who have been affected by
what has happened. I believe this hearing will provide the
necessary platform for Congress to examine more closely the
benefits reductions the Delphi retirees have suffered.
We all know the histories of Delphi and General Motors are
closely intertwined. GM made certain promises regarding
pensions when Delphi was spun off into its own entity, and GM
was there for Delphi when it filed for bankruptcy in 2005,
assuming additional responsibility Delphi worker pensions and
benefits, but when GM was forced into bankruptcy in 2009, times
got tough for both companies.
Promises made to some Delphi retirees were broken entirely,
while benefits promised to others were reduced in order to
remain afloat. GM asked for help from the Federal Government,
and eventually they took TARP funds which were originally
offered by the U.S. Treasury to banks that were in trouble, and
that's where the Financial Services Committee comes in.
Our committee has oversight over all TARP funds, and since
GM has received TARP funds we have a responsibility to look
into how these funds were used. In this case, we are looking
into why Delphi retirees were left out of the equation as GM
tried to return to its financial solvency.
What GM ultimately decided to do was to turn over Delphi
pensions to the Pensions Benefit Guarantee Corporation, the
PBGC. On July 31, 2009, just a year ago, the PBGC assumed
responsibility for these pension plans resulting in sizeable
cuts of up to 80 percent of some members for thousands of hard-
working Delphi retirees.
All of these retirees, all of you here today worked hard
and put in your time counting on what you had been promised in
retirement. You worked hard for benefits that you saw crumble
before your eyes. Having these promises broken is just
unacceptable. Unfortunately, this is not the first time we have
seen this in our Mahoning Valley nor is it in my district at
large. The steel industry is a good example of the same type of
horror story.
Ladies and gentlemen, hard-working men and women across the
valley and across the country have made their long-term
retirement plans based on what they were promised by their
companies. It is simple as that. They don't make contingency
plans for their company filing bankruptcy and they certainly
don't expect to be victimized because of poorly managed pension
plans. They just go to work every day and expect to be
compensated fairly and earn the retirement benefits that they
were promised, and I think when those promises are broken, it's
up to Congress to make sure companies honor commitments to
their employees.
That is why I'm the co-sponsor of a new bill called the
Protecting Employees and Retirees in Business Bankruptcies Act.
This legislation reforms the Bankruptcy Code by making sure
that employees and retirees are treated fairly in corporate
reorganizations. It would also modify existing limits on the
termination of curtailment of employee and retirement benefits.
While this pending legislation could help some in the
future, it does not solve our problem today. I look forward to
hearing from each of you. I hope that today can be a
constructive step towards resolving the unfair treatment of
Delphi retirees.
Thank you, and I yield back the balance of my time, Mr.
Chairman.
Chairman Moore of Kansas. Time has expired. Next,
Representative Tim Ryan is recognized for 3 minutes.
Mr. Ryan. Thank you, Mr. Chairman. I appreciate you coming
to Ohio to help us make the case and continue to make the case
for this important issue for many of our constituents. I would
also like to thank Congressman Lee for getting up early and
making the drive down. We appreciate that as well. Also
Governor Strickland, Lieutenant Governor Fisher, Senator Brown,
and Mike Turner from Dayton, as well, have been great advocates
for this.
Before I do my formal remarks, Mr. Chairman, I ask
unanimous consent to submit some testimony for the record from
someone who the committee was not able to accommodate--
Elizabeth Knauff is the president of the IUE-CWA Local 717
retirees organization, wants to encourage us to take some
action for the record.
Chairman Moore of Kansas. Without objection, it is so
ordered.
Mr. Ryan. Mr. Chairman, the outpouring of support you see
here today is a true reflection of a terrible impact of the
loss of pension and benefits caused by this bankruptcy.
During the time the company was in bankruptcy, the various
pension funds fell further and further behind on the balance
required to meet their obligation. This was compounded by an
aggressive push for early retirement by Delphi's management to
trim the workforce, and when Delphi terminated the pension
plans and sent their obligations to the PBGC, they covered
approximately 700,000 workers and were underfunded. While the
PBGC will pay retirees a percentage of their promised benefits,
many retirees, many here today, will see substantial losses.
The younger retirees were promised the largest early retirement
benefits as a part of the buyout Delphi forced on them, and
will see the largest cuts as many of those payments are not
insured by the PBGC.
Many retirees from Delphi see substantial reductions in or
outright elimination of health care coverage. Without the
stimulus bill, the situation would be even worse, as many
retirees are eligible for an 80 percent health care tax credit.
Mr. Chairman, the direct impact is enormous. I have spoken
with many retirees about how they will be able to afford their
mortgages, their health care costs, their children's education
bills. These retirees and their families, quite frankly, have
been devastated. They worked for years to earn these benefits
and now they are gone. These are our brothers, our sisters, our
baseball coaches, pillars of our community.
But the impact does not stop with the direct losses. There
are many retirees in my congressional district that the losses
will flow to everyone in the region, and one of our families
will testify to that today. So the people least responsible for
the bankruptcy of a company like Delphi are, in the end, the
ones who lose their jobs and pensions over it. The bankruptcy
system must be reformed to give a higher creditor status to
retirees, not the banks.
Many of the creditors currently above retirees are in a
position to make informed decision about the creditworthiness
of borrowers and set rates accordingly. Retirees are in no
position to make those kinds of decisions. Furthermore, we need
to tighten ERISA and other pension protection laws to preserve
promised benefits. H.R. 1322, introduced by Congressman John
Tierney, is a great example of exactly what needs to be done to
prevent more situations like Delphi's, and what my region saw
in the steel industry.
An employee cannot possibly plan for unexpected cuts and
promised benefits after the game has already been played. They
cannot go back 25 years and invest more to cover the investment
losses and mismanagement of their employer. Once again, we see
systematic misalignment of who pays for other people's risks,
other people's recklessness, and other people's mistakes.
But unfortunately, even if these steps are taken, it's too
late to help many of my constituents. While many GM workers and
retirees will receive their full pension and assistance with
their health care through the GM bankruptcy, I am extremely
disappointed that the Obama Administration has not directly
addressed the many Delphi retirees who need assistance for
their pension and benefits. My disappointment was compounded
when the Administration recently announced recess appointment
of a director of the PBGC who has recused himself from Delphi
decisions because of his previous involvement in the
bankruptcy. This simply does not make sense to me to appoint
someone to a position who is unable to address a major concern
for the American citizens.
I have urged the Administration on numerous occasions to
provide assistance at every opportunity and have yet to see any
accommodations. Mr. Chairman, I appreciate the committee
allowing me to participate in today's hearing. I look forward
to the testimony of today's witnesses. It is a problem when
anyone in this country loses their pension no matter how, and
today, we have a chance to better understand and hopefully, in
the short term, address this problem.
Chairman Moore of Kansas. Thank you, Mr. Ryan. I'm pleased
to introduce our first witness, Lieutenant Governor for the
State of Ohio, the Honorable Lee Fisher. Lieutenant Governor
Fisher's career has spanned the private, public, and nonprofit
sectors. In fact, Lieutenant Governor Fisher has more than 17
years of public service, serving as Ohio Attorney General,
State Senator, and State Representative. He has also worked as
a private attorney, public company board director, and as a law
clerk for the U.S. 6th Circuit Court of Appeals.
While Lieutenant Governor Fisher led the State's economic
development efforts as Director of the Department of
Development in 2007 and 2008, Site Selection Magazine awarded
its prestigious Governor's Cup to Ohio for both of those years.
In 2008, the magazine recognized the Ohio Department of
Development, under Fisher's leadership, as the top economic
development agency in the country for business expansion.
I know Governor Strickland's official duties prevented him
from joining us this morning, but we're glad to have you, sir,
to represent the State of Ohio in today's hearing.
Without objection, Lieutenant Governor Fisher, your written
statement will be made a part of the record. You have 5 minutes
to provide an opening statement.
STATEMENT OF THE HONORABLE LEE FISHER, LIEUTENANT GOVERNOR OF
OHIO
Mr. Fisher. Good morning, Chairman Moore and Congressman
Lee. Thank you very much for traveling here today and a special
thanks to my two friends who have been tireless advocates for
the men and women here today; Congressman Charlie Wilson and
Congressman Tim Ryan have been two of the leading advocates of
this issue and, in fact, along with Senator Brown, were the
ones who brought this issue to the attention immediately of
Governor Strickland and me, and both of you deserve very
special credit for the fact that you have continued to make
this a top priority for you and for the valley.
As Chairman Moore said, Governor Strickland wanted very
much to be here. This is an extremely high priority for him,
but unfortunately he has a very sensitive situation he is
dealing with today that prevents him from being here, but I'm
pleased to be here as well. I think it's fair to say that if we
look out on the audience today, the men and women who are here,
in many ways they represent the great recession that has been
brought to our doorstep. In many ways this is ground zero for
the effects of a recession, and if we were to write a book
about it, I think the title would be, ``Through No Fault of
Their Own.''
These are people, as all four of you have already pointed
out, who have worked hard. They played by the rules, they paid
their bills on time. They have saved for their children's
education and now, without notice, I think it's fair to say
they have been evicted from the American dream. We owe it to
them. We owe it not just to the men and women here today but to
other men and women throughout the valley and even throughout
this State who have been hurt through no fault of their own by
this recession.
So I'm here today to testify on behalf of more than 20,000
non-union Delphi retirees and 100 workers represented by the
International Union of Operating Engineers and the
International Brotherhood of Electrical Workers. These
employees, many from Northeast Ohio, have worked as
secretaries, engineers, technicians, and salespeople, devoting
in many cases as much as 4 decades to their company, General
Motors. And now, the very people who helped build General
Motors through their labor are losing the retirement that they
earned over a lifetime of service.
I also want to point out something that Congressman Lee
mentioned. I think it is important to note that although many
of the men and women who have been affected here today are not
necessarily members of unions, the UAW and other unions, to
their credit, have stood up for their brothers and sisters.
That's a story that ought to be told as well. You mentioned Ron
Gettlefinger, and I would also mention Jim Graham and Dave
Green, who have been tireless advocates as well for these men
and women. Even though many would suggest that people look out
for their own, that's not the case. Certainly not in the
valley. People look out for each other and not just for
themselves.
When Delphi spun off from General Motors, most had no
choice but to go to work for this new company and to continue
their careers, and now they're being denied the full pension
benefits that their colleagues at General Motors receive, and I
agree with the four of you that this is, in the end, an issue
of fairness.
This is forcing many families near to the poverty level.
People who have been in the middle class and always felt that
they had a chance to reach higher, and now, through no fault of
their own, are wondering if they really are still in the middle
class. These retirees will lose over $300,000 in pension
payments, on average, and let's make it clear, pension payments
are not handouts. They are earned through years of hard work.
Men and women like Louis Liguore, who was forced to leave
GM/Delphi after over 25 years of service during those years,
Louis was even inducted into the General Motors Hall of Fame.
He has been looking for work and has applied for well over 300
jobs but unfortunately, at 60 years old, it's nearly impossible
for him to find work, so now he and his wife are facing a
monthly income close to the poverty level and faces what he
calls a shattered future.
Mary Ann Hudzik who is going to be sharing her story with
you on the second panel, worked for 30\1/2\ years, 22 of those
years at GM; and she and her husband counted on the pension and
the health benefits and the life insurance that they earned
through years of hard work in accounting and in customer
service. The loss in her benefits was something she could not,
as you pointed out, Congressman Ryan, plan for or anticipate.
She's happy that her friends from General Motors are receiving
the benefits. She's not angry at them, but she can't understand
why she is not being treated fairly.
I think it's fair to say that we owe it to them and to all
the retirees to take all possible steps to secure their
pensions. So that's why I join the four of you and Governor
Strickland and Senator Brown and the UAW in encouraging the
Administration to, in turn, encourage General Motors to do the
right thing and to meet its obligations to the Delphi retirees.
I would be remiss if I also didn't say that the legislation
introduced by Congressman Tim Ryan and Senator Sherrod Brown
that would restore benefits to these retirees through available
funds in the Troubled Asset Relief Program, I think, is a giant
step forward, and I know that Congressman Wilson is a strong
advocate of that.
We should use these dollars that were available to the
companies on Wall Street that were responsible, in large part,
for this economic crisis, to help out the families here today
on Main Street who have shouldered the burden through no fault
of their own.
Thank you, Mr. Chairman.
[The prepared statement of Lieutenant Governor Fisher can
be found on page 68 of the appendix.]
Chairman Moore of Kansas. Thank you, sir, for your
testimony, and for joining us for this important hearing. I
recognize myself for up to 5 minutes for questions. Lieutenant
Governor Fisher, it seems that the financial crisis and
economic recession that followed has made matters worse, not
only for the auto industry, which was already struggling, but
particularly for these Delphi retirees. You did address this,
but do you have anything to add? To what degree do you believe
the financial crisis has made matters worse for these Delphi
retirees and others here in Ohio?
Mr. Fisher. I don't think there's any question that even if
this had not occurred the men and women here today were
already, in many cases, suffering and been hit hard by this
recession. So this is one of those cases where we're adding
insult to injury. I think it's also fair to point out that
there is an economic loss to the valley, and you're going to
hear that very specifically this afternoon, so I won't go into
those statistics. But this is--every person in the valley,
whether they know these men and women or not, they're going to
be adversely affected because this is going to affect the
economy of Mahoning Valley. What happens to the Mahoning Valley
affects Northeast Ohio. What happens to Northeast Ohio affects
the entire State of Ohio. I don't think it's an exaggeration to
say that 11\1/2\ million people in this State, our population,
can be affected by what has happened here today.
Chairman Moore of Kansas. Thank you. What is your response,
sir, to the people who say that the auto industry made their
own mistakes for a number of years, and so if they go bankrupt,
and their workers lose their jobs and pensions, they're only
reaping what they sowed years ago? Is there something unique
about this issue with Delphi retirees and their pension plan
that warrants a closer look?
Mr. Fisher. Mr. Chairman, first let me say that no one
wants the government to own a company or own a large share of
the company, but I believe that 20 years from now, one of the
stories that will be written is that because this
Administration decided to save General Motors, in many cases
they saved manufacturing, and they have also, I believe, said
that we're not going to turn our backs on the men and women who
with their brains and their backs and their hands have
literally built the middle class; and now they're facing the
prospect of losing that middle-class retirement.
I also think it's fair to say that if there's any State in
the country, Mr. Chairman, that is an example of reinvention,
it is here, and because of the work of Congressman Ryan and
Congressman Wilson, Governor Strickland, Senator Brown, and
others, we're seeing the hopeful side right here at Lordstown,
with the Chevy Cruze.
We all live in two worlds. We live in the world of
Mansfield and Twinsburg and Lorain where people feel like they
have been evicted from the American dream, but we also live on
the other side that seeing that when we don't turn our back on
the men and women who have worked for us, we can see great
things like we're seeing at Lordstown. So I would argue that
this is the time to double down and invest in the auto workers
and the auto industry, not to turn our backs.
Chairman Moore of Kansas. Thank you, sir. Would you please
compare the actions the State of Ohio and the Federal
Government have taken with respect to these Delphi workers;
they have both taken actions. What further appropriate actions
should Congress take, in your estimation?
Mr. Fisher. Chairman Moore, I mentioned Congressman Ryan
and Senator Brown's bill. I also would, of course, mention
Congressman Wilson's bill, which I think, in a sense, is the
fence at the top of the cliff. I had a law professor who once
said to me, ``It's better to have a fence at the top of the
cliff than to have an ambulance below.'' Today, we're at the
bottom of the cliff and we're taking the ambulance to help
these men and women, but Congressman Wilson's legislation will
be the fence at the top of the cliff so this doesn't happen
again.
So if you take Congressman Ryan and Senator Brown's
legislation to help these men and women who have already fallen
off the cliff and then you pass Congressman Wilson's
legislation to build a fence at the top so it never happens
again, we have the ideal solution.
Chairman Moore of Kansas. Thank you, sir. My time has
nearly expired. I'm going to recognize Representative Charlie
Wilson at this time for 5 minutes, for questions.
Mr. Wilson. Thank you, Mr. Chairman. One point that I
really would like to get in, Lieutenant Governor Fisher, is
that the effect, the catastrophic effect, that it would have
had on Ohio had we not moved forward with the work with General
Motors and Chrysler; and I have heard that it's up to 100,000
jobs would have been affected in this State and would have just
been catastrophic for our economy. Can you comment on that?
Mr. Fisher. Yes, Congressman Wilson. Ohio is the third
largest manufacturing State in the country. And one of the
pillars of that manufacturing piece of our economy are those
who worked directly and indirectly in the automobile industry,
and that includes suppliers. Ohio is second in the Nation in
the production of motor vehicles, second in the Nation. And
we're also the second largest State that has tier one suppliers
in all of North America.
So if you take all that, our current workforce in Ohio with
regard to motor vehicle and automotive parts is well over
75,000 men and women. And so I think it's fair to say that if
we had not stepped in, or I should say, more importantly, if
you had not stepped in, you and your colleagues, then the story
we're hearing today, it would have been multiplied by 75,000,
and you wouldn't have been able to have this hearing today at
this high school. You would have had to do it at the stadium
because you would have had 75,000 people here today had you not
and Congressman Ryan and others stepped forward to save General
Motors.
Mr. Wilson. Thank you, Lieutenant Governor. I'll yield back
the balance of my time so that others may ask questions.
Chairman Moore of Kansas. Next, I would like to recognize
Representative Chris Lee for 5 minutes.
Mr. Lee. Thank you, Mr. Chairman. And thank you, Lieutenant
Governor, for lending your support here today on behalf of the
primarily salaried retirees who, as you know and you pointed
out, and we both mentioned the fact that UAW President
Gettlefinger has been supportive, and I think that is key
because he also recognizes the fact that the Treasury and the
Auto Task Force had negotiated to ensure that UAW retirees did,
in fact, get topped off on their pensions; and that's why it
boils down to fairness, and I think the frustration we all
share for these retirees and the fact that they have been
stonewalled in terms of getting answers or trying to find
relief, and that's why I do think it's important that we do
keep the heat up and this--because this is yet--this is a
bipartisan issue. This affects all Americans, all hard-working
Americans and these retirees surely need it. From your
perspective, is there anything that can be done from Ohio from
a State level or from your office to help us apply the heat?
Mr. Fisher. Yes. I don't think there's any doubt that, of
course, many voices are always more effective than one voice,
and so Governor Strickland and I have already joined the list
that includes, of course, Congressman Wilson, Congressman Ryan,
Senator Brown, the UAW, and so many others. And I think it's
fair to say that although we have been disappointed and
frustrated, as you heard from Congressman Ryan, I think it's
also fair to say that hearings like this, I think, are a giant
step forward in making sure that those people who can make the
decisions here, especially when I think it's fair to say it is
bipartisan.
Let's be very frank here. I believe that this
Administration has done great things to pull us back from the
edge of the cliff. One of the best examples is what has
happened with General Motors. But this isn't a Democratic
issue, and this isn't a Republican issue, certainly not to the
men and women here, and frankly not to any of us here either.
So that when the Administration that I support makes mistakes,
we have an obligation to point those mistakes out and to do
everything we can to say to them that while we agree with your
policies, in some cases, you need to do better.
Mr. Lee. Thank you, Mr. Chairman. I yield back.
Chairman Moore of Kansas. Thank you, sir. Next, the Chair
will recognize Congressman Ryan for 5 minutes.
Mr. Ryan. Thank you, Mr. Chairman. I know, Lieutenant
Governor, that you have been involved in the past 3 or 4 years
in economic development and we have benefited from that and
testimony coming after you will completely outline, in detail,
as to what the economic impact is going to be, but I think it's
important for the Administration to hear this and others to
hear this on the ground--$57 million of economic impact
annually. Given your background in economic development, the
department here in Ohio, how difficult is it to find any
company to come into any community in Ohio and distribute $57
million every single year that you can, we thought, take to the
bank with a consistent development within that community to buy
cars, to buy homes, to buy--how difficult is it, you on the
front lines in Ohio in the recession to get that kind of
business to come to Ohio?
Mr. Fisher. Congressman Ryan, the Governor and I, I
believe, are the only Governor and Lieutenant Governor in the
country who travel to Detroit 4 times a year to meet with the
executives of all the big three major auto makers. We do that
because we don't think that just writing letters or making
phone calls is enough. So over the last several years, both of
us have been in Detroit many times, and when we're meeting with
GM or meeting with Ford, or meeting with Chrysler, we hear the
same thing, and that is the competition is intense. We have won
some battles and we have lost some.
I believe, however, that because we have developed
relationships and we have made it clear to them that this is
our priority, good things have happened as well; and there is
no better example, no better example not just in Ohio, there's
no better example in the United States of America than
Lordstown, because of your work, Congressman Ryan, because of
the work of Congressman Wilson because of the work of Senator
Brown, Governor Strickland, the UAW, the Mayor, team effort,
bipartisan team effort, Lordstown in many ways has become the
crown jewel for General Motors, and I have to tell you that
almost every day we get calls from companies who tell us the
following: We can pick up and move anywhere and we have States
who want us all the time.
Make no mistake about it that in this recession, saving a
job is the same thing as creating a job, because the
competition is so intense. And so when you not only save jobs
but you add jobs, what you have done is something that the
history books will say is remarkable and no one person deserves
the credit. Everybody in this room, everybody in this valley
but especially, of course, those of you who are elected to
represent the valley do deserve the credit.
And I can tell you that because of what we have done with
Lordstown, now we not only have to protect it, but we also have
to make sure the legacy is not besmirched and that there's not
a smudge on that legacy because of what happened here. Let's
make it a proud legacy that said we not only brought the Cruze
and added a third shift, but that we looked at the men and
women who were the backbone of the auto industry and we helped
them as well.
Mr. Ryan. Just to make the comment, here we have an
opportunity, how difficult it is to go out to compete. Ohio is
not competing with Pennsylvania anymore. Ohio is competing with
India and China for this work, and to have on the table $57
million a year that can be kicked into this local economy here
I think is absolutely significant, so we spent, all of us here,
a lot of time, lot of resources going out, trying to get more
companies here or expand the companies we have.
That's why I feel so strongly about this issue. We have an
opportunity here, something that's laying on the table. There
are personal stories here, but there's also an economic impact
here, and I think we can focus on what would have a great
stimulating effect on our local economy. With that, I thank
you, Lieutenant Governor.
Chairman Moore of Kansas. Thank you, gentlemen, and thank
you, Lieutenant Governor Fisher, for your public service and
for your testimony. You, sir, are now excused. I'll invite the
second panel of witnesses to please take their seats. Thank
you.
Mr. Fisher. Thank you very much.
[recess]
Chairman Moore of Kansas. I'm pleased to introduce our
second witness panel, and the hearing will reconvene: Mr. Bruce
Gump, director of Warren Legislative Council and board member,
Delphi Salaried Retiree Association; Mr. James Frost, vice
chair of DSRA and a constituent of Representative Lee; Ms. Mary
Ann Hudzik, Delphi salaried retiree; Mr. Milan Dragojevic,
Delphi hourly retiree; Mr. Norman Wernet, Ohio director,
Alliance for Retired Americans; and Mr. Frank Akpadock, Ph.D.,
senior research associate and regional scientist for Youngstown
State University.
I welcome our witnesses who are testifying today. Without
objection, your written statements will be made a part of the
record. You will each have up to 5 minutes to summarize your
statements and touch on the key messages you would like to
share. Mr. Gump, sir, you are recognized for 5 minutes.
STATEMENT OF BRUCE GUMP, DIRECTOR, WARREN LEGISLATIVE COUNCIL,
AND BOARD MEMBER, DELPHI SALARIED RETIREE ASSOCIATION (DSRA)
Mr. Gump. Good morning, Chairman Moore, and members of the
subcommittee. We greatly appreciate the concern this
subcommittee has expressed concerning this issue and hope we
can offer some insight and ideas on ways to correct--
Chairman Moore of Kansas. Move your microphone a little
closer, if you would, please. Thank you.
Mr. Gump. Can you hear me now? I'll speak as clearly as I
can. We greatly appreciate the concern this subcommittee has
expressed concerning this issue and we hope we can offer
insight and ideas on ways to correct what the Ohio Senate, the
Speaker of the Ohio House of Representatives, the Ohio and
Michigan Democratic Party Executive Committees, and numerous
others have called unfair and inequitable.
My name is Bruce Gump, as you recognize, and I worked for
General Motors for 23 years and then Delphi for 10 more years
as senior engineer before being involuntarily terminated and
pension eligible. I'll try to describe how the misconceptions
and misunderstandings about our pension plan and other benefits
and our connection to the economy of the United States led to
decisions that have hurt not only the group I represent, but
also other groups, and indeed the entire country.
As we have stated in previous testimony offered in other
committees in both the House and the Senate, we were assured by
the company and the PBGC that our pension plans were being well
cared for. The more than 20,000 salaried workers made up of
secretaries, clerks, technicians, customer service
representatives, accountants, cost estimators, engineers, and
dozens of other classifications believed that we would receive
appropriate protection for the promise deferred compensation
that makes up a pension.
However, as we have learned since the bankruptcy of Delphi
and then General Motors, to executives of the company, and to
the United States Treasury Auto Task Force, we were nothing but
a commodity to be thrown out like yesterday's trash. And so our
government determined we did not have enough commercial value
work or maybe political power to deserve any protection during
the Treasury-orchestrated bankruptcy.
The effect of this decision on our community was calculated
by the Youngstown State University Department of Urban and
Regional Studies. When the study is extended to include the
other lost benefits for all the affected groups, both hourly
and salary, the overall cost to the economy of the United
States is about $1.6 billion per year every year for the next
20 or 30 years. In addition, because the economic activity is
reduced so significantly, nearly 85,000 American citizens who
had nothing to do with the automotive industry will see their
employment simply evaporate.
When the Emergency Economic Stabilization Act of 2008 that
created the Troubled Asset Relief Program, called TARP, was
written, Congress wrote in Section 113, titled ``Minimizing
Negative Impact,'' ``The Secretary shall use the authority
under this Act in a manner that will minimize any potential
long-term negative impact on the taxpayer taking into account
the overall economic benefits of the program, including
economic benefits due to improvements in economic activity and
the availability of credit, the impact on savings and pensions
of individuals, and reductions in losses to the Federal
Government.''
We respectfully submit that the Secretary of the Treasury
did not do everything possible to meet this obligation.
Consider that in just a short 10-year time horizon, $16 billion
of economic activity will have been lost because the Delphi
retirees did not receive the same benefit protection and
support that other groups in the auto industry did. Each of
those transactions represents income for somebody, and if taxed
at 15 percent, the average tax that the IRS claims for people
who owe tax liability, then the United States Government will
not collect $2.4 billion and local governments will not collect
another $960 million in sales taxes calculated using an average
6 percent rate.
This does not include the increased cost to the United
States Government for programs such as unemployment
compensation, retraining, and numerous other programs. Nor does
it include the devastating long-term costs of personal
bankruptcies and home foreclosures, many of which have already
happened, along with family breakups, and even suicides.
The Delphi retirees number around 70,000 people. In
general, each will have spouse, children, brothers, sisters,
perhaps grandchildren plus friends and neighbors. The old
marketing saw about each dissatisfied customer affecting
several other potential purchasing decisions implies that three
quarters of a million to maybe even a million purchasing
decisions will be affected by the Delphi retirees.
If the goal of the Treasury and their unprecedented
involvement in the GM bankruptcy was to rescue that company and
make them able to survive well into the future, it would seem
appropriate to try to hold onto loyal customers like the
Delphi/GM retirees. Instead, they incorrectly determined that
our group had no commercial value to General Motors and so
deserves no support or protection from the United States
Government.
And so as a result of the discriminatory decision by the
United States Treasury to fully fund pensions and benefits for
one group while leaving other groups out, economic activity has
been significantly reduced. There is a strong negative impact
on savings and pensions of thousands of individuals, and the
Federal Government will see significantly more losses than they
would otherwise.
To me, that's obviously not living up to the requirements
of the TARP, and it's a policy error that simply must be
corrected. Furthermore, and maybe even more importantly, there
are the intangible effects of the decision on the country. This
decision was immoral because it was unfair and inequitable.
Just imagine what would happen if the United States Government
was allowed to determine the fate of citizens or citizen groups
based on perceived commercial necessity. Think of anything else
government does like Social Security, military, and now even
health care. That certainly goes against the very foundational
principles of our country like equal protection.
The decision is also unethical because it affects so many
downstream of us in the economy, people who had nothing to do
with the industry or the decision and had no way to protect
themselves. We believe it may even be illegal, and we're
pursuing that issue in the Eastern District of Michigan. It
certainly destroys the credibility of the Administration when
the President himself said it was necessary to protect the auto
workers, and his party published a platform saying they would
protect pension plans. It causes commercial value and political
influence to reign supreme over the United States Constitution.
Only those with enough political power and enough commercial
necessity will receive any benefit from the involvement of the
United States Government. In the written testimony, we provide
thoughts on best ways to resolve and correct the situation.
Numerous pathways are open, but only one needs to be followed.
The bottom line is that we believe the United States
Government has a responsibility to follow both the letter and
the spirit of the United States Constitution to determine how
they will interface with the citizens of this country, not
commercial necessity.
That concept is simply abhorrent in American political
history. The Secretary of the Treasury must be held accountable
to requirements of TARP and not allowed to discriminate between
citizen groups. Thank you.
[The prepared statement of Mr. Gump can be found on page 74
of the appendix.]
Chairman Moore of Kansas. Thank you, sir. Mr. Frost, you
are recognized for up to 5 minutes.
STATEMENT OF JAMES FROST, VICE CHAIR, DELPHI SALARIED RETIREE
ASSOCIATION (DSRA)
Mr. Frost. Chairman Moore, and distinguished members of the
subcommittee, thank you for the invitation to testify at
today's hearing. I'm representing 20,000 current and future
Delphi salaried retiree employees and 70,000 union salaried
retirees across this great country.
As a salaried retiree who worked for Delphi and its
predecessor General Motors for 31 years, events of the last 18
months have been devastating to me, my family, my community,
and many other Delphi retirees. It has forced large numbers of
us into an unsustainable economic situation at a time in our
lives when recovery is difficult or, in some cases, impossible.
What is even more disturbing is that as we dig into the details
of how this all happened, as we have taken the PBGC to court,
we see the hand of the Federal Government deciding the fate of
our pensions for the benefit of others. Uniqueness of the GM
bankruptcy and the Treasury's role in determination of the
Delphi Salary Pension Plan, coupled with the loss of all health
and life insurance, is a reason Delphi salaried retirees are
urging Congress to take a close look at this blatant disregard
for law.
Intervention in the fate of Delphi pensions by the U.S.
Treasury, GM, and the presidentially-appointed Auto Task Force
ventured well outside the bankruptcy and labor law to the great
detriment of Delphi retirees. Public and non-public documents
clearly show that the salaried Delphi pension plan was
terminated by the PBGC upon the urging of the members of the
Auto Task Force working to expedite the GM bankruptcy.
Time was of the essence, and they could not take a chance
that the matter would languish in a contested court termination
proceeding. In sworn depositions, key members of the Auto Task
Force freely admitted that the route taken to terminate the
Delphi pension plans was crafted to avoid due process afforded
to holders of vested benefits under Sections 1113 and 1114 of
the Bankruptcy Code.
I had the opportunity to chair the 1114 committee as we
were trying to get money from Delphi for health care, and we
were successful, but I know what that process is all about and
we were helpless.
Now that our pension plan has been terminated, many
retirees have seen pension reductions in excess of 40 percent
less than what they had earned. In my case, personally, I lost
in excess of 30 percent of my already modest pension. I have a
son who's still in college, and with the added cost of
replacing health care and life insurance, my net disposable
income has been cut to about half of what it was 18 months ago.
While the PBGC has given various and sometimes
contradictory reasons for rapidly terminating Delphi's salaried
pension plan, the most often stated reason is inability to pay
benefits due to severe underfunding. The PBGC has stated that
they consider the plan to be funded at just below 50 percent of
outstanding liabilities; however, actuarial experts disagree
with that assessment. An independent actuarial report by Watson
Wyatt, as Representative Chris Lee mentioned, after determining
4 weeks before the action to terminate pension plans showed
planned funding at at least 86 percent of its liabilities,
based on generally accepted accounting methods prescribed by
ERISA. A second actuary confirmed the accuracy of the Watson
Wyatt estimates and further observed that the funding status of
the Delphi salaried plan was at or above the largest 100 viable
pension plans in this country. In other words, there was no
funding crisis as the PBGC claimed as their reason for swift
termination.
Since time is extremely limited in today's hearing, I can't
walk you through volumes of testimony and evidence that we have
pored through that verifies the abuses of bankruptcy and labor
laws that allowed the PBGC and the U.S. Treasury to get away
with this government taking of our pension, but I would like to
briefly paraphrase testimony of Harry Wilson and Matthew
Feldman of the Auto Task Force as they discussed how they
crafted and executed the termination and subsequent disparate
treatment of the various Delphi pension plans.
When questioned about the disparate treatment of different
groups, Mr. Wilson admitted that certain groups of retirees
were more politically sensitive than others, leading to the
decision of whether or not they would be compensated by
payments from GM and funded by the U.S. Treasury. The salaried
retirees and non-UAW represented hourly retirees were obviously
not considered politically worthy. UAW President Ron
Gettlefinger wrote a letter on our behalf, saying that this was
morally wrong, and asked the Federal Government to make it
right.
When asked about the termination of the Delphi pension
plan, Matthew Feldman confirmed that one of his primary tasks
was to resolve the Delphi pension plan disposition so that GM
could exit bankruptcy rapidly. He made it no secret that he
never considered any other scenario than termination of the
salaried plan and moving the hourly plan intact to GM. When
that scenario failed, Plan B was to terminate all plans but
then have GM make up the loss for UAW-represented retirees in a
separate payment. This was a clever work-around for the
prohibition against successor plans established after a pension
plan has been terminated and trusteed to the PBGC.
In closing, I would like to leave you with a few thoughts.
First of all, the men and women in this audience today have
donated whatever money they have left to helping us continue to
push the PBGC and the Treasury in the court of law, so I give
credit to these people here who are continuing to try to do
whatever they can to fight this. There is irrefutable evidence
that the Delphi salaried pension plan was a viable plan that
was terminated by political appointees for the benefit of
General Motors and the Treasury.
In the process, evidence shows that significant violations
of constitutional and statutory law occurred as the Federal
Government picked winners and losers. These violations of the
law have imposed serious economic and personal harm upon
innocent Americans whose only sin was being in the wrong group
at the wrong time. In the words of Edmund Burke, ``All that is
required for evil to prevail is for good men to do nothing.'' I
refuse to do that. That is why I continue to fight this
injustice and I ask you to join me in that fight. Thank you for
caring. Thank you for listening. We need your help and, as
Chris Lee mentioned, we need action now.
[The prepared statement of Mr. Frost can be found on page
72 of the appendix.]
Chairman Moore of Kansas. Thank you, sir. Ms. Hudzik, you
are recognized now for up to 5 minutes.
STATEMENT OF MARY ANN HUDZIK, DELPHI SALARIED RETIREE
Ms. Hudzik. Good morning, Chairman Moore, and other members
of the subcommittee. Thank you for inviting me here today to
testify about the Delphi salaried pension loss impact. My name
is Mary Ann Hudzik. I retired from Delphi in 2008 after 30\1/2\
years of service; 22 of those as a GM employee being
involuntarily terminated and pension eligible. I worked 11
years in accounting, 19 years in sales, and a short time in
customer service.
I retired believing that I would have health care, life
insurance, and a pension for the rest of my life, which were
part of my overall compensation package, and because even in
bankruptcy, we were assured our pensions were securely funded.
Not long before I retired, I was presented with an
excellence in action award for, ``Providing valuable leadership
and increasing Delphi's overall cash flow by being instrumental
in reducing the unbilled sales by approximately $3 million.''
Shortly after retiring, it was decided that I, and those like
me, had no commercial value, so I lost all earned post-
employment benefits including my pension, which, after the PBGC
takeover was reduced by 40 percent. So my dedication and years
of loyal service to both GM and Delphi were irrelevant to those
companies, but worse, irrelevant to our own government who
agreed that I had no commercial value and therefore was not
entitled to my full pension, while friends who were in the
union working for the same company were entitled to theirs
utilizing TARP funds.
I'm not unhappy for my friends; I'm only perplexed at why
we were treated so differently, and what will be done about it.
I will tell you how this injustice has affected me personally.
My husband is self-employed and therefore on my benefits. He is
a chronic pain patient. Often, he cannot sleep due to the pain,
and he sits up all night, leaving for work having never even
gone to bed or sometimes not even being able to go to work.
As anyone who is self-employed knows, no work equals no
pay. He has endured many nerve blocks as well as surgery and
still he suffers. Additionally, due to multiple chemical
allergies, I myself must seek out specialists for things like
dental treatments because anything that's used on me must be
custom designed and appropriately applied. The cost associated
for these things are 3 times higher and not always covered by
insurance.
My pension reduction, along with the added cost of our lost
health care and life insurance, were not something we
anticipated. Our hope was that at least one of us would have a
livable pension and other needed benefits. There are far worse
situations within our retiree ranks and Delphi is not the only
story of pension and benefit loss in this Mahoning Valley and
throughout this country.
My father and grandfather were steel workers. I know the
heartache that came with the doors to those plants closing. It
is inhumane, in my opinion, to rip away pensions when people
are least able to replace the income. Work a Senior Fair and
you will hear one story after another of widows living on $50 a
month pensions. The story here, though, is that the U.S.
Government stepped into a private sector bankruptcy and
decided, with taxpayer dollars, who should be hurt and who
should not.
If you were politically strong and powerful, as one
committee director actually told me, you were taken care of. I
am personally outraged by this treatment, that we have to fund
an expensive lawsuit on reduced income in the hopes of justice,
an expensive process, while our opponents have deep pockets
thanks to taxpayer dollars. How demoralizing to essentially be
used to help line the pockets of CEOs and then to be, in
effect, discriminated against by our own government--$8 million
awarded for a health care VEBA which retirees had to fight for
in court at their own expense which amounts to roughly $300 per
retiree over their lifetime, while a handful of GM execs will
get millions in stock and compensation packages while shedding
selected baggage. How shameful, really. We have plenty of pent-
up demand for GM cars within our retiree ranks, but loyalty
works both ways. Our treatment should be a wakeup call to all
salaried workers in this country, including those at GM.
I agree with the President when he says, ``We face a
deficit of trust. We need to do our work openly. People have
lost faith in their government.'' Almost 100 Congressmen and
Senators have repeatedly voiced their concern about and support
for us. We have had House and Senate H.E.L.P. committee
hearings, support from governors, attorneys general, State
representatives, and union and community leaders for over a
year now and still no response from this Administration.
Dr. Ed Montgomery, the President's former Auto Czar visited
with us and was presented with the Youngstown State University
(YSU) economic impact study, which incidentally YSU did gratus,
and I thank you, Doctor, for that. We presented it to Dr.
Montgomery, and he assured us he himself would take it back to
the President. That was a year ago. Thousands of letters
written, e-mails, phone calls, volunteers devoting hundreds of
thousands of hours to this pursuit of justice when many of us
now need to be working instead to make up for the losses,
pleading for someone to listen to our voices and yet silence
from those who can right this wrong.
We are present today for our 3rd hearing in 9 months. My
hope is that enough has been heard to move towards a resolution
or to quote the President, ``I'm not interested in words; I'm
interested in action.'' The 2008 Democratic National Platform,
page 13 says, ``We will make it a priority to secure for hard-
working families the part of the American dream that includes a
secure and healthy retirement. We will adopt measures to
preserve and protect existing public and private pension
plans.''
Once this government, my government, stepped into the GM/
Delphi bankruptcy, all impacted retirees should have been dealt
with fairly and equitably. We did nothing to deserve to be
robbed of our dreams, our hopes, and our plans for a secure
future, and to be sent into a downward spiral of existence
while protecting the favored. Mr. Chairman, I sincerely request
that this be the hearing to end all hearings, and that you move
quickly to facilitate a resolution discussion between Treasury,
PBGC, GM, and DSRA. It is well past time for all affected
parties, hourly and salaried, to be treated fairly, and I thank
you, sir.
[The prepared statement of Ms. Hudzik can be found on page
77 of the appendix.]
Chairman Moore of Kansas. Thank you. Mr. Dragojevic, you
are recognized, sir, for 5 minutes.
STATEMENT OF MILAN (NICK) DRAGOJEVIC Jr., DELPHI HOURLY RETIREE
Mr. Dragojevic. Good morning, Chairman Moore, Congressman
Lee, and members of the subcommittee. Welcome to the Mahoning
Valley, what we consider the real heartbeat of America. Thank
you for this opportunity that allows me a chance to voice my
concerns regarding the issues facing IUE, CWA, and GM Delphi
retirees. My name is my Milan Dragojevic, Jr. I retired as an
IUE-CWA hourly retiree after 34-plus years of service, of that,
27 years as a GM employee.
Many of us were enticed into retirement at an early age
because of assurances given to us by GM to maintain our earned
and promised benefits. Many people are not aware of the fact
that not all GM Delphi IUE-CWA retirees were treated the same.
Let me explain those differences.
Those employees who retired prior to spin-off in 1999 are
what we refer to as ``GM retirees,'' due to the simple fact
that they never worked a day of their lives for Delphi,
strictly General Motors. So when the dust cleared after the
bankruptcy, although this group's pensions remain intact, their
health care had changed dramatically. They were now to receive
what is referred to as a catastrophic health care plan, and
since their pensions were not reduced, they had few, if any,
other health care options.
The next group of retirees are Medicare eligible, people 65
and over. This group was now required to purchase a
supplemental plan to suit their individual needs, where
previously these additional costs were assumed through their
health care plans. For many of these folks who never had to
look for or select a plan, this was difficult and traumatic, to
say the least.
And the last group, which I am part of and I know
firsthand, are the post-spin-off employees. Our pensions were
turned over to the PBGC. My pension, if I live on just the PBGC
supplement, will be reduced by 50 percent. But since PBGC had
taken control of my pension, we were able to qualify for the
health care tax credit known as the HCTC subsidy to help pay
for our health care costs and some of us were able to search
and find an additional plan.
Let me give you an example of the changing coverage I
experienced if I remained with the catastrophic plan. In 2006,
I received an ICD, an implanted cardiac defibrillator. When it
was originally placed into my chest, there was no copay for me,
and no out-of-pocket expenses. Today, just to replace the
battery, it will cost me $8,000 out-of-pocket. This is just one
example. All retirees simply want is their earned and promised
benefits, nothing more. For some retirees, decisions must be
made whether to take medication or use those funds to pay
utility bills or other homeowner expenses.
Others allow medical problems to go untreated as they
simply cannot afford to get sick. As one retiree stated, we
used to be afraid of dying, now we're afraid to live. The
changes to our health care plan have tremendously increased the
amount of disposable income used simply for health-related
expenses. I have been able to return to the workforce to offset
some of these increases while others have not. The increases we
must sustain are the premium out-of-pocket expenses and copay.
Lastly, retirees would simply like to know, how did this
happen? Are there not ERISA laws in place to prevent this very
thing? Who was involved in negotiations and what were their
roles in determining what was fair? H.R. 3455, introduced by
Congressman Ryan, and legislation introduced by Senator Brown,
will help pay health care premiums for all GM/Delphi retirees,
and H.R. 1322, proposed by Congressman Tierney, will protect
future retirees' earned and promised benefits.
As Chairman Andrews stated at the House subcommittee
hearing this past December in Washington, D.C., workers need to
have secured creditor status and move to the head of the line
in all bankruptcy legislation. And lastly, the HCTC subsidy
that is due to default to a higher rate at year's end needs to
be continued at the present rate.
Retirees simply want their earned and promised benefits and
ask your help in making them whole, as anything short of this
should be considered unacceptable.
Thank you for this opportunity to speak. I would welcome
any and all questions either later today or in the future. I am
willing to return to Washington, D.C., to discuss these issues,
if needed.
I would also like to thank Chairman Frank for allowing this
hearing to take place here in our valley. Also, I would like to
thank Congressman Wilson and the rest of the Ohio congressional
delegation for working so diligently on these issues and making
this hearing here in this valley a reality. Thank you.
[The prepared statement of Mr. Dragojevic can be found on
page 64 of the appendix.]
Chairman Moore of Kansas. Thank you. Mr. Wernet, you are
recognized for 5 minutes.
STATEMENT OF NORMAN WERNET, STATE DIRECTOR, OHIO ALLIANCE FOR
RETIRED AMERICANS
Mr. Wernet. Thank you, Chairman Moore, Representative Lee,
Representative Wilson, and Representative Ryan for allowing us
to appear. My name is Norman Wernet, and I'm here before you as
the State director and field organizer for the Alliance for
Retired Americans, and on behalf of our Community Advocacy
Network in this area, the Alliance for Senior Action here in
the valley. The Alliance has more than 250,000 members,
consisting of union retirees and other activists here in Ohio
dedicated to improving the quality of life for older Americans.
I appreciate the opportunity to testify about retirement
income security in Ohio. My purpose for appearing is as a
showing of solidarity with retirees of Delphi in their fight
for fairness and equitable treatment and to highlight the
ongoing pervasive weakening of retirement income security.
The auto industry's employment in Ohio has been cut by half
since 2001. Ten percent unemployment has forced many to retire
and tap their pensions to have a source of income. The
workforce retiring now has been through the decade of 1970's
stagflation, wage price freezes, income restructuring,
downsizing, and periods of unemployment to control inflation.
It's also this generation who spent enough to bring us out of
the last couple of recessions.
These workers limited pay demands and gave concessions and
found ways to work and assist their employers to stay in
business. The payoff is in essence, to have that life of work
devalued in retirement.
The Delphi workers fighting for full pension or at least
top off of the reduced pension from PBGC are asking for some
measure of economic justice for the compensation they have
earned through a life of work. To allow those who managed this
company into bankruptcy to walk away with millions of dollars
at the expense of retirees; it's not just an injustice. It's a
weakening of economic structure, as some folks have already
testified to today.
The Youngstown State University study shows $58 million a
year in economic losses are suffered right here in this valley.
That structural weakening has played out across all of the Ohio
economy and has been continued time and again over the last 30-
plus years. The fiscal crisis caused by the manipulation of
financial markets has diminished savings of retirees of Delphi
and all Ohio retirees and workers.
The situation argues for strengthening the financial
regulations which you have been starting to do in Congress, and
we appreciate that. But citizens' personal savings, pensions,
and Social Security need to be strengthened. Over the last 3
decades, we have seen a continued weakening of those three legs
of retirement income.
Those at greatest risk of outliving their retirement are
women. A study by the Institute for Women's Policy Research
showed median personal income for women in Ohio over 65 years
of age was $12,321. I had a call this past week from a woman
who is 82. She's a retiree from this valley, and worked for GE.
She was asking, are there more supplements, is there a way that
I can help find--is there something I have missed in my
retirement so that I can make up the difference. I need to pay
for my supplemental Medicare insurance. She wants to do the
right thing. She wants to do the American thing and pay for it
herself but her income is so low she cannot pay for the
currently available supplemental insurance because her pension
was reduced by a bankruptcy.
Retirees have been left frustrated, and we have heard a lot
of that frustration today. Let me give you a couple of
headlines from the weekend: ``Many sectors sustain while Wall
Street is hiring.'' ``Repairing Social Security may cause
fiscal pain.''
What can Congress do? Immediately, Congress can support the
mechanisms that would make Delphi retirees whole. Topoffs might
be a way to do that. Congress can pass H.R. 4677 and its
companion S. 3033, the Protecting Employees and Retirees Act,
and we thank you, Congressman Wilson and Ryan, for supporting
that legislation and cosponsoring it. Immediately, Congress can
support Social Security by raising the payroll tax cap on the
wealthiest Americans. Freezing the estate tax at 2009 levels so
that those revenues will go to Social Security and putting
Americans back to work in American jobs, good-paying jobs.
Immediately, Congress could enact S. 2927 or H.R. 4191, a
modest tax on speculative investments by Wall Street, a .25
percent tax that would raise $75 billion a year.
Congress could allow shareholders a greater voice in
corporate governance to reign in some of the executive excesses
and engage a better conversation and dialogue about American
business practices. Building trust might actually build
investment.
Congress, in the long term, could adopt into law the
principles of the retirement income security of the Retirement
USA Conference: universal coverage; secure retirement; and
adequate income and principles and specifics as adopted by the
AFL-CIO.
To you, Chairman Moore, Congressman Lee, Congressman
Wilson, and Congressman Ryan, we appreciate the time that we
have had here on behalf of the 250,000 members of the Ohio
Alliance and Delphi workers. I want to thank you for the
opportunity today to testify. Americans who played by the rules
during their working lives should be able to live out their
retirement with security and dignity. Thank you.
[The prepared statement of Mr. Wernet can be found on page
79 of the appendix.]
Chairman Moore of Kansas. Thank you, sir, for your
testimony. Next, the Chair will recognize Dr. Akpadock for 5
minutes, sir.
STATEMENT OF FRANK AKPADOCK, PH.D, SENIOR RESEARCH ASSOCIATE
AND REGIONAL SCIENTIST, YOUNGSTOWN STATE UNIVERSITY'S CENTER
FOR URBAN AND REGIONAL STUDIES
Mr. Akpadock. Chairman Moore, and Representatives Wilson,
Ryan, and Lee, thank you for inviting me to share with you how
the impending pension and health care reductions by Delphi
Packard Electric Systems will impact the social and economic
lives of its retirees from the Mahoning Valley, Ohio, in
particular, and the Mahoning Valley's economy in general. My
name is Frank Akpadock, Ph.D., and I am a senior research
associate and regional scientist at the center for Urban and
Regional Studies. I have been there for over 18 years, mainly
conducting pure and applied economic development research, not
only here in the valley, but also in Northeast Ohio, in the
Midwest, and in the Nation.
When I was asked to testify, I was asked to make a few
statements regarding the Mahoning Valley economy. I will start
with population. Population in 2000 in Mahoning County was
257,560. In Trumbull County, it was 225,114, for a combined
total of 482,674 people. And in 2009, the estimate for both
counties came out to 446,892 people, giving us a loss of 35,782
or 7.4 percent. The household income in 2008 the median for
Mahoning and Trumbull Counties, was $40,508 and $41,409
respectively, compared to the State of Ohio median household
income of $48,011. Poverty in 2008 in the valley in Mahoning
and Trumbull Counties was respectively 17 percent and 16
percent compared to the State's percentage of 13 percent.
The shipments in 2002, manufacturer's shipments in Mahoning
Valley total $11.1 million. And for the same period, wholesale
trade sales was $3.3 billion and $4.5 billion.
The house foreclosures in 2008 were 1,489 in Mahoning
County and 936 in Trumbull County.
Unemployment: In May 2010, Mahoning County had a labor
force of 116,300, out of which 103,000 were employed, for an
unemployment rate of about 11.4 percent; while the City of
Youngstown recorded an unemployment rate of 13.3 percent. Also,
Trumbull County had a total unemployment rate of 11.9 percent.
Unemployment rates from these counties exceeded the national
rate of nearly 10 percent.
Now, when I was asked to come--I just want to give you--of
my conducting this so I really was not a fly by night. You do
this economic regarding the retirees, salary retirees, I have
had a ton of experience conducting this, so I could refer you
to my resume or my vitae 1999 when I conducted a study I did at
the request of the Congressman. The Youngstown Municipal
Airport was about to be shut down because they felt it was not
giving any financial impact, so I went and found that annually
brought in about $11 million, and so it brought about the
unification of the Mahoning County and Trumbull County initial
to call, and if you will, that the impact study that I
conducted we would not be having all these other people coming.
I did set economic about Youngstown for familiar
references. And it was at that time that wanted to close
airports initial one so wanted to find out if air reserve
Vienna was viable initial to the airport. So I did that report
and it was found out it was very viable and that base is still
doing very well today, and I been doing a lot of jobs for the
Nation.
A study I did at Youngstown State level where the initial
in Columbus wanted to trip down the public financial support
for public investors to show that not only does public
university have admission in the State contribute to
development.
And last is the one I did for President Sweet, when they
asked me to conduct economic impact for Mahoning and Trumbull
County about the $50 million earmarked for the construction of
the school of business. So I did that, in other words, trying
to prove that when I--the result I can see the study is not
something (inaudible) even though I'm a part of it, I
understand, but I am just an outsider looking in.
I have no part to play. So what comes out is true
(inaudible) what I would like.
Chairman Moore of Kansas. Your testimony--
Mr. Akpadock. What I did two sections pre and post that pre
what the retirees would obtain in terms of salary retirements
and after the PBGC before the retirement they were head to
$43.2 million and after retirement--I mean, after the takeover,
it's only entrance $6.1 million. That was and that was put into
a model that is called Reams 2. (Inaudible) use in doing
economic process. Hearing about this testimony so far and the
result--$58 million was found to be lost, not only to the
retirees but to Mahoning Valley.
Where does this loss come from and how much it come from
because some saving produced not only here in the valley but
surrounding. So that will be cut off. As I said and also
because of downstream economic development when these people,
and it would bring about the development of smaller industries
downstream it would amount to losing a 1,740 not only that are
working now but down the road. So--
Chairman Moore of Kansas. Time has expired. I remind each
of the witnesses that your testimony will be received in the
record, and I do appreciate the gentleman's testimony. We have
to keep going so we can have questions by the panel, and I
thank you for your testimony.
Mr. Akpadock. Let me continue.
[The prepared statement of Dr. Akpadock can be found on
page 46 of the appendix.]
Chairman Moore of Kansas. Last point, sir. I want to thank
all of the witnesses for their testimony. As I said, all of the
witnesses' testimony, written testimony, will be received in
the record and be considered by the committee and passed onto
our fellow Members of Congress when we return. I recognize
myself for up to 5 minutes for questions.
First, Mr. Frost, and Mr. Gump, I would like to start with
you. We are all aware of the struggles the auto industry has
had, especially in the past decade. What would you say sets
Delphi retirees apart from the larger auto industry or even
other businesses with respect to how their pension plans have
been handled?
Mr. Gump. I didn't understand your question.
Chairman Moore of Kansas. Okay. The auto industry obviously
is going through a terrible struggle right now and in the past
decade. What would you say sets Delphi retirees apart from the
rest of the auto industry or the businesses with respect to how
their pension plans have been handled. Is there any difference
or have they been treated the same?
Mr. Gump. Actually, the Delphi retirees, because of the
bankruptcy situation, obviously have been treated very
differently.
Chairman Moore of Kansas. Right.
Mr. Gump. The issue, I think, that we're fighting is the
fact that some groups received preferential treatment in that
bankruptcy while other groups were ignored or determined to be
not worthy of that preferential treatment. The effect of that,
as Dr. Akpadock was explaining, is devastating, quite honestly,
to individuals and to communities in where we live. We're all
aware that no man's an island. We all affect many people. We go
to restaurants and laundromats and buy gas and groceries and
whatnot. If we don't have the money to do that, then the people
downstream of that suffer from that also.
So how have we been treated differently--I'm having trouble
understanding the question. That's why. The fact is that
because of the disparate treatment and we claim potentially
even illegal treatment that we have received, it's very
possible that thousands downstream, the last point Dr. Akpadock
was making, right here in this community 1,700 people will lose
their jobs just because we can't go out anymore to restaurants
and buy as many groceries, etc. They didn't do anything, so why
is it right for them?
As Mary Ann said, we are overjoyed that the folks at
General Motors have received their pensions. They earned it,
they should get it; but so did we. We should get it, too.
Chairman Moore of Kansas. Do any other panelists have
comments?
Mr. Dragojevic. Yes, I guess I would like to make a
statement regarding that myself. When this bankruptcy first
occurred, we attempted to find out the amount of funding in the
pension plans at the time of the 1999 spin-off. I personally
was unable to do that. I had to utilize the Freedom of
Information Act to go to the Department of Labor to try and
ascertain that information because neither GM nor anyone
locally would give us that information.
At the health committee hearing in D.C., in December, there
was a professor from Georgia who attempted to ascertain the
same information for the committee and he ended up with the
same results I did. He got stonewalled and we couldn't figure
that out.
As near as I can tell from the Department of Labor's
information, the hourly pension plan was never fully funded. It
shows us a funding rate of about 70 percent, a little higher
and, in short, it also showed a shortfall to maintain that fund
by 31.8 percent, so I guess the question would be if you can
find out if this was ever fully funded, we could answer that
question for you a lot better.
Chairman Moore of Kansas. Do any other panelists have a
comment to make in response?
Mr. Frost. Yes.
Chairman Moore of Kansas. Mr. Frost?
Mr. Frost. First of all, most of the bailout, most people
didn't lose their pensions. They stayed with the companies and
there's one group that didn't get a topoff, so there is a
difference in the bottom line for a certain small group of
people.
Chairman Moore of Kansas. Thank you, sir. Mr. Lee, you're
recognized for 5 minutes for questions.
Mr. Lee. Thank you, Mr. Chairman, and I appreciate the
panel coming out here today and sharing your stories because,
like you, I believe that all Americans should be protected by
the Constitution of the United States and the Federal
Government, their action really shouldn't be predicated solely
by the ability of a group's ability to wield political power.
In your case, you weren't united in that regard. At the end of
the day, fairness is what should count above and beyond
everything else.
And that, again, is my frustration as well. And as Mr.
Frost had mentioned in his testimony, there's truly a danger
when the government is picking winners and losers. And I
couldn't agree more with Mrs. Hudzik who illustrated this point
perfectly. It's indeed shameful that our government showed
favoritism to one group over another that resulted in financial
devastation of thousands of retirees. The Treasury Department
has said repeatedly that no commercial necessity existed to act
on behalf of salaried retirees. Unbelievable. Unbelievable.
I just--I would like any--if you can you please elaborate
why the Treasury, here's your chance, is fundamentally wrong?
Anyone want to take a shot? I would love to hear it.
Mr. Gump. Let's start off with the foundational principles
that we have in the United States Constitution. The reason that
document exists is because we felt here in America that we were
not being treated fairly. That's why our country exists. The
principle of equal protection, while it's oftentimes identified
with narrowly defined groups, is a foundational principal of
the document itself.
The people of the United States pride themselves on the
fact that in America you don't have to be part of the gentry or
the elite or in some specific group in order to receive
benefits. The very fact that we're here today petitioning our
government for redressing grievances demonstrates that.
That's why we're here. We have been damaged by the
discriminatory decision that the Administration made during the
process of the bankruptcy. The only way to correct that is to
treat people fairly.
This committee can only do so much. I mean, it's not like
you can write a check and make this all go away. You don't have
a magic wand; we understand that. But you're a very powerful
committee and what you can do is bring us together, start
conversations. One thing we know for certain is that until the
groups who are warring with each other, if you will, start to
talk to each other, there can be no resolution.
So we ask very clearly and directly, please, facilitate
mediated conversations between the Treasury, the PBGC, and the
Delphi retirees. Bring General Motors into it if you feel you
must. At this point in time, General Motors is a government
actor. They are majority-owned--General Motors is majority-
owned by the United States Government. Their CEO was appointed
by this Administration who is directly involved in the day-to-
day decisions that corporation is making.
If they need to come to the table, if that's the best way
to propose it, fine, bring them to the table, but let's start
talking instead of trying to battle this out in court.
These people out here who are trying to get by on $1,500 a
month are sending in $10 and $15 so that we can fund over a
million dollars in our lawsuit so far. It's not right, not when
our next door neighbors have their full pensions and the people
down the street have their full pensions and their full health
care just because they were in the group with the right
initials, they have the political power to scare the United
States Government into fully funding them. Unions do--they
protect their people; that's their purpose. They succeeded in
this case.
That union succeeded in protecting all their people. The
UAW did an outstanding job of that; however, the fact that
makes us different is the United States Government stepped into
it.
Mr. Lee. I want to jump in. I thank you.
Mr. Gump. I can go on for hours.
Mr. Lee. I think you hit the nail on the head. I do
appreciate that. There's another point I do think is a conflict
of interest. I do think it is worthy of this committee to
continue to delve and move forward for fairness. I think that's
the reason all four of us are here. And hopefully, people are
aware of the fact that Treasury Secretary Timothy Geithner sits
on the board of the PBGC, and he also is the co-chair of the
Auto Task Force. Keeping that in mind, you think about it and
we all know--these were difficult times when the auto industry
was melting down, but I think we all agree that the PBGC
terminated the Delphi pension to help expedite the GM
bankruptcy period to get this thing done at the sacrifice of
the salaried retirees. It's strictly a matter of fairness, and
I can assure you I will do my part, I believe my committee
members here are all in the same boat. We want to have
fairness. We ask that you continue to push as well.
Mr. Gump. We're not going to give up.
Ms. Hudzik. I have a comment on what you said.
Chairman Moore of Kansas. One brief comment. Time has
expired.
Ms. Hudzik. The comment I want to make is in meetings, we
have had two pretty outrageous comments made to us. One of
those was that we, the salaried workforce, are viewed as all
Republicans, and therefore, that would be a reason to harm us,
and that is really a very, very bad position to take because,
first of all, it's not true because it's not across-the-board;
but second, I don't understand what that has to do with this
conversation whatsoever. Whatever you are, Republican Democrat,
or Independent, it doesn't make any difference.
And the second outrageous comment that has been made to us
is that the salaried workforce was seen as well-compensated
enough to weather this loss and that, again, I say that's an
outrageous comment. I think and I hope I don't speak out of
turn, but I think somewhere in the YSU economic impact study
somewhere in there it was determined that the pension is within
$200, hourly and the salary, within $200, so I think those are
really comments that have been made to us in meetings which
have just further outraged us and we just can't understand
those being used, and we would like those two reasons taken off
the table because they're an excuse; they're not a reason.
Chairman Moore of Kansas. Thank you, Ms. Hudzik.
Representative Wilson, you are recognized for 5 minutes.
Mr. Wilson. Thank you, Mr. Chairman. My question will be to
Mr. Gump. Mr. Gump, what's the status of the proceedings, the
court proceedings with Delphi at this point?
Mr. Gump. I'll try to make this very short. You want to
do--
Mr. Frost. We're currently waiting for the judge to decide
to move on, so that we can get into discovery and maybe get a
chance to actually find out what's really going on. Each of the
parties has submitted their motions and have submitted all of
the responses to the court, and so right now we're just waiting
for the judge to decide that he wants to move forward.
Mr. Wilson. Mr. Chairman, if I may, has there been any
timeframe offered in that?
Mr. Frost. No. We continue to ask questions and we don't
get any timeframes, but we continue to move the motions and the
responses along so that we don't hold up the court. One of the
concerns we have is we don't have deep pockets and the people
on the other side do, and so every once in a while a new
roadblock jumps in. They went to bankruptcy court and did some
things so we had to have our lawyers do some things in
bankruptcy court. So this could go on for a couple of years,
and we're pulling the money out of our pockets and all the
donations that we have when on the other side we have the PBGC,
the Treasury with our taxpayer money and deep pockets to keep
this moving forward.
Mr. Wilson. Let's assume for a moment the task force had
not intervened, as you think may have happened here, what would
have been the way that you predict General Motors would have
handled this pension issue?
Mr. Gump. General Motors would have probably gone
eventually to a liquidation. Whether or not they should have
entered into it really isn't the question. The fact is, they
did enter into it. If those things had happened, the effect on
this community, as we have all discussed, would have been far
more devastating than what has happened already. I think that
was a point made before.
It was a good thing, if I could put it that way, that
General Motors was put into a position of being able to
continue, and I want to be very clear that we need General
Motors to be a strong, viable company. We don't want to harm
General Motors in any way. We just refuse to be made into
sacrificial lambs so that Mark Reuss can collect a $7 million
bonus that he just got this last quarter, right, the General
Motors president--North American president. So, you know, we
think that the right answer here is that while it would have
been a bad thing to have allowed General Motors to simply fail,
absolutely, it's a better thing that when General Motors is
allowed to succeed that people are treated evenly, equally with
fairness and equity, not one group favored over another group,
and that's really the issue. When bad things happen in
bankruptcies, things can become pretty evil, quite honestly.
People are cut off and a lot of people get hurt. We're not just
investors in a company. We're not speculators in a company. We
put our lives in a company doing what we were told by the
executives. So now we're put into a position that the
executives are getting bonuses while we're trying to figure out
how we're going to buy our next tank of gas.
Mr. Wilson. I think it has been said certainly by
Congressman Lee and all of us up here that we think fairness is
one of the biggest things that we need to strive for. And so
that being said, Mr. Chairman, I yield back the balance of my
time.
Chairman Moore of Kansas. Thank you, gentlemen. And next,
the Chair recognizes Congressman Ryan.
Mr. Ryan. Thank you, Mr. Chairman. Let me respond a little
bit to what Mary Ann said. There are a lot of Democrats up here
and we have not always pleased the Administration by continuing
this fight. I will tell you that speaking on behalf of myself
and I represent all my constituents in Washington and this is
something that I recognize not only the personal stories you
shared with us today but the economic impact that this is
having to our region and to our State, and so I want to kind of
build on what Bruce talked about a little bit earlier. One of
the issues we have I think in this country is we stopped making
things. We stopped manufacturing in the United States, part of
the problem we have we get into this big financial scheme where
people are moving money around and not bringing any real value,
and the auto industry has always been an essential component to
the manufacturing base of the United States, not just for auto,
but for defense capabilities, should we need them. Losing the
auto industry is something that we went through great lengths
to prevent, and this is obviously a negative byproduct of that.
We need to find a fix. One of my concerns, and I will ask
questions I know you already know the answers to. I want to
make the point here publicly is that this situation not being
fixed is going to have economic consequences for the American
car manufacturers, so if I could ask Bruce and at least the
four of the workers from Delphi could answer this. I just want
to ask, Bruce, what was your--what are you making now, if you
don't mind saying, I think I heard you say it before with your
pension and what would you have made if the bridge continued
and you got your ``topoff?''
Mr. Gump. My major high paid salary pension was $3,400 a
month, and it's been reduced to about--my wife's sitting there.
She knows better, I think $2,300 is about--
Mr. Ryan. What's the allowance--she gives you an allowance?
Mr. Gump. Actually, we tend to work things out pretty
carefully, so--yes. I think I have $5 more in my wallet today
than she does, so I'm buying lunch.
Mr. Ryan. You were at $3,400.
Mr. Gump. I was at $3,400, down to $2,300 now.
Mr. Ryan. Mr. Frost?
Mr. Frost. Almost the same exact numbers.
Mr. Ryan. Mary Ann?
Ms. Hudzik. I was at $3,050, roughly. Right now I'm at, I
don't know, maybe $1,800. Maybe.
Mr. Ryan. If you wanted to chime in here?
Mr. Dragojevic. I will. Let's face it. Fair and equitable.
I will speak to this issue. My pension originally was about
$3,100, or thereabouts. The portion that I'm receiving from the
PBGC is about $1,500 a month due to my surviving benefit, but
General Motors has agreed to a topoff so I really haven't
noticed a difference at all.
Ms. Hudzik. I want to add something to that I forgot.
Mr. Ryan. Really quick.
Ms. Hudzik. What I forgot is many of us are kind of holding
our breath because we know that the PBGC has told us in 2 to 3
years, they're going to calculate these pensions again, so my
fear--my true fear is that money will decrease substantially
again.
Mr. Ryan. I'll do this. So you have seen a substantial
reduction. Mary Ann, how many, if you can just guesstimate,
don't give me specifics, how many American cars have you
purchased in your lifetime?
Ms. Hudzik. I can't recall, but I have always purchased
General Motors cars my entire life and so has my family. So--
Mr. Ryan. Are you more inclined or less inclined to buy an
American car?
Ms. Hudzik. No, I will not be purchasing a GM car in the
near future. Unless GM takes care of this, and then I would be
ready and willing to come back into the GM family.
Mr. Ryan. Mr. Frost? How many cars have you purchased in
your lifetime?
Mr. Frost. I would probably say 30, and that's only myself
personally, and then there's all of my friends and families
that we had under the GM program.
Mr. Ryan. Would your friends and family be less inclined
probably to buy General Motors cars?
Mr. Frost. More than likely. One of my clients right now is
a large Ford supplier so it will probably be a Ford so we can
keep it American.
Mr. Ryan. Mr. Gump?
Mr. Gump. We're a little more frugal and made it last a
little longer. Altogether we have had six or eight GM vehicles,
always General Motors. I want to be clear because I'm here
representing our organization that the DSRA takes a total and
neutral stance on buyer decisions. We make no recommendations
one way or the other. Me, personally, I am not anxious to buy
another General Motors car until General Motors chooses to and
the United States Government, and I want to be careful that
we're not aimed at General Motors; we're aimed at the situation
that was orchestrated by the Treasury.
Mr. Ryan. I appreciate that.
Mr. Gump. Until we're treated fairly.
Mr. Ryan. I don't mean to be smart, but I think it's
important for everyone to recognize this ripple effect of
what's happening here. The economic impact obviously from the
millions and millions of dollars that won't get circulated. The
fact that you have thousands of American traditional GM buyers
as we're trying to stand up General Motors, got the Cruze
going, making good cars and doing a great job. We don't want
that to be deleted. We want that to take off.
We need to manufacture in the United States. I feel like
things like this can harm those initiatives. I know some of us
are working on in Washington. Thank you for that. I wanted to
make it apparent to everybody; I wanted it to be on the record.
I will ask you, you don't have to answer here, but I would love
for DSRA to help us push Congressman that has been mentioned
here. It's critical that we do not allow these situations to
continue for others, that we're not back here if not the Delphi
salary with some other organization that is deeply devastated,
many catastrophes we're dealing with now, so I hope you can
join us with that effort. I want to say thank you. I know how
difficult it is for all of you to come up in front of public
and TV cameras to share your story. It's quite courageous.
Thank you for that as well, thank you, Mr. Chairman, for your
generosity.
Chairman Moore of Kansas. Thank you, sir. And I want to,
again, thank all the witnesses for your testimony here today. I
know my colleagues will take what we have learned back to
Washington and share with our colleagues. The Chair notes that
Members present may have additional questions for our witnesses
which they may wish to submit in writing. Without objection,
the hearing record will remain open for 30 days for Members to
submit written questions to our witnesses and to place their
responses in the record, as well as for other committee members
of Ohio, council members not present to enter their own witness
statements into the record; and, again, I thank all of you in
the audience for coming. I thank our panelists and the people
up here today for attending this hearing. This hearing is
adjourned.
[Whereupon, the hearing was adjourned.]
A P P E N D I X
July 13, 2010
[GRAPHIC] [TIFF OMITTED] T1847.001
[GRAPHIC] [TIFF OMITTED] T1847.002
[GRAPHIC] [TIFF OMITTED] T1847.003
[GRAPHIC] [TIFF OMITTED] T1847.004
[GRAPHIC] [TIFF OMITTED] T1847.005
[GRAPHIC] [TIFF OMITTED] T1847.006
[GRAPHIC] [TIFF OMITTED] T1847.007
[GRAPHIC] [TIFF OMITTED] T1847.008
[GRAPHIC] [TIFF OMITTED] T1847.009
[GRAPHIC] [TIFF OMITTED] T1847.010
[GRAPHIC] [TIFF OMITTED] T1847.011
[GRAPHIC] [TIFF OMITTED] T1847.012
[GRAPHIC] [TIFF OMITTED] T1847.013
[GRAPHIC] [TIFF OMITTED] T1847.014
[GRAPHIC] [TIFF OMITTED] T1847.015
[GRAPHIC] [TIFF OMITTED] T1847.016
[GRAPHIC] [TIFF OMITTED] T1847.017
[GRAPHIC] [TIFF OMITTED] T1847.018
[GRAPHIC] [TIFF OMITTED] T1847.019
[GRAPHIC] [TIFF OMITTED] T1847.020
[GRAPHIC] [TIFF OMITTED] T1847.021
[GRAPHIC] [TIFF OMITTED] T1847.022
[GRAPHIC] [TIFF OMITTED] T1847.023
[GRAPHIC] [TIFF OMITTED] T1847.024
[GRAPHIC] [TIFF OMITTED] T1847.025
[GRAPHIC] [TIFF OMITTED] T1847.026
[GRAPHIC] [TIFF OMITTED] T1847.027
[GRAPHIC] [TIFF OMITTED] T1847.028
[GRAPHIC] [TIFF OMITTED] T1847.029
[GRAPHIC] [TIFF OMITTED] T1847.030
[GRAPHIC] [TIFF OMITTED] T1847.031
[GRAPHIC] [TIFF OMITTED] T1847.032
[GRAPHIC] [TIFF OMITTED] T1847.033
[GRAPHIC] [TIFF OMITTED] T1847.034
[GRAPHIC] [TIFF OMITTED] T1847.035
[GRAPHIC] [TIFF OMITTED] T1847.036
[GRAPHIC] [TIFF OMITTED] T1847.037
[GRAPHIC] [TIFF OMITTED] T1847.038
[GRAPHIC] [TIFF OMITTED] T1847.039
[GRAPHIC] [TIFF OMITTED] T1847.040
[GRAPHIC] [TIFF OMITTED] T1847.041
[GRAPHIC] [TIFF OMITTED] T1847.042
[GRAPHIC] [TIFF OMITTED] T1847.043
[GRAPHIC] [TIFF OMITTED] T1847.044
[GRAPHIC] [TIFF OMITTED] T1847.045
[GRAPHIC] [TIFF OMITTED] T1847.046
[GRAPHIC] [TIFF OMITTED] T1847.047
[GRAPHIC] [TIFF OMITTED] T1847.048
[GRAPHIC] [TIFF OMITTED] T1847.049
[GRAPHIC] [TIFF OMITTED] T1847.050
[GRAPHIC] [TIFF OMITTED] T1847.051
[GRAPHIC] [TIFF OMITTED] T1847.052
[GRAPHIC] [TIFF OMITTED] T1847.053
[GRAPHIC] [TIFF OMITTED] T1847.054
[GRAPHIC] [TIFF OMITTED] T1847.055
[GRAPHIC] [TIFF OMITTED] T1847.056
[GRAPHIC] [TIFF OMITTED] T1847.057
[GRAPHIC] [TIFF OMITTED] T1847.058
[GRAPHIC] [TIFF OMITTED] T1847.059
[GRAPHIC] [TIFF OMITTED] T1847.060
[GRAPHIC] [TIFF OMITTED] T1847.061
[GRAPHIC] [TIFF OMITTED] T1847.062
[GRAPHIC] [TIFF OMITTED] T1847.063
[GRAPHIC] [TIFF OMITTED] T1847.064
[GRAPHIC] [TIFF OMITTED] T1847.065
[GRAPHIC] [TIFF OMITTED] T1847.066
[GRAPHIC] [TIFF OMITTED] T1847.067
[GRAPHIC] [TIFF OMITTED] T1847.068
[GRAPHIC] [TIFF OMITTED] T1847.069
[GRAPHIC] [TIFF OMITTED] T1847.070
[GRAPHIC] [TIFF OMITTED] T1847.071
[GRAPHIC] [TIFF OMITTED] T1847.072
[GRAPHIC] [TIFF OMITTED] T1847.073
[GRAPHIC] [TIFF OMITTED] T1847.074
[GRAPHIC] [TIFF OMITTED] T1847.075
[GRAPHIC] [TIFF OMITTED] T1847.076
[GRAPHIC] [TIFF OMITTED] T1847.077
[GRAPHIC] [TIFF OMITTED] T1847.078
[GRAPHIC] [TIFF OMITTED] T1847.079
[GRAPHIC] [TIFF OMITTED] T1847.080
[GRAPHIC] [TIFF OMITTED] T1847.081
[GRAPHIC] [TIFF OMITTED] T1847.082
[GRAPHIC] [TIFF OMITTED] T1847.083
[GRAPHIC] [TIFF OMITTED] T1847.084
[GRAPHIC] [TIFF OMITTED] T1847.085
[GRAPHIC] [TIFF OMITTED] T1847.086
[GRAPHIC] [TIFF OMITTED] T1847.087
[GRAPHIC] [TIFF OMITTED] T1847.088
[GRAPHIC] [TIFF OMITTED] T1847.089
[GRAPHIC] [TIFF OMITTED] T1847.090
[GRAPHIC] [TIFF OMITTED] T1847.091
[GRAPHIC] [TIFF OMITTED] T1847.092
[GRAPHIC] [TIFF OMITTED] T1847.093
[GRAPHIC] [TIFF OMITTED] T1847.094
[GRAPHIC] [TIFF OMITTED] T1847.095
[GRAPHIC] [TIFF OMITTED] T1847.096
[GRAPHIC] [TIFF OMITTED] T1847.097
[GRAPHIC] [TIFF OMITTED] T1847.098
[GRAPHIC] [TIFF OMITTED] T1847.099
[GRAPHIC] [TIFF OMITTED] T1847.100
[GRAPHIC] [TIFF OMITTED] T1847.101
[GRAPHIC] [TIFF OMITTED] T1847.102
[GRAPHIC] [TIFF OMITTED] T1847.103
[GRAPHIC] [TIFF OMITTED] T1847.104
[GRAPHIC] [TIFF OMITTED] T1847.105
[GRAPHIC] [TIFF OMITTED] T1847.106
[GRAPHIC] [TIFF OMITTED] T1847.107
[GRAPHIC] [TIFF OMITTED] T1847.108
[GRAPHIC] [TIFF OMITTED] T1847.109
[GRAPHIC] [TIFF OMITTED] T1847.110
[GRAPHIC] [TIFF OMITTED] T1847.111
[GRAPHIC] [TIFF OMITTED] T1847.112
[GRAPHIC] [TIFF OMITTED] T1847.113
[GRAPHIC] [TIFF OMITTED] T1847.114
[GRAPHIC] [TIFF OMITTED] T1847.115
[GRAPHIC] [TIFF OMITTED] T1847.116
[GRAPHIC] [TIFF OMITTED] T1847.117
[GRAPHIC] [TIFF OMITTED] T1847.118
[GRAPHIC] [TIFF OMITTED] T1847.119
[GRAPHIC] [TIFF OMITTED] T1847.120
[GRAPHIC] [TIFF OMITTED] T1847.121
[GRAPHIC] [TIFF OMITTED] T1847.122
[GRAPHIC] [TIFF OMITTED] T1847.123
[GRAPHIC] [TIFF OMITTED] T1847.124
[GRAPHIC] [TIFF OMITTED] T1847.125
[GRAPHIC] [TIFF OMITTED] T1847.126
[GRAPHIC] [TIFF OMITTED] T1847.127
[GRAPHIC] [TIFF OMITTED] T1847.128