Thursday, September 18, 2014
Inquirer Daily News

Update: Retiree medical cuts likely in Budd bankruptcy

Will ThyssenKrupp trim retiree plans?

Update: Retiree medical cuts likely in Budd bankruptcy

NEW UPDATE from Budd rep Steve Blow below - Budd Co., which made heavy vehicles (like many of the bright stainless-steel Septa railcars still rattling in and out of Philadelphia) at its former Red Lion Road and Hunting Park Ave. plants and other local and Midwestern facilities, has declared bankruptcy again and intends to "modify" its retiree healthcare benefits and make retired workers pay more for some services.

That has Budd's several thousand retirees in Pennsylvania and elsewhere, like Gordon Carlson, who spent 20 years on the line as a UAW union worker and 13 more in management, concerned "about our retirement pay but also medical benefits that retirees have, to include prescription, eyecare and dental," Carlson tells me. He adds that neither union nor management retirees have been told much, so far. Here's a link to documents from the Chicago federal bankruptcy filing: http://dm.epiq11.com/TBC/Project , see also a Bloomberg news story here. 

NEW UPDATE: Steve Blow, spokesman for Budd, adds detail in a new statement replacing his more general earlier claim: Budd's current owner, the German manufacturing conglomerate ThyssenKrupp NA,"is picking up the pension obligation." But the healthcare plan, which "has only $400 milllion to cover $1 billion [in] liabilities," will likely be reduced, and, once the new plan is worked out, it's likely that retirees will have to pay for some medical-related costs that Medicare won't cover.

Blow adds: "The healthcare plan has to go through the creditors' committee, which the bankruptcy court will help to form. I assume the union will have some representation as individual creditors." 

Reader Mike Klimo writes from here in Philadelphia: "I read with interest [this post]. Being a member of Local 813 UAW and a member of the grievance committee when the plant closed, I have been reading over the bankruptcy filing by the Budd Co.," and here's what he finds:

"The overwhelming majority of the posited $1.2 billion Budd says is the actuarial value [of liabilities] to its retirees rests with Local 813 and other UAW local retirees. This, they state, is $830 million. [There is also] $211 million to other unaffiliated retirees such as managers, supervisors, etc. So $830 million is what Budd owes in healthcare benefits, or fringe benefits, fixed by national collective bargaining agreements.

"The actual pension for UAW retirees is governed and funded by a separate entity that is, I believe, not subject to the bankruptcy proceeding. When I last looked at the funding of the Budd Company Consolidated Retirement Benefit Plan for calender year ending Dec. 2013, it was fairly well funded. So I think pensions are not what is at issue in the bankruptcy filing." At least not the union pensions.

"Obviously, the $384 million [in assets] supplied by Thyssen/Krupp is only about a third of what is necessary to meet future healthcare benefits.

"The bankruptcy proceedings required a retirees committee to be formed, but the mechanisms have not been alluded to. When I and several other Budd Local 813 retirees phoned [local and regional UAW officers,] we were told that the International Union was aware of the situation and had people working on it...

"Thus far we have received no notification of the UAW's position vis-a-vis the bankruptcy," only a brief note from Budd and Thyssen. So he and others are waiting for word, and wondering what's going to change, and who gets to represent their rights and interests.

Joseph N. DiStefano
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PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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