Auto workers face retirement woes

May 15, 2009 7:49:34 PM PDT
The closure of hundreds of car dealerships has triggered a new financial crisis. Not only will thousands of people lose their jobs, many won't even be able to retire in comfort.

MOST POPULAR: Video, stories and more
SIGN-UP: Get breaking news sent to you

"We've got wonderful, terrific employees here who many have spent 20 years with us, and it's a tragic thing," said Dennis Fitzpatrick, President of Fitzpatrick Chevrolet in Concord.

What's tragic, Fitzpatrick says, is what's happening to 21 of his 51 employees. Some of the workers whose pension plan is getting squeezed by a downturn in investments and dealership closures include master technicians, parts people and detailers.

Fitzpatrick and about 300 others pay into a multi-employer pension fund that covers 27,000 workers and retirees.

The Automotive Industries Pension Fund has about $1.2 billion in assets, but it will need almost double that to pay benefits in the future.

"They were contributing 66 cents an hour or $115 per month for many years. The bargaining unit was very young -- the employees, that is. The unions were more interested in increasing wages and watching health benefits, and for many years, that $115 a month stayed stagnant," said attorney Bruce Conhain.

Double-digit returns on investments grew the fund's assets, but not now.

J.P. Morgan Asset Management estimates that 92 percent of defined benefit plans are now underfunded compared to 22 percent nine years ago.

The automotive industries trust fund is now in the "red zone," a designation that reflects its critical status. Its trustees and attorney turned down interview requests or did not return calls.

Steve Butler, a pension plan advisor with no connection to the automotive trust, spells out what needs to be done.

"Freeze benefits accruals. Live with the fact that continuing to work additional years for a mechanic is not something that will increase the ultimate retirement benefit that they have," said Butler.

In fact, the Automotive Industries Fund has done that. Anyone retiring before age 65 will see a dramatic drop in pension benefits.

That was a tough reality for 55-year-old technician Mark Ellyson, who is retiring after losing his job at a dealership that is closing. He worked for the company 25 years.

"My wage, what I make a month, what I take home, and what my pension covers it's just under half is what I'm dropping to," said Ellyson

Putting it in real dollars someone retiring last year at 55 would have gotten $790 a month. With the reduction, it's now $377.10.

"So it's a huge disappointment to the employers who have made the contributions, a huge disappointment to the unions that have bargained for these benefits, and of course, obviously, a huge disappointment to the members who had thought they were going to retire and have a nice retirement," said Conhain.

The situation is only compounded by dealerships closing, which are obligated to pay millions of dollars to exit the pension plan. Under the circumstances, no one knows if they can or will.

That could put additional financial strain on dealerships struggling to survive during the recession.

The automotive industry is not the only sector that's affected, the public pensions funds are hurting too. They are victims of the current downdraft in the economy.

       Today's latest headlines | ABC7 News on your phone
Follow us on Twitter | Fan us on Facebook | Get our free widget


Load Comments