Delphi to Send Pension Obligations to G.M.

[billyoc]

Delphi Corporation was preparing to send $3.4 billion worth of pension obligations to General Motors on Thursday, in an unusual transaction that Delphi said would remove a major obstacle to its emergence from bankruptcy after almost three years.

The transaction was a victory for the federal government, which had feared that Delphi’s reorganization was coming apart and that the government’s pension guarantor would get stuck with the bills. Charles E. F. Millard, director of the Pension Benefit Guaranty Corporation, said the pension transfer was “exactly what we have been urging all along.”

The pension insurance fund runs a chronic deficit and is already coping with losses from assuming pension plans of bankrupt airlines and steel firms.

General Motors had promised, when it spun off Delphi in 1999, that if its former auto parts division were ever in financial distress, it would step in and help rescue the hourly workers’ pension plan. But this year, with Delphi struggling to reorganize in bankruptcy court, various lenders had balked at the prospect of G.M. making good on its pension promise, fearing it would give G.M. too much control over Delphi in the future.

http://www.nytimes.com/2008/09/26/business/26pension.html?ref=business