Saturday, November 12, 2005

This Is America?

Northwest and Delta executives to make millions > from > > bankruptcies > > By Jerry Isaacs > > 19 September 2005 > > > > Over the last several years the top corporate > > executives at Northwest and Delta airlines > negotiated > > retirement packages guaranteeing them millions in > the > > event the companies declared bankruptcy and > defaulted > > on their pension payments to employees. Both > companies > > filed for Chapter 11 bankruptcy protection last > > Wednesday, in large measure to escape their > pension > > obligations and seek the bankruptcy court's > backing > > for sweeping cuts in airline workers' jobs, wages > and > > benefits. > > > > Since 2000, Delta has lost $10 billion, slashed > 23,000 > > jobs and cut pay for pilots, managers and other > > employees. Three years ago the company spent more > than > > $44 million setting up trusts to protect > executives' > > pension benefits from creditors in case of > bankruptcy, > > saying the perk was needed to retain executives in > > hard times. Because transferring money to > > bankruptcy-proof trusts typically triggers big tax > > bills for the executives, Delta inflated the > amounts > > to compensate for the extra taxes. > > > > Retiring CEO Leo Mullin, who was paid $13 million > in > > compensation in 2001, was given 22 years of > instant > > seniority—although he worked for Delta for only > > five-and-half years—boosting his retirement > package to > > $16 million. While incoming CEO Gerald Grinstein > took > > a ceremonial pay reduction to bolster the > company's > > demands for sweeping employee wage and pension > cuts, > > behind the scenes other executives were cashing in > on > > the benefits of their golden parachutes. > > > > Former CEO Ronald Allen, who was forced out in > 1997, > > continued to draw $500,000 a year from Delta for > > consulting services up until 2005, although > neither > > the company nor Allen would say whether he ever > > provided any such services. Allen's exit package > also > > included a $4.5 million cash severance payment and > a > > $765,000-a-year pension that continues. He also > got 10 > > years' worth of perks, such as a 2,090-square-foot > > Buckhead, Georgia office, a car and club > memberships > > provided by Delta. > > > > When Northwest Airlines CEO Richard Anderson left > the > > company last year, he took his pension in a > lump-sum > > payment of $3,028,700. Anderson's check covered > three > > separate pensions he received from Northwest: the > > regular pension plan, his excess pension plan and > his > > supplemental executive retirement plan, or SERP. > Other > > top executives at Northwest, including current CEO > > Doug Steenland, also were guaranteed three > pensions. > > > > Union workers at Northwest have a pension plan > based > > on years of service. For mechanics, custodians and > > cleaners—currently on strike against Northwest's > > demands for the elimination of more than half > their > > jobs and the replacement of traditional guaranteed > > pensions with 401(k) plans—that amounts to $85 a > month > > for every year they work. According to the > Aircraft > > Mechanics Fraternal Association (AMFA), a mechanic > who > > retires at 65, after 40 years at Northwest, will > > collect about $40,000 a year. > > > > The company's 2005 proxy statement indicated that > CEO > > Steenland will receive $947,417 a year if he > retires > > at 65. Delta's "supplemental plan" adds > multipliers to > > boost the pensions of the company's four top > > executives, crediting Steenland with 15 years of > > service for every five he works and paying him > pension > > credits at twice the rate applied to regular > salaried > > workers. > > > > The company's four top executives—Steenland and > > executive vice presidents Tim Griffin, Phillip > Haan > > and Andrew Roberts—will receive a total of > $2,476,100 > > in annual pension benefits. This is enough to fund > the > > pensions of 90 flight attendants with comparable > years > > of service. > > > > In addition to their pension benefits, Northwest's > top > > five executives (the above-mentioned, plus > Executive > > Vice President and General Counsel Barry Simon) > have > > taken in $32,000,721 in compensation since 2002, > not > > including other perks such as lifetime health-care > > coverage and travel benefits. The five also sold > more > > than $1 million worth of stock in the months > leading > > up to the bankruptcy announcement, as did big > > investors, like professional financier and former > NWA > > Board of Directors member Al Checchi, who sold > > 1,650,240 shares from April 23 to May 3, raking in > > $8,439,884. > > > > The New York Times reported Thursday that the > timing > > of Northwest's bankruptcy filing allowed the > company > > to protect its assets while executives reneged on > a > > payment of $65 million into the employee pension > fund, > > which is already underfunded by $3.8 billion. If > > Northwest skipped the payment before filing for > > bankruptcy, it would have been in violation of > federal > > pension laws, and the government-run Pension > Benefit > > Guaranty Corporation (PBGC) could have placed a > lien > > on the airline's assets, giving itself a better > chance > > of recovering some of the money. > > > > Instead, the newspaper noted, "[S]ince Northwest > filed > > for bankruptcy first, then skipped the pension > > contribution, the government has no legal power to > > place a lien on its assets. It makes the pension > > guarantor—and the employees and retirees whose > > interests the government represents—into unsecured > > creditors for the $65 million. Unsecured creditors > > generally fare poorly in bankruptcy, recovering > just > > pennies for every dollar they are owed." > > > > If the PBGC takes over Northwest's pension plans > > pilots would suffer the loss of half or more of > their > > pensions because the PBGC caps payments at $45,613 > a > > year for plans canceled in 2005. Other unionized > > workers could also see drastic reductions. > > > > Northwest also wants to freeze its current defined > > benefit pension plans and switch to defined > > contribution plans, such as 401(k)s, which are > cheaper > > for employers but don't provide workers the > guaranteed > > benefits of traditional pensions. > > > > Delta's pension funds are in even worse shape. If > the > > company defaults on its obligations it would set a > > record, surpassing the size of the United Airlines > > pension collapse earlier this year, and further > > staggering the overburdened pension guarantee > board. > > According to board officials, Delta's pension plan > has > > promised benefits worth $17.5 billion, but it only > has > > $6.9 billion in assets. With its bankruptcy filing > the > > company is expected to press for even more drastic > > cuts than it outlined in its corporate > restructuring > > plan last year, when it announced plans to cut $5 > > billion and 7,000 jobs by next year. > > > > The looting of airline workers' pension funds is > but > > one example of how the assets of the major > airlines > > have been squandered over the last several decades > to > > enrich the airline bosses and big investors. It > also > > underscores the widespread parasitism that > pervades > > the boardrooms of corporate America. > > > > The top personnel of the airline industry are > > chosen—and highly compensated—not because of their > > ability to manage complex organizations or to lay > out > > a long-term corporate strategy. Instead a definite > > social type has risen to the top, whose only > > qualifications are its acuity for slashing tens of > > thousands of jobs and guaranteeing the quickest > and > > largest payoffs to Wall Street. > > > > Northwest's CEO Steenland began his career working > for > > the Office of General Counsel for the secretary of > the > > Department of Transportation when the Democratic > > administration of President Jimmy Carter was > preparing > > the deregulation of the airline industry. He later > > joined a top law firm in Washington DC, which > > represented Pan American Air Lines during the > merger > > frenzy that preceded the company's bankruptcy > > declaration, and later represented an investor > group > > that organized the leveraged buyout of Northwest > > Airlines in 1989. > > > > Steenland is particular adept at working the halls > of > > Congress to lift regulations on pension funding > and > > any other restrictions on profit-making, and at > making > > use of the services of the labor bureaucracy to > cut > > labor costs. "Since the biggest input is the > wages, > > salaries, and benefits line, this puts a lot of > > attention on working with our employees in knowing > > what we need to do to survive in the long term," > he > > commented. > > > > Last year, in the midst of concession talks with > the > > pilots union, Steenland hired Barry Simon as the > > company's executive vice president and general > > counsel. Simon was a top executive in the Seabury > > Group, a New York consulting firm whose > > "restructuring" clients have included Air Canada, > US > > Airways, America West Airlines and Continental. > > > > Simon earned his credentials as an executive at > > Continental and Eastern airlines, where he served > > under corporate raider and union-buster Frank > Lorenzo. > > In 1983 Continental filed for bankruptcy—despite > the > > airline's $60 million in cash reserves—in order to > > exploit a provision in the Bankruptcy Code > allowing > > Lorenzo to abrogate his contracts with the unions. > > Simon directed Continental's legal strategy when > it > > emerged from bankruptcy a second time in 1991. > > > > Simon also played a leading role in the bankruptcy > of > > Eastern Airlines, which stopped flying in 1991 > > following the bitter strike by unionized > mechanics. At > > the time, Lorenzo and his team stripped the > airline of > > valuable assets and sold them at fire-sale prices > to > > Continental. > > > > The 1980s and 1990s saw the emergence of junk-bond > > dealers and corporate raiders in the airline > industry > > like Lorenzo and Carl Icahn (who bankrupted Trans > > World Airlines, among others, and who is now worth > > $5.8 billion—no. 55 on the list of the world's > richest > > people). > > > > Today, after nearly a quarter of a century of > > betrayals by the trade union bureaucracy (from the > > striking air traffic controllers in 1981 to the > > present scabbing organized by the airline unions > > against the striking Northwest mechanics), the > > corporate executives running the airlines feel > even > > less restraint than their predecessors did when > > slashing workers' jobs, wages and benefits and > looting > > company assets to enrich themselves. > > > > Copyright 1998-2005 > > World Socialist Web Site > > All rights reserved > > > >

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