Chrysler freezes pension plan for 8,000 employees

Chrysler Group LLC said Friday that it is freezing the pensions of roughly 8,000 U.S. salaried employees at the end of the year.
AP Wire
Jun 16, 2013

 

The U.S. automaker said it is making the move to stay in line with industry trends and to comply with IRS regulations.

The Auburn Hills-based company declined to detail the specifics of the IRS issue, but said it is currently in compliance. Company spokeswoman Shawn Morgan said the compliance matter is not related to underfunding of the pension.

U.S. companies in general have moved away from traditional, or "defined benefit," pensions due to the cost. General Motors made a similar move last year when it froze traditional pension benefits for 19,000 salaried workers hired before 2001. Such pensions guarantee a specific payment to retirees.

Chrysler said that all of its affected employees will be shifted to a defined contribution plan. It also lowered the age at which employees can begin claiming all of their retirement savings to 58 from 62.

The company closed its pension plans to new participants at the start of 2004. The freeze does not affect those hired from that point forward, or those who have already left the company or retired. All of the benefits accrued through Dec. 31 will remain in place, and employees will not lose what they have earned to that point.

Chrysler, majority owned by Italian company Fiat, has 65,500 employees worldwide. Last month, Fiat SpA reported a first-quarter loss, due in part to weaker sales at Chrysler.

Comments

WindChime

No one should get a pension. It's un-American. Save up your own money for retirement. Companies should not have to pay for their workers retirement. That eats into profits. Profits create jobs. If you can't save money you are living beyond your means.

LessThanAmused

Troll much?

Soupy

I'm not sure it's un-American because Americans have received pensions for years. Instead, I'd say it's antiquated and I agree with WindChime about the profits. I think the auto companies are some of the last holdouts that still provide pensions. Most companies have gone to some type of contribution plan like a 401(k). The unions are eventually going to have to accept this or American car companies won't be able to compete.

Whatareyoutalki...

I believe there is a time and place for everything, and for most people it's college. Unions were a corner stone for making this nation great. It's helped force standardized practices for worker safety and helped to establish a national minimal wage.

I believe most unions have become bloated as most of us tend to do as we age. Making those at the top and with tenure the major beneficiaries while those at the bottom still struggle, and struggle more as union workers are cut back and scaled down.

I believe a person should stand on their own merit, and should work for what they believe they are worth. Most states operate without unions and do so relatively well.

Having said that I do believe that employers do have an obligation to assist workers with their retirements as part of any employment package. However, and this is important, it should be part of the agreement between the employee and the employer. Any monies paid, either directly or indirectly to retirement should be counted as part of the salary package.

This is how I view pensions. The company agreed to these as part of the salary of the employee, and should be bound by that. I do not agree with the "redoing" of benefits for those employees hired on those terms without a means of an exit clause or ability to continue said benefits based on a reasonable shift in contributions.

I'm not implying that Chrysler is not giving it's impacted employees this option, but from what I've seen of some unions, they tend to look out for those member with "tenure" rather than the greater good of all it's members which usually results in employers going to extremes to gain the cost savings needed..

Vladtheimp

Ignoring the silliness of Blowin in the Wind, the real story here is the continuing favoritism shown the UAW by Obama in the auto bailout. In addition to screwing the Chrysler secured bond holders, redistributing GM to the union, and screwing the non-UAW employees of Delphi (http://freebeacon.com/the-delphi...) the white collar workers have their pensions frozen while current UAW workers continue to enjoy their defined benefit pension / the UAW voted to only screw new UAW members on their pensions.

WindChime

Did that make you feel better Mr. Vlad?? My parents taught me and my sisters and brothers not to depend on anyone to pay our way. Don't buy anything you can't pay cash for, save your money for a rainy day, tuck a little away for your old age. You are a bully. How sad for you.......

Lanivan

Chrysler's shift from Defined Benefit pension plans to Defined Contribution pension plans mirrors the trend of the last several years. It shifts the investment risk from the corporate sector to households, as an employee's retirement assets are owned by the employee under a DC plan, who bears the responsibility for their own financial security.

Structural changes in the shift in jobs from manufacturing toward service and IT, and the fact that Defined Benefit plans are based on years of service and final salary in an economy and job market that is transient (DB plans are not portable) are the biggest reasons for the trending towards Defined Contribution plans.

The Recession of 2007-2009 was devastating. The private sector experienced a trillion dollar loss in the value of assets held in DB plans; state and local DB plans lost another trillion dollars in value - another reason for shifting the burden of financial responsibility to the individual.

The argument that Chrysler must shift to DC plans to "stay competitive" seems a little nebulous, given they were the only US carmaker to gain market share in 2012; just three years from bankruptcy and receiving a $12.5 billion government loan, Chrysler made $1.7 billion in profits in 2012, and is expected to make $2.2 billion in profits in 2013.

Nearly all the government loans plus interest have been paid back.

Vladtheimp

Warning - smoke and fog

The question: Did or did not Chrylser discriminate against its current salaried employees by doing away with their defined benefit pensions and freezing their pension benefits while retaining the current UAW defined benefit full pension benefits? Answer - Yes it did.

Warning - untruths

"Factoring in previous realized losses, and assuming that the government sells its remaining 300 million shares at or near $27.50, it would end up losing roughly $19 billion of the $49.5 billion it poured into GM. Coupled with the $1.3 billion it lost on its $12.5 billion Chrysler commitment, the total taxpayer loss on the auto companies comes to $20.3 billion." http://articles.washingtonpost.c...

Wing's correct - it is not worth responding to each and every foggy and untruthful comment you make trying to protect Obama from the truth - it's only value is the entertainment of watching you pants yourself and shred any remaining credibility your comments have.

Wingmaster

It actually is helping damage BO because he is given so many passes by the sycophants in the media he looks even more incompetent to even the casual low information voters!

IF the media turns on this guy, he will go down faster than Nixon!

Lanivan

First of all, I was not replying to you, nor was I attempting to challenge any statement you made within your comments. My entire purpose was to share some information I had found regarding the shift from DB pension plans to DC pension plans, linking it with the topic of Chrysler. Everything I said about the various pension plans was accurate and factual.

Secondly, I was limiting my focus to Chrysler only, and my statements are accurate and factual to the best of my knowledge. Regarding the payback of the government loan: I was quoting CEO Marchionne. This is what I uncovered today - "Some may quibble about Chrysler’s characterization of its own repayment. The automaker indeed paid back its loans in May 2011, six years ahead of schedule, under CEO Sergio Marchionne. The following month, the Treasury Department sold its last remaining equity interest in the company. The government has said Chrysler returned more than $11.2 billion of the $12.5 billion committed to the company and that it’s unlikely to fully recover the remaining $1.3 billion".

Chrysler says the $1.3 billion difference refers to the loan to Old Carco, the Chrysler that has been in bankruptcy since 2009, not Chrysler Group, the new company formed on June 10, 2009. Chrysler is majority owned by Turin, Italy-based Fiat SpA". In this regard, I should not have quoted Marchionne without digging a little deeper. If you are itching to bust chops over this, have at it.

And I would like to give some unsolicited advice, said in as civil way possible - you are not the consistory of all information, knowledge, wisdom, and opinion. You represent but one opinion and one mindset. Do not apply your obsessive tendencies to pair me, on every subject, with Obama, the liberals, or any other one of your dirty cuss words. You will note I never mentioned Obama in my comment - you were the one to do that.

You are free to make your own assessment of the facts and my comments. But if you are only interested in disparaging me with silly attacks, whose sole attempt is to browbeat me into submission, or worse yet, hurl slanderous lies at me in order to bolster your opinion, it will stop now.

Vladtheimp

1. Fair enough - if you were not replying to my comment, and you do not disagree that Chrysler treated its salaried employees more harshly than its union employees, then we agree and I regret characterizing your comment as fog and smoke.

2. You stated as fact that "Nearly all the government loans plus interest have been paid back." Knowing this was false, I simply searched for losses from auto bailout to get the actual numbers, and from the plethora of sites showing the taxpayer had significant losses from the auto bailouts in general, and Chrysler in particular, I chose the New York Times, one of your favorite sources.

3. I question why that statement would even be made about an article on freezing pensions other than to imply that the Obama decison to upend normal bankruptcy processes and buy majority shares in the auto companies was a good policy decison, since not only were the loans paid back, but with interest? Was there another purpose?

3. I respectfully suggest that the best way to avoid being called out for citing as fact something that is inaccurate is simply to stop citing as fact things that are inaccurate; you are entitled to your own opinions but not your own facts. As much as I enjoy our sparring, and learning things in the process, facts is facts and there is no learning going on when facts are mis-stated.

Lanivan

I was most interested in the Defined Benefit/Defined Contribution aspect of the article. Truth be told, I didn't even read over the comments last night before I wrote my comment.

Neither unions, GM, Obama, nor the government auto loan program were the focus of my comments. I was looking at the fact that Chrysler has made a strong comeback, is making tidy profits, gaining market share, and "has paid back the government loans six year early", according to it's CEO, thanks to the government loan program when they were in the throes of bankruptcy, and then Chrysler rewards their employees (i.e. taxpayers - the source of the government loans) by freezing pension plans and instituting the much-favored corporate promoted Defined Contribution pension plan.

There are opinions, and there are facts; to break it down even further, there are facts, and then there are facts. We've had the union/gov't auto loan program debate before, but it's fine by me if you want to re-visit it. This just wasn't the battle I was picking with my original comment.

Say no to new taxes

The government seems to be the only one to be clinging to unsustainable defined benefit pensions. Why?

GHJames

The stereotypical complaints about our government employees is that they are stupid, lazy, and/or dishonest. If you want quality you have to pay fair market value. If the government is not willing to pay it as cash every 2weeks they better make up the difference in benefits such as a defined benefit at retirement. I want the best teaching my kids, controlling my tax dollars, protecting my family, and listening to my phone calls. ( j / k ) If we don't offer a DB retirement to people like our military then what kind of fool would devote 20 years of their life for what they get paid on payday? How are we to convince the best and brightest to teach our kids knowing full well that no matter how hard they work and how good they are they will never take home even close to the cash they could make in the private sector? You offer them a reasonable wage and the security of knowing they will be comfortable after they retire. Otherwise you end up like Columbia who is losing it's best military leaders and soldiers to private security firms leaving the inept and lazy as the only ones left to fill the void. Our taxes go to pay for the services we count on and it costs us ten times as much in the long run if we are not willing to pay/provide benefits for the best. Anyone who reads the news can probibly cite 10 examples in the last few months where the lack of quality in a single gov employee cost millions. Sorry for the rambling, it's past my bedtime.

Say no to new taxes

Since they're already getting the defined benefit pension and pay package you claim is needed to attract top people, what is the reason for what you so eloquently stated "Anyone who reads the news can probably cite 10 examples in the last few months where the lack of quality in a single gov employee cost millions"?

GHJames

Most are not getting the pay needed to compete with the private sector. My personal opinion is that teachers should be paid much much more to get the absolute best willing to teach our kids. Nothing against current teachers and no, I am not a teacher and have none in my family. Two more things the government needs to do as well as the private sector, recruiting and QUALITY CONTROL! If someone isn't performing then get them out of there and look for the right replacement by going after people already proving their skills with other employers. Don't just put an ad in the paper / online and resolve yourself to pick only from the ones that come to you.

 

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