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GM and Chrysler May Need Another Bailout to Pay For Pensions

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Apr 12th, 2010 by Ross Edwards

The Government Accountability Office said Tuesday that General Motors and Chrysler will need to add $14.5 billion combined to their pension funds over the next four years in order to meet funding requirements.  According to the New York Times, the GAO says that GM will need to add $12.3 billion to its pension fund by 2014 and Chrysler will need to add $2.62 billion. If those figures aren’t met, the government will need to step in and pay for the pensions of the 956,000 pensioned employees Chrysler and GM are responsible for.

Chrysler and GM both issued statements saying that they plan to fully meet their pension requirements in the future. The GAO report said that it “remains uncertain” whether the companies will be able to pay for pensions in the coming years. The U.S. Treasury Department says that it believes GM and Chrysler will be able to pay what they owe and avoid costing the government even more money by forcing it to take over the pensions.

If GM and Chrysler are unable to pay for the pensions they owe to former employees, the U.S. government will step in and pay the costs. The Pension Benefit Guaranty Corporation insurance program would take over the entire $14.5 billion in pensions, according to the New York Times. Pensioned former GM and Chrysler employees don`t need to worry about their retirements being canceled. They do, however, need to worry along with the rest of us about this situation. If GM or Chrysler force the government to bail them out again, consumer backlash could be substantial.  If one or both of the companies needs another bailout, customers may lose all faith in the company and a permanent bankruptcy could result.  If that happened, any money still owed to the government would have to be chalked up as a loss.


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