Looting of the Delphi Pension Fund - Part 1

Delphi was an automotive parts manufacturer and supplier that was once a subsidiary of General Motors. In the early 2000s, the company started experiencing financial difficulties due to declining demand for its products and increased competition from overseas suppliers.

In 2005, Delphi filed for bankruptcy and began a process of restructuring the company's operations and cutting costs. As part of this restructuring, Delphi's pension fund was frozen, meaning that no new contributions would be made and no further benefits would be earned by existing participants.

In order to emerge from bankruptcy, Delphi needed to secure financing from outside sources. However, its pension fund was a major liability that was seen as a potential obstacle to obtaining this financing. To address this, Delphi and its parent company, General Motors, reached an agreement with the United Auto Workers union (UAW) to shift the responsibility for funding the pension plan from the company to the UAW.

This agreement was controversial, as it meant that the UAW would be responsible for funding the pension plan for its members who worked at Delphi, even though these members had never been UAW employees and had not worked under a UAW-negotiated contract. Moreover, the agreement meant that the UAW would be able to invest the pension fund's assets as it saw fit.

After the agreement was reached, the UAW established a trust to manage the Delphi pension fund. However, instead of investing the assets of the fund in a prudent manner, some trustees of the fund engaged in risky investments and speculative trading, resulting in significant losses for the fund. Some of these investments were made with so-called "prohibited transactions," in which the trustees used the fund's assets for their own benefit, in violation of federal pension laws.

As a result, the Delphi pension fund was seriously underfunded, and many retirees who had worked at Delphi for decades had their pensions reduced or eliminated altogether. The looting of the Delphi pension fund remains controversial, and has been the subject of numerous investigations and lawsuits.