The unprecedented intrusion of the executive branch of the US government into the American auto industry when the Obama Administration orchestrated the General Motors and Chrysler bankruptcy processes is now leading to unprecedented responses. Groups that were clearly discriminated against and had their rights subordinated to politically powerful unions may actually have a winnable case against our own government as lawsuits are being brought against the US Treasury Dept. and others.
The Delphi salaried retirees who saw their pension benefits disintegrate after the GM bankruptcy are now suing the US Treasury, the Auto Task Force, Treasury Secretary Tim Geithner, and ex-Auto Task Force heads, Steve Rattner and Ron Bloom. The first hearing against the Treasury Dept. and others will occur on August 17th. The basis of the suit is that the Obama Administration wrongfully used taxpayer dollars to pick winners and losers in the GM bankruptcy. I had a conversation with one of the lead plaintiffs, Chuck Cunningham, who explained how there was blatant favoritism and discrimination in regards to pension benefits for groups that should have had equal standing.
Mr. Cunningham, who is a retired senior executive of Delphi, informed me that the Delphi salaried workers’ benefit fund was one of the highest funded plans that were taken over by the Pension Benefits Guarantee Company (an independent agency of the US government administered by Presidential cabinet members) during bankruptcy processes. Other Delphi groups whose pensions were taken over included the UAW, International Union of Electrical Workers and the United Steelworkers Union. Can you take a guess at which groups faired the best?
While the pension funds involved should have been treated equally, politically powerful cronies of the Obama Administration were favored through a process called “topping up.” Treasury instructed GM to use taxpayer money to top up pension payments for the UAW, GM salaried workers, the IUE and the steelworkers’ union while Delphi salaried workers lost the majority of their benefits. The favored groups lost none of their pension payments, courtesy of the US taxpayers, and retained health care benefits. The non-politically connected Delphi workers lost 70% of their pensions and all of their health care benefits.
A congressional committee has been investigating the unfair treatment that Delphi retirees received compared to other groups. According to Mr. Cunningham, while he was not at liberty to discuss congressional actions, the investigations will continue. Thus far, much evidence from closed door meetings between Treasury and the PBGC has been withheld from Delphi plaintiffs. The plaintiffs also will be releasing a four page document described as a “timeline of deception.”
The American people should pay close attention to the Delphi case. The auto bailouts are an ugly chapter in American history and should be viewed as such. Actions taken by the Obama Administration were manipulative and displayed a clear plan to redistribute wealth from taxpayers and less favored groups, like GM bondholders and Delphi retirees, to politically powerful friends of Obama. The claim that these actions were taken with the sole intention of saving jobs is false as evidenced by the Auto Tasks Force’s demands to close thousands of dealerships during the process. The intentions were to save UAW jobs and reward the groups with the most political clout. In the words of former head of the Auto Task Force, Ron Bloom, they “did it all for the unions.”
When the Obama Administration presents its case that the auto bailouts were a huge success, they are relying on an arrogant assumption that the majority of voters will not be paying close enough attention to the discrimination and unethical conduct that transpired. I don’t expect that most Americans will be too concerned with the losses incurred by Delphi retirees or GM bondholders, but there is a much more important reason to be concerned. If the executive branch of our government can seize assets from any one group of individuals and redistribute the wealth as they deem fit, all Americans are at risk. Congress should be unrelenting in its investigations and America should pay attention. Most of all, the unprecedented actions that took place should never have a chance of being repeated.
Mark Modica is an NLPC Associate Fellow.