UPDATE: US PBGC To Assume Metaldyne Pension Plan -Source
July 30 2009 - 5:09PM
Dow Jones News
The U.S. Pension Benefit Guaranty Corp. soon will assume
responsibility for a pension plan covering about 11,000 workers
from auto supplier Metaldyne Corp., a person familiar with the
matter said Thursday.
Metaldyne, struggling amid the slowdown in the auto sector,
filed for bankruptcy protection in May and is attempting to
reorganize itself. Exact details on the arrangement between the
pension insurer and Metaldyne still aren't known. The pension plan
in question covers active and former workers at the company.
A company official wasn't immediately available for comment.
The PBGC has expressed concern that Metaldyne's asset sales
could lead to the termination of its pension plans. In papers filed
Wednesday with the U.S. Bankruptcy Court in Manhattan, the agency
objected to the proposed sale of the company's chassis business
because it doesn't include the assumption of pension
obligations.
PBGC attorneys said if that sale and other proposed transactions
proceed without the assumption of the pensions, the plan will
"likely terminate." Metaldyne also is seeking to sell its
powertrain unit.
In court documents, the PBGC estimated that Metaldyne's pension
plan is underfunded by more than $150 million.
Based in Plymouth, Mich., Metaldyne is a manufacturer of
powertrain and chassis components for the automotive industry.
PBGC's expected assumption of Metaldyne's pension plan follows a
rash of auto-supplier retirement plans that have been seized by the
agency.
Most recently, PBGC agreed to take on $6.2 billion in pension
liabilities from auto supplier Delphi Corp. (DPHIQ), which is in
bankruptcy protection. That pension rescue is the PBGC's
second-largest ever, ranked by dollars, after that of UAL Corp.'s
(UAUA) United Airlines in 2005, which totaled $7.5 billion.
In an attempt to mitigate how many pensions PBGC is required to
take over, the agency launched a campaign earlier this year
encouraging companies to come to it and negotiate changes to
strained pension plans before plant closures or plan
terminations.
This effort led to the $55 million deal PBGC brokered with
Visteon Corp. (VSTN). The former Ford Motor Co. (F) parts unit
agreed to accelerate a $10.5 million cash contribution to the plan,
provide a $15 million letter of credit, and have Visteon and its
affiliates be responsible for up to $30 million in contingent
pension obligations.
Still, the agency's $33.5 billion deficit remains a concern for
lawmakers, as the economic recession lingers and more businesses
reorganize or close in response to the downturn.
-By Darrell A. Hughes, Dow Jones Newswires; 202-862-6684;
darrell.hughes@dowjones.com
(Eric Morath and Jeff Bennett contributed to this report.)