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GM retirees pressing for return of cost-of-living adjustments

Cars pass under an overpass at the General Motors Car assembly plant in Oshawa, June 1, 2012. General Motors Co said on Friday it expects to close one of the two lines at its Oshawa, Ontario, assembly plant by June 1, 2013. The consolidated assembly line, which employs about 2,000 workers, was originally expected to cease production in 2008, GM said in November 2005. But production was extended due to market demand for the Chevrolet Impala and Chevrolet Equinox crossover, GM said.

Mark Blinch/Reuters

A group of General Motors of Canada Ltd. retirees is urging the federal and Ontario governments to force the company to restore cost-of-living adjustments that were frozen as part of the $10.8-billion contribution taxpayers made to the bailout of the auto maker's parent company in 2009.

"Since it was governments that mandated the elimination of our pension cost-of-living adjustment, it is our belief that the governments must mandate GM to reinstate our pension cost-of-living adjustment," the retirees say in letters sent to Prime Minister Stephen Harper, Ontario Premier Kathleen Wynne and the finance ministers of both governments.

The retirees are also seeking direct representation in any talks that involve pensions, putting them in a battle with Unifor, the union that represents active workers at GM's operations in Canada and negotiates changes to pension plans for both active workers and retirees.

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The issue underscores the challenges facing Unifor – the union created by the merger last year of the Canadian Auto Workers union and the Communications, Energy and Paperworkers Union – during negotiations with GM and its Detroit-based rivals in 2016 as they see better returns on their investments outside Canada.

GM Canada has about 35,000 unionized retirees and about 5,000 unionized active employees at factories in Oshawa and St. Catharines.

"When I retired in 2007 I was promised all my health care benefits and cost of living adjustments until the day I die," said retiree Steve Drinkwalter. Mr. Drinkwalter noted that active workers received a signing bonus in contract talks in 2012 to make up for cost-of-living adjustments they will lose until payments are restored in 2016, the final year of the contract.

"COLA was an integral part of our pension," Mr. Drinkwalter said. "It didn't keep pace [with inflation] but it helped."

Depending on the amounts of their pensions, retirees are short about $4,000 each since the payments were frozen, said Karl Zimmerman, who retired in 1994.

About $4-billion of the $10.8-billion Ottawa and Ontario contributed to the bailouts went to help shore up GM Canada's pension funds, which had a solvency deficiency of $4.5-billion in the fall of 2008, when GM Canada's parent General Motors Co. was approaching the depths of the crisis that eventually pushed it into Chapter 11 bankruptcy protection.

That deficit had grown to $4.7-billion according to a valuation made on Sept. 1, 2012. Since that date, the financial position of most Canadian pension funds has improved thanks to higher interest rates and buoyant equity markets that have boosted the values of pension plan assets.

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Jerry Dias, Unifor's president, said he's sympathetic to the retirees' position, but the critical factor for the union in bargaining in 2012 was making sure GM's plants in Canada stay open so that pensions for both active workers and retirees are protected.

"We tried to get a lump sum for all the retirees and that was just about the last issue that fell off the [bargaining] table," Mr. Dias said.

Active workers gave up some benefits and agreed to reductions in time during bargaining in 2008 to help secure the government bailout, he said.

"Our whole bargaining was about saving GM and making sure their pensions weren't reduced from 100 per cent to 39 per cent," he said.

During the 2012 set of negotiations, the union was unable to restore all the benefits active members gave up in 2008.

Mr. Dias added that retiree issues will be presented by the union during negotiations in 2016, but retiree representatives will not sit on the union's bargaining committee.

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About the Author
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

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