U.S. Automakers Dipping into Auto Worker Pension

It's a tough situation to be in.

U.S. automakers fighting for their lives and running out of new sources of cash are dipping into pension funds set aside for its auto workers according to a piece by John Stoll in the "WSJ" ("Pension Agency Sounds Alarm on Big Three," 11/28/08).

The article says that when GM reported an update on its pension earlier in the month it said its plan for hourly workers was underfunded by $500 million because of restructuring expenses. However its plan for salaried employees remains overfunded by at least $500 million.

The U.S. Pension Benefit Guaranty Corp. (like the FDIC but for pensions) acts only if a company's pension plan fails. The U.S. PBGC sent a letter of concern to the big 3 automakers about how pension money is being used. The PBGC has reason to be concerned since it already has a $14 billion deficit (that may not seem like such a bigger number these days unless it's your pension on the line).

Is the writing on the wall? Is is better to walk away pensions still intact or use the pension money to fund U.S. automakers. It depends on whether you believe that the automakers can emerge as sustainable companies. Managers will always say yes, give us another chance. What do workers think?