Adding Insult to Auto Dealers’ Injury

by Ivan Osorio on July 10, 2009

in Bailout Watch, Economy

If anything could make finding yourself out of business overnight any worse, it is to have to pay a penalty for it. That’s what now threatens some GM and Chrysler dealers whose factory agreements are not being renewed as part of those companies’ government-led restructuring. Many of those soon-to-be-defunct dealers may find themselves exposed to having to pay withdrawal penalties into the union pension funds into which they will no longer pay.

Now, the Detroit automakers overextended their dealer networks — but that is no justification for penalizing local auto dealers for GM’s and Chrysler’s mistakes. To address this potential problem, Rep. John Kline (R-Minn.) has introduced the Auto Dealers Pension Fairness Act (H.R. 2793), which would direct the Presidential Task Force on the Auto Industry to report to Congress on which dealers are to be closed and bar pension withdrawal penalties until 60 days after the Task Force reports to Congress –  and thus allow Congress to determine a course of action.

This is only fair, but I’m not holding my breath waiting for any unions to endorse it. Many union pension plans are severely underfunded — due in large part to union pension fund managers’ use of funds to pursue political agendas at public company shareholder meetings — and this would only add to their troubles.

For more on union pension funds, see here, here, here, and here.

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