By Don Shilling
Retirees remain optimistic despite concerns, and one analyst says GM will file for bankruptcy protection if Congress doesn’t provide loans.
Dennis Hamm is worried that a General Motors bankruptcy could strip away his pension and health-care benefits, but he won’t let that take away his sense of humor.
“I do have serious concerns,” the 58-year-old General Motors retiree said. “I feel it will be OK. But if not, then I’ll come live with you.”
The Austintown resident laughed, but his concerns are real. Area residents who retired from GM’s Lordstown complex said this week that they are closely following news reports that GM faces bankruptcy without loans from Congress.
The retirees’ chief concerns are pensions and health care. Recent retirees receive $3,000 a month in pensions and health-care insurance for life.
Roy Weamer, 59, of Struthers said he thought he had his future figured out when he retired from the paint shop at the Lordstown plant in 2006. He received a pension and a $35,000 buyout after working 34 years at Lordstown.
“My financial planner said I was in good shape — until Wall Street happened,” he said.
Now, he’s dealing with losses in his investment accounts and a potential cut in his pension.
Weamer said he knows the federal Pension Benefit Guaranty Corp. guarantees pensions, but he’s also been told his benefits would be reduced if GM turns its plan over to the agency.
The PBGC says the maximum benefit from the agency for plans terminating next year is about $4,500 a month, but that is reduced for people who retire before age 65 and who want benefits for their spouse if they die.
For example, the maximum benefit for a 59-year-old retiree would be about $2,700, or $2,400 with benefits for the spouse.
Weamer has some backup income, however. While working at Lordstown, he also was a part-time driver for Gold Cross Limousine. He has kept that job in retirement.
Hamm said he has found his pension didn’t go as far as he had hoped. He has taken a seasonal job as a nighttime stock clerk at Kmart in Niles and is hoping to make the job permanent.
He went from being paid $33 an hour as a welder/repairman at the plant to $8 an hour at Kmart. Now, he wishes he had stayed on at the plant for a few more years.
Health care is another benefit the retirees have depended on.
Ralph Cascarelli of Boardman has been relying on the coverage since he retired from Lordstown 14 years ago. He’s now 69, so the GM insurance is secondary to Medicare, but it still is an important part of his retirement plans.
“We are in fear and hope GM doesn’t file for bankruptcy,” he said.
A bankruptcy filing almost certainly would end health-care coverage for retirees, said Erich Merkle, an analyst with Crowe Horwath, a consulting company in Grand Rapids, Mich.
Hamm said he hoped that health-care coverage could be retained because the United Auto Workers agreed last year to take over insurance for retirees with money from GM.
Merkle said, however, that the fund for retirees won’t be created until 2010 and GM hasn’t transferred money to it yet. With GM’s financial troubles, Merkle doubts that it would have money to put into the fund for some time.
Automakers, with support from dealers and suppliers, are lobbying Congress this week for loans to help them get through a financial crisis. GM has said it is burning through its cash reserves so quickly that it soon won’t have enough money to fund its daily operations.
Merkle said that GM will file for bankruptcy in December or January if Congress doesn’t provide loans.
“There’s no way they’ll make it without assistance,” he said.
GM has announced cost-cutting measures but has said it is still losing money because of a drastic slowdown in vehicle sales. It also has been unable to loan money from private sources because credit markets are frozen.
Although this worries retirees, they remain optimistic.
“They are a big enough corporation that they will figure something out,” Cascarelli said.
Weamer said he thinks GM “can come through this, but it will be on shaky ground for a while.”
What if they are wrong?
“They promised me a future,” Hamm said. “If I lose my health care and my pension, I’ll be living in a refrigerator box somewhere.”
Then he laughed.
“GM will make it,” he said. “They are going to pull through.”