A defined-benefit pension plan for the company’s salaried employees will be converted to a less-expensive defined-contribution plan beginning Jan. 1. Salaried employees who retire after 2014 will receive lump-sum payments for health care instead of the traditional plan that had given them coverage for vision, dental and other expenses.
“Certain changes were necessary to meet GM’s financial objectives of building a fortress balance sheet, becoming financially sustainable and ensuring long-term viability, while other changes were made to maintain competitiveness in the Canadian market,” the auto maker said in a letter to salaried employees that outlined the changes.
The moves underline how the Canadian unit of the largest Detroit auto maker is still striving – three years after its parent company was restructured under bankruptcy protection – to reduce or eliminate so-called legacy costs it built up during decades of market domination.
The key legacy cost remaining for GM Canada is its pension funds, which are in better shape now than they were in 2009, when about $5-billion of a $10.6-billion contribution the federal and Ontario governments made to its parent company’s bailout went to shore up funds carrying massive deficits.
Letters to employees with the most recent data show the funding available to pay benefits due in the unionized plan rose to 85.1 per cent as of Sept. 1, 2011, compared with 83.1 per cent on Sept. 1, 2010.
The comparable figures for the salaried plan were 90.5 per cent and 88.8 per cent.
“This year’s letter to plan members indicates that the funding levels for the plans are steady with no drastic change between the 2010 and 2011 valuations,” GM Canada spokeswoman Faye Roberts said.
Unionized retirees, however, are worried about another measurement of the health of the plans, which is the amount of money that would be available to pensioners if the plans were wound up in a bankruptcy.
The deficit in a potential wind-up of the unionized plan rose to $3.64-billion in the Sept. 1, 2011, valuation from $3.2-billion a year earlier.
“So as you can see, our pension plan is in worse shape than the year before,” said Chris White, a retiree from GM’s Oshawa, Ont., operations.
The solvency ratio fell to 62.8 per cent in 65.6 per cent a year earlier, Mr. White pointed out, meaning if the plan were wound up, pensioners would receive 63 cents for every $1 they were owed.
The agreement between GM Canada and the governments included a six-year freeze on changes in payments.
That freeze and a reduction in health care benefits after the company transferred those programs to a health care trust have sent the cost of living for unionized retirees soaring, Mr. White said.
He and about another 30,000 GM Canada unionized retirees will take their case to a Canadian Auto Workers convention in Toronto on Monday as they try to gain a share of whatever the union negotiates for its active workers.
CAW president Ken Lewenza has talked about restoring Christmas bonuses or other ways of gaining some new compensation for active workers in the talks with GM Canada, Chrysler Canada Inc. and Ford Motor Co. of Canada Ltd.
Mr. Lewenza said it will be difficult to win anything for GM Canada’s retirees.
“The company has clearly taken the position that things that are attributed to increased compensation for retirees is a non-starter,” he said.
All three auto makers, he noted, are pushing for a key change in their pensions – eliminating a provision that allows employees with 30 years’ experience to retire with a full pension, the so-called 30 and out clause.
“They want to go with age and years of service,” Mr. Lewenza said. “They don’t see how it makes sense that a 48- or 49-year-old guy can retire with a full pension.”
GM’s Ms. Roberts declined to comment about specific proposals that might be on the table in the CAW negotiations.
“Our total hourly compensation package needs to be competitive within North America – exactly how we get there is what we will discuss with our labour partners,” she said.
Original Article
Source: the globe and mail
Author: GREG KEENAN
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