GM Retirees Face an Uncertain Future

Nearly half a million retired autoworkers and surviving spouses worry about the future of their pensions and health benefits

By Rebecca Reisner

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Robert and Joan Allen, 83 and 79 respectively, have what is known in Detroit as a mixed marriage. Both spent their careers with General Motors, but he worked a union job as a shipping clerk in a GM warehousing facility, while she held a salaried position as a senior analyst for the Chevrolet division. Now with GM having filed for bankruptcy, the Allens worry that neither will retain benefits or pension payments adequate to sustain them in their condominium in South Lyon, Mich.

"I don't think my husband's union benefits are safe. Maybe they'll take away all of it, or maybe just dental and eye," says Joan. "And I don't know about our pensions either. You hear this, and you hear that, but you don't know what to believe. I retired from GM in 1985, paying nothing for my benefits. Then they started pecking away at them." The Allens receive a combined monthly pension of $1,900 from GM.

Worrying about the future isn't new to GM's 493,000 retirees and surviving spouses, who have watched the automaker lose market share for years. But with the company's Chapter 11 bankruptcy filing on June 1, retirees have entered a new, uncertain zone. GM's restructuring will affect salaried retiree health care, some executive pensions, and retiree life insurance, the company says. But details are incomplete.

salaried retirees are more at risk

On June 2, GM spokesman Tom Wilkinson acknowledged that there's no solid answer for retirees yet, although GM filed a first-day motion to continue employee benefits, including the pension plan. "But that's not certain until the judge approves the sale of GM," Wilkinson explained. "I believe the assumption everyone has is that those [employee benefits] will be moved to the new company, but there probably will be some reduction in those benefits." He added that those reductions are more likely to involve health-care and life insurance benefits—rather than pension payments—for salaried retirees.

That won't reassure the Allens, who have already seen one change this year. In January, GM revoked all health benefits for salaried retirees older than 65, replacing them with a $300-a-month payment to cover the costs of private-market insurance to supplement Medicare. Joan Allen was paying $138 for the combined medical, dental, and vision insurance GM once promised would be free for life. Now she's on Medicare and has purchased a $192-per-month health insurance policy from AARP to cover what Medicare doesn't; she dropped dental insurance altogether because it stretched her budget too far. Plus, she's had to figure out which specialists are on her new medical plan, and which aren't.

While both salaried and union retirees are likely to face changes, benefits offered to salaried retirees—who are not covered by collective bargaining agreements—appear to be most at risk under the transition. For the moment, pensions appear safe.

"We were assured that GM would move our Salary Retirement Plan—which is the formal name of what we call 'pension'—into the new GM and there will be no disruption," says Jack Dickinson, president of Over the Hill Car People, a Hoover (Ala.) membership organization that looks out for the interests of salaried GM retirees. "It appears that GM has taken the proper steps to protect it. The fund is in excellent shape. And they've indicated it will take care of retirees for years and years to come."

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