WASHINGTON-As Dana Corp. emerges from bankruptcy court protection today, the Pension Benefit Guaranty Corporation called the retention of the auto parts supplier's retirement plans a victory for the private defined benefit pension system.
"Dana's pension plans will remain under company sponsorship, which means that no worker or retiree will lose a single hard-earned retirement dollar," said Charles E.F. Millard, director of the Pension Benefit Guaranty Corporation. "I am pleased to say that by working with Dana's management over the course of the bankruptcy process, the PBGC helped achieve this success. Dana should be commended for keeping its pension commitments to its workers and executing a successful turnaround that didn't rely on the PBGC as part of its exit strategy from Chapter 11."
Dana's successful reorganization is the latest in a series of transactions in which the PBGC has worked with companies to help them retain sponsorship of their retirement plans. The transition continues a trend in which companies have emerged from bankruptcy with their pension plans intact without the need for PBGC to assume control.
During Dana's bankruptcy, the company continued to make its legally required funding contributions and consolidated 34 defined benefit plans into seven pension funds. The changes reduced Dana's minimum funding contributions by $60 million through the year 2012.
These moves will significantly improve the financial health of Dana's seven plans that cover more than 53,000 participants, of which almost 15,000 are active employees. By reducing the number of plans, Dana made its pension obligations more affordable and lessened the possibility that the plans would be assumed by the PBGC in the future.
In December, after a seven year stint operating under bankruptcy court protection, Federal-Mogul Corp. emerged with its U.S. pension plan intact. During the reorganization, the company made all minimum funding contributions to its U.S. plan, including $33.6 million in contributions in excess of the minimum during 2007. Federal-Mogul's plan covers 33,000 participants, of which 13,000 are active employees.
Also in December, the agency reached a $77.5 million agreement with Swedish-owned Electrolux Home Products Inc. to protect the retirement benefits of more than 2,350 former employees. The PBGC intervened after a March 2006 shutdown of Electrolux's plant in Greenville, Mich., which triggered agency action to obtain financial protection for the pension plan.
Those agreements followed similar efforts by the PBGC in July to preserve Tower Automotive's pension plan when the company's assets were purchased by Cerberus Capital Management before Tower emerged from bankruptcy court protection.
And when DaimlerChrysler was nearing agreement with an affiliate of Cerberus on the sale of its North American Chrysler operations in May, the company and Cerberus entered into discussions with the PBGC on providing protection for the Chrysler pension plans.
The agency's actions resulted in Daimler's pledge to pay $1 billion into the Chrysler plans if they ended within five years. Chrysler also agreed to make $200 million in pension contributions over the next five years beyond the legally required minimum.
As the insurer of American workers' defined benefit pension plans, the PBGC monitors corporate transactions that might jeopardize the financial security of those plans and arranges suitable protections for the pension plans and the pension insurance program.
The PBGC is a federal corporation created under the Employee Retirement Income Security Act of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 30,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.